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                                                                   EXHIBIT 10.38
                                                Confidential Treatment Requested

                        INTERACTIVE MARKETING AGREEMENT
                        -------------------------------

     This Interactive Marketing Agreement (the "Agreement"), dated as of
February 15, 2000 (the "Effective Date"), is between America Online, Inc.
("AOL"), a Delaware corporation, with offices at 22000 AOL Way, Dulles, Virginia
20166, and HomeGrocer.com, Inc. ("Marketing Partner" or "MP") a Delaware
corporation, with offices at 10230 NE Points Drive, Kirkland, WA  98033-7879.
AOL and MP may be referred to individually as a "Party" and collectively as the
"Parties."

                                 INTRODUCTION
                                 ------------

     AOL and MP each desires to enter into an interactive marketing relationship
whereby AOL will promote and distribute an interactive site referred to (and
further defined) herein as the Affiliated MP Site (as defined in Section 2.1).
This relationship is further described below and is subject to the terms and
conditions set forth in this Agreement.  Defined terms used but not defined in
the body of the Agreement will be as defined on Exhibit B attached hereto.
                                                ---------

                                     TERMS
                                     -----

1.   PROMOTION, DISTRIBUTION AND MARKETING.
     -------------------------------------

     1.1.  AOL Promotion of Affiliated MP Site.
           -----------------------------------

           1.1.1.  AOL will provide MP with the promotions (the "Promotions")
                   described on Exhibit A attached hereto for the Affiliated MP
                                ---------
                   Site (as defined in Section 2.1). Subject to MP's reasonable
                   approval, AOL will have the right to fulfill its promotional
                   commitments with respect to any of the foregoing by providing
                   MP comparable promotional placements in appropriate
                   alternative areas of the AOL Network. In addition, if AOL is
                   unable to deliver any particular Promotion, AOL will work
                   with MP to provide MP a comparable promotional placement. AOL
                   reserves the right to redesign or modify the organization,
                   structure, "look and feel," navigation and other elements of
                   the AOL Network at any time. In the event such modifications
                   materially and adversely affect any specific Promotion, AOL
                   will work with MP to provide MP, as its sole remedy, a
                   comparable promotional placement. As used throughout this
                   Agreement, the phrases "comparable promotional placements" or
                   "comparable promotions" shall mean placements which are of
                   comparable overall value, to be determined based on a variety
                   of factors, including size, quality, type (e.g., integrated
                   or banner), location (i.e., page or screen and the subject
                   matter thereof), demographically and geographically targeted
                   relevance, and audience reach (taking into account the
                   targeted nature of the placement). If the parties disagree
                   about whether any substitute promotional placements are
                   "comparable," either party may invoke the dispute resolution
                   procedures set forth in Section 7.

           1.1.2.  AOL shall use commercially reasonable efforts to enable
                   additional advertising slots in relevant channels on the AOL
                   Network for geo-targeted advertising to the local geographic
                   markets in which MP provides the Exclusive Product; provided,
                   however, that nothing herein shall require AOL to
                   specifically create such areas.

           1.1.3.  As soon as available and in all events by not later than the
                   second anniversary of the Effective Date (or such later date
                   as the parties may agree), AOL shall provide to MP an anchor
                   tenancy in a relevant department/commerce center of

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                   AOL's Shop@AOL shopping area (or its successor). AOL shall
                   provide MP with 90 days' written notice of an anchor tenancy
                   becoming available.

           1.1.4.  Within thirty (30) days following the Effective Date, the
                   Parties shall meet to review the Carriage Plan and devise a
                   switching matrix pursuant to which MP shall be permitted to
                   switch Promotions no more often than monthly for other
                   inventory which becomes available on the AOL Network;
                   provided, however, that all switching of Promotions shall be
                   subject to inventory availability and AOL's reasonable
                   approval. At the meeting the Parties shall, among other
                   things, make good faith efforts to establish minimum levels
                   of Impressions by Designated Exclusivity Area in order to
                   maintain exclusivity in such Designated Exclusivity Area,
                   and, in addition, shall revise the carriage plan to increase
                   geo-targeted Impressions (taking into account relative value
                   and the switching matrix) including allocation from Digital
                   City local sales force, establish future allocation for an
                   anchor tenancy in Shop@AOL as required under Section 1.1.3,
                   and reallocate the overallotment of Impressions in Calendar
                   and a possible reallocation of what may be an overallotment
                   of Impressions in Oxygen Cable.

     1.2.  Impressions Commitment.  During the Term, AOL shall deliver a minimum
           ----------------------
          of [***] Impressions which link to the Co-Branded Entry Page through
          the Promotions in accordance with Exhibit A and the timelines set
                                            ------- -
          forth therein (the "Impressions Commitment").  The Impressions targets
          specified on Exhibit A are the minimum amount of Impressions to be
                       ---------
          provided by AOL.  The parties will determine annually, beginning
          March 1, 2001, whether the actual Impressions targets for the
          immediately preceding year were met, and any shortfall in Impressions
          at the end of any year during the Term will not be deemed a breach of
          the Agreement by AOL so long as AOL promptly takes commercially
          reasonable action to remedy the situation with comparable Impressions.
          If a significant shortfall continues after six (6) months, either
          party may invoke the dispute resolution procedures set forth in
          Section 7 to fashion a strategy reasonably acceptable to MP to
          alleviate such continuing significant shortfall. In the event there is
          a shortfall in Impressions as of the end of the Term (a "Final
          Shortfall"), AOL will, within ninety days of the end of the Term,
          provide MP with Impressions equal in number to the Final Shortfall
          (the "Final Makegood"); provided, however, that, if the Final
          Shortfall is equal to a number of Impressions which is more than [***]
          percent ([***]%) of the total Impressions to be delivered hereunder in
          that year, then, upon written notice delivered to AOL within five (5)
          days of the end of the Term, MP shall be entitled to receive in lieu
          of the Final Makegood, a refund of the Payment, calculated in
          accordance with the Pro-Rata Refund Formula. The Parties agree that in
          each year during the term of this Agreement [***] percent ([***]%) of
          the Impressions will be for the Exclusive Product and not more than
          [***] percent ([***]%) of the Impressions may include references to MP
          Products other than traditional grocery store products.

     1.3.  Content of Promotions.  The Promotions will link only to the Co-
           ---------------------
           Branded Entry Page and will promote only the Exclusive Product and
           not more than [***] percent ([***]%) of the Promotions each year
           shall promote MP Products other than everyday grocery products and
           services. The specific MP Content to be contained within the
           Promotions described in this Agreement (the "Promo Content") will be
           determined by MP, subject to AOL's technical limitations, the terms
           of this Agreement and AOL's then-applicable policies relating to
           advertising and promotions (the "Ad Policies"); provided, however,
           that MP shall have ninety (90) days from written notice of any new Ad
           Policy to comply and provided, further that if MP's compliance with
           such new Ad Policy is not technically feasible or commercially
           reasonable, AOL shall either waive such new Ad Policy for MP or
           provide MP with an equitable remedy to alleviate the effect of such
           new Ad Policy. In the event that the Parties are unable to agree on
           an equitable remedy, the matter shall be

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           submitted to the Management Committee for resolution in accordance
           with dispute resolution procedures set forth in Section 7 of this
           Agreement. MP will submit in advance to AOL for its review a
           quarterly online marketing plan with respect to the Affiliated MP
           Site. The Parties will meet in person or by telephone at least
           monthly to review operations and performance hereunder, including a
           review of the Promo Content to ensure that it is designed to maximize
           performance. MP will periodically update the Promo Content. Except to
           the extent expressly described herein, the specific form, placement,
           duration and nature of the Promotions will be as determined by AOL in
           its reasonable editorial discretion (consistent with the editorial
           composition of the applicable screens). Either Party may invoke the
           dispute resolution procedures of Section 7 in the event that the
           requirements of this Section 1.3 materially adversely affect the
           rights of such Party under this Agreement.

     1.4.  MP Promotion of Affiliated MP Site and AOL.  As set forth in fuller
           ------------------------------------------
           detail in Exhibit C, MP will promote AOL and the availability of the
                     ---------
           Affiliated MP Site through the AOL Network. MP will not implement or
           authorize any promotion that is substantially similar (including,
           without limitation, in scope, purpose, amount, prominence or
           regularity) to the promotion required or provided pursuant to Exhibit
                                                                         -------
           C for any other Interactive Service on terms more favorable than
           -
           those provided herein.

2.   AFFILIATED MP SITE.
     ------------------

     2.1.  Creation of Affiliated MP Site.    MP will create a customized start
           ------------------------------
           page to which the Promotions shall link (the "Co-Branded Entry Page")
           (to the extent consistent with the terms hereof), including distinct
           versions of the Co-Branded Entry Page for each applicable property of
           the AOL Network as set forth below (e.g., one for linking from the
           AOL Service which is co-branded with the AOL brand, one for linking
           from the CompuServe Service which is co-branded with the CompuServe
           brand, etc.). Such Co-Branded Entry Page shall serve as the start
           page for an Interactive Site of MP which conforms to the requirements
           set forth herein (the "Affiliated MP Site"). MP will use commercially
           reasonable efforts to include certain distinct Content within each
           such distinct version of the Co-Branded Entry Page, tailored and
           targeted to the applicable audience as mutually agreed (the "Brand
           Specific Content"). On the Co-Branded Entry Page, MP will comply with
           AOL's and its affiliates' then generally applicable customization
           standards and design guideline templates for each property with
           respect to headers, footers, co-branding and URLs, by way of example
           as set forth on Exhibit H attached hereto. The Parties agree that the
                           ---------
           Co-Branded Entry Page shall reside on a joint URL structured in a
           manner to provide MP with user and unique visitor credit. Internal
           pages within the Affiliated MP Site shall reside on a joint URL
           structured in a manner to provide AOL with credit for time spent on
           the Affiliated MP Site, which shall nonetheless be owned by MP. The
           Co-Branded Entry Page shall have AOL or AOL affiliate branded headers
           and footers. AOL shall have the right to change or modify its design
           guideline templates and co-branding requirements during the Terms, to
           conform to general changes made to the AOL Network or portions
           thereof. In the event that MP desires to add such tools to the
           Affiliated MP Site, MP will consider in good faith the integration
           of, and may with AOL's consent integrate, AOL's tools and technology
           for chat, message boards, Quick Checkout, Shopping Cart and Search,
           plus such other tools and technology as the Parties may further
           mutually agree, so long as the integration of such tools and
           technology is technically feasible and commercially reasonable and
           does not adversely affect the shopping experience. If the Parties
           cannot agree on any of these matters, either Party may invoke the
           dispute resolution procedures set forth in Section 7.

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     2.2.  Content.  MP will make available through the Affiliated MP Site the
           -------
           comprehensive offering of Products and related Content described on
           Exhibit D (the "MP Products"). Except as mutually agreed in writing
           ---------
           by the Parties, the Affiliated MP Site will contain the MP Products
           and will not contain more than [***]% of products and services other
           than everyday grocery products and services. All sales of Products
           through the Affiliated MP Site will be conducted through a direct
           sales format; MP will not promote, sell, offer or otherwise
           distribute any products through any format other than a direct sales
           format (e.g., through auctions or clubs) without the prior written
           consent of AOL; provided, however, that MP may use a third-party for
           back-end fulfillment. MP will review, delete, edit, create, update
           and otherwise manage all Content available on or through the
           Affiliated MP Site in accordance with the terms of this Agreement. MP
           will ensure that the Affiliated MP Site does not in any respect
           promote or advertise, market or distribute the products, services or
           content of (x) any other Interactive Service, or (y) solely with
           respect to the Co-Branded Entry Page, any entity that is in direct
           competition with any third party with which AOL has an exclusive or
           premier relationship (provided that AOL has given written notice to
           MP of such third party and the exclusive or premier relationship that
           AOL has with such third party). MP may offer any material
           functionality (e.g. instant messaging, calendar, decision guides) on
           its Affiliated MP Site, even if such functionality is reasonably
           deemed to be competitive with a material functionality offered by or
           on behalf of AOL on the AOL Network, so long as in connection
           therewith there is no attribution or link to an Interactive Service,
           provided further that MP shall offer no functionality which requires
           a user to register with another Interactive Service. If the parties
           cannot agree on any matter described in this subsection, either party
           may invoke the dispute resolution procedures of Section 7.

     2.3.  Production Work.  Except as agreed to in writing by the Parties
           ---------------
           pursuant to the "Production Work" section of the Standard Online
           Commerce Terms & Conditions attached hereto as Exhibit F, MP will be
                                                          ---------
           responsible for all production work associated with the Affiliated MP
           Site, including all of MP's related costs and expenses.

     2.4.  Technology. AOL will be entitled to require reasonable changes to the
           ----------
           Content (including, without limitation, the features or
           functionality) within the Affiliated MP Site to the extent such
           Content will, in AOL's good faith judgment, adversely affect any
           technological operational aspect of the AOL Network. AOL reserves the
           right to review and test the Affiliated MP Site from time to time to
           determine whether the site is compatible with AOL's then-available
           client and host software and the AOL Network.

     2.5.  Product Offering.  MP will use commercially reasonable efforts to
           ----------------
           ensure that the Affiliated MP Site includes generally all of the
           Products and other Content (including, without limitation, any
           features, offers, contests, functionality or technology) that are
           then made available by or on behalf of MP through the MP Interactive
           Site for the same geographical area; provided, however, that such
           inclusion will not be required where it is commercially or
           technically impractical (e.g., inclusion would cause either Party to
           incur substantial incremental costs), and not more that [***] percent
           ([***]%) of the Products shall be other than everyday grocery items.

     2.6.  Pricing and Terms.  MP will ensure that: (i) the prices (and any
           -----------------
           other required consideration) for Products in the Affiliated MP Site
           do not exceed the prices for the Products or substantially similar
           Products offered by or on behalf of MP through the MP Interactive
           Site for the same geographical area during the same time period; and
           (ii) the terms and conditions related to Products in the Affiliated
           MP Site are no less favorable in any respect to the terms and
           conditions for the Products or substantially similar Products offered
           by or on behalf of MP through the primary MP Interactive Site for the
           same geographical area during the same time period; and (iii) the
           prices in the aggregate for

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           MP's top [***] grocery Products shall be no higher than [***] percent
           ([***]%) above of the prices of such Products offered by any MP
           Competitor through any Interactive Site for sale in the same
           geographic area during the same time period.

     2.7.  Exclusive AOL Offers/Member Benefits.  MP will generally promote
           ------------------------------------
           through the Affiliated MP Site any special or promotional offers made
           available by or on behalf of MP through any Additional MP Channel. In
           addition, MP shall promote through the Affiliated MP Site on a
           regular and consistent basis special offers (which, from time to
           time, shall be exclusive to AOL Users) available to AOL Users (the
           "AOL Offers") equal to or better than any other special offer
           available to non-AOL users. MP shall, at all times, feature at least
           one AOL Offer for at least first time AOL Users. The AOL Offer made
           available by MP shall provide a substantial member benefit to AOL
           Users, either by virtue of a meaningful price discount, product
           enhancement, unique service benefit or other special feature.
           Specific AOL Offers that may be made available by MP include the AOL
           Offers listed on Exhibit D-1 attached hereto. MP will provide AOL
                            -----------
           with reasonable prior notice of AOL Offers so that AOL can market the
           availability of such AOL Offers in the manner AOL deems appropriate
           in its editorial discretion.

     2.8.  Operating Standards.  MP will ensure that the Affiliated MP Site
           -------------------
           complies in all material respects and at all times with the standards
           set forth in Exhibit E within a commercially reasonable amount of
                        ---------
           time. To the extent operating site standards are not established in
           Exhibit E with respect to any aspect or portion of the Affiliated MP
           ---------
           Site (or the Products or other Content contained therein), MP will
           provide such aspect or portion of operating standards which meets or
           exceeds prevailing standards in the online grocery industry. In the
           event AOL determines that MP has failed to comply with the material
           technical requirements of this Section 2.8 AOL will have the right
           (in addition to any other remedies available to AOL hereunder), after
           providing MP with advance notice, to decrease the promotion it
           provides to MP hereunder until such time as MP corrects its non-
           compliance (and in such event, if such failure to comply shall last
           for more than five (5) days, AOL will be relieved of the
           proportionate amount of any promotional commitment made to MP by AOL
           hereunder corresponding to such decrease in promotion) and any
           revenue threshold(s) set forth in Section 4 will each be adjusted
           proportionately to correspond to such decrease in promotion during
           the period of non-compliance. MP may invoke the dispute resolution
           procedures of Section 7 in the event that it reasonably believes that
           the Affiliated MP Site meets the applicable standards, AOL has acted
           unjustly, or AOL has adversely affected MP's rights hereunder. AOL
           shall not be permitted to decrease the promotion for MP's failure to
           comply with the requirements of Section 1 of Exhibit E, if MP has
           invoked the dispute resolution procedures of Section 7.

     2.9.  Advertising Sales. In the event that MP decides to designate
           -----------------
           advertising inventory on the Affiliated MP Site, MP will offer AOL
           the opportunity to present its proposal for selling such inventory.

     2.10. Traffic Flow.  MP will take commercially reasonable efforts to
           ------------
           ensure that AOL traffic is either kept within the Affiliated MP Site
           or is channeled back into the AOL Network (with the exception of
           advertising links sold and implemented pursuant to the Agreement)
           through a "return to AOL" button at checkout, the "back" button on an
           Internet browser, and/or the AOL control bar. In the event that AOL
           points to the Co-Branded Entry Page or any other MP Interactive Site
           or otherwise delivers traffic to such site hereunder, MP will channel
           back to the AOL Network from such site, whether through a particular
           pointer or link, the "back" button on an Internet browser, the
           closing of an active window, or any other return mechanism.

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3.   AOL EXCLUSIVITY OBLIGATIONS  During the Term, except as otherwise provided
     ---------------------------
     herein, AOL shall not promote any MP Competitor or the Exclusive Product in
     the Designated Exclusivity Areas. For the purposes of this Agreement,
     "Exclusive Product" shall mean the service of online ordering from an
     Online Grocer, for delivery (directly or through a third-party) or pick-up,
     of everyday grocery items assembled for the customer. For purposes of this
     Agreement, the term "Online Grocer" shall mean any entity that offers the
     online ordering of and whose primary business is the sale or delivery of, a
     comprehensive range of everyday grocery items, regardless of whether such
     entity offers such grocery items solely online or as ancillary to its
     traditional bricks-and-mortar grocery or convenience food store business;
     provided however, that in no event shall "Online Grocer" include any entity
     (i) with a [***], provided that this exception shall not except a [***]
     business or an [***] from the definition of "Online Grocer", (ii) who
     offers only a [***], or (iii) that provides predominantly a [***]. As part
     of the exclusivity, AOL shall not itself or through any agent use any part
     of the Designated Exclusivity Areas to market or promote the Exclusive
     Product. Notwithstanding anything to the contrary in this Section 3 (and
     without limiting any actions which may be taken by AOL without violation of
     MP's rights hereunder), no provision of this Agreement will limit AOL's
     ability (on or off the AOL Network) to (i) undertake activities or perform
     duties pursuant to existing arrangements with third parties, provided,
     however, that the Impressions delivered pursuant to any such arrangement
     with any MP Competitor or as part of the marketing of the Exclusive Product
     by any other Online Grocer shall reduce the number of Impressions permitted
     under Section 3.2.1 below (or pursuant to any agreements to which AOL
     becomes a party subsequent to the Effective Date as a result of Change of
     Control, merger, acquisition or other similar transaction), (ii) create
     editorial content relating to any third party marketer of the Exclusive
     Product (but shall not sell contextual links to any marketer of the
     Exclusive Product except in accordance with this Agreement) or (iii) offer
     information relating to marketers of the Exclusive Product on any yellow
     pages, white pages, classifieds or other search, directory or review
     services or Content or similar service. In addition, to the extent that any
     third party does not solely [***], AOL will not be restricted from
     promoting such party (on or off the AOL Network), so long as such
     promotions do not, [***], expressly [***] or allow a [***]. Notwithstanding
     any provision of this Agreement to the contrary:

     3.1.  The delivery services for the following types of products shall not
           be deemed to be "Exclusive Product" except when sold, delivered,
           offered or promoted by MP Competitors: (i) delivery of [***]; (ii)
           delivery services where the [***] is not the [***]; (iii) delivery
           services where the [***] is not the delivery of the [***]; (iv)
           delivery of [***]; or (v) delivery of [***]; and

     3.2.  AOL may sell promotions mentioning the Exclusive Product of any
           traditional bricks-and-mortar grocer or convenience food store
           ("Traditional Grocer Exclusive Product Promotions") so long as such
           Traditional Grocer Exclusive Product Promotions do not promote any MP
           Competitor and provided that:

           3.2.1.  Traditional Grocer Exclusive Product Promotions shall
                   constitute no more than [***] Impressions in the aggregate
                   during the Term; and (a) in the national market, in any year
                   total Traditional Grocer Exclusive Product Promotions shall
                   not exceed the "Permitted National Market Carve-out Amount";
                   for these purposes, the "Permitted National Market Carve-out
                   Amount" shall equal [***] percent ([***]%) of the Impressions
                   Commitment in the national market for that year; and (b) in
                   any local markets where MP provides the Exclusive Product,
                   Traditional Grocer Exclusive Product Promotions shall not
                   exceed in any year the "Permitted Local Market Carve-out
                   Amount"; for these purposes, the "Permitted Local Market
                   Carve-out Amount" shall equal [***] percent ([***]%) of the
                   Impressions Commitment in that local market for that year;
                   and

           3.2.2.  AOL agrees to [***], in consideration of its [***] permitted
                   under this Section 3.2.

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4.   PAYMENTS.
     --------

          4.1.1.  Payment. Subject to Sections 4.1.2, 4.1.3, 4.1.4 and 6 below,
                  -------
                  in consideration of AOL's obligations hereunder including
                  without limitation the delivery of the Impressions, MP will
                  pay AOL a payment (the "Payment") equal to Sixty Million
                  Dollars ($60,000,000) in the aggregate as follows:

                  4.1.1.1.  Six Million Dollars ($6,000,000) payable on the
                            Effective Date;

                  4.1.1.2.  Four Million Dollars ($4,000,000) on each of June 1,
                            2000, September 1, 2000, and December 1, 2000; and

                  4.1.1.3.  Three Million Dollars (US $3,000,000) on each of
                            March 1, 2001, June 1, 2001, September 1, 2001,
                            December 1, 2001, March 1, 2002, June 1, 2002,
                            September 1, 2002, December 1, 2002, March 1, 2003,
                            [June 1, 2003], September 1, 2003, December 1, 2003,
                            March 1, 2004, and June 1, 2004

          4.1.2.  Early Termination of Exclusivity.
                  --------------------------------

                  4.1.2.1.  Twenty Fourth Month. AOL shall be entitled, on the
                            -------------------
                            later of (x) March 1, 2002, or (y) the date on which
                            a total of [***] billion Impressions have been
                            delivered under this Agreement (the "First
                            Exclusivity Termination Date"), to terminate its
                            exclusivity obligations set forth in Section 3 of
                            this Agreement solely with respect to Traditional
                            Grocer Exclusive Product Promotions by providing MP,
                            not later than six (6) months prior to March 1,
                            2002, with written notice of its election to
                            terminate such exclusivity. In the event that AOL
                            elects to terminate its exclusivity obligations
                            under this Agreement in accordance with this Section
                            4.1.2.1, all payments due by MP pursuant to Section
                            4.1.1 on or after March 1, 2002, shall be reduced to
                            [***], and the Impressions Commitment shall be
                            increased by [***] comparable Impressions to be
                            delivered over the remainder of the Term; provided,
                            however, that all requirements of AOL pursuant to
                            Section 3.2 of this Agreement shall terminate as of
                            the First Exclusivity Termination Date.

