Document:

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                                 LEASE AGREEMENT

               THIS LEASE AGREEMENT is made this 8th day of September, 1999 (the
"Commencement Date") between ProLogis Development Services Incorporated, a
Delaware corporation, having its principal office at 14100 East 35th Place,
Aurora, Colorado 80011 ("Landlord"), and the Tenant named below ("Tenant").

Tenant:                           barnesandnoble.com llc

Tenant's representative,          William F. Duffy, Vice President of Operations
address, and phone no.:           76 Ninth Avenue, 11th Floor
                                  New York, NY  10011
                                  (212) 414-6006

Premises:                         The Land and the Building, together with (x)
                                  any and all other improvements and structures
                                  (now or hereafter erected) on the Land, and
                                  (y) all of Landlord's right, title and
                                  interest in and to all easements, rights and
                                  other matters appurtenant to the Land or the
                                  Building and in and to any land lying in the
                                  bed of any roads adjacent to the Land.

Project:                          That certain industrial project commonly known
                                  as Damonte Ranch Trade Center I, which
                                  industrial project is composed of the parcels
                                  of land lying and being in the County of
                                  Washoe, State of Nevada, as more particular
                                  described in Exhibit B annexed hereto,
                                  together with any improvements now or
                                  hereafter erected thereon.

Building:                         That certain building that is to be erected by
                                  Landlord in accordance with Addendum 2 of this
                                  Lease, which building is to contain
                                  approximately 600,000 rentable square feet of
                                  space.

Land:                             That certain parcel of land lying and being in
                                  the County of Washoe and State of Nevada, as
                                  more particularly described in Exhibit A
                                  annexed hereto.

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Common Area Land:                 That certain parcel of land lying and being in
                                  the County of Washoe and State of Nevada, as
                                  more particularly described in Exhibit C
                                  annexed hereto.

Tenant's Project
Proportionate
Share:                            33.96% (subject to downward adjustment as
                                  provided for under this Lease). Tenant's
                                  Project Proportionate Share has been
                                  calculated based on the fraction, the
                                  numerator of which is the square footage of
                                  the Building (for purposes of this estimate is
                                  deemed to be 600,000) and the denominator of
                                  which is the maximum buildable area contained
                                  within the Project (which maximum buildable
                                  area Landlord represents and warrants is, as
                                  of the Commencement Date, 1,766,727 square
                                  feet, it being agreed that (x) Tenant's sole
                                  remedy in the event of a breach of such
                                  representation and warranty shall be a
                                  re-calculation of Tenant's Project
                                  Proportionate Share and a reduction, both
                                  retroactively and prospectively, in the
                                  Additional Rent for the Common Area Land (as
                                  defined below) and (y) in no event shall
                                  Tenant's Project Proportionate Share ever
                                  exceed 33.96%)

Lease Term:                       Beginning on the Commencement Date and ending
                                  on the last day of the 120th full calendar
                                  month following the Rent Commencement Date (as
                                  hereinafter defined), the term "Lease Term" to
                                  include any renewal or extension terms.

Rent Commencement
Date:                             Thirty (30) days following "Substantial
                                  Completion of the Base Building Work" (as such
                                  term is defined in Addendum 2).

Initial Monthly Base
Rent:                             $174,000.00 (subject to adjustment in
                                  accordance with Addendum 1 and the second
                                  paragraph of Paragraph 4).

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Initial Estimated Monthly
Additional Rent
Payments for the Common
Area Land:                        $6,000.00 (which is composed of the
                                  Association Fees (estimated at $1,500), the
                                  Property Management Fee (estimated at $3,000),
                                  and the Insurance Fee (estimated at $1,500),
                                  such terms being defined below)

Initial Estimated Monthly
Base Rent and
Additional Rent for Common
Area Land Payments:               $180,000.00

Security Deposit:                 $180,000.00

Broker:                           Benchmark Associates, Inc./David Haut; C.B.
                                  Richard Ellis/Dave Simonsen

Addenda:                          Addendum 1 (Base Rent Adjustments); Addendum 2
                                  (Construction); Addendum 3 (Renewal Options);
                                  Addendum 4 (Right of First Offer); Addendum 5
                                  (Letter of Credit)

             Granting Clause. In consideration of the terms, covenants, and
conditions hereof, Landlord leases to Tenant, and Tenant takes from Landlord,
the Premises, to have and to hold for the Lease Term, subject to the terms,
covenants and conditions of this Lease.

             Acceptance of Premises. Subject to (i) Punch List items (as defined
in Addendum 2), (ii) all of Landlord's obligations and warranties as set forth
in Paragraphs 3, 10, 15, 16, 30 and 43 of this Lease, and (iii) any latent
defects, Tenant shall accept the Premises in its as-is condition as of the Rent
Commencement Date. Except for Punch List Items or as otherwise provided in
Paragraphs 3, 10, 15, 16, 30 and 43 of this Lease, in no event shall Landlord
have any obligation to repair or cure any defects in the Premises (except for
latent defects).

             Landlord represents and warrants, to Landlord's knowledge, that:
(i) as of the Commencement Date, there are no deed restrictions, use
restrictions or other restrictive covenants (including, without limitation, the
Declaration (as hereinafter defined) and the other Permitted Encumbrances (as
hereinafter defined)) that would adversely affect Tenant's Intended Use (as
defined below) of the Premises; (ii) on the Rent Commencement Date, Tenant shall
be able to operate in the Premises twenty-four (24) hours a day, seven (7) days
a week, three hundred sixty-five (365) days a year for general warehouse
purposes; (iii) as of the

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Commencement Date, there are no Legal Requirements or restrictive covenants
(including, without limitation, the Declaration and the other Permitted
Encumbrances) that would affect the ability to construct and operate the
Premises in accordance with the Performance Specifications (as defined in
Addendum 2); (iv) as of the Commencement Date, there are no liens, encumbrances,
security interests, charges, reservations, easements, rights-of-way, restrictive
covenants, conditions, limitations, or any other burden covering or affecting
the Land, other than those (the "Permitted Encumbrances") listed on Exhibit D
annexed hereto and made a part hereof; (v) as of the Commencement Date, the Land
is directly accessible from Old Virginia Road, which is a public road (as shown
on Parcel Map No. 4387) under construction and which is contiguous to the Land;
(vi) as of the Commencement Date, all utility, water and sewer services
necessary for the construction of the Building in accordance with the
Performance Specifications and the operation and use thereof for the Intended
Use are available at the boundaries of the Land; and (vii) as of the
Commencement Date, the Land is zoned OC-I. For purposes of this paragraph,
Landlord's knowledge shall mean the actual knowledge of David Morze and John
Hanson, after appropriate due inquiry and investigation. Landlord represents and
warrants to Tenant that no employee of Landlord has any material knowledge that
is not possessed by David Morze or John Hanson about any of the matters that are
the subject of the representations and warranties contained in the foregoing
clauses (i) through (vii).

             Use. Tenant may use the Premises for the following uses twenty-four
(24) hours a day, seven (7) days a week, three hundred sixty-five (365) days a
year (such uses for such time periods, collectively, the "Intended Use"): (i) as
a warehouse facility for the purpose of receiving, shipping, storing, processing
and selling products, materials and merchandise (which may include, without
limitation, the receiving, shipping, storing, processing and selling of books,
books on tape, books on computer disk, books on CD-ROM, magazines, periodicals,
computer software, compact discs and other forms of recorded music and
videotapes, together with any other consumer products), (ii) for general,
executive and administrative offices, and (iii) for all lawful uses ancillary to
the uses described in the preceding clauses (i) and (ii) of this sentence. In
addition, Tenant may use the Premises for any other legally permitted use which
shall not reduce the value of the Project. Tenant shall not permit any
objectionable smoke, dust, gas, noise, or vibrations (other than vibrations from
any generator) to emanate from the Premises, or take any other action, that
would constitute a nuisance or would unreasonably disturb, unreasonably
interfere with, or endanger Landlord or any tenants of the Project. Landlord
acknowledges and agrees that Tenant's Intended Use will not violate any of the
restrictions in the preceding sentence.