                  4.1.2.2.  Thirtieth Month.  Notwithstanding any provision of
                            ---------------
                            Section 3 of this Agreement to the contrary, AOL
                            shall be entitled as of September 1, 2002 to promote
                            any marketer of the Exclusive Product, including
                            without limitation any MP Competitor in any local
                            market in which MP has neither established local-
                            based offerings of the Exclusive Product ("Local
                            Offerings") nor notified AOL that it intends to
                            establish Local Offerings in such local market (a
                            "Fifteen Month Notice"). Following receipt of a
                            Fifteen Month Notice, AOL shall, within three months
                            of receipt of such Fifteen Month Notice, discontinue
                            any local promotions for marketers of the Exclusive
                            Product (unless otherwise permitted under this
                            Agreement, including without limitation, pursuant to
                            Section 3.2). In the event that MP has failed, as of
                            a date which is fifteen months after AOL's receipt
                            of such Fifteen Month Notice (the "Fifteen Month
                            Date"), to establish Local Offerings in the local
                            market which is the subject of such Fifteen Month
                            Notice, AOL shall be entitled to promote any
                            marketer of the Exclusive Product, including without
                            limitation, any MP Competitor, in such local

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                            market until the later of (a) nine months from the
                            Fifteen Month Date or (b) the date on which MP
                            establishes Local Offerings in such local market.

                  4.1.2.3.  Thirty Sixth Month. In addition to the rights
                            ------------------
                            granted to AOL pursuant to Sections 4.1.2.1 or
                            4.1.2.2 above, in the event that MP is not then one
                            of the top [***] marketers of the Exclusive Product
                            in at least [***] of the [***] Performance Criteria,
                            AOL shall be entitled, on the later of (x) March 1,
                            2003, or (y) the date on which [***] Impressions are
                            delivered under this Agreement (the "Second
                            Exclusivity Termination Date"), to terminate its
                            exclusivity obligations set forth in Section 3 of
                            this Agreement by providing MP with written notice
                            of its election to terminate such exclusivity by not
                            later than six (6) months prior to March 1, 2003. In
                            the event AOL terminates its exclusivity obligations
                            in accordance with this Section 4.1.2.3, and MP does
                            not exercise its right to terminate the Agreement as
                            set forth below, then all payments due by MP
                            pursuant to Section 4.1.1 on or after March 1, 2003,
                            shall be reduced to [***], if AOL has not exercised
                            its exclusivity termination option granted pursuant
                            to Section 4.1.2.1 above. In addition, in the event
                            AOL terminates its exclusivity obligations in
                            accordance with this Section 4.1.2.3, MP shall have
                            the right to terminate the Agreement, and, upon MP's
                            exercise of such right to terminate this Agreement,
                            (x) AOL shall refund and pay to MP, within 30 days
                            of MP's notice of termination, a refund calculated
                            in accordance with the Pro-Rata Refund Formula; and
                            (y) MP shall have no obligation to make any of the
                            payments due on or after March 1, 2003, pursuant to
                            Section 4.1.1.

     4.2.  Payment by MP of Bounty. During each year of the Term, MP shall pay
           -----------------------
           AOL a bounty according to the schedule below for each new AOL
           Purchaser during such year:

<TABLE>
<CAPTION>
               Year 1 Goal        Bounty            Year 2 Goal        Bounty
               <S>                <C>               <C>                <C>
               [***]              [***]             [***]              [***]
               [***]              [***]             [***]              [***]
               [***]                                [***]
<CAPTION>
               Year 3 Goal        Bounty            Year 4 Goal        Bounty
               <S>                <C>               <C>                <C>
               [***]              [***]             [***]              [***]
               [***]              [***]             [***]              [***]
               [***]                                [***]              [***]
                                                    [***]
</TABLE>

               Year 5 Goal        Bounty
               [***]              [***]
               [***]              [***]
               [***]              [***]
               [***]

     4.3.  Late Payments; Wired Payments.  All amounts owed hereunder not paid
           -----------------------------
           when due and payable will bear interest from the date such amounts
           are due and payable at the prime rate as set forth in the Wall Street
           Journal in effect at such time. All payments required to be paid to
           AOL hereunder will be paid in immediately available, non-refundable
           U.S. funds wired to the "America Online" account, [***]. All payments
           required to be paid to MP hereunder will be paid in immediately
           available, non-refundable U.S. funds wired to the account of
           HomeGrocer.com at [***].

"[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]"

                                       8
<PAGE>

     4.4.  Auditing Rights.  Each Party will maintain complete, clear and
           ---------------
           accurate records of all expenses, revenues and fees in connection
           with the performance of this Agreement. For the sole purpose of
           ensuring compliance with this Agreement, each Party (or its
           representative) will have the right on an annual basis to have a
           third-party accounting firm reasonably acceptable to the Party being
           audited (the "Audit Party") conduct a reasonable and necessary
           inspection limited to the portions of the books and records of the
           Audit Party which are relevant to such Audit Party's performance
           pursuant to this Agreement. Any such audit may be conducted after
           twenty (20) business days' prior written notice to the other Party.
           The Party requesting the audit (the "Requesting Party") shall bear
           the expense of any audit conducted pursuant to this Section 4.4,
           unless such audit shows an error in the Requesting Party's favor
           amounting to a deficiency to the Requesting Party in excess of five
           percent (5%) of the actual amounts paid and/or payable to such Party
           hereunder, in which event the Audit Party shall bear the reasonable
           expenses of the audit. If any payment deficiency is discovered,
           during an audit or otherwise, the Party owing the deficient payment
           shall pay the deficient amount to the Party owed such amount within
           thirty (30) days after receipt of notice thereof.

     4.5.  Taxes.  MP will collect and pay and indemnify, and hold AOL harmless
           -----
           from, any sales, use, excise, import or export value added or similar
           tax or duty including any penalties and interest, as well as any
           costs associated with the collection or withholding thereof,
           including attorneys' fees, which arises out of the sale or any other
           transaction between MP and any other party (other than AOL) or which
           is based on MP's net income. Likewise, AOL will collect and pay and
           indemnify, and hold MP harmless from, any sales, use, excise, import
           or export value added or similar tax or duty including any penalties
           and interest, as well as any costs associated with the collection or
           withholding thereof, including attorneys' fees, which arises out of
           the sale or any other transaction between AOL and any other party
           (other than MP) or which is based on AOL's net income.

     4.6.  Reports.
           -------

           4.6.1.  Sales Reports.  MP will provide AOL in an automated manner
                   -------------
                   with a monthly report in an AOL-designated format, detailing
                   the following activity in such period (and any other
                   information mutually agreed upon by the Parties or reasonably
                   required for measuring activity at the Co-Branded Entry
                   Page): summary sales information by day (date and total
                   number of AOL Purchasers for such day, total new AOL
                   Purchasers by day and total revenue for such
                   day)(collectively, the "Sales Reports"). AOL will be entitled
                   to use the Sales Reports in its own internal business
                   operations, subject to the terms of this Agreement, but
                   agrees to protect such information as Confidential
                   Information.

           4.6.2.  Usage Reports.  At least once a month, AOL shall provide MP
                   -------------
                   with standard usage information related to the Promotions
                   (e.g. a schedule of the Impressions delivered by AOL at such
                   time) which is similar in substance and form to the reports
                   provided by AOL to other interactive marketing partners
                   similar to MP. MP acknowledges that such information may be
                   Confidential Information as defined herein.

           4.6.3.  Fraudulent Transactions.  To the extent permitted by
                   -----------------------
                   applicable laws, MP will provide AOL with an prompt report of
                   any fraudulent order, including the date, screenname or email
                   address and amount associated with such order, promptly
                   following MP obtaining knowledge that the order is, in fact,
                   fraudulent.

5.   [INTENTIONALLY DELETED]
      ---------------------

                                       9
<PAGE>

6.   TERM; AFTER EXPIRATION OF TERM; TERMINATION.
     -------------------------------------------

     6.1.  Term.  Unless earlier terminated as set forth herein, the term of
           -----
           this Agreement will be five years from the Effective Date (the
           "Term").

     6.2.  After Expiration of Term.  Upon the expiration of Term (as opposed to
           ------------------------
           termination), AOL has the right to continue the link to the
           Affiliated MP Site for an additional one-year period upon written
           notice to MP, with the right to renew for two (2) additional one-year
           terms upon written notice to MP. MP shall pay AOL a [***] ($[***])
           dollar bounty for new AOL Purchasers generated during any such
           extended period and shall have no other payments obligations
           hereunder to AOL. MP will pay all of the foregoing amounts on a
           quarterly basis within thirty (30) days following the end of the
           quarter in which the applicable bounties were generated.

     6.3.  [intentionally deleted].
            ---------------------

     6.4.  Termination for Breach.  Except as expressly provided elsewhere in
           ----------------------
           this Agreement, either Party may terminate this Agreement at any time
           in the event of a material breach of the Agreement by the other Party
           which remains uncured after thirty (30) days written notice thereof
           to the other Party (or such shorter period as may be specified
           elsewhere in this Agreement); provided that if MP fails to make any
           payment required under Section 4.1.1, AOL will provide notice to MP
           of MP's failure and the cure period with respect to any scheduled
           payment will be twelve (12) days from the date of such notice. In the
           event this Agreement is terminated, any payment obligations accrued
           prior to termination will survive the termination of this Agreement,
           and, except to the extent expressly set forth to the contrary in this
           Agreement, the parties shall be relieved of all other payment
           obligations, provided, however, that nothing herein shall affect any
           Party's right to damages as a result of the other Party's breach. If
           this Agreement is terminated by MP under this provision, MP shall be
           entitled to a refund calculated in accordance with the Pro-Rata
           Refund Formula.

     6.5.  Termination for Bankruptcy/Insolvency.  Subject to existing
           -------------------------------------
           bankruptcy laws, either Party may terminate this Agreement
           immediately following written notice to the other Party if the other
           Party (i) ceases to do business in the normal course, (ii) becomes or
           is declared insolvent or bankrupt, (iii) is the subject of any
           proceeding related to its liquidation or insolvency (whether
           voluntary or involuntary) which is not dismissed within ninety (90)
           calendar days or (iv) makes an assignment for the benefit of
           creditors.

     6.6.  Termination on Change of Control.
           --------------------------------

           6.6.1.  In the event of a Change of Control of MP resulting in
                   control of MP by an Interactive Service, AOL may terminate
                   this Agreement by providing thirty (30) days prior written
                   notice of such intent to terminate.

           6.6.2.  In the event of a Change of Control of AOL resulting in
                   control of AOL by an MP Competitor, MP may terminate this
                   Agreement by providing thirty (30) days prior written notice
                   of such intent to terminate.

     6.7.  Press Releases.  Each Party will submit to the other Party, for its
           ---------------
           prior written approval, which will not be unreasonably withheld or
           delayed, any press release or any other public statement ("Press
           Release") regarding the transactions contemplated hereunder.
           Notwithstanding the foregoing, either Party may, if and to the extent
           required by law, issue Press Releases and other disclosures without
           the consent of the other Party so

"[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]"

                                       10
<PAGE>

           long as the disclosing Party provides at least five (5) business days
           prior written notice of such disclosure. The failure by one Party to
           obtain the prior written approval of the other Party prior to issuing
           a Press Release (except as and to the extent required by law) shall
           be deemed a material breach of this Agreement. Because it would be
           difficult to precisely ascertain the extent of the injury caused to
           the non-breaching party, in the event of such material breach, the
           non-breach party may elect as its sole remedy to either (a) terminate
           this Agreement immediately upon notice to the other Party, or (b) as
           liquidated damages, elect to modify the Impression Commitment
           hereunder by [***] percent ([***]%) (either an increase in
           Impressions if AOL has materially breached the Agreement or a
           decrease in Impressions if MP has materially breached the Agreement).
           The Parties agree that the liquidated damages set forth are a
           reasonable approximation of the injury that would be suffered by the
           non-breaching Party.

7.   MANAGEMENT COMMITTEE/ARBITRATION.
     --------------------------------

     7.1.  Management Committee.  The Parties will act in good faith and use
           --------------------
           commercially reasonable efforts to promptly resolve any claim,
           dispute, claim, controversy or disagreement (each a "Dispute")
           between the Parties or any of their respective subsidiaries,
           affiliates, successors and assigns under or related to this Agreement
           or any document executed pursuant to this Agreement or any of the
           transactions contemplated hereby. If the Parties cannot promptly
           resolve any such Dispute, either party may submit the dispute to the
           "Management Committee" for resolution. The Management Committee shall
           initially consist of MP's Senior Vice President of Marketing, Jon
           Landers, and AOL's President of Marketing, David M. Colburn. At the
           parties' earliest convenience and by not later than 10 days after the
           request for dispute resolution, the Management Committee shall
           convene at a mutually acceptable location or telephonically, and
           shall have the exclusive right for the following ten (10) days to
           resolve such Dispute; provided further that the Management Committee
           will have the final and exclusive right to resolve Disputes arising
           from any provision of the Agreement which expressly or implicitly
           provides for the Parties to reach mutual agreement as to certain
           terms. If the Management Committee is unable to amicably resolve the
           Dispute during such ten-day period, then the Management Committee
           will consider in good faith the possibility of retaining a third
           party mediator to facilitate resolution of the Dispute. In the event
           the Management Committee elects not to retain a mediator within the
           five (5) days immediately following the dead-lock, the dispute will
           be subject to the resolution mechanisms described below. Neither
           Party will seek, nor will be entitled to seek, binding outside
           resolution of the Dispute unless and until the Parties have sought
           resolution of the Dispute by the Management Committee and have been
           unable amicably to resolve the Dispute as set forth in this Section 7
           and then, only in compliance with the procedures set forth in this
           Section 7.

     7.2.  Arbitration.  Except for Disputes relating to issues of (i)
           ------------
           proprietary rights, including but not limited to intellectual
           property and confidentiality, and (ii) any provision of the Agreement
           which expressly or implicitly provides for the Parties to reach
           mutual agreement as to certain terms (which will be resolved by the
           Parties solely and exclusively through amicable resolution as set
           forth in Section 7.1), any Dispute not resolved by amicable
           resolution as set forth in Section 7.1 will be governed exclusively
           and finally by arbitration. Such arbitration will be conducted by the
           American Arbitration Association ("AAA") in Washington, D.C., or
           Seattle, Washington, and will be initiated and conducted in
           accordance with the Commercial Arbitration Rules ("Commercial Rules")
           of the AAA, including the AAA Supplementary Procedures for Large
           Complex Commercial Disputes ("Complex Procedures"), as such rules
           will be in effect on the date of delivery of a demand for arbitration
           ("Demand"), except to the extent that such rules are inconsistent
           with the provisions set forth herein. Notwithstanding the foregoing,
           the Parties may agree

"[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]"

                                       11
<PAGE>

           in good faith that the Complex Procedures will not apply in order to
           promote the efficient arbitration of Disputes where the nature of the
           Dispute, including without limitation the amount in controversy, does
           not justify the application of such procedures.

     7.3.  Selection of Arbitrators.  The arbitration panel will consist of
           -------------------------
           three arbitrators. Each Party will name an arbitrator within ten (10)
           days after the delivery of the Demand. The two arbitrators named by
           the Parties may have prior relationships with the naming Party, which
           in a judicial setting would be considered a conflict of interest. The
           third arbitrator, selected by the first two, should be a neutral
           participant, with no prior working relationship with either Party. If
           the two arbitrators are unable to select a third arbitrator within
           ten (10) days, a third neutral arbitrator will be appointed by the
           AAA from the panel of commercial arbitrators of any of the AAA Large
           and Complex Resolution Programs. If a vacancy in the arbitration
           panel occurs after the hearings have commenced, the remaining
           arbitrator or arbitrators may not continue with the hearing and
           determination of the controversy, unless the Parties agree otherwise.

     7.4.  Governing Law.  The Federal Arbitration Act, 9 U.S.C. Secs. 1-16, and
           --------------
           not state law, will govern the arbitrability of all Disputes. The
           arbitrators will allow such discovery as is appropriate to the
           purposes of arbitration in accomplishing a fair, speedy and cost-
           effective resolution of the Disputes. The arbitrators will reference
           the Federal Rules of Civil Procedure then in effect in setting the
           scope and timing of discovery. The Federal Rules of Evidence will
           apply in toto. The arbitrators may enter a default decision against
           any Party who fails to participate in the arbitration proceedings.

     7.5.  Arbitration Awards.  The arbitrators will have the authority to award
           -------------------
           compensatory damages only. Any award by the arbitrators will be
           accompanied by a written opinion setting forth the findings of fact
           and conclusions of law relied upon in reaching the decision. The
           award rendered by the arbitrators will be final, binding and non-
           appealable, and judgment upon such award may be entered by any court
           of competent jurisdiction. The Parties agree that the existence,
           conduct and content of any arbitration will be kept confidential and
           no Party will disclose to any person any information about such
           arbitration, except as may be required by law or by any governmental
           authority or for financial reporting purposes in each Party's
           financial statements.

     7.6.  Fees.  Each Party will pay the fees of its own attorneys, expenses of
           -----
           witnesses and all other expenses and costs in connection with the
           presentation of such Party's case (collectively, "Attorneys' Fees").
           The remaining costs of the arbitration, including without limitation,
           fees of the arbitrators, costs of records or transcripts and
           administrative fees (collectively, "Arbitration Costs") will be borne
           equally by the Parties. Notwithstanding the foregoing, the
           arbitrators may modify the allocation of Arbitration Costs and award
           Attorneys' Fees in those cases where fairness dictates a different
           allocation of Arbitration Costs between the Parties and an award of
           Attorneys' Fees to the prevailing Party as determined by the
           arbitrators.

     7.7.  Non Arbitratable Disputes.  Any Dispute that is not subject to final
           --------------------------
           resolution by the Management Committee or to arbitration under this
           Section 7 or by law (collectively, "Non-Arbitration Claims") will be
           brought in a court of competent jurisdiction in the Commonwealth of
           Virginia or the State of Washington. Each Party irrevocably consents
           to the non-exclusive jurisdiction of the courts of the Commonwealth
           of Virginia and the federal courts situated in the Commonwealth of
           Virginia, and of the courts of the State of Washington and the
           federal courts situated in the State of Washington, over any and all
           Non-Arbitration Claims and any and all actions to enforce such claims
           or to recover damages or other relief in connection with such claims.

                                       12
<PAGE>

8.   NEW DELIVERY PLATFORMS; FURTHER DISCUSSIONS.  In the event that AOL
     -------------------------------------------
     launches any new delivery platform other than standard narrow-band
     platform, and at any time thereafter [***] percent ([***]%) or more of the
     AOL Users uses the new delivery platform, then MP shall have the
     opportunity to negotiate for promotions on the new delivery platform.

9.   FURTHER ASSURANCES REGARDING LOCAL OFFERINGS.  If MP has not established
     --------------------------------------------
     local based offerings of the Exclusive Product in a local market, and AOL
     has identified a substantial AOL User demand for the Exclusive Product in
     such market, then the Parties shall work together in good faith to develop
     a plan to satisfy the needs of such AOL Users, which plan may include MP's
     partnering with a local marketer of the Exclusive Product or the
     establishment of a revenue sharing relationship.

10.  NATIONAL OFFERING OF THE EXCLUSIVE PRODUCT.  MP shall use commercially
     ------------------------------------------
     reasonable efforts to offer the Exclusive Product on a national basis
     within twelve (12) months from the Effective Date.  In the event that MP is
     unable to accomplish this objective, AOL may refer such matter to the
     Management Committee in accordance with Section 7, in order to agree upon a
     strategy to provide the Exclusive Product to AOL Users on a national basis.

11.  STANDARD TERMS.  The exhibits and schedules identified in and attached to
     --------------
     this Agreement (including without limitation the Standard Online Commerce
     Terms & Conditions set forth on Exhibit F attached hereto and Standard
                                     -------
     Legal Terms & Conditions set forth on Exhibit G attached hereto) are each
                                           ---------
     incorporated into this Agreement and are hereby made a part of this
     Agreement.  In the event of a conflict between the substantive provisions
     set forth above in body of this Agreement (the "Substantive Agreement") and
     the exhibits and schedules incorporated into this Agreement, the
     Substantive Agreement shall control.

                           [Signature Page Follows]

"[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]"

                                      13
<PAGE>

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
Effective Date.

AMERICA ONLINE, INC.                       HOMEGROCER.COM, INC.

By: /s/ Terry Drayton                      By: /s/ Eric Keller
    -------------------------------            -------------------------------
Name:  Terry Drayton                       Name:  Eric Keller
Title: President                           Title: Vice President, Business
                                                  Affairs

                                       14
<PAGE>

                                   EXHIBIT A

                              Placement/Promotion
                              -------------------

I.  Attached Hereto.

II.  During the Term, subject to the terms and conditions hereof, MP shall have
the right to use the following Keyword Search Terms: HomeGrocer.

                                       15
<PAGE>

                                   EXHIBIT B

                                  Definitions
                                  -----------

The following definitions will apply to this Agreement:

Additional MP Channel.  Any other distribution channel (e.g., an Interactive
---------------------
Service other than AOL) through which MP makes available an offering comparable
in nature to the Affiliated MP Site

Advertising Sales Commission.  Actual amounts paid as commission to third party
----------------------------
agencies by either buyer or seller in connection with sale of the Advertisement.

AOL Interactive Site.  Any Interactive Site which is managed, maintained, owned
--------------------
or controlled by AOL or its agents.

AOL Look and Feel.  The elements of graphics, design, organization,
------------------
presentation, layout, user interface, navigation and stylistic convention
(including the digital implementations thereof) which are generally associated
with Interactive Sites within the AOL Service or AOL.com.

AOL Member.  Any authorized user of the AOL Service, including any sub-accounts
----------
using the AOL Service under an authorized master account.

AOL Network.  (i) The AOL Service, (ii) AOL.com, (iii) CompuServe, (iv) Digital
-----------
City, (v) Netcenter, (vi) MovieFone, and (vii) any other product or service
owned, operated, distributed or authorized to be distributed by or through AOL
or its affiliates worldwide (and including those properties excluded from the
definitions of the AOL Service or AOL.com).

AOL Purchaser.  Any person or entity who enters the Affiliated MP Site from the
-------------
AOL Network including, without limitation, from any third party area therein (to
the extent entry from such third party area is traceable through both Parties'
commercially reasonable efforts), and generates Transaction Revenues (regardless
of whether such person or entity provides an e-mail address during registration
or entrance to the Affiliated MP Site which includes a domain other than an
"AOL.com" domain),

AOL Service. The standard narrow-band U.S. version of the America Online(R)
-----------
brand service, specifically excluding (a) AOL.com, Netcenter or any other AOL
Interactive Site, (b) the international versions of an America Online service
(e.g., AOL Japan), (c) the CompuServe(R) brand service and any other CompuServe
products or services (d) "Driveway," "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant
Messenger(TM)," "Digital City," "NetMail(TM)," "Electra", "Thrive", "Real Fans",
"Love@AOL", "Entertainment Asylum," "AOL Hometown," "My News" or any similar
independent product, service or property which may be offered by, through or
with the U.S. version of the America Online(R) brand service, (e) any
programming or Content area offered by or through the U.S. version of the
America Online brand service over which AOL does not exercise complete
operational control (including, without limitation, Content areas controlled by
other parties and member-created Content areas), (f) any yellow pages, white
pages, classifieds or other search, directory or review services or Content
offered by or through the U.S. version of the America Online brand service, (g)
any property, feature, product or service which AOL or its affiliates may
acquire subsequent to the Effective Date and (h) any other version of an America
Online service which is materially different from the standard narrow-band U.S.
version of the America Online brand service, by virtue of its branding,
distribution, functionality, Content or services, including, without limitation,
any co-branded version of the service or any version distributed through any
broadband distribution platform or through any platform or device other than a
desktop personal computer.