             Except as otherwise expressly set forth in the Lease, including,
without limitation, Paragraph 43 of the Lease, Tenant shall comply with all
Legal Requirements (as defined below) relating to the Premises. Notwithstanding
the foregoing, if (i) a new Legal Requirement is enacted during the Lease Term,
and (ii) repairs, alterations or modifications to the Premises are necessary and
legally required (i.e. the Premises is not grandfathered) in order for the
Premises to comply with such new Legal Requirement, then Landlord shall make
those necessary repairs, modifications or alterations to the Premises. Upon
completion thereof, (i) Landlord shall furnish Tenant with a statement setting
forth the actual out-of-pocket cost to Landlord of such repairs, modifications
or alterations to the Premises (together with invoices and other evidence
reasonably necessary to corroborate such cost), and (ii) the actual
out-of-pocket cost of such repairs,

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modifications or alterations to the Premises shall be amortized on a straight
line basis in equal monthly installments over a period equal to the useful life
thereof under GAAP (as defined below), and such monthly installments shall
thereafter be payable by Tenant to Landlord on the first day of each calendar
month during the Lease Term until the sooner of (i) the last day of Lease Term
and (ii) the last day of such useful life (it being agreed that Tenant shall not
be responsible for any portion of such costs that relates to the portion of such
useful life that extends beyond the Lease Term). Any installment payable
pursuant to the preceding sentence for a partial month shall be appropriately
prorated. For purposes of this Lease, the term "Legal Requirements" shall mean
all laws, statutes, codes, ordinances, orders and regulations of any or all of
the federal, state or local government or governmental (or quasi-governmental)
authority having jurisdiction over the Land, the Building and/or the Premises,
whether now or hereafter in force. Tenant shall have the right at its expense to
contest, by appropriate legal proceedings conducted in good faith and with due
diligence, the validity or application, in whole or in part, of any Legal
Requirements with which Tenant is obligated to comply and, so long as such
proceeding is being conducted in good faith and with due diligence and deferral
of compliance does not subject Landlord to civil penalties (unless Tenant elects
to pay such penalties) or criminal prosecution, Tenant may defer compliance
pending the outcome of such contest. Landlord shall, upon request by Tenant,
reasonably cooperate with any such contest (at no expense to Landlord, unless
Tenant pays such expense) and shall promptly execute and deliver to Tenant any
documents, information, consents or other materials required or reasonably
desirable to prosecute such contest. Notwithstanding the fact that the
Commencement Date occurred on the date of this Lease, Tenant shall have no
obligations or liabilities under this Lease unless and until the Rent
Commencement Date occurs, except as and to the extent provided in the next
succeeding sentence; provided, however, that any occupation of the Premises by
Tenant prior to the Rent Commencement Date shall be subject to all obligations
of Tenant under this Lease, except the obligation to pay Base Rent, Additional
Rent for the Common Area Land (as defined below), the Additional Rental Amount
(as defined in Addendum 2), utility charges and Taxes (as defined below).
Notwithstanding the foregoing, if, prior to the Rent Commencement Date, Tenant
occupies any portion of the Building for the conduct of its business for the
Intended Use (as opposed to the prosecution of Tenant's Initial Work (as defined
in Addendum 2) or the use of the Premises for the activities described in the
definition of "Substantial Completion of Base Building Shell" as contained in
the Workletter) for more than 30 days, then Tenant shall pay to Landlord as
additional rent an amount equal to: (i) the initial Base Rent (calculated on a
per diem basis based on a 365 day year), in the event that Tenant so occupies at
least half of the Building; or (ii) one-half of the initial Base Rent
(calculated on a per diem basis based on a 365 day year), in the event that
Tenant so occupies less than one-half of the Building, in each such instance,
for each day in the period commencing 31 days after the first date on which
Tenant so occupies the Premises for the conduct of its business for the Intended
Use and ending on the day before the Rent Commencement Date. No occupancy of any
portion of the Building as described preceding sentence shall (i) be deemed to
be an agreement by Tenant that any portion of the Base Building Work has been
Substantially Completed (as defined in Addendum 2) or (ii) otherwise relieve

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Landlord from any of its obligations under Addendum 2 (including, without
limitation, its obligation to pay Tenant the Liquidated Damages (as defined in
Addendum 2)).

             Base Rent. Tenant shall pay Base Rent in the amount set forth
above. The Security Deposit shall be due and payable on the date hereof, and the
first month's Base Rent and the first monthly installment of estimated
Additional Rent for Common Area Land shall be due and payable on the Rent
Commencement Date. Tenant promises to pay to Landlord in advance, without
demand, deduction or set-off (except as expressly provided in this Lease),
monthly installments of Base Rent on or before the first day of each calendar
month succeeding the Rent Commencement Date. Payments of Base Rent for any
fractional calendar month shall be appropriately prorated. All payments required
to be made by Tenant to Landlord hereunder shall be payable at such address in
the United States as Landlord may specify from time to time by written notice
delivered in accordance herewith. The obligation of Tenant to pay Base Rent and
other sums to Landlord and the obligations of Landlord under this Lease are
independent obligations. Tenant shall have no right at any time to abate, reduce
or set-off any rent due hereunder except as may be expressly provided in this
Lease.

             Within ten (10) days after the Substantial Completion of the
Building Shell (as defined in Addendum 2), Landlord, at Landlord's cost and
expense, shall have Landlord's project architect measure the square footage of
the Building from dripline to dripline on each side of the exterior of the outer
walls of the Building. If the measured square footage of the Building (as
finally determined under this paragraph) is less than 600,000 square feet, then
this Lease shall be amended to reflect the actual measured square footage of the
Building, the monthly Base Rent under the Lease shall be reduced (both
retroactively and for the remainder of the Lease Term) by $3.48 per year for
each square foot by which the Building is less than 600,000 square feet, and
Tenant's Project Proportionate Share and Additional Rent for the Common Area
Land shall be adjusted accordingly (both retroactively and for the remainder of
the Lease Term). Within 5 days after Landlord's architect determines the square
footage of the Building in accordance with the method contained in the first
sentence of this paragraph, Landlord shall cause Landlord's project architect to
certify to Landlord and Tenant in writing such determination of the square
footage of the Building. Tenant's architect may review such certification and if
Tenant's architect disputes such measurement, then Landlord's project architect
and Tenant's architect shall use good faith efforts to try and resolve the
dispute over the measurement. In connection therewith, Tenant's architect shall
have the right to measure the Building in accordance with the method of
measurement set forth in the first sentence of this paragraph. If the two
architects are unable to resolve the dispute over the measurement within 15
days, then the two architects shall choose a third architect who is impartial
and independent and the third architect shall measure the total square footage
of the Building in accordance with the terms of this paragraph and the third
architect's measurement of the square footage of the Building shall be final and
binding on both Landlord and Tenant. If the measured square footage of the
Building (as finally determined under this paragraph) is equal to or greater
than 600,000 square feet, then the Lease shall not be amended or modified.

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             Security Deposit. The Security Deposit shall be held by Landlord as
security for the performance of Tenant's obligations under this Lease. The
Security Deposit is not an advance rental deposit or a measure of Landlord's
damages in case of Tenant's default. Upon each occurrence of an Event of Default
(hereinafter defined), Landlord may use all or part of the Security Deposit to
pay delinquent payments due under this Lease, and the cost of any damage,
injury, expense or liability caused by such Event of Default, without prejudice
to any other remedy provided herein or provided by law. Tenant shall pay
Landlord on demand the amount that will restore the Security Deposit to its
original amount. Landlord's obligation respecting the Security Deposit is that
of a debtor, not a trustee; no interest shall accrue thereon. The Security
Deposit shall be the property of Landlord, and unless used by Landlord as set
forth above, shall be paid to Tenant within 30 days of the expiration or
termination of this Lease. Landlord shall be released from any obligation with
respect to the Security Deposit upon transfer of this Lease and the Premises to
a person or entity assuming Landlord's obligations under this Paragraph 5. At
Tenant's election, the Security Deposit may be in the form of an unconditional,
irrevocable letter of credit from a bank reasonably acceptable to Landlord, and
in substantially similar form as attached hereto as Addendum 5 to this Lease or
in another form reasonably acceptable to Landlord. The letter of credit shall
either provide that it shall automatically renew during each year of the Lease
Term or shall otherwise be renewed at least 30 days prior to its expiration
during the term of the Lease (it being agreed that Tenant may elect at any time
to substitute cash for the letter of credit). The letter of credit shall provide
that it may be drawn down upon by Landlord at any time Landlord delivers its
sight draft to the bank, together with a "drawing" request in the form of
Exhibit E annexed hereto. If Landlord sells or conveys the Premises, Tenant
shall, at Landlord's request (and at no expense to Tenant), cooperate in having
the letter of credit transferred to the purchaser. If the letter of credit is
ever drawn upon by Landlord pursuant to the terms of the Lease and Addendum 5 to
the Lease, Tenant shall within ten (10) days thereafter cause the letter of
credit to be restored to its original amount. Landlord shall not draw on the
letter of credit unless and until (i) an Event of Default occurs or (ii) the
expiration or termination of the Lease Term occurs and Tenant has defaulted in
its obligations under Paragraph 21 below.

             Additional Rent Payments for the Common Area Land. Landlord will
maintain in good order and repair the Common Area Land and Landlord hereby
grants to Tenant, its agents, employees and invitees the nonexclusive right to
use the Common Area Land in common with other tenants of the Project. Commencing
on the Rent Commencement Date, during each month of the Lease Term, on the same
date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12,
as reasonably estimated by Landlord from time to time, of Tenant's Project
Proportionate Share of the projected Additional Rent for the Common Area Land
for the applicable calendar year. Payments thereof for any fractional calendar
month or fractional calendar year shall be appropriately prorated. The term
"Additional Rent for the Common Area Land" means, for any calendar year all or
any part of which occurs during the Lease Term, only the following costs and
expenses: (A) the actual charges or assessments levied against the Premises for
such calendar year pursuant to the Declaration (the "Association Fee") (it being
agreed, however, that (x) the Association Fee for the 12-month period following
the Rent Commencement Date shall, for purposes of this Lease, be capped at $.03
per square foot of the

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Building and (y) in no event shall the Association Fee include, and in no event
shall Tenant be obligated to pay or reimburse Landlord for, (i) any penalties,
late charges, interest, fines or assessments resulting from a default by
Landlord under the Declaration or (ii) any amounts payable under the Declaration
on account of Capital (as defined below) improvements, repairs or replacements,
other than in connection with landscaping); (B) property management fee equal to
$3,000 per month increased annually by 3% ("Property Management Fee"); and all
(C) of Landlord's insurance cost for both the Premises and the Common Area Land
for such calendar year ("Insurance Fee"). Notwithstanding anything to the
contrary contained herein, Tenant shall not be obligated to pay or reimburse
Landlord for Association Fees on account of any calendar year to the extent that
Association Fees for such calendar year have increased by more than five percent
(5%) per annum, compounded annually on a cumulative basis ("Cap"), from the
Association Fees for (I) in the case of the initial term of this Lease, the
calendar year in which the Rent Commencement Date occurs (it being agreed that
the Association Fee for such first calendar year shall in no event exceed $.03
per square foot of the Building) and (II) in the case of any renewal term, the
calendar year in which the first day of such renewal term occurs (it being
agreed, however, that, for purposes of such renewal term only, the Association
Fee for the calendar year in which the first day of such renewal term occurs
shall not (x) include the cost of any Capital improvements, repairs,
replacements or reserves of any kind, and (y) be subject to the Cap). In no
event shall any Additional Rent for the Common Area Land be payable by Tenant
for, during or on account of any period prior to the Rent Commencement Date. For
purposes of this Lease, a repair, replacement or improvement shall be "Capital"
if, in accordance with generally accepted accounting principles consistently
applied ("GAAP"), the costs associated with such repair, replacement or
improvement are generally capitalized.

             Landlord shall provide Tenant within 120 days following the final
day of each calendar year during the Lease Term an itemized statement setting
forth in reasonable detail the actual Additional Rent for Common Area Land for
such year (which statement shall be accompanied by invoices and such other
reasonable corroborating documentation as Tenant may request from time to time).
If Tenant's total estimated payments of Additional Rent for Common Area Land on
account of any such calendar year are less than Tenant's Project Proportionate
Share of actual Additional Rent for the Common Area Land for such year (as
limited by the Cap), then Tenant shall pay the difference to Landlord within 30
days after demand, and if more, then Landlord shall retain such excess and
credit it against Tenant's next payments due on account of Additional Rent for
the Common Area Land (or if there is less than 6 months remaining in the Lease
Term, or if the Lease Term has terminated or expired, Landlord shall refund such
excess to Tenant). The estimated Additional Rent for the Common Area Land set
forth in this paragraph of this Lease and any other operating expenses for the
Premises or for Items as set forth in Paragraph 11 of this Lease are only
estimates, and Landlord makes no guaranty or warranty that such estimates will
be accurate.

             Utilities. Tenant shall pay directly to the utility provider
servicing the Premises for all water, gas, electricity, heat, light, power,
telephone, sewer, sprinkler services, refuse and trash collection, and other
utilities and services used on the Premises, all maintenance charges for
utilities, and any storm sewer charges or other similar charges for utilities
imposed by any

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governmental entity or utility provider, together with any taxes, penalties,
surcharges or the like pertaining to Tenant's use of the Premises. Landlord, as
part of the Base Building Work, shall (x) install all telephone, gas, water,
sanitary sewer and electric utilities in accordance with the Performance
Specifications and in a manner consistent with "Class A" warehouse facilities in
the Reno, Nevada area (provided that in the event of any inconsistency between
such standards, the Performance Specifications shall control) and (y) install
any other utilities that are customarily installed in "Class A" warehouse
facilities in the Reno, Nevada area (excluding any telecommunication equipment
or lines beyond the point of connection to the Building). Prior to the Rent
Commencement Date, Landlord shall at its expense cause all of the utilities
described in the preceding sentence to be separately metered, such that user
charges for such utilities will be charged directly to Tenant by the utility
provider. No interruption or failure of utilities shall result in the
termination of this Lease or the abatement of rent, except as otherwise provided
for in the following paragraph.

             Notwithstanding anything to the contrary contained in this Lease,
if an interruption or cessation of utilities results from a cause within the
Landlord's reasonable control and the Premises or any portion thereof are not
usable by Tenant for the conduct of Tenant's business as a result thereof, Base
Rent, the Additional Rental Amount and applicable Additional Rent for Common
Area Land shall be abated for the period which commences three (3) business days
after the date Tenant gives to Landlord notice of such interruption until such
utilities are restored.

             Taxes. "Taxes" shall mean all real property taxes, assessments and
governmental charges which shall be levied, assessed or imposed against the
Premises during the Lease Term; the parties hereby acknowledge that the Premises
constitute a separate tax parcel (i.e., Parcel 1 of Parcel 1 of Parcel Map No.
3487, APN: 140-010-09) provided, however, that if, at any time during the Lease
Term, the methods of a taxation prevailing on the date hereof shall be altered
so that in lieu of, in addition to, or as a substitute for, the whole or any
part of the items referred to above now levied, assessed or imposed on real
estate or upon the owner or owners of real estate, there shall be levied,
assessed or imposed any franchise tax, any excise, transaction, sales for
privilege tax, assessment, levy or charge measured by or based, in whole or in
part, upon the rents from the Premises the same shall be included within Taxes,
provided, however, that the terms of the legislation imposing any such tax,
assessment, levy or charge or any other factors, documents or instruments
evidence that such tax, assessment, levy or charge was intended to serve as a
real estate tax. Notwithstanding the foregoing, "Taxes" shall not include: (A)
any inheritance, estate, succession, transfer, gains, mortgage recording, gift,
franchise, corporation, income or profit tax or capital levy; and (B) any
special non-recurring assessments arising as a result of the development of the
Project (and not specifically related to the Premises). Assessments included
within Taxes shall, regardless of how actually paid, be deemed to be paid in the
maximum number of installments permitted by the taxing authority imposing any
such assessment.