                                       16
<PAGE>

AOL User.  Any user of the AOL Service, AOL.com, CompuServe, Digital City,
--------
Netcenter, or the AOL Network.

AOL.com.  AOL's primary Internet-based Interactive Site marketed under the
-------
"AOL.COM(TM)" brand, specifically excluding (a) the AOL Service, (b) Netcenter,
(c) any international versions of such site, (d) "ICQ," "AOL NetFind(TM)," "AOL
Instant Messenger(TM)," "NetMail(TM)," "AOL Hometown," "My News" or any similar
independent product or service offered by or through such site or any other AOL
Interactive Site, (e) any programming or Content area offered by or through such
site over which AOL does not exercise complete operational control (including,
without limitation, Content areas controlled by other parties and member-created
Content areas), (f) any programming or Content area offered by or through such
site which was operated, maintained or controlled by the former AOL Studios
division (e.g., Electra), (g) any yellow pages, white pages, classifieds or
other search, directory or review services or Content offered by or through such
site or any other AOL Interactive Site, (h) any property, feature, product or
service which AOL or its affiliates may acquire subsequent to the Effective Date
and (i) any other version of an America Online Interactive Site which is
materially different from AOL's primary Internet-based Interactive Site marketed
under the "AOL.COM(TM)" brand, by virtue of its branding, distribution,
functionality, Content or services, including, without limitation, any co-
branded versions or any version distributed through any broadband distribution
platform or through any platform or device other than a desktop personal
computer.

Change of Control.  (a) The consummation of a reorganization, merger or
-----------------
consolidation or sale or other disposition of substantially all of the assets of
a party or (b) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1933,
as amended) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under such Act) of more than 50% of either (i) the then outstanding
shares of common stock of such party; or (ii) the combined voting power of the
then outstanding voting securities of such party entitled to vote generally in
the election of directors.

CompuServe.  The standard, narrow-band U.S. version of the CompuServe brand
----------
service, specifically excluding (a) any international versions of such service,
(b) any web-based service including "compuserve.com", "cserve.com" and "cs.com",
or any similar product or service offered by or through the U.S. version of the
CompuServe brand service, (c) Content areas owned, maintained or controlled by
CompuServe affiliates or any similar "sub-service," (d) any programming or
Content area offered by or through the U.S. version of the CompuServe brand
service over which CompuServe does not exercise complete or substantially
complete operational control (e.g., third-party Content areas), (e) any yellow
pages, white pages, classifieds or other search, directory or review services or
Content and (f) any co-branded or private label branded version of the U.S.
version of the CompuServe brand service, (g) any version of the U.S. version of
the CompuServe brand service which offers Content, distribution, services and/or
functionality materially different from the Content, distribution, services
and/or functionality associated with the standard, narrow-band U.S. version of
the CompuServe brand service, including, without limitation, any version of such
service distributed through any platform or device other than a desktop personal
computer and (h) any property, feature, product or service which CompuServe or
its affiliates may acquire subsequent to the Effective Date.

Confidential Information.  Any information relating to or disclosed in the
------------------------
course of the Agreement, which is or should be reasonably understood to be
confidential or proprietary to the disclosing Party, including, but not limited
to, the material terms of this Agreement, information about AOL Members, AOL
Users, AOL Purchasers and MP customers, technical processes and formulas, source
codes, product designs, sales, cost and other unpublished financial information,
product and business plans, projections, and marketing data.  "Confidential
Information" will not include information (a) already lawfully known to or
independently developed by the receiving Party, (b) disclosed in published
materials, (c) generally known to the public, or (d) lawfully obtained from any
third party.

                                       17
<PAGE>

Content.  Text, images, video, audio (including, without limitation, music used
-------
in synchronism or timed relation with visual displays) and other data, Products,
advertisements, promotions, URLs, links, pointers and software, including any
modifications, upgrades, updates, enhancements and related documentation.

Designated Exclusivity Areas.  Digital City, the AOL Service AOL.com, Netscape
----------------------------
Netcenter, MovieFone.com, Oxygen (but not Oxygen's non-online operations),
Shop@AOL, and CompuServe collectively and individually, as the context shall
require.

Digital City.   The standard, narrow-band U.S. version of Digital City's local
-------------
content offerings marketed under the Digital City(R) brand name, specifically
excluding (a) the AOL Service, AOL.com, Netcenter, or any other AOL Interactive
Site, (b) any international versions of such local content offerings, (c) the
CompuServe(R) brand service and any other CompuServe products or services (d)
"Driveway," "ICQ(TM)," "AOL NetFind(TM)," "AOL Instant Messenger(TM)," "Digital
City," "NetMail(TM)," "Electra", "Thrive", "Real Fans", "Love@AOL",
"Entertainment Asylum," "AOL Hometown," "My News" or any similar independent
product, service or property which may be offered by, through or with the
standard narrow band version of Digital City's local content offerings, (e) any
programming or Content area offered by or through such local content offerings
over which AOL does not exercise complete operational control (including,
without limitation, Content areas controlled by other parties and member-created
Content areas), (f) any yellow pages, white pages, classifieds or other search,
directory or review services or Content offered by or through such local content
offerings, (g) any property, feature, product or service which AOL or its
affiliates may acquire subsequent to the Effective Date,  (h) any other version
of a Digital City local content offering which is materially different from the
narrow-band U.S. version of Digital City's local content offerings marketed
under the Digital City(R) brand name, by virtue of its branding, distribution,
functionality, Content or services, including, without limitation, any co-
branded version of the offerings or any version distributed through any
broadband distribution platform or through any platform or device other than a
desktop personal computer, and (i) Digital City- branded offerings in any local
area where such offerings are not owned or operationally controlled by America
Online, Inc. or DCI (e.g., Chicago, Orlando, South Florida, and Hampton Roads).

Impression.  User exposure to the applicable Promotion, as such exposure may be
----------
reasonably determined and measured by AOL in accordance with its standard
methodologies and protocols which shall be consistent with then-applicable
industry standards.

Interactive Service.  An entity offering one or more of the following: (i)
-------------------
online or Internet connectivity services (e.g., an Internet service provider);
(ii) an interactive site or service featuring a broad selection of aggregated
third party interactive content (or navigation thereto) (e.g., an online service
or search and directory service) and/or marketing a broad selection of products
and/or services across numerous interactive commerce categories (e.g., an online
mall or other leading online commerce site); and (iii) communications software
capable of serving as the principal means through which a user creates, sends
and receives electronic mail or real time online messages.

Interactive Site. Any interactive site or area, including, by way of example and
----------------
without limitation, (i) an MP site on the World Wide Web portion of the Internet
or (ii) a channel or area delivered through a "push" product such as the
Pointcast Network or interactive environment such as Microsoft's Active Desktop.

Keyword Search Terms.  (a) The Keyword(TM) online search terms made available
--------------------
on the AOL Service, combining AOL's Keyword(TM) online search modifier with a
term or phrase specifically related to MP (and determined in accordance with the
terms of this Agreement), and (b) the Go Word online search terms made available
on CompuServe, combining CompuServe's Go Word online search modifier with a term
or phrase specifically related to MP and determined in accordance with the terms
of this Agreement).

                                       18
<PAGE>

Licensed Content.  All Content offered through the Affiliated MP Site pursuant
----------------
to this Agreement or otherwise provided by MP or its agents in connection
herewith (e.g., offline or online promotional Content, Promotions, AOL
"slideshows", etc.), including in each case, any modifications, upgrades,
updates, enhancements, and related documentation.

MovieFone.com. AOL's primary Internet-based Interactive Site marketed under the
-------------
"MovieFone(TM)" brand, specifically excluding (a) the AOL Service, (b) AOL.com,
(c) any international versions of such site, (d) "ICQ," "AOL Netfind(TM)," "AOL
Instant Messenger(TM)," "NetMail(TM)," "AOL Hometown," "My News," "Digital
City(TM)," or any similar independent product or service offered by or through
such site or any other AOL Interactive Site, (e) any programming or Content area
offered by or through such site over which AOL does not exercise complete
operational control (including, without limitation, Content areas controlled by
other parties and member-created Content areas), (f) any programming or Content
area offered by or through the U.S. version of the America Online(R) brand
service which was operated, maintained or controlled by the former AOL Studios
division (e.g., Electra), (g) any yellow pages, white pages, classifieds or
other search, directory or review services or Content offered by or through such
site or any other AOL Interactive Site, (h) any property, feature, product or
service which AOL or its affiliates may acquire subsequent to the Effective Date
and (i) any other version of an AOL or Netscape Communications Corporation
Interactive Site which is materially different from AOL's primary Internet-based
Interactive Site marketed under the "MovieFone(TM)" brand, by virtue of its
branding, distribution, functionality, Content or services, including, without
limitation, any co-branded versions and any version distributed through any
broadband distribution platform or through any platform or device other than a
desktop personal computer.

MP Competitors. The entities listed on Exhibit B-1.
--------------                         -------

MP Interactive Site. Any Interactive Site (other than the Affiliated MP Site)
-------------------
which is managed, maintained, owned or controlled by MP or its agents.

Net Transaction Revenues.  Transaction Revenues minus the actual cost to MP of
------------------------
goods sold (i.e., the cost paid to MP's vendors for such goods, but not MP's
costs of selling such goods).

Netcenter.   Netscape Communications Corporation's primary Internet-based
---------
Interactive Site marketed under the "Netscape Netcenter(TM)" brand, specifically
excluding (a) the AOL Service, (b) AOL.com, (c) any international versions of
such site, (d) "ICQ," "AOL Netfind(TM)," "AOL Instant Messenger(TM),"
"NetMail(TM)," "AOL Hometown," "My News," "Digital City(TM)," or any similar
independent product or service offered by or through such site or any other AOL
Interactive Site, (e) any programming or Content area offered by or through such
site over which AOL does not exercise complete operational control (including,
without limitation, Content areas controlled by other parties and member-created
Content areas), (f) any programming or Content area offered by or through the
U.S. version of the America Online(R) brand service which was operated,
maintained or controlled by the former AOL Studios division (e.g., Electra), (g)
any yellow pages, white pages, classifieds or other search, directory or review
services or Content offered by or through such site or any other AOL Interactive
Site, (h) any property, feature, product or service which AOL or its affiliates
may acquire subsequent to the Effective Date and (i) any other version of an AOL
or Netscape Communications Corporation Interactive Site which is materially
different from Netscape Communications Corporation's primary Internet-based
Interactive Site marketed under the "Netscape Netcenter(TM)" brand, by virtue of
its branding, distribution, functionality, Content or services, including,
without limitation, any co-branded versions and any version distributed through
any broadband distribution platform or through any platform or device other than
a desktop personal computer (e.g. Custom NetCenters built specifically for third
parties).

Oxygen.  Oxygen Media's Interactive Site customized for AOL Members, accessible
------
through the AOL Service, specifically excluding (a) any programming or Content
area offered by or through such site over

                                       19
<PAGE>

which AOL does not have the exclusive right to sell all online advertising
inventory and (b) any other property of Oxygen Media other than its Internet
based properties.

Performance Criteria.  [***] as measured by [***] (or its successor), [***] of
--------------------
the online business, and [***] from online business.  Unless MP is in the top
[***] marketers of the Exclusive Product in at least [***] of these categories,
AOL shall be entitled, in accordance with and as more particularly set forth in
the terms of Section 4.1.2.2 of the Agreement, to terminate the exclusivity.

Product.  Any product, good or service which MP (or others acting on its behalf
-------
or as distributors) offers, sells, provides, distributes or licenses to AOL
Users directly or indirectly through (i) the Affiliated MP Site (including
through any Interactive Site linked thereto), (ii) any MP Interactive Site
(including through any Interactive Site linked thereto), (iii) any other
electronic means directed at AOL Users (e.g., e-mail offers), or (iv) an
"offline" means (e.g., toll-free number) for receiving orders related to
specific offers within the Affiliated MP Site or any MP Interactive Site
requiring purchasers to reference a specific promotional identifier or tracking
code, including, without limitation, products sold through surcharged downloads
(to the extent expressly permitted hereunder).

Promotions.  The promotions described on Exhibit A, any comparable promotions
-----------                              ---------
delivered by AOL in accordance with Section1.1, and any additional promotions of
the Affiliated MP Site provided by AOL (including, without limitation,
additional Keyword Search Terms and other navigational tools).

Pro-Rata Refund Formula.  The pro rata refund shall equal the difference
-----------------------
between (a) the total of the amounts which have actually been paid by MP to AOL
pursuant to Section 4.1 of this Agreement as of the date of termination of the
Agreement, and (b) the product of $60,000,000 multiplied by a fraction the
numerator of which shall be the number of Impressions actually delivered
pursuant to the Agreement up to the minimum amount required to be delivered for
the applicable period, and the denominator of which shall be the total number of
Impressions constituting the Impressions commitment.

Transaction Revenues.  Aggregate amounts paid by AOL Purchasers in connection
--------------------
with the sale, licensing, distribution or provision of any Products, including,
in each case, handling, shipping, service charges, and excluding, in each case,
(a) amounts collected for sales or use taxes or duties and (b) credits and
chargebacks for returned or canceled goods or services, but not excluding cost
of goods sold or any similar cost.

"[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]"

                                       20
<PAGE>

                                  EXHIBIT B-1

                                MP Competitors

[***]

From time to time MP shall have the right to add by name other online grocery
ordering and/or delivery services to such list, provided that (i) all additions
shall require the approval of AOL, which approval shall not be unreasonably
withheld, (ii) MP may add to such list no more than [***] once every [***] and
(iii) the addition of any entity shall have no effect on pre-existing
contractual obligations of AOL, so long as such contractual obligations were not
a breach of AOL's obligations under this Agreement.

"[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]"

                                       21
<PAGE>

                                   EXHIBIT C

                              MP Cross-Promotion
                              ------------------

1.   MP shall provide the following (collectively, the "AOL Promos"): (i) on the
     Co-Branded Entry Page, a prominent promotional banner or button (at least
     90 x 30 pixels in size) appearing "above the fold" on the Co-Branded Entry
     Page, to promote such AOL products or services as AOL may designate (for
     example, the America Online(R) brand service, the CompuServe(R) brand
     service, the AOL.com(R) site, any of the Digital City services or the AOL
     Instant Messenger(TM) service); and (ii) on the home page of the primary MP
     Interactive Site, a prominent "Try AOL" button (at least 90 x 30 pixels in
     size) through which users can obtain promotional information about AOL
     products or services designated by AOL; and (iii) at AOL's option, MP will
     provide a link on the Co-Branded Entry Page that allows AOL users to order
     the then-current version of client software for such AOL products or
     services. AOL will provide the creative content to be used in the AOL
     Promos (including designation of links from such content to other content
     pages), no more frequently than once per calendar quarter. MP shall post
     (or update, as the case may be) the creative content supplied by AOL within
     the spaces for the AOL Promos within ten (10) days of its receipt of such
     content from AOL. Without limiting any other reporting obligations of the
     Parties contained herein, MP shall provide AOL with monthly written reports
     specifying the number of impressions to the pages containing the AOL Promos
     during the prior month. In the event that AOL elects to serve the AOL
     Promos from an ad server controlled by AOL or its agent, MP shall take all
     reasonable operational steps necessary to facilitate such ad serving
     arrangement including, without limitation, inserting HTML code designated
     by AOL on the pages on which the AOL Promos will appear. MP shall be
     permitted to participate in AOL's generally applicable affiliate program.
     For the AOL Promos, AOL will take commercially reasonable efforts to ensure
     that, if technically feasible, MP traffic is channeled back to MP and the
     MP Interactive Site containing such AOL Promo.

2.   In addition, within each MP Interactive Site, MP shall provide prominent
     promotion for the keywords granted to MP hereunder. Other than for
     instances in which physical execution would be commercially impractical
     (i.e., in the case of radio or television, an advertisement of fifteen
     seconds or less, and, in the case of print advertisement, an advertisement
     less than one quarter page) or in which MP is not the party paying for such
     advertisements, in MP's television, radio, print and "out of home" (e.g.,
     buses and billboards) advertisements (excluding all delivery vehicles,
     provided that no Interactive Service shall be promoted on such delivery
     vehicles) and in any publications, programs, features or other forms of
     media over which MP exercises primary editorial control, MP will include
     specific references or mentions (verbally where possible) of the
     availability of the Affiliated MP Site through the AOL Network, which are
     at least as prominent as any references that MP makes to the URL (e.g.,
     "www.") or other navigation (but not including general branding of MP's
     tradename) for any MP Interactive Site. Without limiting the generality of
     the foregoing, MP's listing of the "URL" (e.g., "www.") for any MP
     Interactive Site will be accompanied by an equally prominent listing of the
     "keyword" term on AOL for the Affiliated MP Site.

3.   At AOL's option, MP shall no more than once per quarter distribute CD-Roms
     containing the software necessary to operate the AOL Service through MP's
     grocery delivery business and shall pay MP [***] ($[***]) per CD-Rom
     distributed. In addition, MP may request that AOL provide CD-Roms for
     delivery to MP customers and potential customers. In the event AOL grants
     MP's request, AOL shall provide MP with all such CD-Roms free of charge.
     AOL shall pay MP a bounty of [***] dollars ($[***]) for each Qualified New
     Member obtained through such distribution. "Qualified New Member" shall
     mean any person over the age of 18 in the U.S. who newly registers (i.e.,
     is not a current member and was not a member for the 2 months immediately
     preceding such registration) for the AOL Service during the Term using
     MP 's special promotion identifier and who pays the then-standard fees
     required for membership to the AOL Service and remains a fully paid member
     in good standing through at least one (1) billing cycle (60 days total,
     including one free month and one paid month). AOL shall deliver

"[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]"

                                       22
<PAGE>

     all payments due under this paragraph to MP quarterly. In the event that
     the one dollar per CD-Rom charge is adverse to AOLs ability to participate
     in the distribution described in this Section 3, the Parties agree to
     discuss in good faith a restructuring of this arrangement.

                                       23
<PAGE>

                                   EXHIBIT D

                   Description of Products and Other Content
                   -----------------------------------------

Products and services generally available in grocery supermarkets

                                       24
<PAGE>

                                  EXHIBIT D-1

                             AOL Exclusive Offers
                             --------------------

Examples include:

Free delivery on next two orders

$10 off on each of the next two shops that are over $75.00

                                       25
<PAGE>

                                   EXHIBIT E

                                  Operations
                                  ----------

1.   General.  The Affiliated MP Site (including the Products and other Content
     -------
contained therein) will be in the top [***] in the online grocery delivery
industry, as determined by each of the following methods: (a) based on a cross-
section of third-party reviewers who are recognized authorities in such industry
and (b) with respect to all material quality averages or standards in such
industry, including each of the following: (i) pricing of Products, (ii) scope
and selection of Products, (iii) quality of Products, (iv) customer service and
fulfillment associated with the marketing and sale of Products and (v) ease of
use.

2.   Affiliated MP Site Infrastructure.  MP will be responsible for all
     ---------------------------------
communications, hosting and connectivity costs and expenses associated with the
Affiliated MP Site. MP will provide all hardware, software, telecommunications
lines and other infrastructure necessary to meet traffic demands on the
Affiliated MP Site from the AOL Network. MP will design and implement the
network between the AOL Service and Affiliated MP Site such that (I) no single
component failure will have a materially adverse impact on AOL Members seeking
to reach the Affiliated MP Site from the AOL Network and (ii) no single
lineunder material control by MP will run at more than 70% average utilization
for a 5-minute peak in a daily period. In the event that MP elects to create a
custom version of the Affiliated MP Site in order to comply with the terms of
this Agreement, MP will bear responsibility for all aspects of the
implementation, management and cost of such customized site.

3.   Optimization; Speed.  MP will use commercially reasonable efforts to
     -------------------
ensure that: (a) the functionality and features within the Affiliated MP Site
are optimized for the client software then in use by AOL Members; and (b) the
Affiliated MP Site is designed and populated in a manner that minimizes delays
when AOL Members attempt to access such site. At a minimum, MP will ensure that
the Affiliated MP Site's data transfers initiate within fewer than fifteen (15)
seconds on average. Prior to commercial launch of any material promotions
described herein, MP will permit AOL to conduct performance and load testing of
the Co-Branded Site (in person or through remote communications), with such
commercial launch not to commence until such time as AOL is reasonably satisfied
with the results of any such testing.

4.   intentionally deleted
     ---------------------

5.   Technical Problems.  MP agrees to use commercially reasonable efforts to
     ------------------
address material technical problems (over which MP exercises control) affecting
use by AOL Members of the Affiliated MP Site (a "MP Technical Problem") promptly
following notice thereof. In the event that MP is unable to promptly resolve a
MP Technical Problem following notice thereof from AOL (including, without
limitation, infrastructure deficiencies producing user delays), AOL will have
the right to initiate the dispute resolution procedures set forth in Section 7
of the Agreement.

6.   Monitoring.  MP will ensure that the performance and availability of the
     ----------
Affiliated MP Site is monitored on a continuous basis. MP will provide AOL with
contact information (including e-mail, phone, pager and fax information, as
applicable, for both during and after business hours) for MP's principal
business and technical representatives, for use in cases when issues or problems
arise with respect to the Affiliated MP Site.

7.   Telecommunications. Where applicable MP will utilize encryption methodology
     ------------------
to secure data communications between the Parties' data centers. The network
between the Parties will be configured such that no single component failure
will significantly impact AOL Users.

8.   Security.  MP will utilize Internet standard encryption technologies (e.g.,
     --------
Secure Socket Layer - SSL) to provide a secure environment for conducting
transactions and/or transferring private member information (e.g. credit card
numbers, banking/financial information, and member address information) to and
from the Affiliated MP Site. MP will facilitate periodic reviews of the
Affiliated MP Site with AOL in order to evaluate the security risks of such
site. MP will promptly remedy any security risks or breaches of security as may
be identified by AOL's Operations Security team.

9.   Technical Performance.
     ---------------------

     i.        MP will design the Affiliated MP Site to support the AOL-client
          embedded versions of the Microsoft Internet Explorer 4.XX and 5.XX
          browsers (Windows and Macintosh) and the Netscape Browser 4.XX and
          make commercially reasonable efforts to support all other AOL browsers
          listed at: "http://webmaster.info.aol.com."

     ii.       To the extent MP creates customized pages on the Affiliated MP
          Site for AOL Members, MP will develop and employ a methodology to
          detect AOL Members (e.g. examine the HTTP User-Agent field in order to
          identify the "AOL Member-Agents" listed at: "http://webmaster.
          info.aol.com)."

     iii.      MP will periodically review the technical information made
          available by AOL at http://webmaster.info.aol.com.

     iv.       MP will design its site to support HTTP 1.0 or later protocol as
          defined in RFC 1945 and to adhere to AOL's parameters for refreshing
          or preventing the caching of information in AOL's proxy system as
          outlined in the document provided at the following URL:
          http://webmaster.info.aol.com. MP is responsible for the manipulation
          of these parameters in web-based objects so as to allow them to be
          cached or not cached as outlined in RFC 1945.

     v.        Prior to releasing material, new functionality or features
          through the Affiliated MP Site ("New Functionality"), MP will use
          commercially reasonable efforts to (i) test the New Functionality to
          confirm its compatibility with AOL Service client software and (ii)
          provide AOL with written notice of the New Functionality so that AOL
          can perform tests of the New Functionality to confirm its
          compatibility with the AOL Service client software. Should any

"[***] CONFIDENTIAL TREATMENT REQUESTED. OMITTED PORTIONS FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION]"

                                       26
<PAGE>

          new material, new functionality or features through the Affiliated MP
          Site be released without notification to AOL, AOL will not be
          responsible for any adverse member experience until such time that
          compatibility tests can be performed and the new material,
          functionality or features qualified for the AOL Service

10.  AOL Internet Services MP Support.  AOL will provide MP with access to the
     --------------------------------
standard online resources, standards and guidelines documentation, technical
phone support, monitoring and after-hours assistance that AOL makes generally
available to similarly situated web-based partners. AOL support will not, in any
case, be involved with content creation on behalf of MP or support for any
technologies, databases, software or other applications which are not supported
by AOL or are related to any MP area other than the Affiliated MP Site.