             Commencing on the Rent Commencement Date and thereafter throughout
the Lease Term, Tenant shall, in the manner set forth in this Paragraph 8, pay
the Taxes for each tax

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or fiscal year (a "Tax Year") of the relevant taxing authority occurring within
the Lease Term. If, however, (i) the Rent Commencement Date shall occur on a day
other than the first day of any such Tax Year, then the Tenant's payment of
Taxes for such Tax Year shall be a pro-rated amount (computed on a per diem
basis), based upon the number of days within such Tax Year occurring from and
after the Rent Commencement Date, or (ii) the expiration of this Lease shall
occur on a day other than the last day of a Tax Year, then Tenant's payment of
Taxes for such tax or fiscal year shall be a pro-rated amount (computed on a per
diem basis), based upon the number of days within such Tax Year occurring within
the Lease Term.

             Landlord shall cause each taxing authority having jurisdiction over
the Premises to send statements for Taxes directly to Tenant and Tenant shall
make timely payment of all such Taxes, subject to the provisions of Paragraph
8(b) hereof. Tenant shall, upon written request of Landlord, furnish Landlord
with (i) evidence that Taxes have been paid in accordance with this Paragraph
8(b) and 8(c) all correspondence sent to, or received by, Tenant from
governmental authorities regarding Taxes. If Landlord is unable to cause any
such taxing authority to render statements for Taxes directly to Tenant, then,
Landlord, at anytime prior to the end of any Tax Year may deliver to Tenant a
statement for Taxes for such Tax Year. Tenant, for each such Tax Year, shall pay
to Landlord the amount set forth on such statement for such Tax Year in equal
installments in the same number of installments as Taxes are required to be paid
to the such taxing authority, with each such installment being due on the later
to occur of (x) the date that is thirty (30) days prior to the due date of the
corresponding installment of Taxes and (y) the date that is ten (10) business
days after the date that Tenant receives the statement from Landlord. Landlord
shall, together with the provision of any statement to Tenant, provide Tenant
with a copy of any tax bill to which such statement applies. If there shall be
any increase in Taxes for any Tax Year, whether prior to, during or after such
Tax Year, or if there shall be any decrease in Taxes for any such Tax Year,
whether prior to, during or after such Tax Year, then Tenant's payment for Taxes
for such Tax Year shall be recalculated and (i) if there has been an
underpayment, Tenant shall pay to Landlord, within 30 days after Landlord's
request therefor, the amount of such underpayment, or (ii) if there has been an
overpayment, Landlord shall, within 30 days after Tenant's request therefor,
refund to Tenant the amount of such overpayment.

             If with respect to any Tax Year for which Tenant shall have made
payment of Taxes, Landlord shall receive a refund of any portion of Taxes,
Landlord, within 30 days after Tenant's request therefor, shall pay to Tenant
the amount of such refund.

             Tenant shall, at its sole cost and expense, have the right to file
a protest with respect to the assessed valuation of the Premises and commence
any administrative or judicial proceeding as may be necessary in connection
therewith. Tenant shall keep Landlord informed of the progress of any such
proceeding, including, by providing copies of any correspondence and other
documents submitted in connection therewith. Landlord, at Tenant's cost and
expense, shall fully cooperate with Tenant with respect to any such protest and
proceeding, including, without limitation, by promptly providing Tenant with
copies of all relevant materials, documents, contracts, invoices and, if
necessary, by attending meetings and/or appearing at proceedings. Tenant shall
indemnify, defend and hold harmless Landlord from and against all

                                       10
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liabilities, damages, interest, penalties and expenses (including reasonable
attorneys' fees and expenses), resulting from or incurred in connection with any
such protest or proceeding by Tenant.

             Insurance. (a) Landlord, throughout the Lease Term, shall maintain
(i) commercial liability insurance, including a contractual liability
endorsement, and (ii) all risk property insurance covering the full replacement
cost of the Building. All insurance to be maintained by Landlord pursuant to
this Paragraph 9, (i) shall be carried in favor of Landlord and shall name
Tenant as an additional insured (for commercial liability insurance only), (ii)
shall be in such form normally carried by prudent owners of premises similarly
situated, due regard given to the type of premises (i.e., size, age, condition),
its construction and its use and occupancy, (iii) shall be issued by domestic
insurance companies, licensed to do business in the State of Nevada and having a
Best's rating of AVIII or better or the then equivalent of such rating and
having a policyholders surplus of at least $100,000,000, and (iv) shall be
written on policies which have a term of not less than one year, and which shall
provide that no cancellation, non-renewal, change or reduction in the coverages
afforded under said policies will be effective until at least thirty (30) days'
prior written notice of such cancellation or reduction has been given to Tenant.
Certificates of the foregoing insurance shall be delivered by Landlord to Tenant
on or prior to the Rent Commencement Date Landlord may, but is not obligated to,
maintain such other insurance and additional coverages as it may deem reasonably
necessary, including, but not limited to, rent loss insurance; provided,
however, such other insurance and additional coverage shall be consistent (in
both type and limit) with insurance maintained in connection with industrial
warehouse buildings owned by institutional landlords in the Reno, Nevada area.
The cost of all insurance maintained by Landlord under this Paragraph 9 shall be
competitive with the cost of comparable insurance available from other insurance
carriers. The Project or Building may be included in a blanket policy (in which
case the cost of such insurance allocable to the Project or Building will be
reasonably allocated by Landlord based upon the insurer's cost calculations),
provided that such blanket policy (i) complies in all respects with the terms of
this Paragraph 9, (ii) expressly identifies the Premises as being covered by
such blanket insurance policy, and (iii) does not provide for any possibility of
reduction of coverage by reason of any damage to any other property named in
such blanket insurance policy.

             Tenant, at its expense, shall maintain during the Lease Term: all
risk property insurance covering the full replacement cost of all property and
improvements installed or placed in the Premises by Tenant at Tenant's expense;
worker's compensation insurance with no less than the minimum limits required by
law; employer's liability insurance with such limits as required by law; and
commercial liability insurance, with a minimum limit of $1,000,000 per
occurrence and a minimum umbrella limit of $1,000,000, for a total minimum
combined general liability and umbrella limit of $2,000,000 for property damage,
personal injuries, or deaths of persons occurring in or about the Premises.
Landlord may from time to time require reasonable increases in any such limits,
such increases to be consistent with the insurance limits required by comparable
landlords at comparable projects. The commercial liability policies shall name
Landlord as an additional insured, insure on an occurrence and not a claims-made
basis, be issued by insurance companies which are domestic insurance companies,
licensed to do business

                                       11
<PAGE>

in the State of Nevada and having a Best's rating of AVIII or better or the then
equivalent of such rating and having a policyholders surplus of at least
$100,000,000, not be cancelable unless 30 days prior written notice shall have
been given to Landlord, contain a hostile fire endorsement and a contractual
liability endorsement and provide primary coverage to Landlord (any policy
issued to Landlord providing duplicate or similar coverage shall be deemed
excess over Tenant's policies). Such policies or certificates thereof shall be
delivered to Landlord by Tenant upon the earlier of (i) the Rent Commencement
Date, or (ii) the date Tenant occupies the Premises for any reason whatsoever,
including without limitation, the date Tenant enters onto the Premises to
conduct the Initial Tenant Work and upon each renewal of said insurance.

             The all risk property or comparable insurance obtained by Landlord
and Tenant shall include a waiver of subrogation by the insurers and all rights
based upon an assignment from its insured, against Landlord or Tenant, their
officers, directors, members, employees, managers, agents, invitees and
contractors, in connection with any loss or damage thereby insured against.
Neither party nor its officers, directors, employees, members, managers,
invitees or agents shall be liable to the other for loss or damage caused by any
risk coverable by all risk property insurance, and each party waives any claims
against the other party, and its officers, directors, employees, members
managers, invitees and agents for such loss or damage. The failure of a party to
insure its property shall not void this waiver.

             Subject to Tenant's rent abatement rights contained in Paragraph 7
above, Landlord and its agents and employees shall not be liable for, and Tenant
hereby waives all claims against such parties for, business interruption and
losses occasioned thereby sustained by Tenant or any person claiming through
Tenant resulting from any accident or occurrence in or upon the Premises or the
Project from any cause whatsoever, including without limitation, damage caused
in whole or in part, directly or indirectly, by the negligence of Landlord or
its agents, contractors or employees, it being agreed that the foregoing release
of liability and waiver shall apply only to the extent that such business
interruption and losses can be covered by customary business interruption
insurance.

             Tenant and its subtenants, assignees, invitees, employees, members
and agents shall not be liable for, and Landlord hereby waives all claims
against Tenant and its subtenants, assignees, invitees, employees, members and
agents for loss of rents derived from the Premises sustained by Landlord or any
person claiming through Landlord resulting from any accident or occurrence in or
upon the Premises or in or about the Project from any cause whatsoever,
including, without limitation, damage caused in whole or in part, directly or
indirectly, by the negligence of Tenant or its subtenants, assignees, invitees,
employees, contractors, members or agents, it being agreed that the foregoing
release of liability and waiver shall apply only to the extent such rent
interruption and losses can be covered by customary rental interruption
insurance.

             Landlord's Repairs. For the Lease Term, Landlord shall maintain,
repair, and replace, at its expense, the following portions of the Premises
(such portions of the Premises being collectively the "Landlord's Structural
Obligations"): (i) all utility lines servicing the Premises to

                                       12
<PAGE>

the points of connection within the Building, (ii) all elements of the roof,
including the roof membrane and the skylights, and (iii) all elements of the
slab, foundation, floor, footings, piers and exterior walls of the Building so
that such Landlord's Structural Obligations are in good condition, reasonable
wear and tear excluded, and, subject to the provisions of Paragraph 9(c) above,
any damage or injury to the Building or Premises (including, without limitation,
the slab and the structure of the Premises) caused by the negligence and/or
willful misconduct of Tenant, its agents, contractors, employees and invitees
excluded. Notwithstanding anything to the contrary contained in the foregoing in
clause (iii) above, it is the stated intent of Landlord and Tenant that the
Landlord shall not be responsible for maintaining or repairing cracks and other
surface repair items in the slab or floor caused by normal wear and tear and/or
normal forklift traffic over the slab or floor (it being agreed, however, that
nothing in this sentence shall be deemed to limit Landlord's obligations under
Paragraph 43 below). Subject to Paragraph 43, the term "walls" as used in this
Paragraph 10 shall not include windows, glass or plate glass, doors or overhead
doors, special store fronts, dock bumpers, dock plates or levelers, or office
entries. Tenant shall promptly give Landlord written notice of any repair
required by Landlord pursuant to this Paragraph 10, after which Landlord shall
have a reasonable opportunity to repair. Subject to the provisions of Paragraph
9(c) above, Landlord shall also be responsible for any damage to the Premises
caused by the negligence or willful misconduct of Landlord or its agents,
employees or contractors at the Premises.

             In the event of an emergency (being defined for purposes hereof as
an imminent threat of injury to persons or material damage to Tenant's
equipment, inventory or other property at the Premises or any other event that
impedes more than 20% of Tenant's business operations at the Premises, Tenant
shall have the right to make such temporary, emergency repairs to the Premises
as may be reasonably necessary to (x) prevent material damage to Tenant's
equipment, inventory or other property at the Premises, (y) repair an imminent
threat of personal injury to persons at the Premises, or (z) repair the
condition that is the cause of any material impediment to Tenant's business
operations at the Premises; provided Tenant has either (i) notified Landlord's
representative, as soon as possible under the circumstances, of such emergency
by telephone (with subsequent written notice as soon as practicable), and
Landlord has failed to initiate (and diligently continue to pursue all necessary
emergency repairs within twenty-four (24) hours of such notification, or (ii)
Tenant has attempted in good faith to notify Landlord's representative of such
emergency by telephone (with subsequent written notice as soon as practicable)
and has been unsuccessful in its attempts to contact such representative for a
period of twenty-four (24) hours. If because of the circumstances it is
necessary for Tenant to act immediately (i.e. Tenant does not reasonably have
time to notify Landlord), then Tenant may do so without prior notice to Landlord
provided that Tenant uses commercially reasonable efforts to notify Landlord of
such actions as soon as possible. In the event that Tenant makes any emergency
repairs to the Premises in accordance with this paragraph, Landlord shall
reimburse Tenant, up to the Self-Help Maximum (as defined below), for the
actual, reasonable, out-of-pocket third party costs incurred by Tenant (as
evidenced by written invoices or other reasonable evidence) in making such
emergency repairs. The term "Self Help Maximum" shall mean (i) the aggregate sum
of $25,000 for each emergency that occurs during each lease year (other than
Catastrophic Emergencies (as defined below)), such sum to increase each year of
the Lease Term

                                       13
<PAGE>

following the first lease year by the percentage increases in the Consumer Price
Index (over the amount of the Consumer Price Index as of the Rent Commencement
Date), or (ii) the aggregate sum of $200,000 for each Catastrophic Emergency
that occurs during each lease year. For purposes hereof, (i) the term
"Catastrophic Emergency" means any emergency with respect to the roof that will
require Tenant to expend more than $25,000 to alleviate such emergency; and (ii)
the term "Consumer Price Index" means the Consumer Price Index for All Urban
Consumers (Revised Series) (CPI-U) All Items, U.S. City Average (1982-1984
equals 100) of the United States Department of Labor, Bureau of Labor
Statistics. If Landlord fails to reimburse Tenant for the reasonable,
out-of-pocket costs incurred by Tenant in making such repairs, up to but not to
exceed the Self Help Maximum with respect to such emergency, within 30 days
after demand therefor, accompanied by supporting evidence of the costs incurred
by Tenant, then Tenant may either (i) bring an action for damages against
Landlord to recover such costs, together with interest thereon at the Interest
Rate from the due date therefor (i.e., the date 30 days after demand), and
reasonable attorney's fees incurred by Tenant in bringing such action for
damages, or (ii) offset such amount against the Base Rent and Additional Rental
Amount due under this Lease, with interest accruing 30 days after such amount
was due. The self help remedy granted to Tenant under this Paragraph in the
event of an emergency is in addition to, and not in lieu or limitation of, any
and all other remedies granted to Tenant under this Lease. Subject to the
provisions of Paragraph 9(c) above, Tenant shall be responsible for any damage
to the Premises caused by the negligence or willful misconduct of Tenant or its
agents, employees or contractors at the Premises.

             Tenant's exercise of its right to self help or offset Base Rent and
the Additional Rental Amount shall in no way be an acknowledgment of or be
construed as an agreement by Landlord that such payment (or work) required is
the obligation of Landlord and shall in no way hinder the Landlord from
disputing such claims and Base Rent and Additional Rental Amount offsets by
Tenant. In the event of a dispute, and if Landlord prevails, Tenant shall
promptly reimburse Landlord for all amounts paid by Landlord to Tenant, or any
amounts offset by Tenant or any amounts on which Landlord has prevailed,
whichever is appropriate, plus interest at the Interest Rate from the date the
amount was offset or paid. Further the prevailing party shall be entitled to
reasonable attorneys' fees and costs incurred in the offset dispute.