                                       27
<PAGE>

                                   EXHIBIT F

                  Standard Online Commerce Terms & Conditions
                  -------------------------------------------

1.   AOL Network Distribution. MP will not authorize or permit any third party
     ------------------------
to distribute or promote the Products or any MP Interactive Site through the AOL
Network absent AOL's prior written approval. The Promotions and any other
promotions or advertisements purchased from or provided by AOL will link only to
the Affiliated MP Site, will be used by MP solely for its own benefit and will
not be resold, traded, exchanged, bartered, brokered or otherwise offered to any
third party.

2.   Provision of Other Content. In the event that AOL notifies MP that (i) as
     --------------------------
reasonably determined by AOL, any Content within the Affiliated MP Site violates
AOL's then-standard Terms of Service (as set forth on the America Online brand
service at Keyword term "TOS"), for the AOL Service or any other AOL property
through which the entry page is promoted, the terms of this Agreement or any
other standard, written AOL policy or (ii) AOL reasonably objects to the
inclusion of any Content within the Affiliated MP Site (other than any specific
items of Content which may be expressly identified in this Agreement), then MP
will take commercially reasonable steps to block access by AOL Users to such
Content using MP's then-available technology. In the event that MP cannot,
through its commercially reasonable efforts, block access by AOL Users to the
Content in question, then MP will provide AOL prompt written notice of such
fact. AOL may then, at its option, restrict access from the AOL Network to the
Content in question using technology available to AOL. MP will cooperate with
AOL's reasonable requests to the extent AOL elects to implement any such access
restrictions.

3.   Contests. MP will take all steps necessary to ensure that any contest,
     --------
sweepstakes or similar promotion conducted or promoted through the Affiliated MP
Site (a "Contest") complies with all applicable federal, state and local laws
and regulations.

4.   Navigation. Subject to the prior consent of MP, which consent will not be
     ----------
unreasonably withheld, AOL will be entitled to establish navigational icons,
links and pointers connecting the Co-Branded Entry Page (or portions thereof)
with other content areas on or outside of the AOL Network, provided that MP
shall have final approval, in its sole discretion, of the design. Additionally,
in cases where an AOL User performs a search for MP through any search or
navigational tool or mechanism that is accessible or available through the AOL
Network (e.g., Promotions, Keyword Search Terms, or any other promotions or
navigational tools), AOL shall have the right to direct such AOL User to the
Affiliated MP Site, or any other MP Interactive Site determined by AOL in its
reasonable discretion.

5.   Disclaimers. Upon AOL's request, MP agrees to include within the Affiliated
     -----------
MP Site a product disclaimer (the specific form and substance to be mutually
agreed upon by the Parties) indicating that transactions are solely between MP
and AOL Users purchasing Products from MP.

6.   AOL Look and Feel. MP acknowledges and agrees that AOL will own all right,
     -----------------
title and interest in and to the elements of graphics, design, organization,
presentation, layout, user interface, navigation and stylistic convention
outlined in the standards and design guideline templates (including the digital
implementations thereof) which are generally associated with online areas
contained within the AOL Network, subject to MP's ownership rights in any MP
trademarks or creative works within the Affiliated MP Site and to any software
code created by MP.

7.   Management of the Affiliated MP Site. MP will manage, review, delete, edit,
     ------------------------------------
create, update and otherwise manage all Content available on or through the
Affiliated MP Site, in a timely and professional manner and in accordance with
the terms of this Agreement. MP will ensure that the Affiliated MP Site is
current, accurate and well-organized at all times. MP warrants that the Products
and other Licensed Content: (i) will not infringe on or violate any copyright,
trademark, U.S. patent or any other third party right, including without
limitation, any music performance or other music-related rights; (ii) will not
violate AOL's then-applicable Terms of Service for the AOL Service and any other
AOL property through which the Affiliated MP Site will be promoted or any other
standard, written AOL policy; and (iii) will not violate any applicable law or
regulation, including those relating to contests, sweepstakes or similar
promotions. Additionally, MP represents and warrants that it owns or has a valid
license to all rights to any Licensed Content used in AOL "slideshow" or other
formats embodying elements such as graphics, animation and sound, free and clear
of all encumbrances and without violating the rights of any other person or
entity. MP also warrants that a reasonable basis exists for all Product
performance or comparison claims appearing through the Affiliated MP Site. MP
shall not in any manner, including, without limitation in any Promotion, the
Licensed Content or the Materials state or imply that AOL recommends or endorses
MP or MP's Products (e.g., no statements that MP is an "official" or "preferred"
provider of products or services for AOL). AOL will have no obligations with
respect to the Products available on or through the Affiliated MP Site,
including, but not limited to, any duty to review or monitor any such Products

8.   Duty to Inform. MP will promptly inform AOL of any claim or threatened
     --------------
claim related to the Affiliated MP Site which could reasonably lead to a claim,
demand, or liability of or against AOL and/or its affiliates by any third party.

9.   Customer Service. It is the sole responsibility of MP to provide customer
     ----------------
service to persons or entities purchasing Products through the MP Interactive
Site, when accessed through the Affiliated MP Site and AOL Network
("Customers"). MP will bear full responsibility for all customer service,
including without limitation, order processing, billing, fulfillment, shipment,
collection and other customer service associated with any Products offered, sold
or licensed through the Affiliated MP

                                       28
<PAGE>

Site, and AOL will have no obligations whatsoever with respect thereto. MP will
receive all emails from Customers via a computer available to MP's customer
service staff and respond to such emails in a timely manner. t. MP will receive
all orders electronically and generally process all orders within one business
day of receipt, provided Products ordered are not advance order items. MP will
ensure that all orders of Products are received, processed, fulfilled and
delivered on a timely and professional basis. MP will offer AOL Users who
purchase Products through such Affiliated MP Site a money back satisfaction
guarantee. MP will bear all responsibility for compliance with federal, state
and local laws in the event that Products are out of stock or are no longer
available at the time an order is received. MP will also comply with the
requirements of any federal, state or local consumer protection or disclosure
law. Payment for Products will be collected by MP directly from customers.

10.  Production Work. In the event that MP requests AOL's production assistance
     ---------------
in connection with (i) ongoing programming and maintenance related to the
Affiliated MP Site, (ii) a redesign of or addition to the Affiliated MP Site
(e.g., a change to an existing screen format or construction of a new custom
form), (iii) production to modify work performed by a third party provider or
(iv) any other type of production work, MP will work with AOL to develop a
detailed production plan for the requested production assistance (the
"Production Plan"). Following receipt of the final Production Plan, AOL will
notify MP of (i) AOL's availability to perform the requested production work,
(ii) the proposed fee or fee structure for the requested production and
maintenance work and (iii) the estimated development schedule for such work. To
the extent the Parties reach agreement regarding implementation of the agreed-
upon Production Plan, such agreement will be reflected in a separate work order
signed by the Parties. To the extent MP elects to retain a third party provider
to perform any such production work, work produced by such third party provider
must generally conform to AOL's standards & practices (as provided on the
America Online brand service at Keyword term "styleguide"). The specific
production resources which AOL allocates to any production work to be performed
on behalf of MP will be as determined by AOL in its sole discretion. AOL shall
bear all AOL fees and expenses with respect to any routine production,
maintenance or related services which AOL reasonably determines are necessary
for AOL to perform in order to support the proper functioning and integration of
the Affiliated MP Site ("Routine Services").

11.  Overhead Accounts. To the extent AOL has granted MP any overhead accounts
     -----------------
on the AOL Service, MP will be responsible for the actions taken under or
through its overhead accounts, which actions are subject to AOL's applicable
Terms of Service and for any surcharges, including, without limitation, all
premium charges, transaction charges, and any applicable communication
surcharges incurred by any overhead Account issued to MP, but MP will not be
liable for charges incurred by any overhead account relating to AOL's standard
monthly usage fees and standard hourly charges, which charges AOL will bear.
Upon the termination of this Agreement, all overhead accounts, related screen
names and any associated usage credits or similar rights, will automatically
terminate. AOL will have no liability for loss of any data or content related to
the proper termination of any overhead account.

12.  Navigation Tools. Any Keyword Search Terms to be directed to the Affiliated
     ----------------
MP Site shall be (i) made available for use by MP and (ii) limited to the
combination of the Keyword search modifier combined with a registered trademark
of MP (e.g. "AOL keyword: XYZ Company Name"). AOL reserves the right to revoke
at any time MP's use of any Keyword Search Terms which do not incorporate
registered trademarks of MP. MP acknowledges that its utilization of a Keyword
Search Term will not create in it, nor will it represent it has, any right,
title or interest in or to such Keyword Search Term, other than the right, title
and interest MP holds in MP's registered trademark independent of the Keyword
Search Term. Without limiting the generality of the foregoing, MP will not: (a)
attempt to register or otherwise obtain trademark or copyright protection in the
Keyword Search Term; or (b) use the Keyword Search Term, except for the purposes
expressly required or permitted under this Agreement. To the extent AOL allows
AOL Users to "bookmark" the URL or other locator for the Affiliated MP Site,
such bookmarks will be subject to AOL's control at all times. Upon the
termination of this Agreement, MP's rights to any Keyword Search Terms (subject
to Section 4 of Exhibit G) will terminate.

13.  Merchant Certification Program. MP will participate in any generally
     ------------------------------
applicable "Certified Merchant" program operated by AOL or its authorized agents
or contractors. Such program may require merchant participants on an ongoing
basis to meet certain reasonable, generally applicable standards relating to
provision of electronic commerce through the AOL Network (including, as a
minimum, use of 40-bit SSL encryption and if requested by AOL, 128-bit
encryption) and may also require the payment of certain reasonable certification
fees to the applicable entity operating the program. Each Certified Merchant in
good standing will be entitled to place on its affiliated Interactive Site an
AOL designed and approved button promoting the merchant's status as an AOL
Certified Merchant.

14.  Reward Programs. On the Affiliated MP Site, MP shall not offer, provide,
     ---------------
implement or otherwise make available any promotional programs or plans that are
intended to provide customers with rewards or benefits in exchange for, or on
account of, their past or continued loyalty to, or patronage or purchase of, the
products or services of MP or any third party (e.g., a promotional program
similar to a "frequent flier" program), unless such promotional program or plan
is provided to no greater degree than AOL's "AOL Rewards" program, accessible on
the AOL Service at Keyword: "AOL Rewards."

15.  Search Terms. To the extent this Agreement sets forth any mechanism by
     ------------
which the Affiliated MP Site or the MP Interactive Site that is accessed through
the Affiliated MP Site will be promoted in connection with specified search
terms within any AOL product or service, MP hereby represents and warrants that
MP has all consents, authorizations, approvals, licenses, permits or other
rights necessary for MP to use such specified search terms.

                                       29
<PAGE>

                                   EXHIBIT G

                       Standard Legal Terms & Conditions
                       ---------------------------------

1.   Promotional Materials (Other than Press Releases).  Each Party will submit
     -------------------------------------------------
to the other Party, for its prior written approval, which will not be
unreasonably withheld or delayed, any marketing, advertising, or other
promotional materials, excluding Press Releases, related to the Affiliated MP
Site and/or referencing the other Party and/or its trade names, trademarks, and
service marks (the "Promotional Materials"); provided, however, that either
Party's use of screen shots of the Affiliated MP Site for promotional purposes
will not require the approval of the other Party so long as America Online(R) is
clearly identified as the source of such screen shots and so long as the URL of
the MP and/or the trademark of the MP is included; and provided further,
however, that, following the initial public announcement of the business
relationship between the Parties in accordance with the approval and other
requirements contained herein, either Party's subsequent factual reference to
the existence of a business relationship between the Parties in Promotional
Materials, will not require the approval of the other Party. Each Party will
solicit and reasonably consider the views of the other Party in designing and
implementing such Promotional Materials. Once approved, the Promotional
Materials may be used by a Party and its affiliates for the purpose of promoting
the Affiliated MP Site and the content contained therein and reused for such
purpose until such approval is withdrawn with reasonable prior notice. In the
event such approval is withdrawn, existing inventories of Promotional Materials
may not be depleted.

2.   License.  MP hereby grants AOL a revocable non-exclusive worldwide license
     -------
to market, license, distribute, reproduce, display, perform, transmit and
promote the Licensed Content (or any portion thereof) through such areas or
features of the AOL Network as AOL deems appropriate. MP acknowledges and agrees
that the foregoing license permits AOL to distribute portions of the Licensed
Content in synchronism or timed relation with visual displays prepared by MP or
AOL (e.g., as part of an AOL "slideshow"), subject in each case to MP's approval
of the display. In addition, AOL Users will have the right to access and use the
Affiliated MP Site.

3.   Trademark License. In designing and implementing the Materials and subject
     -----------------
to the other provisions contained herein, MP will be entitled to use the
following trade names, trademarks, and service marks of AOL: the "America
Online" brand service, "AOL" service/software and AOL's triangle logo; and AOL
and its affiliates will be entitled to use the trade names, trademarks, and
service marks of MP for which MP holds all rights necessary for use in
connection with this Agreement (collectively, together with the AOL marks listed
above, the "Marks"); provided that each Party: (i) does not create a unitary
composite mark involving a Mark of the other Party without the prior written
approval of such other Party; and (ii) displays symbols and notices clearly and
sufficiently indicating the trademark status and ownership of the other Party's
Marks in accordance with applicable trademark law and practice.

4.   Ownership of Trademarks.  Each Party acknowledges the ownership right of
     -----------------------
the other Party in the Marks of the other Party and agrees that all use of the
other Party's Marks will inure to the benefit, and be on behalf, of the other
Party. Each Party acknowledges that its utilization of the other Party's Marks
will not create in it, nor will it represent it has, any right, title, or
interest in or to such Marks other than the licenses expressly granted herein.
Each Party agrees not to do anything contesting or impairing the trademark
rights of the other Party.

5.   Quality Standards.  Each Party agrees that the nature and quality of its
     -----------------
products and services supplied in connection with the other Party's Marks will
conform to quality standards set by the other Party. Each Party agrees to supply
the other Party, upon request, with a reasonable number of samples of any
Materials publicly disseminated by such Party which utilize the other Party's
Marks. Each Party will comply with all applicable laws, regulations, and customs
and obtain any required government approvals pertaining to use of the other
Party's marks.

6.   Infringement Proceedings.  Each Party agrees to promptly notify the other
     ------------------------
Party of any unauthorized use of the other Party's Marks of which it has actual
knowledge. Each Party will have the sole right and discretion to bring
proceedings alleging infringement of its Marks or unfair competition related
thereto; provided, however, that each Party agrees to provide the other Party
with its reasonable cooperation and assistance with respect to any such
infringement proceedings.

7.   Representations and Warranties.  Each Party represents and warrants to the
     ------------------------------
other Party that: (i) such Party has the full corporate right, power and
authority to enter into this Agreement and to perform the acts required of it
hereunder; (ii) the execution of this Agreement by such Party, and the
performance by such Party of its obligations and duties hereunder, do not and
will not violate any agreement to which such Party is a party or by which it is
otherwise bound; (iii) when executed and delivered by such Party, this Agreement
will constitute the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms; and (iv) such Party
acknowledges that the other Party makes no representations, warranties or
agreements related to the subject matter hereof that are not expressly provided
for in this Agreement. MP hereby represents and warrants that it possesses all
authorizations, approvals, consents, licenses, permits, certificates or other
rights and permissions necessary to sell the Products.

8.   Confidentiality.  Each Party acknowledges that Confidential Information may
     ---------------
be disclosed to the other Party during the course of this Agreement. Each Party
agrees that it will take reasonable steps, at least substantially equivalent to
the steps it takes to protect its

                                       30
<PAGE>

own proprietary information, during the term of this Agreement, and for a period
of three years following expiration or termination of this Agreement, to prevent
the duplication or disclosure of Confidential Information of the other Party,
other than by or to its employees or agents who must have access to such
Confidential Information to perform such Party's obligations hereunder, who will
each agree to comply with this section. Notwithstanding the foregoing, either
Party may issue a press release or other disclosure containing Confidential
Information without the consent of the other Party, to the extent such
disclosure is required by law, rule, regulation or government or court order. In
such event, the disclosing Party will provide at least five (5) business days
prior written notice of such proposed disclosure to the other Party. Further, in
the event such disclosure is required of either Party under the laws, rules or
regulations of the Securities and Exchange Commission or any other applicable
governing body, such Party will (i) redact mutually agreed-upon portions of this
Agreement to the fullest extent permitted under applicable laws, rules and
regulations and (ii) submit a request to such governing body that such portions
and other provisions of this Agreement receive confidential treatment under the
laws, rules and regulations of the Securities and Exchange Commission or
otherwise be held in the strictest confidence to the fullest extent permitted
under the laws, rules or regulations of any other applicable governing body.

9.   Limitation of Liability; Disclaimer; Indemnification.
     ----------------------------------------------------

9.1  Liability.   UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE TO THE
     ---------
OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY
DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES), ARISING FROM BREACH OF THE AGREEMENT, THE SALE OF PRODUCTS AND/OR
SERVICES, THE USE OR INABILITY TO USE THE AOL NETWORK, THE AOL SERVICE, AOL.COM
OR THE CO-BRANDED ENTRY PAGE THE AFFILIATED MP SITE OR ANY OF THE MP INTERACTIVE
SITES, OR ARISING FROM ANY OTHER PROVISION OF THIS AGREEMENT, SUCH AS, BUT NOT
LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS
(COLLECTIVELY, "DISCLAIMED DAMAGES"); PROVIDED THAT EACH PARTY WILL REMAIN
LIABLE TO THE OTHER PARTY TO THE EXTENT ANY DISCLAIMED DAMAGES ARE CLAIMED BY A
THIRD PARTY AND ARE SUBJECT TO INDEMNIFICATION PURSUANT TO SECTION 9.3. EXCEPT
AS PROVIDED IN SECTION 9.3, (I) LIABILITY ARISING UNDER THIS AGREEMENT WILL BE
LIMITED TO DIRECT, OBJECTIVELY MEASURABLE DAMAGES, AND (II) THE MAXIMUM
LIABILITY OF ONE PARTY TO THE OTHER PARTY FOR ANY CLAIMS ARISING IN CONNECTION
WITH THIS AGREEMENT WILL NOT EXCEED THE AGGREGATE AMOUNT OF FIXED PAYMENT
OBLIGATIONS OWED BY MP UNDER SECTION 4.1.1 OF THE AGREEMENT IN THE YEAR IN WHICH
THE EVENT GIVING RISE TO LIABILITY OCCURS; PROVIDED THAT EACH PARTY WILL REMAIN
LIABLE FOR THE AGGREGATE AMOUNT OF ANY PAYMENT OBLIGATIONS OWED TO THE OTHER
PARTY PURSUANT TO THE AGREEMENT.

9.2  No Additional Warranties.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
     ------------------------
NEITHER PARTY MAKES ANY, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE AOL NETWORK,
THE AOL SERVICE, AOL.COM, THE CO-BRANDED ENTRY PAGE OR THE AFFILIATED MP SITE OR
ANY OF THE MP INTERACTIVE SITES, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, AOL SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING
THE PROFITABILITY OF THE AFFILIATED MP SITE.

9.3  Indemnity.  Each Party will defend, indemnify, save and hold harmless the
     ---------
other Party and the officers, directors, agents, affiliates, distributors,
franchisees and employees of the other Party from any and all third party
claims, demands, liabilities, costs or expenses, including reasonable attorneys'
fees ("Liabilities"), resulting from the indemnifying Party's material breach of
any duty, representation, or warranty of this Agreement.

9.4  Claims. If a Party entitled to indemnification hereunder (the "Indemnified
     ------
Party") becomes aware of any matter it believes is indemnifiable hereunder
involving any claim, action, suit, investigation, arbitration or other
proceeding against the Indemnified Party by any third party (each an "Action"),
the Indemnified Party will give the other Party (the "Indemnifying Party")
prompt written notice of such Action. Such notice will (i) provide the basis on
which indemnification is being asserted and (ii) be accompanied by copies of all
relevant pleadings, demands, and other papers related to the Action and in the
possession of the Indemnified Party. The Indemnifying Party will have a period
of ten (10) days after delivery of such notice to respond. If the Indemnifying
Party elects to defend the Action or does not respond within the requisite ten
(10) day period, the Indemnifying Party will be obligated to defend the Action,
at its own expense, and by counsel reasonably satisfactory to the Indemnified
Party. The Indemnified Party will cooperate, at the expense of the Indemnifying
Party, with the Indemnifying Party and its counsel in the defense and the
Indemnified Party will have the right to participate fully, at its own expense,
in the defense of such Action. If the Indemnifying Party responds within the
required ten (10) day period and elects not to defend such Action, the
Indemnified Party will be free, without prejudice to any of the Indemnified
Party's rights hereunder, to compromise or defend (and control the defense of)
such Action. In such case, the Indemnifying Party will cooperate, at its own
expense, with the Indemnified Party and its counsel in the defense against such
Action and the Indemnifying Party will have the right to participate fully, at
its own expense, in the defense of such Action. Any compromise or settlement of
an Action will require the

                                       31
<PAGE>

prior written consent of both Parties hereunder, such consent not to be
unreasonably withheld or delayed.

10.  Acknowledgment.  AOL and MP each acknowledges that the provisions of this
     --------------
Agreement were negotiated to reflect an informed, voluntary allocation between
them of all risks (both known and unknown) associated with the transactions
contemplated hereunder. The limitations and disclaimers related to warranties
and liability contained in this Agreement are intended to limit the
circumstances and extent of liability. The provisions of this Section 10 will be
enforceable independent of and severable from any other enforceable or
unenforceable provision of this Agreement.

11.  Solicitation of AOL Users. During the term of the Agreement and for a two
     -------------------------
year period thereafter, MP will not use the AOL Network (including, without
limitation, the e-mail network contained therein) to solicit AOL Users on behalf
of another Interactive Service. More generally, MP will not send unsolicited,
commercial e-mail (i.e., "spam") or other online communications through or into
AOL's products or services, absent a Prior Business Relationship. For purposes
of this Agreement, a "Prior Business Relationship" will mean that the AOL User
to whom commercial e-mail or other online communication is being sent has
voluntarily either (i) engaged in a transaction with MP or (ii) provided
information to MP through a contest, registration, or other communication, which
included clear notice to the AOL User that the information provided could result
in commercial e-mail or other online communication being sent to that AOL User
by MP or its agents. Any commercial e-mail or other online communications to AOL
Users which are otherwise permitted hereunder, will (a) include a prominent and
easy means to "opt-out" of receiving any future commercial communications from
MP, and (b) shall also be subject to AOL's then-standard restrictions on
distribution of bulk e-mail (e.g., related to the time and manner in which such
e-mail can be distributed through or into the AOL product or service in
question).

12.  AOL User Communications.  To the extent that MP is permitted to communicate
     --------------------------
with AOL Users under Section 11 of this Exhibit G, in any communications to AOL
Users on or off the Affiliated MP Site (including, without limitation, e-mail
solicitations) that are the type of communications described in Section 11 (the
"AOL User communications"), MP will not encourage AOL Users to take any action
inconsistent with the scope and purpose of this Agreement, including without
limitation, the following actions: (i) using an entry page other than the
Affiliated MP Site for the purchase of Products, (ii) using Content other than
the Licensed Content; (iii) bookmarking of Interactive Sites; or (iv) changing
the default home page on the AOL browser. Additionally, with respect to such AOL
User communications, in the event that MP encourages an AOL User to purchase
products through such communications, MP shall ensure that (a) the AOL Network
is promoted as the primary means through which the AOL User can access the
Affiliated MP Site and (b) any link to the Affiliated MP Site will link to a
page which indicates to the AOL User that such user is in a site which is
affiliated with the AOL Network.