             If and only if requested by Tenant in writing, Landlord shall make
any reasonably necessary Capital repairs or replacements to the Premises for
which Tenant is responsible under Paragraph 11 below. Upon completion thereof,
(i) Landlord shall furnish Tenant with a statement setting forth the actual
out-of-pocket cost to Landlord of any such Capital repairs or replacements
(together with invoices and other evidence reasonably necessary to corroborate
such cost) and (ii) the actual out-of-pocket cost to Landlord of such Capital
repairs or replacements to the Premises shall be amortized on a straight line
basis in equal monthly installments over a period equal to the useful life
thereof under GAAP, and such monthly installments shall thereafter be payable by
Tenant to Landlord on the first day of each calendar month during the Lease Term
until the sooner of (i) the last day of Lease Term and (ii) the last day of such
useful life (it being agreed that Tenant shall not be responsible for any
portion of such costs that relates to the portion of such useful life that
extends beyond the Lease Term).

                                       14
<PAGE>

Landlord expressly acknowledges and agrees that the reimbursement obligation
contained in the preceding sentence shall not apply to any Capital repairs or
replacements that Landlord is required to make under (i) any of the other
provisions of this Paragraph 10, or (ii) any of the provisions of Paragraphs 3,
15, 16, 30 and 43 of this Lease. Any installment payable pursuant to the this
paragraph for a partial month shall be appropriately prorated. Landlord shall
competitively bid the performance of such Capital repairs or replacements in
accordance with the Bidding Procedures (as defined in Addendum 2).

             Tenant's Repairs. (a) Subject to Landlord's obligations in
Paragraphs 3, 9, 10, 15, 16, 30 and 43, Tenant, at its sole cost and expense,
shall be responsible for the maintenance, repair and replacement of all portions
of the Premises, Building and Land and for all costs and expenses related
thereto (including, without limitation, paving and parking areas, alleys,
driveways, mowing, landscaping, exterior painting, dock and loading areas, truck
doors, plumbing from and after the point of connection to the Building, fire
sprinklers and fire protection systems, entries, doors, windows, interior walls,
and the interior side of demising walls heating, ventilation and air
conditioning systems, lighting, electrical and utility systems from and after
the point of connection to the Building and other mechanical and building
systems; amounts paid to contractors and subcontractors for work or services
performed in connection with any of the foregoing; security services, if any;
and trash collection, sweeping and removal). Except as set forth in the last
paragraph of Paragraph 10 above, such repair and replacements may include
Capital expenditures and repairs whose benefit may extend beyond the Lease Term.
Heating, ventilation and air conditioning systems and other mechanical and
building systems serving the Premises shall be maintained at Tenant's expense
pursuant to maintenance service contracts entered into by Tenant. If, (i) Tenant
fails to make any repair for which Tenant is responsible pursuant to this
Paragraph 11 within thirty (30) days after notice thereof from Landlord (except
in case of emergency) (unless such performance will, due to the nature of the
obligation, require a period of time in excess of thirty (30) days, then after
such period of time as is reasonably necessary) and (ii) Tenant's failure to
make such repair has a material adverse effect on any structural component of
the Building or otherwise results in a hazardous condition, then, Landlord may,
at its option, make such repair, and Tenant shall pay the actual, reasonable,
out-of-pocket third party costs incurred by the Landlord (as evidenced by
written invoices or other reasonable evidence), within 30 days after demand. If
Tenant fails to pay such amount within 30 days after demand, then such amount
shall accrue interest at the Interest Rate.

             (b) Notwithstanding anything contained herein to the contrary,
Tenant shall have the right, from time to time and for such periods of time as
Tenant shall desire throughout the Lease Term, to require Landlord (without cost
to Tenant) to provide asset management services to Tenant as may be necessary
for Tenant to maintain the Premises in accordance with the provisions of
Paragraph 11(a) hereof. Such asset management services shall include, but not be
limited to, the hiring of contractors, subcontractors and suppliers on behalf of
Tenant for each of the items of maintenance and repair (each an "Item") for
which Tenant is responsible under Paragraph 11(a) hereof using competitive
bidding procedures with entities which are not affiliated with Landlord (with
each such hiring being subject to Tenant's prior written approval,

                                       15
<PAGE>

such approval not to be unreasonably withheld or delayed), appropriately
supervising each such contractor, subcontractor and supplier, and providing
Tenant with such periodic reports, as Tenant may reasonably require, with
respect to each of the Items, and any other management or operational services
reasonably requested by Tenant which are customary for the maintenance and
operation of a first-class warehouse facility in Reno, Nevada (collectively the
"Asset Management Services"). On or before each November 1 during the Lease
Term, Landlord shall provide Tenant with a budget setting forth Landlord's good
faith estimate of the Additional Rent for the Premises (as defined below) for
all Items for the immediately succeeding calendar year. For purposes hereof, the
term "Additional Rent for the Premises" shall mean, for any calendar year all or
any part of which occurs during the Lease Term, the actual, third-party
out-of-pocket costs and expenses incurred by Landlord in connection with all the
Items provided by Landlord with respect to such calendar year. If Tenant
requests that Landlord provide such Asset Management Services, then during each
month of the Lease Term, on the same date that Base Rent is due, Tenant shall
pay Landlord an amount equal to 1/12 of the annual cost, as reasonably estimated
by Landlord from time to time, of the Additional Rent for the Premises for the
Items requested. Notwithstanding the foregoing, in no event shall Tenant be
obligated to pay Additional Rent for the Premises on account of any calendar
year to the extent that the Additional Rent for the Premises for such calendar
year has increased by more than five percent (5%) per annum, compounded annually
on a cumulative basis ("Premises Cap"), from the Additional Rent for the
Premises for (I) in the case of the initial term of this Lease, the first full
calendar year during which Landlord performs the Asset Management Services and
(II) in the case of any renewal term, the calendar year in which the first day
of such renewal term occurs (it being agreed that, for purposes of such renewal
term only, the Additional Rent for the Premises for the calendar year in which
the first day of such renewal term occurs shall not be subject to the Premises
Cap). Notwithstanding anything to the contrary contained herein, if, in
connection with the performance of its obligations under this Paragraph 11(b),
Landlord performs any reasonably necessary Capital repairs or replacements to
the Premises, then the provisions of the last paragraph of Paragraph 10 above,
and not this Paragraph 11(b), shall govern with respect to the reimbursement of
Landlord for such Capital repairs or improvements.

             Tenant-Made Alterations and Trade Fixtures. For purposes of this
Lease, the following definitions shall apply:

             "Tenant-Made Alteration" shall mean any alteration, addition or
improvement performed by, or to be performed by, Tenant in or about the
Premises.

             "Material Tenant-Made Alteration" shall mean any Tenant-Made
Alteration that will have an effect on the structural soundness of the Building,
including, without limitation the slab or floor of the Building, or cause a
penetration of the roof of the Building.