13.  Collection and Use of User Information.  Each party shall ensure that its
     --------------------------------------
collection, use and disclosure of information obtained from AOL Users under this
Agreement ("User Information") complies with (i) all applicable laws and
regulations and (ii) AOL's standard privacy policies, available on the AOL
Service at the keyword term "Privacy" (or, in the case of the Affiliated MP
Site, MP's standard privacy policies so long as such policies are prominently
published on the site and provide adequate notice, disclosure and choice to
users regarding MP's collection, use and disclosure of user information). MP
will not (a) disclose User Information collected hereunder (i) to any third
party in a manner that identifies AOL Users as end users of an AOL product or
service, or (ii) to any Interactive Service or (b) use Member Information
collected under this Agreement to market another Interactive Service. Likewise,
AOL will not without in each case the prior written consent of MP (a) disclose
User Information collected hereunder (i) to any third party in a manner that
identifies AOL Users as end users of an MP product or service, or (ii) to any
Interactive Service or (b) use Member Information collected under this Agreement
to market another provider of the Exclusive Product.

14.  Excuse.  Neither Party will be liable for, or be considered in breach of
     ------
or default under this Agreement on account of, any delay or failure to perform
as required by this Agreement as a result of any causes or conditions which are
beyond such Party's reasonable control and which such Party is unable to
overcome by the exercise of reasonable diligence.

15.  Independent Contractors.  The Parties to this Agreement are independent
     -----------------------
contractors. Neither Party is an agent, representative or employee of the other
Party. Neither Party will have any right, power or authority to enter into any
agreement for or on behalf of, or incur any obligation or liability of, or to
otherwise bind, the other Party. This Agreement will not be interpreted or
construed to create an association, agency, joint venture or partnership between
the Parties or to impose any liability attributable to such a relationship upon
either Party.

16.  Notice.  Any notice, approval, request, authorization, direction or other
     ------
communication under this Agreement will be given in writing and will be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail on the AOL Network (to screenname
"AOLNotice@AOL.com" in the case of AOL) or by confirmed facsimile; (ii) on the
delivery date if delivered personally to the Party to whom the same is directed;
(iii) one business day after deposit with a commercial overnight carrier, with
written verification of receipt; or (iv) five business days after the mailing
date, whether or not actually received, if sent by U.S. mail, return receipt
requested, postage and charges prepaid, or any other means of rapid mail
delivery for which a receipt is available. In the case of AOL, such notice will
be provided to both the Senior Vice President for Business Affairs (fax no. 703-
265-1206) and the Deputy General Counsel (fax no. 703-265-1105), each at the
address of AOL set forth in the first paragraph of this Agreement. In the case
of MP, such notice will be provided to both the Senior Vice

                                       32
<PAGE>

President of Marketing, currently Jon Landers (fax no. 425-201-7887) and the
General Counsel, currently Kristin Stred (fax no. 425-201-7805) each at the
address for MP set forth in the first paragraph of this Agreement.

17.  Launch Dates.  In the event that any terms contained herein relate to or
     ------------
depend on the commercial launch date of the Affiliated MP Site contemplated by
this Agreement (the "Launch Date"), then it is the intention of the Parties to
record such Launch Date in a written instrument signed by both Parties promptly
following such Launch Date; provided that, in the absence of such a written
instrument, the Launch Date will be as reasonably determined by AOL based on the
information available to AOL.

18.  No Waiver.  The failure of either Party to insist upon or enforce strict
     ---------
performance by the other Party of any provision of this Agreement or to exercise
any right under this Agreement will not be construed as a waiver or
relinquishment to any extent of such Party's right to assert or rely upon any
such provision or right in that or any other instance; rather, the same will be
and remain in full force and effect.

19.  Return of Information.  Upon the expiration or termination of this
     ---------------------
Agreement, each Party will, upon the written request of the other Party, return
or destroy (at the option of the Party making the request) all confidential
information, documents, manuals and other materials specified the other Party.

20.  Survival.  Sections 1.2, 4.4, 4.5, 6.2, and 7.7 of the body of the
     --------
Agreement, Sections 4 and 8 through 30 of this Exhibit, and any payment
                                               -------
obligations accrued prior to termination or expiration will survive the
completion, expiration, termination or cancellation of this Agreement.

21.  Entire Agreement.  This Agreement sets forth the entire agreement and
     ----------------
supersedes any and all prior agreements of the Parties with respect to the
transactions set forth herein. Neither Party will be bound by, and each Party
specifically objects to, any term, condition or other provision which is
different from or in addition to the provisions of this Agreement (whether or
not it would materially alter this Agreement) and which is proffered by the
other Party in any correspondence or other document, unless the Party to be
bound thereby specifically agrees to such provision in writing.

22.  Amendment.  No change, amendment or modification of any provision of this
     ---------
Agreement will be valid unless set forth in a written instrument signed by the
Party subject to enforcement of such amendment, and in the case of AOL, by an
executive of at least the same standing to the executive who signed the
Agreement.

23.  Further Assurances.  Each Party will take such action (including, but not
     ------------------
limited to, the execution, acknowledgment and delivery of documents) as may
reasonably be requested by any other Party for the implementation or continuing
performance of this Agreement.

24.  Assignment.  Neither party may assign this Agreement or any right,
     ----------
interest or benefit under this Agreement without the prior written consent of
the other party; provided, however, that (i) MP shall have the right to assign
this Agreement to any successor to MP, whether by way of acquisition, merger,
consolidation or otherwise, without the prior approval of AOL, unless such
successor is an Interactive Service and (ii) AOL shall have the right to assign
this Agreement to any affiliate of AOL. Subject to the foregoing, this Agreement
will be fully binding upon, inure to the benefit of and be enforceable by the
Parties hereto and their respective successors and assigns.

25.  Construction; Severability.  In the event that any provision of this
     --------------------------
Agreement conflicts with the law under which this Agreement is to be construed
or if any such provision is held invalid by a court with jurisdiction over the
Parties to this Agreement, (i) such provision will be deemed to be restated to
reflect as nearly as possible the original intentions of the Parties in
accordance with applicable law, and (ii) the remaining terms, provisions,
covenants and restrictions of this Agreement will remain in full force and
effect.

26.  Remedies.  Except where otherwise specified, the rights and remedies
     --------
granted to a Party under this Agreement are cumulative and in addition to, and
not in lieu of, any other rights or remedies which the Party may possess at law
or in equity; provided that, in connection with any dispute hereunder, MP will
be not entitled to offset any amounts that it claims to be due and payable from
AOL against amounts otherwise payable by MP to AOL.

27.  Applicable Law.  Except as otherwise expressly provided herein, this
     --------------
Agreement will be interpreted, construed and enforced in all respects in
accordance with the laws of the State of New York except for its conflicts of
laws principles.

28.  Export Controls.  Both Parties will adhere to all applicable laws,
     ---------------
regulations and rules relating to the export of technical data and will not
export or re-export any technical data, any products received from the other
Party or the direct product of such technical data to any proscribed country
listed in such applicable laws, regulations and rules unless properly
authorized.

29.  Headings.  The captions and headings used in this Agreement are inserted
     --------
for convenience only and will not affect the meaning or interpretation of this
Agreement.

30.  Counterparts.  This Agreement may be executed in counterparts, each of
     ------------
which will be deemed an original and all of which together will constitute one
and the same document

                                       33<PAGE>

                                                                   EXHIBIT 10.42

           STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
                          FORNI DRIVE--HOMEGROCER.COM

1.   Basic Provisions ("Basis Provisions")

     1.1  Parties: This Lease ("Lease"), dated for reference purposes only March
3, 2000, is made by and between Gonsalves & Santucci, Inc., a California
corporation ("Lessor") and HomeGrocer.Com, Inc., a Delaware corporation
("Lessee"), (collectively the "Parties", or individually a "Party").

     1.2  Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as Forni Drive and described in Exhibit A attached hereto, located in the
County of Contra Costa, State of California, and generally described as a to-be-
constructed free standing concrete tilt-up building of approximately 100,800
square feet comprised of a combination of office and warehouse space
("Building") situated on approximately 5.59 acres (such real property and
Building, the "Premises").  (See also Paragraph 2)

     1.3  Term: Commencing on the Commencement Date (as defined below) and
ending on the last day of the month that is one hundred twenty (120) full months
after the Rent Commencement Date (as defined below) (such last date, the
"Expiration Date"), which initial term is referred to herein as the "Original
Term".  The "Commencement Date" shall be the date that Lessor delivers the
Premises to Lessee in the condition required under this Lease.  The "Rent
Commencement Date" shall be the date that is the earlier of (a) the date that
Lessee commences the operation of business in the Premises, or (b) sixty (60)
days after the Commencement Date (See also Paragraph 3)

     1.4  Early Possession: [not applicable.]

     1.5  Base Rent: Initially, $ 0.68 per square foot of gross space per month
("Base Rent"), payable on the first day of each month commencing on the Rent
Commencement Date.  If the gross square footage is determined to be 100,800
square feet, then the Base Rent will be $68,544 per month, subject to adjustment
as provided in this Lease. (See also Paragraph 4).

     1.6  Base Rent Paid Upon Execution: $68,544 as Base Rent for first full
month after the Rent Commencement Date.  If the first month of the Original Term
is less than a full month, then promptly after the Rent Commencement Date,
Lessee shall pay the Base Rent for such partial month, prorated as provided in
Paragraph 4.2.

     1.7  Security Deposit: $100,000 to be paid by Lessee to Lessor within ten
(10) business days after execution of this Lease by the Parties.  Concurrently
therewith, Lessee is to deliver to Lessor an irrevocable standby letter of
credit issued to Lessor's favor by a financial institution reasonably acceptable
to Lessor, in form reasonably acceptable to Lessor, in the amount of $800,000
("Letter of Credit").  The cash deposit and the Letter of Credit are referred to
herein as the "Security Deposit". (See also Paragraphs 5 and 51)
<PAGE>

     1.8  Agreed Use: warehousing, office, retail distribution and related
activities. (See also Paragraph 6)

     1.9  Insuring Party. Lessor is the "Insuring Party" unless otherwise stated
herein. (See also Paragraph 8)

     1.10 Real Estate Brokers: (See Paragraph 15)

          (a) Representation: The following real estate brokers (collectively,
the "Brokers") and brokerage relationships exist in this transaction:  Cushman &
Wakefield represents Lessor exclusively ("Lessor's Broker"); E&Y Kenneth
Leventhal Real Estate Group represents Lessee exclusively ("Lessee's Broker").

          (b) Payment to Brokers: Upon final approval of the conditional use
permit described in Section 3.3 below, Lessor shall pay to the Brokers one-half
of the fee agreed to in their separate written agreement.  Provided such
conditional use permit is obtained, on or before December 31, 2000, Lessor shall
pay to the Brokers the remaining one-half of the fee.  Lessee's Broker
acknowledges its arrangement with Lessee that immediately upon receipt of its
share of each commission payment from Lessor, Lessee's Broker shall pay such
commission over to Lessee to defray Lessee's costs with respect to the Premises
and this transaction.

     1.11 Guarantor. [not applicable].

     1.12 Addenda and Exhibits. Attached hereto is Addendum A, consisting of
Paragraphs 50 through 58, and Exhibits A through C, all of which constitute a
part of this Lease.

     1.13 Force Majeure. As used in this Lease, "Force Majeure" shall mean any
delay resulting from or caused by an Act of God, fire, earthquake, flood,
explosion, action of the elements, war, invasion, insurrection, riot, mob
violence, sabotage, malicious mischief, inability to procure or general shortage
of labor, equipment, facilities, materials, or supplies in the open market,
inability to obtain or delays in obtaining necessary government approvals,
licenses or permits, failure of transportation, strike, lockout, action of labor
unions, changes in law, order or regulation of government authority, or any
other cause (excluding financial inability) whether similar or dissimilar to the
forgoing not within the reasonable control of Lessor.

     1.14 Work Letter. As used in this Lease, "Work Letter" means the Work
Letter attached to this Lease as Exhibit B.

2.   Premises.

     2.1  Letting; Premises. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease.  The exact square
footage of the Premises shall be determined by Lessor's architect, subject to
the reasonable approval of Lessee.  Lessor's architect shall measure the space,
and certify in writing that such measuring is based upon the standards most
recently promulgated by the Building Owners and Managers Association upon
completion of

                                      -2-
<PAGE>

construction. If Lessee disagrees with the rentable square footage determined by
Lessor's architect, Lessor and Lessee shall mutually agree upon an independent,
third party architect who shall measure the Premises based on the foregoing
standards and whose decision will be final and binding upon Lessor and Lessee.
The cost of such third party architect shall be shared equally by Lessor and
Lessee. Lessor's leasing of the Premises to Lessee also includes the appurtenant
right for Lessee to use, throughout the term all entranceways, common areas,
parking areas, sidewalks, lobbies, elevators, stairwells and other common areas
located on or serving the Building, Complex and Land.

     2.2  Condition. Lessor shall deliver the Premises to Lessee on the
Commencement Date in the condition described in the Work Letter attached hereto
as Exhibit B, and so long as the required service contracts described in
Paragraph 7.1 (b) below are obtained by Lessee within thirty (30) days following
the Commencement Date, warrants that the electrical, plumbing, fire sprinkler,
lighting, heating, ventilating and air conditioning systems ("HVAC"), loading
doors, if any, and all other such elements in the Premises, other than those
constructed by Lessee, shall as of that date be in good operating condition on
said date and that the structural elements of the roof, bearing walls and
foundation of the Building on the Premises shall be free of material defects.
If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, as Lessor's sole obligation with respect to such matter, except as
otherwise provided in this Lease, promptly after receipt of written notice from
Lessee setting forth with reasonable specificity the nature and extent of such
non-compliance, rectify same at Lessor's expense. If, after the Commencement
Date, Lessee does not give Lessor written notice of any non-compliance with this
warranty within: (i) as to the HVAC systems, the later of (a) six (6) months or
(b) ten (10) days prior to the expiration of the warranties therefor, (ii) as to
the remaining systems and other non-structural elements of the Building, the
later of (a) ninety (90) days or (b) ten (10) days prior to the expiration of
all warranties therefor, then correction of such non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense.  Lessor shall within
thirty (30) days after the Commencement Date provide to Lessee copies of all
written warranties for the electrical, plumbing, fire sprinkler, lighting, HVAC
and loading doors, which Lessor covenants and warrants shall be on no less
favorable terms than those standard in the building management industry.

     2.3  Compliance. Lessor warrants that the Building and all other
improvements on the Premises shall comply with all applicable laws, covenants or
restrictions of record, building codes, regulations and ordinances ("Applicable
Requirements") in effect on the Commencement Date, or such later date as the
Building and all other improvements are completed by Lessor.  Said warranty does
not apply to the use to which Lessee will put the Premises or to any Alterations
or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by
Lessee.  Lessee is responsible for determining whether or not the zoning is
appropriate for Lessee's intended use, and acknowledges that past uses of the
Premises may no longer be allowed.  If the Premises do not comply with said
warranty, Lessor shall promptly after receipt of written notice from Lessee
setting forth with specificity the nature and extent of such non-compliance,
rectify the same at Lessor's expense. If the Applicable Requirements are
hereafter changed (as opposed to being in existence at the Commencement Date,
which is addressed in Paragraph 6.2(e) below) so as to require during the term
of this Lease the

                                      -3-
<PAGE>

construction of an addition to or an alteration of the Building, the remediation
of any Hazardous Substance, or the reinforcement or other physical modification
of the Building ("Capital Expenditure"), Lessor and Lessee shall allocate the
cost of such work as follows:

     (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are
required as a result of the specific and unique use of the Premises by Lessee as
compared with uses by tenants in general, Lessee shall be fully responsible for
the cost thereof, provided, however that if such Capital Expenditure is required
(i) during the last two (2) years of the Original Term or any extensions thereof
and the cost thereof exceeds six (6) months Base Rent, or (ii) during the last
twelve (12) months of the Original Term or any extension thereof and the cost
thereof exceeds three (3) months Base Rent, then Lessee may instead terminate
this Lease unless Lessor thereafter notifies Lessee, in writing, within ten (10)
business days after receipt of Lessee's termination notice that Lessor has
elected to pay all the costs of such Capital Expenditures.  If Lessee elects
termination, Lessee's notice of termination shall specify a termination date at
least ninety (90) days thereafter. Such termination date shall, however, in no
event be earlier than the last day that Lessee could legally utilize the
Premises without commencing such Capital Expenditure.

     (b) If such Capital Expenditure is not the result of the specific and
unique use of the Premises by Lessee (such as by way of example, but not by way
of limitation, governmentally mandated seismic modifications), then Lessor and
Lessee shall allocate the obligation to pay for such costs pursuant to the
provisions of Paragraph 7.1 (c).

     (c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.

     2.4  Acknowledgments. Lessor agrees to deliver the Building and the
Premises in the form and condition set forth in the Work Letter attached hereto
as Exhibit B.

3.   Term.

     3.1  Term.  The Commencement Date, Rent Commencement Date, Expiration Date
and Original Term of this Lease are as specified in Paragraph 1.3.

     3.2  Possession on Commencement Date.  While the obligation to pay Base
Rent is abated during the period from the Commencement Date until the Rent
Commencement Date, all other terms of this Lease (including but not limited to
the obligations to pay insurance premiums and to maintain the Premises) shall,
however, be in effect during such period.  Lessee's possession during such
period shall not affect the Expiration Date.

     3.3  Delay In Possession.  Lessor agrees to use its best commercially
reasonable and diligent efforts to obtain a conditional use permit for warehouse
and distribution use of the

                                      -4-
<PAGE>

Premises on or before April 30, 2000. If Lessor is unable to do so, then this
Lease shall terminate on or before May 15, 2000, provided however, that this
Lease shall not terminate, if Lessee provides Lessor with written notice on or
before May 15, 2000 of its intent to (a) keep this Lease in full force and
effect, and (b) seek a conditional use permit for warehouse and distribution
use. If Lessee so notifies Lessor, then (i) Lessee shall diligently seek to
obtain the conditional use permit and Lessor shall fully cooperate with Lessee's
efforts, and (ii) this Lease shall terminate on July 31, 2000 if the
governmental agencies having jurisdiction over this site have not issued the
conditional use permit for warehouse and distribution use of the Premises. If
the conditional use permit is not issued on or before April 30, 2000, then all
provisions of this Lease relating to the date that Lessor will provide the
Premises to Lessee shall be adjusted to reflect the days of delay between April
30, 2000 and the date the conditional use permit is actually issued.
Notwithstanding the foregoing, if such governmental agencies approve the
conditional use permit for warehouse and distribution use, Lessee may within ten
(10) days of such approval seek confirmation that Lessee's planned use of the
Premises as a HomeGrocer facility (but excluding sale of alcoholic beverages)
fits within the uses permitted by the conditional use permit. If Lessee timely
requests confirmation that the conditional use permit will allow such use by
Lessee and confirmation of same is not received by Lessee within 45 days after
such request is made, then Lessee shall have the right to terminate this Lease
by giving Lessor written notice of such termination no later than the first to
occur of five (5) days after said 45 day period, or July 31, 2000, which
termination shall be effective upon Lessor's receipt of such notice. If this
Lease is not terminated pursuant to the foregoing provisions of this Section
3.3, Lessor agrees to use its commercially reasonable and diligent efforts to
complete construction and deliver the Premises to Lessee in the condition
described in the Work Letter on or before the date that is ten (10) months after
the later of the date the conditional use permit is issued, and if requested,
approval of Lessee's planned use is confirmed. If, despite said efforts, Lessor
is unable to deliver the Premises as agreed, Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease.
Lessee shall not, however, be obligated to pay Rent or perform its other
obligations until Lessee receives the Premises including the Building all
completed as required herein. If possession is not delivered as required,
subject to extension of the delivery date for Force Majeure delays, Lessee may
elect to terminate this Lease within ten (10) days after the last date that the
Premises were required to be delivered. If Lessee so terminates this Lease, the
Parties shall be discharged from all obligations hereunder; provided however
that Lessor shall be obligated to reimburse Lessee for out of pocket costs
incurred by Lessee with respect to costs of design of the interior of the
Premises and for obtaining all requisite building and other permits for
construction of the tenant improvements that Lessee would have constructed
therein.

     3.4  Lessee Compliance.  Lessor shall not be required to deliver possession
of the Premises to Lessee until Lessee complies with its obligation to provide
evidence of insurance (Paragraph 8.5).  Pending delivery of such evidence, the
Commencement Date shall be deemed to have occurred and Lessee shall be required
to perform its obligations as provided in this Lease.

4.   Rent.

                                      -5-
<PAGE>

     4.1  Rent Defined.  All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the Security Deposit) are deemed to be rent
("Rent").

     4.2  Payment.  Lessee shall cause payment of Rent to be sent to Lessor in
lawful money of the United States, without offset or deduction (except as
specifically permitted in this Lease), on or before the day on which it is due.
Rent for any period during the term hereof which is for less than one (1) full
calendar month shall be prorated based upon the actual number of days of said
month. Payment of Rent shall be made to Lessor at its address stated herein or
to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating.

     4.3  Annual Adjustments to Base Rent.  Base Rent payable during the
Original Term shall be adjusted on the first day of the month that follows the
twelfth full month after the Rent Commencement Date, and annually thereafter, by
increasing the Base Rent previously in effect by three percent (3%).  For
example, assuming the Premises constitute 100,800 square feet, the initial Base
Rent would be $68,544 per month, the first annual adjustment would increase the
Base Rent to $70,600 per month, the second annual adjustment would increase the
Base Rent to $72,718 per month, and subsequent adjustments would increase the
Base Rent previously in effect by three percent (3%) each year.

5.   Security Deposit.

     See Paragraph 51 for additional provisions relating to the Security
Deposit.

6.   Use.

     6.1  Use.  Lessee shall use and occupy the Premises only for the Agreed Use
(which may include distribution of alcoholic beverages for off-site
consumption).  The Premises may be used for other legal uses which are
reasonably comparable thereto, subject to Lessee obtaining Lessor's prior
written consent, which shall not be unreasonably withheld.  Lessor consents to
the following additional use, provided that Lessee does not seek any required
permits or licenses therefor until Lessor has first obtained the conditional use
permit and necessary building permits to allow Lessor to construct the Premises
in the manner described in the Work Letter attached as Exhibit B:  to the extent
legally necessary to enable Lessee to sell off-site distribution alcoholic
beverages as part of its retail home grocery distribution business, Lessee may
operate an on-site store for the retail sale of alcoholic beverages for off-site
consumption, of a size and capacity not larger than the minimum reasonably
necessary, in the opinion of Lessee's counsel, to qualify for the license needed
for the sale of off-site delivery of alcoholic beverages as part of Lessee's
home grocery retail sale and distribution business.  Lessee shall not use or
permit the use of the Premises in a manner that is unlawful, or creates damage,
waste or a nuisance. Lessor shall not unreasonably withhold or delay its consent
to any written request for a modification of the Agreed Use, so long as the same
will not impair the structural integrity of the improvements on the Premises or
the mechanical or electrical systems therein, and is not significantly more
burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall
within ten (10)

                                      -6-
<PAGE>

business days after such request give written notification of same, which notice
shall include an explanation of Lessor's objections to the change in use.

     6.2  Hazardous Substances.

          (a) Reportable Uses Require Consent. The term "Hazardous Substance" as
used in this Lease shall mean any product, substance, or waste whose presence,
use, manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either: (i)
potentially injurious to the public health, safety or welfare, the environment
or the Premises, (ii) regulated or monitored by any governmental authority, or
(iii) a basis for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory. Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, and/or crude oil or any products, by-products or fractions thereof.
Lessee shall not engage in any activity in or on the Premises which constitutes
a Reportable Use of Hazardous Substances without the express prior written
consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, and may store on the
Premises 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, so long as such use is in compliance with all
Applicable Requirements, is not a Reportable Use, and does not expose the
Premises or neighboring property to any meaningful risk of contamination or
damage or expose Lessor to any liability therefor. In addition, Lessor may
condition its consent to any Reportable Use upon receiving such additional
assurances as Lessor reasonably deems necessary to protect itself, the public,
the Premises and/or the environment against damage, contamination, injury and/or
liability, including, but not limited to, the installation (and removal on or
before Lease expiration or termination) of protective modifications (such as
concrete encasements).

          (b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall immediately give written notice of such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.

          (c) Lessee Remediation. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under, or about the Premises
(including through the plumbing or sanitary sewer system) and shall promptly, at
Lessee's expense, take all

                                      -7-

<PAGE>

investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the cleanup of any contamination of, and for
the maintenance, security and/or monitoring of the Premises or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance brought onto the Premises
during the term of this Lease, by or for Lessee, or any third party under
Lessee's control.

          (d) Lessee Indemnification. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys' and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee,
or any third party (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from adjacent properties, nor shall Lessee have any liability
arising from Lessor's own negligent or intentional acts or omissions). Lessee's
obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease.  No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances, unless specifically so agreed by Lessor in
writing at the time of such agreement.

          (e) Lessor Indemnification. Lessor shall indemnify, defend, reimburse
and hold Lessee, its employees and lenders, harmless from and against any and
all environmental damages, including the cost of remediation, which existed as a
result of Hazardous Substances on the Premises prior to the Commencement Date or
which are caused by the negligence or intentional acts or omissions of Lessor,
its agents or employees. Lessor's obligations, as and when required by the
Applicable Requirements, shall include, but not be limited to, the cost of
investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this Lease.

          (f) Lessor Investigations and Remediations. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Commencement Date, unless such
remediation measure is required as a result of  Lessee's activities on the
Premises, in which event Lessee shall be responsible for such payment.  Lessee
shall cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor's agents to have reasonable access to the Premises at
reasonable times, upon at least 24 hours' notice, in order to carry out Lessor's
investigative and remedial responsibilities.

          (g) Lessor Termination Option. If a Hazardous Substance Condition (as
defined in Paragraph 9.1) occurs during the term of this Lease, unless Lessee is
legally responsible therefor (in which case Lessee shall make the investigation
and remediation thereof required by the Applicable Requirements and this Lease
shall continue in full force and effect, but subject to Lessor's rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's

                                      -8-

<PAGE>

option, either (i) investigate and remediate such Hazardous Substance Condition,
if required, as soon as reasonably possible at Lessor's expense, in which event
this Lease shall continue in full force and effect, or (ii) if the estimated
cost to remediate such condition exceeds twelve (12) times the then monthly Base
Rent, give written notice to Lessee, within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of
Lessor's desire to terminate this Lease as of the date one hundred twenty (120)
days following the date of such notice. In the event Lessor elects to give a
termination notice, Lessee may, within ten (10) days thereafter, give written
notice to Lessor of Lessee's commitment to pay the amount by which the cost of
the remediation of such Hazardous Substance Condition exceeds an amount equal to
twelve (12) times the then monthly Base Rent. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days following
such commitment; provided however that after making such commitment, if Lessee
so desires, Lessee shall have a period of ninety (90) days to review the costs
of remediation and obtain bids from other firms reasonably satisfactory to
Lessor to remediate the Hazardous Substance Condition. In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice or Lessee does not provide the
required funds or assurance thereof within the time provided, then unless Lessor
rescinds its termination notice, this Lease shall terminate as of the date
specified in Lessor's notice of termination.

     6.3  Lessee's Compliance with Applicable Requirements. Except as otherwise
provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Commencement Date.
Lessee shall, within ten (10) days after receipt of Lessor's written request,
provide Lessor with copies of all permits and other documents, and other
information evidencing Lessee's compliance with any Applicable Requirements
specified by Lessor, and shall immediately upon receipt, notify Lessor in
writing (with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or involving
the failure of Lessee or the Premises to comply with any Applicable
Requirements.

     6.4  Inspection; Compliance. Lessor and Lessor's "Lender" (as defined in
Paragraph 30 below) and consultants shall have the right to enter into Premises
at any time, in the case of an emergency, and otherwise at reasonable times upon
at least 24 hours' prior notice, but generally no more than twice in any one
calendar year, for the purpose of inspecting the condition of the Premises and
for verifying compliance by Lessee with this Lease.  In exercising their rights
hereunder Lessor and Lessor's Lender shall not unreasonably interfere with or
materially adversely affect the operation of Tenant's business.  The cost of any
such inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or a contamination is found to exist or be imminent, or the
inspection is requested or ordered by a governmental authority, and such
violation, contamination or request is as a result of Lessee's acts or
omissions.  In such case, Lessee shall upon request reimburse Lessor for the
commercially reasonable cost of such inspections, so long as such inspection is
reasonably related to the violation or contamination.

                                      -9-

<PAGE>

7.   Maintenance; Repairs, Utility Installations; Trade Fixtures and
     Alterations.

     7.1  Lessee's Obligations.

          (a) In General.  Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises,
Utility Installations, and Alterations in good order, condition and repair
(whether or not the portion of the Premises requiring repairs, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's use, the
elements or the age of such portion of the Premises), including, but not limited
to, all equipment or facilities, such as plumbing, heating, ventilating, air-
conditioning, electrical, lighting facilities, boilers, pressure vessels, fire
protection system, fixtures, interior non-load bearing walls, ceilings, floors,
windows, doors, plate glass, skylights, landscaping, driveways, parking lots,
fences, retaining walls, signs, sidewalks and parkways located in or on the
Premises. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices, specifically including
the procurement and maintenance of the service contracts required by Paragraph
7.1(b) below. Lessee's obligations shall include roof repairs (but not
replacement) and non-structural restorations, replacements or renewals of all
improvements on or in the Premises or the Building or a part thereof, to keep
same in good order, condition and state of repair. Lessee shall, during the term
of this Lease, keep the exterior appearance of the Building in a first-class
condition consistent with the exterior appearance of other similar facilities of
comparable age and size in the vicinity, including, when necessary, exterior
repainting of the Building.

          (b) Service Contracts. Lessee shall, at Lessee's sole expense, procure
and maintain contracts, with copies to Lessor, in customary form and substance
for, and with contractors specializing and experienced in the maintenance of the
following equipment and improvements ("Basic Elements"), if any, if and when
installed on the Premises: (i) HVAC equipment, (ii) boiler, and pressure
vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke
detection, (iv) landscaping and irrigation systems, (v) roof covering and
drains, (vi) driveways and parking lots, (vii) clarifiers (viii) basic utility
feed to the perimeter of the Building, and (ix) any other equipment, if
reasonably required by Lessor.

          (c) Replacement. Subject to Lessee's indemnification of Lessor as set
forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if the Basic Elements described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of replacing
such Basic Elements, then such Basic Elements shall be replaced by Lessor, and
the cost thereof shall be prorated between the Parties and Lessee shall only be
obligated to pay, each month during the remainder of the term of this Lease, on
the date on which Base Rent is due, an amount equal to the product of
multiplying the cost of such replacement by a fraction, the numerator of which
is one, and the denominator of which is the number of months of the useful life
of such replacement as such useful life is determined in accordance with
generally accepted accounting

                                      -10-
<PAGE>

principles ("GAAP") (including Interest (as defined in Paragraph 13.5) on the
unamortized balance) with Lessee reserving the right to prepay its obligation at
any time.

     7.2  Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation),
it is intended by the Parties hereto that Lessor have no obligation, in any
manner whatsoever, to repair and maintain the non-structural aspects of the
Premises, or the equipment therein, all of which obligations are intended to be
that of the Lessee. It is the intention of the Parties that the terms of this
Lease govern the respective obligations of the Parties as to maintenance and
repair of the Premises, and they expressly waive the benefit of any statute now
or hereafter in effect to the extent it is inconsistent with the terms of this
Lease.  Except for Lessee's obligation to maintain the non-structural components
of the roof and periodically repaint the Building, Lessee is not obligated to
maintain any structural or exterior components of the Building, which
obligations remain the Lessor's.

     7.3  Utility Installations; Trade Fixtures; Alterations.

          (a) Definitions; Consent Required. The term "Utility Installations"
refers to all floor and window coverings, air lines, power panels, electrical
distribution, security and fire protection systems, communication systems,
antennas and satellite dishes, refrigeration equipment, lighting fixtures, HVAC
equipment, plumbing, and fencing in or on the Premises. The term "Trade
Fixtures" shall mean Lessee's machinery and equipment that can be removed
without doing material damage to the Premises, including but not limited to
Lessee's antennas and satellite dishes, and refrigeration equipment. The term
"Alterations" shall mean any modification of the improvements, other than
Utility Installations or Trade Fixtures, whether by addition or deletion.
"Lessee Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee. Lessee shall not make
any Alterations or Utility Installations to the Premises without Lessor's prior
written consent. Lessee may, however, make non-structural Alterations and
Utility Installations to the interior of the Building (excluding the roof)
without such consent but upon notice to Lessor, as long as they are not visible
from the outside, do not involve puncturing, relocating or removing the roof or
any exterior walls, and the cumulative cost thereof in any year during this
Lease as extended does not exceed $50,000.

          (b) Consent.  Any Alterations or Utility Installations that Lessee
shall desire to make and which require the written consent of the Lessor shall
be presented to Lessor in written form with detailed plans.  Lessor shall review
such detailed plans and give Lessee written notice of consent or rejection
within ten (10) days after receipt by Lessor.  In the event Lessor does not
provide such written consent or rejection within such ten (10) day period,
Lessor is deemed to have approved all such plans.  At the time Lessor gives
consent, Lessor shall state whether the Alteration or Installation will be
required to be removed at the end of the Term or any extensions.  Failure of
Lessor to state in the written consent that the Alteration or Installation
should be removed shall be deemed a waiver of Lessor's right to require such
removal.  Consent shall be deemed conditioned upon Lessee's: (i) acquiring all
applicable governmental permits, (ii) furnishing Lessor with copies of both the
permits and the plans and specifications prior to commencement of the work, and
(iii) compliance with all conditions of said permits and other

                                      -11-
<PAGE>

Applicable Requirements in a prompt and expeditious manner. Any Alterations or
Utility Installations shall be performed in a workmanlike manner with good and
sufficient materials. Lessee shall promptly upon completion furnish Lessor with
as-built plans and specifications. For work which costs an amount greater than
one month's Base Rent, Lessor may condition its consent upon Lessee providing a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor.

          (c) Indemnification. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility. If Lessee shall contest the validity of any such
lien, claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof. If Lessor shall require, Lessee shall furnish a surety bond in an
amount equal to one and one-half times the amount of such contested lien, claim
or demand, indemnifying Lessor against liability for the same. If Lessor elects
to participate in any such action, Lessee shall pay Lessor's attorneys'
reasonable fees and costs.

     7.4  Ownership; Removal; Surrender; and Restoration.

          (a) Ownership.  All Alterations and Utility Installations made by
Lessee shall be the property of Lessee, but considered a part of the Premises.
Unless otherwise provided in this Lease or agreed to by Lessor, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of
this Lease, shall remain the property of Lessee and not be surrendered by Lessee
with the Premises.

          (b) Removal.  Lessee shall remove all Lessee Owned Alterations or
Utility Installations by the expiration or termination of this Lease. Lessor may
require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without Lessor's consent under
circumstances that required Lessor's consent.

          (c) Surrender/Restoration. Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear, and wear and tear
caused by Lessor's own negligent or intentional acts or omissions, excepted.
"Ordinary wear and tear" shall not include any damage or deterioration that
would have been prevented by good maintenance practice.  Lessee shall repair any
damage occasioned by the installation, maintenance or removal of Trade Fixtures,
Lessee Owned Alterations and Utility Installations, furnishings, and equipment
as well as the removal of any storage tank installed by or for Lessee, and the
removal, replacement, or remediation of any soil, material or groundwater
contaminated by Lessee. Trade Fixtures shall remain the property of Lessee and
shall be removed by Lessee. The failure by Lessee to timely vacate the Premises

                                      -12-

<PAGE>

pursuant to this Paragraph 7.4(c) without the express written consent of Lessor
shall constitute a holdover under the provisions of Paragraph 26 below.

8.   Insurance; Indemnity.

     8.1  Payment For Insurance. Lessee shall pay for all insurance required
under Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor under Paragraph 8.2(b) in excess of $5,000,000 per
occurrence. Premiums for policy periods commencing prior to or extending beyond
the Lease term shall be prorated to correspond to the Lease term. Payment shall
be made by Lessee to Lessor within ten (10) days following receipt of an
invoice.

     8.2  Liability Insurance.

          (a) Carried by Lessee. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee and Lessor
against claims for bodily injury, personal injury and property damage based upon
or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $5,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises
Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement"
for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall
not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance carried by Lessee shall be primary to and not contributory with any
similar insurance carried by Lessor, whose insurance shall be considered excess
insurance only.

          (b) Carried by Lessor. Lessor may at its own expense maintain
liability insurance as described in Paragraph 8.2(a), which insurance would be
in addition to, and not in lieu of, the insurance required to be maintained by
Lessee.  If Lessor maintains such insurance, Lessee shall not be named as an
additional insured thereunder.

     8.3  Property Insurance - Building, Improvements And Rental Value.

     (a) Building and Improvements. The Insuring Party shall obtain and keep in
force a policy or policies in the name of Lessor, with loss payable to Lessor,
any ground lessor, and to any Lender(s) insuring loss or damage to the Premises.
The amount of such insurance shall be equal to the full replacement cost of the
Premises, as the same shall exist from time to time, or the amount required by
any Lenders, but in no event more than the commercially reasonable and available
insurable value thereof. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations, Trade Fixtures, and Lessee's personal
property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor.
If the coverage is available and commercially appropriate, such policy or
policies shall insure against all risks of direct physical loss or damage
(including the perils of flood and earthquake), including coverage for debris

                                      -13-
<PAGE>

removal and the enforcement of any Applicable Requirements requiring the
upgrading, demolition, reconstruction or replacement of any portion of the
Premises as the result of a covered loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per occurrence,
and Lessee shall be liable for such deductible amount in the event of an Insured
Loss.

     (b) Rental Value. The Insuring Party shall obtain and keep in force a
policy or policies in the name of Lessor with loss payable to Lessor and any
Lender, insuring the loss of the full Rent for one (1) year. Said insurance
shall provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide for
one full year's loss of Rent from the date of any such loss. Said insurance
shall contain an agreed valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the next twelve (12) month period. Lessee
shall be liable for any deductible amount in the event of such loss.

     (c) Adjacent Premises. [Intentionally Deleted.]

     8.4  Lessee's Property/Business Interruption Insurance.

     (a) Property Damage. Lessee shall obtain and maintain insurance coverage on
all of Lessee's personal property, Trade Fixtures, and Lessee Owned Alterations
and Utility Installations. Such insurance shall be full replacement cost
coverage with a deductible of not to exceed $1,000 per occurrence. The proceeds
from any such insurance shall be used by Lessee for the replacement of personal
property, Trade Fixtures and Lessee Owned Alterations and Utility Installations.
Lessee shall provide Lessor with written evidence that such insurance is in
force.

     (b) Business Interruption. Lessee shall obtain and maintain loss of income
and extra expense insurance in amounts as will reimburse Lessee for direct or
indirect loss of earnings attributable to all perils commonly insured against by
prudent lessees in the business of Lessee or attributable to prevention of
access to the Premises as a result of such perils.

     (c) No Representation of Adequate Coverage. Lessor makes no representation
that the limits or forms of coverage of insurance specified herein are adequate
to cover Lessee's property, business operations or obligations under this Lease.

     8.5  Insurance Policies.  Insurance required herein shall be by companies
duly licensed or admitted to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least A-, VII, as set forth in the most current issue of "Best's
Insurance Guide", or such other rating as may be required by a Lender. Neither
party shall do or permit to be done anything which invalidates the required
insurance policies.  Lessee shall, prior to the Start Date, deliver to Lessor
certified

                                      -14-
<PAGE>

copies of policies of such insurance or certificates evidencing the existence
and amounts of the required insurance. No policy required under this Lease shall
be cancelable or subject to modification except after thirty (30) days prior
written notice to each party. Both parties shall, at least thirty (30) days
prior to the expiration of such policies, furnish the other with evidence of
renewals or "insurance binders" evidencing renewal thereof, or the other party
may order such insurance and charge the cost thereof to the first party, which
amount shall be payable by the other upon demand. Such policies shall be for a
term of at least one year, or the length of the remaining term of this Lease,
whichever is less. If either Party shall fail to procure and maintain the
insurance required to be carried by it, the other Party may, but shall not be
required to, procure and maintain the same.

     8.6  Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages against the other, for loss of or damage to its
property arising out of or incident to the perils required to be insured against
herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto. The
Parties agree to have their respective property damage insurance carriers waive
any right to subrogation that such companies may have against Lessor or Lessee,
as the case may be.  Such waiver of all claims and rights of subrogation shall
remain in full force and effect irrespective of whether a party fails to carry
insurance it is required to carry pursuant to this Lease.

     8.7  Indemnity. Except for Lessor's negligence or intentional acts or
omissions, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
liens, judgments, penalties, attorneys' and consultants fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be defended or indemnified.

     8.8  Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant or Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.

9.  Damage or Destruction.

                                      -15-

<PAGE>

     9.1

     (a)  Definitions.

          (i) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which can reasonably be repaired in six (6)
months or less from the date of the damage or destruction.

          (ii) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which cannot reasonably be repaired in six (6) months or less
from the date of the damage or destruction.

          (iii)  "Insured Loss" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations
and Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.

          (iv) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.

          (v) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.

     (b) Notice.  Lessor shall notify Lessee in writing within thirty (30) days
from the date of the damage or destruction as to whether or not Lessor has
determined whether the damage is Partial or Total.

     9.2  Partial Damage - Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that if such damage or destruction is
non-structural in nature and the total cost to repair is equal to or less than
the monthly Base Rent then in effect, then at Lessor's election, Lessee shall
make the repair of such damage or destruction, provided that Lessor makes any
applicable insurance proceeds available to Lessee on a prompt basis for that
purpose.  Lessor covenants to promptly file a claim with its insurer in order to
satisfy its obligations under this Section. Notwithstanding the foregoing, if
the required insurance was not in force or the insurance proceeds are not
sufficient to effect such repair, Lessor shall promptly contribute the shortage
in proceeds (except as to the deductible which is Lessee's responsibility) as
and when required to complete said repairs.

                                      -16-

<PAGE>

     9.3  Partial Damage - Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by Lessee's willful misconduct, in
which event Lessee shall promptly make the repairs at Lessee's expense, Lessor
may either: (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) terminate this Lease by giving written notice to Lessee within thirty (30)
days after receipt by Lessor of knowledge of the occurrence of such damage. Such
termination shall be effective sixty (60) days following the date of such
notice. In the event Lessor elects to terminate this Lease, Lessee shall have
the right within ten (10) business days after receipt of the termination notice
to give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available and diligently pursue such
repairs to completion. If Lessee does not make the required commitment, this
Lease shall terminate as of the date specified in the termination notice.

     9.4  Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, Lessor has the right to (i) terminate this
Lease on sixty (60) days written notice to Tenant; or (ii) reconstruct the
Premises (but not Lessee's Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect; provided, however, that if such destruction
was caused by the gross negligence or willful misconduct of Lessee, then Lessor
may elect either to terminate this Lease as above provided, or to require Lessee
to reconstruct the Premises.

     9.5  Damage Near End of Term. If, at any time during the last six (6)
months of the Original Term or any extensions thereof, there is damage for which
the cost to repair exceeds six (6) month's Base Rent, whether or not an Insured
Loss, Lessor may terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving a written termination notice to
Lessee within thirty (30) days after the date of occurrence of such damage.
Notwithstanding the foregoing, if Lessee at that time has an exercisable option
to extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, exercising such option (a) in writing, and (b) providing Lessor any
shortage in insurance proceeds (or reasonably adequate assurance thereof) needed
to make the repairs, such exercise to be on or before the earlier of (i) the
date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires.  If Lessee duly exercises such option during such period
and provides Lessor with a commitment to deliver funds (or reasonably adequate
assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at
Lessor's commercially reasonable expense, repair such damage as soon as
reasonably possible and this Lease shall continue in full force and effect. If
Lessee fails to exercise such option and provide such funds or assurance during
such period, then this Lease shall terminate on the date specified in the
termination notice and Lessee's option shall be extinguished.

     9.6  Abatement of Rent; Lessee's Remedies.

                                      -17-
<PAGE>

          (a) Abatement. In the event of Premises Partial Damage or Premises
Total Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated as of
the date of the casualty in proportion to the degree to which Lessee's use of
the Premises is impaired, but in no event shall the amount of rent abated be
less than the proceeds received by Lessor from the Rental Value insurance. All
other obligations of Lessee hereunder shall be performed by Lessee, and Lessor
shall have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.

          (b) Remedies. If Lessor shall be obligated to repair or restore the
Premises and does not commence such repair, within thirty (30) days after such
obligation shall accrue, Lessee may, at any time prior to the commencement of
such repair or restoration, give written notice to Lessor and to any Lenders of
which Lessee has actual notice, of Lessee's election to terminate this Lease on
a date not less than sixty (60) days following the giving of such notice.  If
Lessee gives such notice and such repair or restoration is not commenced within
thirty (30) days thereafter, this Lease shall terminate as of the date specified
in said notice. If the repair or restoration is commenced within said thirty
(30) days, this Lease shall continue in full force and effect. "Commence" shall
mean either (i) the unconditional authorization of (x) the preparation of the
required plans, and (y) the preparation of the application for all requisite
building and other permits, or (ii) the beginning of the actual work on the
Premises, whichever first occurs.

     9.7  Termination-Advance Payments. Upon termination of this Lease pursuant
to Paragraph 6.2(g) or Paragraph 9, a full refund of all unearned advance Base
Rent and any other advance payments made by Lessee to Lessor within thirty (30)
days. Lessor shall, in addition, return to Lessee so much of Lessee's Security
Deposit as has not been, or is not then required to be, used by Lessor, provided
such use is proper.

     9.8  Waive Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.

10.  Real Property Taxes.

     10.1  Definition of "Real Property Taxes:' As used herein, the term "Real
Property Taxes" shall include any form of assessment; real estate, general,
special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises that are obligations incurred during the Term of this Lease,
regardless of the date the bill is received, Lessor's right to other income
therefrom, and/or Lessor's business of leasing, by any authority having the
direct or indirect power to tax and where the funds are generated with reference
to the Building address and where the proceeds so generated are to be applied by
the city, county or other local taxing authority of a jurisdiction within which
the Premises are located.  For the purposes of calculating Lessee's liability
hereunder, in all cases, any such assessment, bond, charge, fee, levy, or tax
shall be amortized

                                      -18-
<PAGE>

over its full life, period, or term. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring during the term of this Lease, including
but not limited to, a change in the ownership of the Premises, but do not
include transfer taxes and similar charges imposed on the transfer itself.