             Tenant, without any need to obtain Landlord's consent or approval,
shall have the right to perform any Tenant-Made Alterations in and about the
Premises, other than Material Tenant-Made Alterations. In addition, Tenant, upon
obtaining Landlord's consent, which may be withheld only if a Material
Tenant-Made Alteration would have an adverse affect on the

                                       16
<PAGE>

structural soundness of the Building, including, without limitation, the floor
or slab of the Building or invalidate any Landlord roof warranty for the
Building (the "Approval Criteria"), shall have the right to perform Material
Tenant-Made Alterations in and about the Premises. Landlord shall not perform
any alterations in or about the Premises except as otherwise required or
permitted under this Lease. Landlord's approval of Tenant's plans and
specifications for any work or Tenant-Made Alterations performed for or on
behalf of Tenant shall not be deemed to be a representation by Landlord that
such plans and specifications comply with applicable Legal Requirement or
insurance requirements or that the alterations, additions and improvements
constructed in accordance with such plans and specifications will be adequate
for Tenant's use. Landlord and Tenant hereby acknowledge and agree that Tenant's
construction and/or placement of one or more racking systems, a conveyor and
related equipment and any mezzanine structure in the Building and on the
Premises are both Tenant-Made Alterations that do not require Landlord's prior
written consent (and Tenant may, without Landlord's consent, bolt the same to
the slab); provided however, Tenant hereby agrees that upon the expiration or
earlier termination of this Lease, Tenant shall remove, at Tenant's sole cost
and expense, such racking systems, conveyor and related equipment and mezzanine
structures and shall, at Tenant's sole cost and expense, repair any damage to
the Premises caused by Tenant's removal of the racking system (such removal and
repair obligations for the racking system being set forth in and governed by
paragraph (e) below), conveyor system and mezzanine structure.

             Tenant, prior to commencing any Material Tenant-Made Alteration,
shall give Landlord written notice thereof, and to the extent that good
construction practice requires plans and specifications to be prepared with
respect to such Tenant-Made Alteration, such notice shall be accompanied by a
copy of such plans and specifications. In the case of any Material Tenant-Made
Alteration, Landlord, within ten (10) business days after its receipt of such
notice, shall either (i) give its written consent to the Material Tenant-Made
alteration, or (ii) deny its consent and request revisions or modifications to
such Material Tenant-Made Alteration (but only if and to the extent that the
proposed Material Tenant-Made Alteration fails to meet the Approval Criteria).
Notwithstanding anything in this Lease to the contrary, if during the Lease
Term, Tenant removes from the Premises any items in the Performance
Specifications (defined in Addendum 2) installed by Landlord at Landlord's cost
and expense as part of the Base Building Work (defined in Addendum 2) ("Base
Improvements"), then, except for the in-rack sprinkler system and heads
referenced in Section 8.1.3 of the Performance Specifications which shall be
excluded from the Base Improvements and which Tenant shall not be obligated to
replace or restore, Tenant, upon or prior to the expiration or sooner
termination of the Lease, shall replace all such Base Improvements it has
removed from the Premises with other items or equipment of comparable size, age,
make and quality to that of the removed Base Improvements (taking into
consideration the condition that such Base Improvements would have been in if
they had remained throughout the Lease Term, it being agreed, however, that if
Tenant removes any Base Improvements that are typical office improvements, then
Tenant, upon the re-installation thereof, shall replace such office improvements
with new office improvements).

             Tenant at its own expense may perform all Tenant-Made Alterations
with contractors and subcontractors of Tenant's own choosing. Tenant shall
perform all Tenant-Made

                                       17
<PAGE>

Alterations in a good and workmanlike manner and in accordance with all Legal
Requirements. Landlord shall, upon Tenant's request (and at no cost to
Landlord), furnish or execute promptly any documents, information, consents or
other materials which are necessary or reasonably desirable in connection with
Tenant's efforts to obtain any license or permit for the making of any
Tenant-Made Alteration. Landlord shall not be entitled to impose upon Tenant any
charges or fees of any kind (including, without limitation, charges or fees for
profit, overhead, or supervision) in connection with any Tenant-Made
Alterations, except that Tenant shall pay to Landlord, within 30 days after
Tenant's receipt of Landlord's demand therefor, Landlord's reasonable
out-of-pocket costs and expenses of any third party architect or engineer
employed by Landlord for reviewing mechanical and structural plans and
specifications relating to any Material Tenant-Made Alteration. Throughout the
performance of Tenant-Made Alterations, either Tenant or Tenant's general
contractor shall carry (i) commercial general liability insurance, with
completed operation endorsement, for any occurrence in or about the Premises,
with a combined single limit of not less than $1,000,000 and (ii) employer's
liability insurance in the statutory limit. With respect to all such insurance,
Landlord and any mortgagee of the Premises whose name and address have been
furnished to Tenant shall be named as additional insureds. All such insurance
shall be issued by insurers that satisfy the requirements in Paragraph 9.
Throughout the performance of any Tenant-Made Alteration, each contractor and
subcontractor engaged in such Tenant-Made Alteration shall carry worker's
compensation and disability insurance in statutory limits.

             Any and all Tenant-Made Alterations made by, or on behalf of,
Tenant in, to or upon the Premises and Tenant's Property (as defined below)
installed on the Premises by (or on behalf of) Tenant, shall remain the property
of Tenant and may be removed from the Premises at any time during the Lease
Term, provided that any damage caused by such removal shall be repaired by
Tenant. Tenant may (subject to the next succeeding sentence) elect not to remove
any or all of its Tenant-Made Alterations, Tenant's Initial Work, its fixtures
or Tenant's Property, in which case the same shall become the property of
Landlord upon Tenant's surrender of the Premises. Notwithstanding the foregoing,
at the expiration or earlier termination of the Term, Tenant shall remove (i)
its movable business equipment and other movable personal property, (ii) any
Extraordinary Fixture (as defined below) in respect of which Landlord, in
accordance with Paragraph (f) below, has not waived (or been deemed to have
waived) its right to cause Tenant to remove, and (iii) any trade fixtures
("Tenant's Trade Fixtures") installed by Tenant in the Building, including the
warehouse racking system to be installed in the Premises by or for Tenant (it
being agreed that (x) in removing any trade fixtures from the Building that are
bolted to the slab, Tenant shall only be required to cut and file the bolts
connecting such trade fixtures to the slab, rather than remove such bolts from
the slab, and (y) Tenant shall not be required to remove the wiring relating to
such trade fixtures that will be imbedded in the slab, behind walls and doors
and below the floor). Moreover, for purposes of this Lease, the term "Tenant's
Property" shall mean all office furniture and equipment, movable partitions,
communications equipment and other articles of movable personal property owned
or leased by Tenant and located in the Premises.

                                       18
<PAGE>

             Tenant shall have the right from time to time and at any time to
give a notice (each, an "Extraordinary Fixture Advice Notice") to Landlord
requesting Landlord's advice as to whether any proposed Tenant-Made Alteration
will constitute an Extraordinary Fixture. Within 10 business days after
Landlord's receipt of any Extraordinary Fixture Advice Notice, Landlord shall
notify Tenant (each a "Removal Notice") (i) whether, in Landlord's opinion, any
of the alterations, additions or improvements described in such Extraordinary
Fixture Advice Notice constitute an Extraordinary Fixture (and identifying same)
and (ii) which items of those identified as Extraordinary Fixtures, Tenant must
remove at the expiration or earlier termination of this Lease. If Landlord (i)
gives a Removal Notice stating that in Landlord's opinion the alterations,
additions or improvements (or any of them) described in the Extraordinary
Fixture Advice Notice in question constitute an Extraordinary Fixture, but that
Landlord will not require Tenant to remove the same at the expiration or earlier
termination of this Lease, or (ii) fails to give a Removal Notice with respect
to any of the alterations, additions or improvements described in the applicable
Extraordinary Fixture Advice Notice within 10 days after receipt of such
Extraordinary Fixture Advice Notice, then, in either such event, Landlord shall
have waived its right to cause Tenant to remove such alterations, additions or
improvements, and Tenant shall not be obligated to remove the same. For purposes
of this Lease, "Extraordinary Fixture" means an alteration, addition,
improvement or fixture which, at the time of installation, (aa) is not the type
of improvement that is customarily found in a standard warehouse and/or office
installation in the Reno, Nevada area and (bb) is materially more expensive to
remove than the type of improvement that is customarily found in a standard
warehouse and/or office installation in the Reno, Nevada area.