     10.2

     (a)  Payment of Taxes. Lessee shall pay the Real Property Taxes applicable
to the Premises during the term of this Lease. Subject to Paragraph 10.2(b), and
provided that Lessor has provided the property tax statement to Lessee at least
thirty (30) days prior to the delinquency date, each payment shall be made at
least ten (10) days prior to the delinquency date. Lessee shall promptly furnish
Lessor with satisfactory evidence that such taxes have been paid. If any such
taxes shall cover any period of time prior to or after the expiration or
termination of this Lease, Lessee's share of such taxes shall be prorated to
cover only that portion of the tax bill applicable to the period from the
Commencement Date through the expiration or earlier termination of this Lease,
and Lessor shall reimburse Lessee for any overpayment. If Lessee shall fail to
pay any required Real Property Taxes, Lessor shall have the right to pay the
same, and Lessee shall reimburse Lessor therefor upon demand.

     (b)  Advance Payment. If Lessee fails to timely pay Rent and incurs a late
charge for such failure pursuant to Section 13.4, and this occurs more than once
in any calendar year, Lessor may thereafter during the term of this Lease, at
Lessor's option, estimate the current Real Property Taxes, and require that such
taxes be paid in advance to Lessor by Lessee monthly with the payment of the
Base Rent. If Lessor elects to require payment monthly in advance, the monthly
payment shall be an amount equal to the amount of the estimated installment of
taxes divided by the number of months remaining before the month in which said
installment becomes delinquent. When the actual amount of the applicable tax
bill is known, the amount of such equal monthly advance payments shall be
adjusted as required to provide the funds needed to pay the applicable taxes. If
the amount collected by Lessor is insufficient to pay such Real Property Taxes
when due, Lessee shall pay Lessor, upon demand, such additional sums as are
necessary to pay such obligations. All moneys paid to Lessor under this
Paragraph may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a Breach by Lessee in the performance of its
obligations under this Lease, then any balance of funds paid to Lessor under the
provisions of this Paragraph may at the option of Lessor, be treated as an
additional Security Deposit.

     10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessors work sheets or such other information as
may be reasonably available.

     10.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, with Lessor's

                                      -19-
<PAGE>

cooperation, Lessee shall cause such property to be assessed and billed
separately from the real property of Lessor. If any of Lessee's said personal
property shall be assessed with Lessor's real property, Lessee shall pay Lessor
the taxes attributable to Lessee's property concurrent with Lessee's payment of
Real Property Taxes.

     10.5 Protest of Increase. If in any year the Real Property Taxes are
increased during the term of this Lease by more than the approximately two
percent (2%) per annum increase that is normal under California law, Lessor
shall either (i) file a notice as permitted by applicable law protesting such
increase and thereafter pursue such protest in a commercially reasonable manner
to completion; or (ii) notify Lessee, at least thirty (30) days prior to the
deadline for filing any such notice of protest, that Lessor does not intend to
file such notice of protest, in which case Lessee shall have the right to
protest such increase in Lessor's name.  If Lessee chooses to protest any such
increase,  Lessor shall fully cooperate with Lessee's efforts provided Lessee
pays all costs and expenses necessary to conduct such protest.  In the event
Lessor protests such increase and a reduction in the taxes for the Property
results, Lessee shall promptly reimburse to Lessor all costs and expenses
incurred by Lessor with respect to such protest.  Lessee shall be entitled to
the benefit of such reduction, 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.  If Lessee protests any such increase and the taxes for the Property
are reduced as a result of such protest, Lessor and Lessee shall each be
entitled to the benefit of such reduction.

11.  Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon.

12.  Assignment and Subletting.

     12.1 Lessor's Consent Required.

          (a)  Lessee shall not voluntarily or by operation of law, assign,
transfer, mortgage or encumber (collectively, "assign or assignment") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent, except that Lessee shall have the right to
assign this Lease in its entirety or to sublease all or any portion of the
Premises without the consent of Lessor to (a) any entity resulting from a merger
or consolidation with Lessee, (b) any parent, subsidiary or affiliate of Lessee,
(c) a successor corporation related to a non-bankruptcy reorganization or
government action, or (d) an entity that acquires all or substantially all of
Lessee's assets in California that relate to distribution of grocery products.
Nor shall the provisions of this Section 12 apply to any sale of common stock of
Lessee through an Initial Public Offering or subsequent offering and trading.

          (b)  Subject to the exceptions described in (a) above, a change in the
control of Lessee shall constitute an assignment requiring consent. The
transfer, on a cumulative basis, of fifty percent (50%) or more of the voting
control of Lessee shall constitute a change in control for this purpose.

          (c)  Subject to the exceptions described in (a) above, the involvement
of Lessee or its assets in any transaction, or series of transactions (by way of
merger, sale,

                                      -20-
<PAGE>

acquisition, financing, transfer, leveraged buy-out or otherwise), whether or
not a formal assignment or hypothecation of this Lease or Lessee's assets
occurs, which results or will result in a reduction of the Net Worth of Lessee
by an amount greater than fifty percent (50%) of such Net Worth as it was
represented at the time of the execution of this Lease or at the time of the
most recent assignment to which Lessor has consented, or as it exists
immediately prior to said transaction or transactions constituting such
reduction, whichever was or is greater, shall be considered an assignment of
this Lease to which Lessor may withhold its consent. "Net Worth of Lessee" shall
mean the net worth of Lessee (excluding any guarantors) established under
generally accepted accounting principles.

          (d) In the event of an assignment or subletting without consent
(unless such consent is not required pursuant to the exceptions described in (a)
above), Lessor may elect to treat such assignment or subletting as a (a) Default
curable after notice per Paragraph 13.1(c); or (b) as a noncurable Breach, in
which case Lessor may either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice, increase the monthly Base Rent to one hundred ten percent
(110%) of the Base Rent then in effect. Further, in the event of such Breach and
rental adjustment, (i) the purchase price of any option to purchase the Premises
held by Lessee shall be subject to similar adjustment to one hundred ten percent
(110%) of the price previously in effect, and (ii) all fixed and non-fixed
rental adjustments scheduled during the remainder of the Lease term shall be
increased to One Hundred Ten Percent (110%) of the scheduled adjusted rent.

          (e)  Lessee's remedy for any Default of Paragraph 12.1 by Lessor shall
be limited to compensatory damages and/or injunctive relief.

     12.2 Terms and Conditions Applicable to Assignment and Subletting.

          (a)  Regardless of whether Lessor's consent is required, but subject
to any specific agreement by Lessor, any assignment or subletting shall not: (i)
be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Rent or for the performance of any other obligations to be
performed by Lessee.

          (b)  Lessor may accept Rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for Lessee's Breach.

          (c)  Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.

          (d)  In the event of any Breach by Lessee, Lessor may proceed directly
against Lessee, or anyone else responsible for the performance of Lessee's
obligations under this Lease, including any assignee or sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefore to Lessor, or any security held by Lessor.

                                      -21-
<PAGE>

          (e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $1,000 as
consideration for Lessor's considering and processing said request. Lessee
agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested.

          (f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing.

     12.3  Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

          (a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until a Breach shall occur in the performance of Lessee's obligations,
Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or
any assignment of such sublease, nor by reason of the collection of Rent, be
deemed liable to the sublessee for any failure of Lessee to perform and comply
with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably
authorizes and directs any such sublessee, upon receipt of a written notice from
Lessor stating that a Breach exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor all Rent due and to become due under the
sublease. Sublessee shall rely upon any such notice from Lessor and shall pay
all Rents to Lessor without any obligation or right to inquire as to whether
such Breach exists, notwithstanding any claim from Lessee to the contrary.

          (b) In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.

          (c) Any matter requiring the consent of the sublessor under a sublease
shall also require the consent of Lessor.

          (d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.

                                      -22-

<PAGE>

          (e) Lessor shall deliver a copy of any notice of Default by Lessee to
the sublessee, who shall have the right to cure the Default of Lessee within the
grace period, if any, specified in such notice. The sublessee shall have a right
of reimbursement and offset from and against Lessee for any such Defaults cured
by the sublessee.

13.  Default; Breach; Remedies.

     13.1  Default; Breach.  "Default" is defined as a failure by the Lessee to
comply with or perform any of the terms, covenants, conditions or rules under
this Lease. A "Breach" is defined as the occurrence of one or more of the
following Defaults, and the failure of Lessee to cure such Default within any
applicable grace period:

          (a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, or where the
coverage of the property insurance described in Paragraph 8.3 is jeopardized as
a result thereof, or without providing reasonable assurances to minimize
potential vandalism.

          (b) The failure of Lessee to make any payment of Rent or any Security
Deposit required to be made by Lessee hereunder, whether to Lessor or to a third
party, when due, to provide reasonable evidence of insurance or surety bond, or
to fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of ten (10) days following
written notice to Lessee.

          (c) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts, (iii)
the rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate, (v) a requested subordination, (vi) any document requested under
Paragraph 42 (easements), or (vii) any other documentation or information which
Lessor may reasonably require of Lessee under the terms of this Lease, where any
such failure continues for a period of fifteen (15) days following written
notice to Lessee.

          (d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, other than those described in subparagraphs 13.1 (a),
(b) or (c), above, where such Default continues for a period of thirty (30) days
after written notice; provided, however, that if the nature of Lessee's Default
is such that more than thirty (30) days are reasonably required for its cure,
then it shall not be deemed to be a uncured Breach if Lessee commences such cure
within said thirty (30) day period and thereafter diligently prosecutes such
cure to completion.

          (e) The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "debtor" as defined in 11 U.S.C. (S) 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within sixty (60) days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged

                                      -23-
<PAGE>

within thirty (30) days; provided, however, in the event that any provision of
this subparagraph (e) is contrary to any applicable law, such provision shall be
of no force or effect, and not affect the validity of the remaining provisions.
(f) The discovery that any financial statement of Lessee given to Lessor was
materially false and Tenant knew it to be false at the time it was given to
Lessor.

          (g)  Intentionally Deleted.

     13.2  Remedies. If Lessee fails to perform any of its affirmative duties or
obligations, within the applicable grace period, if any (or in case of an
emergency, without notice from Lessor), Lessor may, at its option, perform such
duty or obligation on Lessee's behalf, including but not limited to the
obtaining of reasonably required bonds, insurance policies, or governmental
licenses, permits or approvals. The costs and expenses of any such performance
by Lessor shall be due and payable by Lessee upon receipt of invoice therefor.
If any check given to Lessor by Lessee shall not be honored by the bank upon
which it is drawn, Lessor, at its option, may require all future payments to be
made by Lessee to be by cashier's check. In the event of a Breach, Lessor may,
on written notice, and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such Breach:

          (a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent (1%).  Commercially reasonable efforts by
Lessor to mitigate damages caused by Lessee's Breach of this Lease shall not
waive Lessor's right to recover damages under Paragraph 12.  If termination of
this Lease is obtained through the provisional remedy of unlawful detainer,
Lessor shall have the right to recover in such proceeding any unpaid Rent and
damages as are recoverable therein, or Lessor may reserve the right to recover
all or any part thereof in a separate suit. If a notice and grace period
required under Paragraph 13.1 was not previously given, a notice to pay rent or
quit, or to perform or quit given to Lessee under the unlawful detainer statute
shall also constitute the notice required by Paragraph 13.1. In such case, the
applicable grace period required by Paragraph 13.1

                                      -24-

<PAGE>

and the unlawful detainer statute shall run concurrently, and the failure of
Lessee to cure the Default within the greater of the two such grace periods
shall constitute both an unlawful detainer and a Breach of this Lease entitling
Lessor to the remedies provided for in this Lease and/or by said statute.

          (b) Continue the Lease and Lessee's right to possession and recover
the Rent as it becomes due, in which event Lessee may sublet or assign, subject
only to reasonable limitations. Acts of maintenance, efforts to relet, and/or
the appointment of a receiver to protect the Lessor's interests, shall not
constitute a termination of the Lessee's right to possession.

          (c) Pursue any other remedy now or hereafter available under the laws
or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.

     13.3  Inducement Recapture. Intentionally Deleted.

     13.4  Late Charges. Lessee hereby acknowledges that late payment by Lessee
of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within seven (7) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to five percent (5%) of each such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, then notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor's option,
become due and payable quarterly in advance.

     13.5  Interest. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within thirty (30) days following the date on which it was due for non-
scheduled payment, shall bear interest from the date when due, as to scheduled
payments, or the thirty-first (31st) day after it was due as to non-scheduled
payments. The interest ("Interest") charged shall be equal to the prime rate
reported in the Wall Street Journal as published closest prior to the date when
due plus two percent (2%), but shall not exceed the maximum rate allowed by law.
Interest is payable in addition to the potential late charge provided for in
Paragraph 13.4.

  13.6  Breach by Lessor.

          (a) Notice of Breach. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by

                                      -25-
<PAGE>

Lessor. For purposes of this Paragraph, a reasonable time shall in no event be
less than thirty (30) days after receipt by Lessor, and any Lender whose name
and address shall have been furnished Lessee in writing for such purpose, of
written notice specifying wherein such obligation of Lessor has not been
performed; provided, however, that if the nature of Lessor's obligation is such
that more than thirty (30) days are reasonably required for its performance,
then Lessor shall not be in breach if performance is commenced within such
thirty (30) day period and thereafter diligently pursued to completion.

          (b) Performance by Lessee on Behalf of Lessor. In the event that
neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent until Lessee's reasonable costs of repairs are
covered.  If Lessee's reasonable costs of repair exceed the remaining financial
obligations of Lessee under this Lease, Lessor shall reimburse any remaining
balances to Lessee upon the expiration or early termination of this Lease.
Prior to seeking such offset or reimbursement, Lessee shall document the cost of
said cure and supply said documentation to Lessor.

     13.7  Mitigation.  Notwithstanding any other provision of this Lease,
provided that Lessee reasonably cooperates with Lessor, Lessor shall take
commercially reasonable steps to mitigate its damages.

14.  Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "Condemnation"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If, in the event of a Condemnation, it is determined, as provided
below, that Lessee cannot operate its business in and on the Premises as a
result of the Condemnation, Lessee may, as provided below, terminate this Lease
as of the date the condemning authority takes such possession. If Lessee does
not so terminate this Lease, this Lease shall remain in full force and effect as
to the portion of the Premises remaining, except that the Base Rent shall be
reduced in proportion to the reduction in utility of the Premises caused by such
Condemnation. Condemnation awards and/or payments shall be the property of
Lessor, whether such award shall be made as compensation for diminution in value
of the leasehold, the value of the part taken, or for severance damages;
provided, however, that Lessee shall be entitled to any compensation for
Lessee's relocation expenses, loss of business goodwill and/or Trade Fixtures,
without regard to whether or not this Lease is terminated pursuant to the
provisions of this Paragraph. All Alterations and Utility Installations made to
the Premises by Lessee, for purposes of Condemnation only, shall be considered
the property of the Lessee and Lessee shall be entitled to any and all
compensation which is payable therefor. In the event that this Lease is not
terminated by reason of the Condemnation, Lessor shall repair any damage to the
Premises caused by such Condemnation.

  14.1  Inability to Conduct Business.  If as a result of a partial
Condemnation, it would not be commercially feasible for Lessee to continue to
conduct its business in the Premises after a restoration were completed, then
Lessee shall have the right to terminate this Lease by giving

                                      -26-
<PAGE>

notice of termination to Lessor, which notice must be given within thirty (30)
days after the determination is made, as provided below, that it would no longer
be commercially feasible for Lessee to continue the conduct its business in the
Leased Premises. In the event of such termination, Lessee shall not be obligated
for Restoration of the Leased Premises.

          (a) If Lessee determines in its reasonable business judgment exercised
in good faith that after a taking or proposed taking it would not be
commercially feasible to continue to conduct its business in the Premises,
Lessee shall so notify Lessor within thirty (30) days of Lessee's receipt of
notice of such taking or proposed taking.  Lessor shall thereupon determine
within thirty (30) days of its receipt of such notice, whether in its reasonable
business judgment exercised in good faith, it agrees with Lessee.  If Lessor and
Lessee do not agree, then the matter shall be submitted for determination by an
independent third party, as provided below.

          (b) The independent third party to decide any dispute as to whether it
would be commercially feasible for Lessee to continue to conduct its business in
the Premises after a restoration were completed shall be a person presently
employed in an executive capacity in the retail warehouse/distribution industry,
with at least 10 years recent experience in such industry, provided however such
person shall not be employed by or have any direct or indirect interest in any
competitor of Lessee (such person, "Qualified Mediator").  If Lessor and Lessee
are unable to agree on one Qualified Mediator within fifteen (15) days after the
end of said thirty (30) day period, then each shall within ten (10) days
thereafter select a Qualified Mediator and the two selected Qualified Mediators
shall promptly meet to appoint a third Qualified Mediator who alone shall
determine the matter; provided however that if only one party selects a
Qualified Mediator within such ten (10) day period, then such Qualified Mediator
shall be deemed agreed upon by the parties.  The single Qualified Mediator
selected as provided above shall promptly determine the matter and immediately
report such determination concurrently to Lessor and Lessee.

          (c) If pursuant to the foregoing provisions it is determined that it
is no longer commercially feasible for Lessee to continue the conduct of its
business in the Leased Premises, then Lessee may notify Lessor within thirty
(30) days of such determination that Lessee has elected to terminate this Lease.
If timely notice of termination is given, such termination shall be effective
upon the Condemnation, if the notice is timely given prior thereto, or if the
notice of termination is timely given, but is given after the Taking, then such
termination shall be effective sixty (60) days after such notice is given.

15.  Brokers' Fee.

     15.1  Additional Commission. [Intentionally Deleted]

     15.2  Assumption of Obligations. [Intentionally Deleted]

     15.3  Representations and Indemnities of Broker Relationships. Lessee and
Lessor each represent and warrant to the other that it has had no dealings with
any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than

                                      -27-
<PAGE>

said named Brokers is entitled to any commission or finder's fee in connection
herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend
and hold the other harmless from and against liability for compensation or
charges which may be claimed by any such unnamed broker, finder or other similar
party by reason of any dealings or actions of the indemnifying Party, including
any costs, expenses, attorneys' fees reasonably incurred with respect thereto.

16.  Estoppel Certificates.

     (a) Each Party (as "Responding Party") shall within ten (10) days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Estoppel Certificate" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

     (b) If the Responding Party shall fail to execute or deliver the Estoppel
Certificate within such ten day period, the Responding Party is deemed to have
agreed that: (i) the Lease is in full force and effect without modification
except as may be represented by the Requesting Party, (ii) there are no uncured
defaults in the Requesting Party's performance, and (iii) if Lessor is the
Requesting Party, not more than one month's rent has been paid in advance.
Prospective purchasers and encumbrancers may rely upon the Requesting Party's
Estoppel Certificate, and the Responding Party shall be estopped from denying
the truth of the facts contained in said Certificate, unless the facts are
patently or intentionally inaccurate.

     (c) If Lessor desires to finance, refinance, or sell the Premises, or any
part thereof, Lessee shall deliver to any potential lender or purchaser
designated by Lessor the most recently prepared set of those financial
statements that are customarily prepared by a public company; and Lessee shall
not be required to provide financial statements or other financial information
that is different in nature than the financial information provided by Lessee to
Lessor to induce Lessor to enter into this Lease. All such financial statements
shall be received by Lessor and such lender or purchaser in confidence and shall
be used only for the purposes herein set forth.

17.  Definition of Lessor. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid,
provided the transferee assumes all of the liabilities of the Lessor that arise
after the date of the transfer of the Lease, the prior Lessor shall be relieved
of all liability with respect to the obligations and/or covenants under this
Lease thereafter to be performed by the Lessor. Subject to the foregoing, the
obligations and/or covenants in this Lease to be performed by the Lessor shall
be binding only upon the Lessor as herein above defined. Notwithstanding the
above, and subject to the provisions of Paragraph 20 below, the original Lessor
under this Lease, and all subsequent holders of the Lessor's interest in this
Lease shall remain liable and responsible with regard to the potential duties
and liabilities of

                                      -28-

<PAGE>

Lessor pertaining to Hazardous Substances as outlined in Paragraph 6 above, to
the extent that such duties and liabilities were incurred by the original Lessor
and each subsequent Lessor, respectively, during each such Lessor's period of
ownership of the Premises.

18.  Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.

19.  Days. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.

20.  Limitation on Liability. Subject to the provisions of Paragraph 17 above,
the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, as well as the income from the Premises, the proceeds from any
Condemnation award, the proceeds from any insurance policy and the proceeds from
the Security Deposit and the Letter of Credit, and to no other assets of Lessor,
for the satisfaction of any liability of Lessor with respect to this Lease, and
shall not seek recourse against the individual partners of Lessor, or its or
their individual partners, directors, officers or shareholders, or any of their
personal assets for such satisfaction.

21.  Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

22.  No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and Attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker's liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.

23.  Notices.

     23.1  Notice Requirements. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by courier) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice. A copy of all
notices to Lessor or Lessee shall be

                                      -29-

<PAGE>

concurrently transmitted to such party or parties (but no more than two others
for each of Lessor and Lessee) at such addresses as Lessor or Lessee may from
time to time hereafter designate in writing.

     23.2  Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail the notice shall be deemed given forty-eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantee next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the Postal Service or courier. Notices transmitted by
facsimile transmission or similar means shall be deemed delivered upon
confirmation of receipt, provided a copy is also delivered via delivery or mail.
If notice is received on a Saturday, Sunday or legal holiday or after 5:00 p.m.
on a business day, it shall be deemed received on the next business day.

24.  Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. The acceptance of Rent by
Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by
Lessee may be accepted by Lessor on account of moneys or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.

25.  Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.

26.  No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred twenty-five percent (125%) of the Base Rent applicable during the
month immediately preceding the expiration or termination. Nothing contained
herein shall be construed as consent by Lessor to any holding over by Lessee.

27.  Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28.  Covenants and Conditions; Construction of Agreement. All provisions of this
Lease to be observed or performed by Lessee are both covenants and conditions.
In construing this Lease, all headings and titles are for the convenience of the
parties only and shall not be considered a part of this Lease. Whenever required
by the context, the

                                      -30-

<PAGE>

singular shall include the plural and vice versa. This Lease shall not be
construed as if prepared by one of the parties, but rather according to its fair
meaning as a whole, as if both parties had prepared it.

29.  Binding Effect; Choice of Law. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.

30.  Subordination; Attornment; Non-Disturbance.

     30.1  Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lender') shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee, whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.

     30.2  Attornment. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one (1) month's rent.

     30.3  Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within sixty (60) days after the execution of this Lease,
Lessor shall use its commercially reasonable efforts to obtain a Non-
Disturbance Agreement from the holder of any pre-existing Security Device which
is secured by the Premises. In the event that Lessor is unable to provide the
Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement.

     30.4  Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises,

                                      -31-

<PAGE>

Lessee and Lessor shall execute such further writings as may be reasonably
required to separately document any subordination, attornment and/or Non-
Disturbance Agreement provided for herein.

     30.5  Non-Termination.  Nothing in this Section 30 grants any Lender or any
party taking title to the Premises through any Lender, the right to terminate
this Lease, it being agreed that any such rights of Lender or other party to
terminate arise out of, and are exercised pursuant to and in accordance with,
Section 13 hereof.

31.  Attorneys' Fees. If any Party or Broker brings an action or proceeding
involving the Premises to enforce the terms hereof or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees and
costs. Such fees may be awarded in the same suit or recovered in a separate
suit, whether or not such action or proceeding is pursued to decision or
judgment. The term, "Prevailing Party" shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense. The attorneys' fees award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees reasonably incurred. In addition,
Lessor shall be entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach, provided such Default or Breach actually
occurs and is not merely alleged by Lessor.

32.  Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times upon at least 24 hours prior notice
for the purpose of showing the same to prospective purchasers, lenders, or
lessees (only during the last six months of the Original Term or any extension
thereof), and making repairs to the Premises as Lessor may deem necessary. All
such activities shall be without abatement of rent or liability to Lessee.
Lessor may, with Lessee's consent, which shall not be unreasonably withheld,
place on the Premises any ordinary "For Sale" signs.  During the last six (6)
months of the term or any extensions, Lessor may place on the Premises any
ordinary "For Lease" signs. Lessee may at any time place on or about the
Premises any ordinary "For Sublease" sign.

33.  Auctions. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises without Lessor's prior written consent. Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether to
permit an auction.

34.  Signs. Except for ordinary "For Sublease" signs, Lessee shall not place any
sign upon the Premises without Lessor's prior written consent, which shall not
be unreasonably withheld.  All signs must comply with all Applicable
Requirements.

35.  Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation

                                      -32-
<PAGE>

hereof, or a termination hereof by Lessor for Breach by Lessee, shall
automatically terminate any sublease or lesser estate in the Premises; provided,
however, that Lessor may elect to continue any one or all existing subtenancies,
and in any such case, such tenancy is a direct relationship between Lessor and
any such subtenant, and Lessee has no liability of any kind whatsoever for the
performance of any obligations under any such relationship. Lessor's failure
within ten (10) days following any such event to elect to the contrary by
written notice to the holder of any such lesser interest, shall constitute
Lessor's election to have such event constitute the termination of such
interest.

36.  Consents. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld, conditioned or delayed.  Consenting party's
actual reasonable costs and expenses (including but not limited to architects',
attorneys', engineers and other consultant fees) incurred in the consideration
of, or response to, a request by the other party for any consent, including but
not limited to consents to an assignment, a subletting or the presence or use of
a Hazardous Substance, shall be paid by the other party upon receipt of an
invoice and supporting documentation therefor. consenting party's consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
default or breach by the other party of this Lease exists, nor shall such
consent be deemed a waiver of any then existing default or breach, except as may
be otherwise specifically stated in writing by the consenting party at the time
of such consent. The failure to specify herein any particular condition to
consenting party's consent shall not preclude the imposition by the consenting
party at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given. In the event that either Party disagrees with any determination made by
the other hereunder and reasonably requests the reasons for such determination,
the determining party shall furnish its reasons in writing and in reasonable
detail within ten (10) business days following such request.

37.  Guarantor.  [not applicable/deleted]

38.  Quiet Possession. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.

39.  Options.

     39.1  Definition. "Option" shall mean the right to extend the term of or
renew this Lease as set forth in Paragraph 53 below.

     39.2  Options Personal To Original Lessee. Each Option granted to Lessee in
this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.  For purposes hereof, the original Lessee shall be deemed to include
a

                                      -33-
<PAGE>

successor lessee to whom Lessee's interest in the Lease is assigned in a
transaction that does not require the consent of Lessor pursuant to the
provisions of this Lease.

     39.3 Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options have been validly exercised.

     39.4 Effect of Default on Options.

          (a)  Lessee shall have no right to exercise an Option: (i) during the
period commencing with the giving of any notice of Default and continuing until
said Default is cured, (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has
been given three (3) or more notices of separate material Default, whether or
not the material Defaults are cured, during the twelve (12) month period
immediately preceding the exercise of the Option.

          (b)  The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).

          (c)  At the election of Lessor, an Option shall terminate and be of no
further force or effect, notwithstanding Lessee's due and timely exercise of the
Option, if, after such exercise and prior to the commencement of the extended
term, (i) Lessee fails to pay Rent for a period of thirty (30) days after such
Rent becomes due (without any necessity of Lessor to give notice thereof), (ii)
Lessor gives to Lessee two (2) or more notices of separate and material Default
during any six (6) month period, whether or not the material Defaults are cured,
or (iii) if Lessee commits a Breach of this Lease.

          (d)  The provisions of this Section 39.4 only apply where a Default or
Breach has actually occurred, and is not merely alleged by Lessor.

40.  Multiple Buildings. Intentionally deleted.

41.  Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

42.  Reservations. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not materially interfere (which for purposes hereof the term "do
not materially interfere" shall mean the interference is minor and not
significant) with the use of the Premises by Lessee. Lessee agrees to sign any
documents

                                      -34-
<PAGE>

reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.

43.  Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay. The party holding the funds shall
return funds to the other party within thirty (30) days after the ruling that
such funds were not owed by that other party.

44.  Authority. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each party
shall, within thirty (30) days after request, deliver to the other party
satisfactory evidence of such authority.

45.  Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions, provided such typewritten or handwritten provisions are
initialed by both parties hereto.

46.  Offer. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.

47.  Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification, As long as they do not
adversely change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.

48.  Multiple Parties. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.

49.  Mediation and Arbitration of Disputes.

          (a)  In any case of dispute relating to or arising out of this
Agreement, including but not limited to Section 14. above, (in all cases,
"Dispute"), the parties shall attempt, in good faith, to mediate such
disagreement.  Within fifteen (15) days of the request of any party, the parties
shall employ the services of a third person, mutually acceptable to the parties,
who shall conduct such mediation at a location in the Concord, California area
within fifteen (15) days of his or her appointment.  The parties shall act
reasonably in the selection of the mediator,

                                      -35-
<PAGE>

shall participate in good faith in such mediation and use their best efforts to
reach agreement on the matters in dispute. However, if upon completion of such
mediation, the parties remain unable to agree, then the parties shall proceed to
arbitration as provided in (b) hereafter.

          (b)  Any Dispute shall be settled by binding arbitration conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, as then in effect, except as hereinafter provided.

          (1)  Unless the parties agree otherwise, any such arbitration shall be
held at a place within the Concord area before one (1) arbitrator who shall be
selected by mutual agreement of the parties; if agreement is not reached on the
selection of the arbitrator within (15) days after receipt of a demand for
arbitration by the other party (the "Initial Selection Period"), then each party
shall have fifteen (15) days from the expiration of the Initial Selection Period
to select an arbitrator.  The arbitrators so selected shall select a neutral
arbitrator which neutral arbitrator shall arbitrate the dispute.  If either
party fails to timely select an arbitrator, the arbitrator selected by the other
party shall arbitrate the dispute.

          (2)  The parties shall provide each other with production of all
requested documents and records reasonably related to the dispute in a manner
that will minimize the expense and inconvenience of both parties.  Discovery
will not include depositions or interrogatories except as the arbitrator
expressly allows on a showing of need.

          (3)  Cost and fees of the arbitrator who conducts the arbitration
shall be borne by the non-prevailing party, unless the arbitrator determines
otherwise. The award of the arbitrator, which may include equitable relief,
shall be final and judgment may be entered upon it in accordance with applicable
law in any court having jurisdiction thereof. Any demand for arbitration shall
be in writing and must be made within a reasonable time after the Dispute has
arisen. In no event shall the demand for arbitration be made after the date that
institution of legal or equitable proceedings based upon such Dispute would be
barred by applicable statutes of limitations.

          NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU
ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A
COURT OR JURY TRIAL.  BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR
JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION.  IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE
UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE.  YOUR AGREEMENT
TO THIS ARBITRATION PROVISION IS VOLUNTARY.  WE HAVE READ AND UNDERSTAND THE
FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN
THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.

                                      -36-
<PAGE>

     INITIALED BY LESSOR:         INITIALED BY LESSEE:
                         -------                      --------

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

50.  TENANT IMPROVEMENTS.

     The Lessor will provide a tenant improvement allowance ("TI Allowance") of
Three Hundred Sixty Thousand and No/100 Dollars ($360,000.00) to be used for
space planning, standard office and warehouse improvements only.  The TI
Allowance shall be paid by Lessor to Lessee within ten (10) days after the Rent
Commencement Date, subject to Lessee providing Lessor with paid invoices that
evidence qualifying expenditures in an amount at least equal to the TI
Allowance.  If less than the full amount is spent by Lessee, then such lesser
amount will be reimbursed by Lessor.  Any tenant improvements in excess of the
TI Allowance shall be paid for by Lessee, although Lessee's Broker has agreed
with Lessee that in addition to the TI Allowance to be provided by Lessor to
Lessee, Lessee's Broker will pay over to Lessee upon receipt from Lessor,
Lessee's Broker's commission, which in the aggregate will be $231,409 when it is
fully earned.

51.  SECURITY DEPOSIT:

     51.1 Within ten (10) business days after execution of this Lease by the
Parties, Lessee shall deposit with Lessor a cash Security Deposit, in the amount
stated in Paragraph 1.7, for the faithful performance of its obligations under
this Lease. If Lessee fails to pay Rent, or otherwise Defaults under this Lease,
Lessor may use, apply or retain all or any portion of said Security Deposit for
the payment of any amount due Lessor or to reimburse or compensate Lessor for
any actual liability, expense, loss or damage which Lessor may suffer or incur
by reason thereof. If Lessor properly applies all or any portion of said
Security Deposit, Lessee shall within ten (10) business days after written
request by Lessor thereof deposit monies with Lessor sufficient to restore said
Security Deposit to the full amount required by this Lease. Within thirty (30)
days after the Premises have been vacated pursuant to Paragraph 7.4(c), Lessor
shall return all of that portion of the Security Deposit not properly used or
applied by Lessor. No part of the Security Deposit shall be considered to be
held in trust, to bear interest or to be prepayment for any monies to be paid by
Lessee under this Lease.

     51.2 As additional security for the faithful performance of Lessee's
obligations under this Lease, Lessee shall, within ten (10) business days
following the execution of this Lease by the Parties, deliver to Lessor, an
unconditional, irrevocable, transferable letter of credit (the

                                      -37-
<PAGE>

"Letter of Credit"), naming Lessor as beneficiary, in the form of Exhibit C to
the Lease, and issued by a financial institution ("Issuer"), reasonably
satisfactory to Lessor. The amount available to be drawn, only when the cash
Security Deposit stated in Paragraph 1.7 is insufficient, under the Letter of
Credit shall be Eight Hundred Thousand Dollars ($800,000). So long as there is
no uncured Default or Breach then existing under the Lease, the amount remaining
available to be drawn under the Letter of Credit shall be as follows:
<TABLE>
<CAPTION>
Months (counting from the       Minimum Amount Available
Rent Commencement Date)        Under the Letter of Credit        Percentage Decrease
   <S>                              <C>                           <C>
       01 - 12                         $800,000                          20%
       13 - 24                         $640,000                          20%
       25 - 36                         $480,000                          20%
       37 - 48                         $320,000                          20%
       49 - 60                         $160,000                          20%
       61 - 72                         $ 50,000                          N/A
       73 - 84                         $ 50,000                          N/A
</TABLE>

The foregoing reductions in the face amount of the Letter of Credit shall be
accomplished through the delivery of substitute Letters of Credit.  Without
limiting the generality of the foregoing, no Letter of Credit shall provide for
any reduction in its face value other than those resulting from draws on such
Letter of Credit.  Lessee shall have exclusive right to pursue a reduction in
the Letter of Credit at any time during the Lease Term in accordance with the
above schedule provided that there is no uncured Default or Breach then existing
under the Lease.

     51.3 Lessor shall be entitled to draw any portion or all of the amount
under the Letter of Credit, only when the cash Security Deposit stated in
Paragraph 1.7 is insufficient, or if (i) Lessee fails to replenish the cash
Security Deposit as required above, or (ii) a Breach occurs under the Lease, or
(iii) Lessee does not deliver to Lessor a replacement letter of credit from
Issuer or another financial institution satisfactory to Lessor in the amount and
form of the initial Letter of Credit no later than thirty (30) days before the
expiration date of the then outstanding Letter of Credit, or (iv) if upon a
proposed sale or lease of the Building, Lessee does not deliver to any new
landlord a replacement Letter of Credit pursuant to the provisions of Paragraph
51.5 below.  The Letter of Credit shall provide for partial draws by Lessor in
accordance with this paragraph.  Any such draws when made shall be deemed
applied to the amounts owing under this Lease (in such order as Lessor may
elect).  In the event of any draw under the Letter of Credit, only in an amount
reasonably necessary to cure a Breach by Lessee that is not cured within any
applicable cure periods.  After any such draw, Lessee shall within ten (10)
business days after demand thereof from Lessor, cause the amount remaining
available to be drawn under the Letter of Credit to be increased by an amount
equal to the amount drawn.  Any improper draws by Lessor upon the Letter of
Credit shall be deemed a Breach by Lessor, and Lessee shall be entitled to an
offset, equal to the amount drawn, on the Base Rent, and all costs incurred by
Lessee.  Additionally, if the Letter of Credit was previously reduced as
permitted under this Paragraph 51, Lessee shall not be responsible for
increasing the Letter of Credit to the original amount and, if

                                      -38-
<PAGE>

consistent with the provisions of this Paragraph 51, the revised amount of the
Letter of Credit shall continue to be decreased by the percentage in the
schedule above.

     51.4  Lessee shall not assign or encumber or attempt to assign or encumber
the Letter of Credit and neither Lessor nor its successors or assigns shall be
bound by any such assignment or encumbrance or attempted assignment or
encumbrance.

     51.5  In the event of a sale or other transfer of the Building, Lessee
will, if requested by Lessor in writing, at Lessor's sole cost and expense
within ten (10) business days after receiving such request, cause the issuing
bank of the Letter of Credit to consent to the assignment or to issue a
substitute letter of credit on identical terms to the Letter of Credit other
than the stated beneficiary, from the same issuing bank naming such transferee
as the beneficiary thereof, upon delivery by Lessor of the then outstanding
Letter of Credit to Lessee.  Lessee's obligations hereunder are contingent upon
such delivery by Lessor.  The provisions of this paragraph are contingent upon
the acceptance of the transferee of all provisions of this Lease, pursuant to
Section 12.

52.  GENERAL IMPROVEMENTS:  As per Work Letter attached as Exhibit B.

53.  LESSEE'S EXTENSION OPTIONS.

     53.1  Options.  Subject to the provisions of Paragraph 39, Lessee shall
have the following options to extend the term of this Lease (each an "Extension
Option").  (1) an option (the "First Extension Option") to extend the term of
this Lease, for the period from the expiration of the Original Term for a period
of five (5) years (the "First Extension Period"), by delivering written notice
to Lessor of exercise of Lessee's First Extension Option at least six (6) months
prior to expiration of the Original Term, but not more than twelve (12) months
prior to the expiration of the Original Term, and (2) if Lessee duly exercises
the First Extension Option, an additional option (the "Second Extension Option")
to further extend the term of this Lease, for an additional five (5) years after
the expiration of the First Extension Period (the "Second Extension Period"), by
delivering written notice to Lessor of exercise of Lessee's Second Extension
Option at least six (6) months prior to the end of the First Extension Period,
but not more than twelve (12) months prior to the end of the First Extension
Period.  Any Extension Option shall terminate if not exercised in the manner
provided herein.  Any such extension shall be upon all the terms and conditions
set forth in this Lease, except as may be expressly modified and fully executed
by both parties.

     53.2  Fair Market Base Rental.  The Base Rent for each Extension Period
("Fair Market Base Rental") shall be determined as set forth below.  "Fair
Market Base Rental" shall mean the Base Rent at the time or times in question
for the applicable space, based on the prevailing rentals then being charged to
new tenants in similar buildings in the Greater Concord area, of comparable
size, location, quality and age as the Building, with comparable tenant
improvements, and taking into account the method for payment of taxes and
expenses or increases in taxes and expenses for the space in the building for
which Fair Market Base Rental is being determined.  Fair Market Base Rental
shall also reflect the then prevailing rental

                                      -39-
<PAGE>

structure for comparable buildings in the general vicinity of the Premises, so
that if, for example, at the time Fair Market Base Rental is being determined
the prevailing rental structure for comparable space and for comparable lease
terms includes periodic rental adjustments or escalations, Fair Market Base
Rental shall reflect such rental structure. The value of cash and non-cash
tenant concessions included in the transactions being used for comparison shall
also be taken into account in determining prevailing rentals.

     53.3  Determination of Fair Market Base Rental.  Upon written notice of
Lessee's exercise an Extension Option, Lessor shall within ten (10) days provide
Lessee, with written notice of the amount which Lessor contends to be the Fair
Market Base Rental.  Within ten (10) days after receipt of Lessor's written
notice of the Fair Market Base Rental, Lessee shall give Lessor written notice
("Lessee's Response"), either (a) accepting the statement of Fair Market Base
Rental set forth in Lessor's notice, or (b) rejecting the Fair Market Base
Rental set forth in Lessor's notice and specifying the amount Lessee contends to
be the Fair Market Base Rental.  If Lessee rejects the Fair Market Base Rental
specified by Lessor, then Lessor and Lessee shall endeavor to negotiate a
mutually acceptable resolution to their dispute concerning the Fair Market Base
Rental.  If they are unable to agree on the Fair Market Base Rental within
fifteen (15) days after receipt by Lessee's Response, then such rental shall be
determined as follows:  Lessor and Lessee shall, within ten (10) days, each
separately designate a licensed real estate broker who is reasonably active in
the leasing of the office/warehouse space in the Greater Concord area to
participate in determination of the Fair Market Base Rental.  If either Lessor
or Lessee fails timely to designate a broker as provided above, then the
determination of Fair Market Base Rental shall be made solely by the broker
timely designated by the other party and such determination shall be binding on
Lessor and Lessee.  Within thirty (30) days thereafter, the broker(s) shall each
determine the Fair Market Base Rental.  If two brokers have been selected as
provided above and the brokers do not agree upon the actual Fair Market Base
Rental, then if their determinations of Fair Market Base Rental are within ten
percent (10%) of one another, then the two statements of Fair Market Base Rental
shall be averaged and such amount shall be binding on Lessor and Lessee as the
Fair Market Base Rental.  If the higher determination exceeds the lower by more
than ten percent (10%) of the lower, then the two brokers shall be instructed to
appoint, within ten (10) days thereafter, a third broker or appraiser who has
significant experience and is then active leasing or appraising office/warehouse
space in the Greater Concord area.  If the two brokers designated by Lessor and
Lessee cannot agree on the appointment of a third broker or appraiser within the
time period provided, either Lessor or Lessee may seek the appointment of a
third broker or appraiser by the presiding judge for the Contra Costa County
Superior Court.  The third broker or appraiser shall then determine which of the
two final contended Fair Market Base Rental amounts submitted by the parties is
closet to the actual Fair Market Base Rental, and such determination shall be
binding on Lessor and Lessee as the Fair Market Base Rental.

     53.4  Costs and Expenses.  All reasonable fees and expenses of the brokers
shall be paid as follows:  Lessor shall advance the fees and expenses of the
broker designated by Lessor and Lessee shall advance the fees and expenses of
the broker designed by Lessee.  Lessor and Lessee shall each advance one half of
any fees and expenses of the third broker or appraiser.  The

                                      -40-
<PAGE>

attorneys' fees and expenses of counsel for the respective parties and of
witnesses shall be paid and borne by the party engaging such counsel or calling
such witness, as the case may be.

     53.5  Payments Pending Determination.  If the Fair Market Base Rental for
any Extension Period has not been determined at such time as Lessee is obligated
to pay Base Rent for such Extension Period, Lessee shall pay as Base Rent
pending such determination 110% of the Base Rent in effect for such space
immediately prior to the Extension Period; provided, that upon the determination
of the applicable Fair Market Base Rental, any shortage of Base Rent paid shall
be paid to Lessor by Lessee, and any excess of Base Rent shall be paid by Lessor
to Lessee.

54.  SIGNAGE:

     All signage must be approved by Lessor and comply with County of Contra
Costa codes and regulations. Signage criteria shall be submitted in writing to
Lessor prior to installation. Lessee shall be allowed to place signage on the
building fronting Fomi Drive (south side) only.

55.  ROOF INSTALLATIONS:

     Lessee, at its sole cost and expense, shall have the option to install (a)
antennas and satellite dishes, (b) refrigeration equipment, and (c) heating
ventilation and air conditioning equipment on the roof of the Premises subject
to applicable codes, provided that the working drawings are submitted to Lessor
for its prior review and approval.  Exterior roof installations are subject to
obtaining a conditional use permit issued by the County of Contra Costa. All
associated costs shall be paid by Lessee.  Lessor shall deliver standard
industrial load roof as provided in the attached Work Letter.   If structural
enhancement is required as a result of roof installations, the Lessee shall pay
such upgrades.  Notwithstanding any provision in this Lease to the contrary,
Lessee shall have the right to retain all such equipment at the end of the term
or any extensions, provided that Lessee returns the roof structure to its
original condition, normal wear and tear accepted.

56.  [Not applicable/deleted]

57.  PARKING:

     57.1  Lessee shall have the right to use the entire Premises for parking.
Lessor shall apply for land use and building permits using the parking plan
shown on the attached site plan attached as Exhibit "D".  Lessee, at its sole
cost and expense, shall have the option to develop and submit for Contra Costa
County approval an alternate parking plan, provided that such alternate parking
plan is submitted to Lessor for its prior review and approval, which shall not
be unreasonably withheld, conditioned or delayed.  Lessor's failure to review
and approve the plans within ten (10) days of its receipt of same shall be
deemed an approval of such alternate parking plan.  Whichever parking plan is
approved, Lessee shall have the right to park delivery vehicles around the
Premises and stage such vehicles in and around the Premises.

                                      -41-
<PAGE>

     57.2  While not a condition to this Lease, Lessee desires to obtain
additional parking in the vicinity of the Premises.  Lessor agrees to use best
efforts to negotiate a lease for approximately 60,000 square feet of property
(the "Lesher Parcel") adjacent to the north side of the Premises for Lessee's
use for additional parking.  If Lessor is successful in negotiating such a lease
(the "Additional Parking Lease"), Lessor shall provide the final draft thereof
to Lessee, and Lessee shall have five (5) business days to determine, in its
sole and absolute discretion, if the terms and provisions of such lease are
acceptable to Lessee.  If Lessee notifies Lessor in writing that the Additional
Parking Lease is acceptable to Lessee, Lessor shall enter into such lease and
upon execution thereof, the Lesher Parcel shall become a part of the Premises
hereunder and Lessee shall be deemed to have sublet the Lesher Parcel from
Lessor on the terms and provisions of the Additional Parking Lease; provided
however that if rent is payable under the Additional Parking Lease (it is
possible that no rent will be payable and instead the sole consideration for the
lease will be the construction of parking improvements on adjacent property of
the landlord thereunder for the benefit of said landlord), the rent payable by
Lessee to Lessor hereunder for the Lesher Parcel shall be 110% of such rent
(excluding the costs of construction of parking improvements) payable under the
Additional Parking Lease.  Lessee agrees that Lessee shall be solely responsible
for obtaining all necessary permits to construct, and for constructing, all at
Lessee's sole cost and expense, the parking improvements to be constructed
pursuant to the Additional Parking Lease.

58.  OUTSIDE WORK AND STORAGE:

     At no time shall Lessee be permitted to conduct work activities (except for
normal loading and unloading of vehicles) nor store goods or material of any
kind outside of the confines of the Premises.

IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the date
and year first above written.

LESSOR:                                LESSEE:

GONSALVES & SANTUCCI, INC.,            HOMEGROCER.COM, INC.,
a California corporation               a Delaware corporation

By: /s/ Barry Silberman                By: /s/ Kristin Stred
   --------------------------------       --------------------------------
Name Printed: Barry Silberman          Name Printed:  Kristin Stred
             ----------------------                 ----------------------
Title: Vice President                  Title: Sr. Vice President and
      -----------------------------           ----------------------------
                                              General Counsel
                                              ----------------------------

By:                                    By: /s/ Mary Alice Taylor
   --------------------------------       --------------------------------
Name Printed:                          Name Printed:  Mary Alice Taylor
             ----------------------                 ----------------------
Title:                                 Title: Chairman and Chief Executive
      -----------------------------           ----------------------------
                                              Officer
                                              ----------------------------
                                      -42-

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