             Signs. Subject to the Declaration (as defined below) and any
applicable Legal Requirements, Tenant may install any exterior lights,
decorations, balloons, flags, pennants, banners, or painting, or erect or
install any signs, windows or door lettering, placards, decorations, or
advertising media of any type which can be viewed from the exterior of the
Premises, without Landlord's prior written consent. Upon surrender or vacation
of the Premises, Tenant, at its sole cost and expense, shall remove all signs
and repair, paint, and/or replace the building facia surface to which its signs
are attached. Tenant shall obtain all applicable governmental permits and
approvals for sign and exterior treatments (and Landlord shall cooperate with
Tenant in connection therewith, including, without limitation, by signing any
applications in connection therewith). Subject to the Declaration, any
applicable Legal Requirements and Landlord's reasonable approval, Tenant may
place directional signs as appropriate throughout the Project for the benefit of
its customers. Landlord represents to Tenant that, to Landlord's knowledge, as
of the Commencement Date, other than the Declaration, there are no other signage
restrictions or controls that adversely affect Tenant's ability to install any
signage on the Building. Landlord agrees to use commercially reasonable efforts
to obtain a variance from the necessary parties to enhance the signage size on
the east half of the Building facing Highway 395. For purposes of this
paragraph, Landlord's knowledge shall mean the actual knowledge of David Morze
and John Hanson, after due investigation and inquiry. Landlord represents and
warrants to Tenant that no employee of Landlord has any material knowledge that
is not possessed by David Morze or John Hanson about any of the matters that are
the subject of the representations and warranties contained in this paragraph.

                                       19
<PAGE>

             Parking. Intentionally deleted.

             Restoration. If the Building shall be partially or totally damaged
or destroyed by fire or other casualty, then, unless this Lease is terminated as
hereinafter provided, and whether or not the damage or destruction shall have
resulted from the fault or neglect of Tenant or its employees, agents,
contractors or invitees, Landlord, at its sole expense, shall perform Landlord's
Restoration Work (as hereinafter defined) with reasonable dispatch and
continuity. For purposes hereof, the term "Landlord's Restoration Work" shall
mean all of the work necessary to repair and restore the Premises (including,
without limitation, all the building systems) to substantially the same
condition as that in which they were in immediately prior to the happening of
the fire or other casualty (it being agreed that Landlord's Restoration Work
shall not include the repair and restoration of (w) any Tenant-Made Alterations,
(x) Tenant's Initial Work installed by Tenant, (y) any Tenant's Trade Fixtures,
and/or (z) any Tenant's Property). Notwithstanding anything to the contrary in
this Paragraph 15, in the event a fire or other casualty to the Premises occurs
that is covered by the all risk insurance referenced in Paragraph 9(a) above,
Tenant shall, within 30 days after demand therefor, pay to Landlord the lesser
of (i) the amount of any deductible in respect of the insurance adjustment
relating to such fire or other casualty and (ii) $25,000 (it being agreed that,
in any event, the payment of such amount by Tenant is not a condition precedent
to any of Landlord's obligations under this Paragraph 15).

             If the Premises shall be partially damaged or destroyed or rendered
untenantable or inaccessible as a result of a fire or other casualty, then the
Base Rent, the Additional Rental Amount and all other rent payable under this
Lease (including any amounts payable under Sections 6 and 8 above) shall be
abated in proportion to the area of the Premises that has been rendered
untenantable, inaccessible or unfit for Tenant's use and occupancy for the
period from the date of such damage or destruction until the earlier of (a) the
last day of a reasonable period (beginning on the date on which Landlord's
Restoration Work is substantially completed and Tenant has reasonable access to
the Premises) for Tenant to repair and restore any Tenant's Initial Work,
Tenant-Made Alterations, Tenant Trade Fixtures and Tenant's Property damaged as
a result of such fire or other casualty and (b) the date on which Tenant
reoccupies the Premises (or such portion thereof) for the normal conduct of its
business (as opposed to the repair or restoration of any of Tenant's Initial
Work, Tenant's Trade Fixtures, Tenant-Made Alterations or Tenant's Property). If
the Premises shall be totally damaged or destroyed or rendered untenantable or
inaccessible, then the Base Rent, the Additional Rental Amount and all other
rent payable under this Lease (including any amounts payable under Sections 6
and 8 above) shall abate from the date of the damage or destruction until the
earlier of (a) the last day of a reasonable period (beginning on the date on
which Landlord's Restoration Work is substantially completed and Tenant has
reasonable access to the Premises) for Tenant to repair and restore any Tenant's
Initial Work, Tenant-Made Alterations, Tenant Fixtures and Tenant's Property
damaged as a result of such fire or other casualty and (b) the date on which
Tenant reoccupies the Premises (or such portion thereof) for the normal conduct
of its business (as opposed to the repair or restoration of any of Tenant's
Initial Work, Tenant's Trade Fixtures, Tenant-Made Alterations or Tenant's
Property).

                                       20
<PAGE>

             If the Building or any portion thereof shall be damaged or
destroyed by fire or other casualty, then Landlord, within thirty (30) days
after the occurrence of the fire or other casualty, shall furnish to Tenant an
estimate (the "Estimate"), prepared and certified by an architect selected by
Landlord and reasonably acceptable to Tenant, of the date (the "Estimated Date")
by which Landlord expects (in good faith) the Landlord's Restoration Work to be
completed. If the Estimated Date shall be a date later than one hundred eighty
(180) days after the date of the fire or other casualty, then Tenant may, at its
option, terminate this Lease by giving written notice to Landlord within thirty
(30) days after Tenant's receipt of the Estimate. In any case where the Estimate
does not give rise to Tenant's termination right as aforesaid (as well as any
case where Tenant does not elect to exercise its termination right as
aforesaid), Tenant shall have the right to terminate this Lease, if for any
reason, Landlord's Restoration Work is not completed by the Outside Restoration
Date (as defined below). Tenant may exercise the termination right described in
the preceding sentence by delivering written notice thereof to Landlord at any
time following the Outside Restoration Date and prior to the date Landlord
completes Landlord's Restoration Work. If Tenant terminates this Lease as
provided in this Paragraph 15, then such termination shall be effective on the
date specified in Tenant's notice of termination but no later than one hundred
eighty (180) days after the date of such notice as if said date were the date
fixed for the expiration of the Lease Term. Any Base Rent, Additional Rental
Amount or other amounts paid by Tenant for a period beyond the date of
termination of this Lease or for any period of abatement shall promptly be
refunded by Landlord to Tenant. For purposes of this Lease, the term "Outside
Restoration Date", with respect to any fire or other casualty, shall mean the
Estimated Date for the Landlord's Restoration Work in connection with such fire
or other casualty; provided, however, that the Outside Restoration Date shall be
postponed by one day for each day that Landlord is actually delayed in
completing such Landlord's Restoration Work as a result of one or more Force
Majeure Events (but in no event shall the Outside Restoration Date be extended
by Force Majeure Events by more than 60 days) or any delays caused by Tenant,
its agents, employees, consultants, contractors and invitees.

             If (i) the Building shall be damaged or destroyed by fire or other
casualty during the last 12 months of the then current Lease Term, (ii) the
Estimate indicates that Landlord's Restoration Work will require a period of
time which exceeds 20% of the then remaining Lease Term, and (iii) Tenant, on or
prior to the date of the fire or other casualty shall not have elected to extend
the then current Lease Term in accordance with the provisions of Addendum 3
hereto (assuming Tenant had the right to do so), then and in such events, either
Landlord or Tenant shall have the right, to be exercised by written notice to
the other party given within thirty (30) days the electing party's receipt of
the Estimate, to terminate this Lease. If either party terminates this Lease as
provided in this Paragraph 15, then such termination shall be effective on the
date specified in such party's notice of termination but no later than one
hundred eighty (180) days after the date of such notice as if said date were the
date fixed for the expiration of the Lease Term; and any Base Rent, Additional
Rental Amount or other amounts paid by Tenant for a period beyond the date of
such termination of this Lease or for any period of abatement shall promptly be
refunded by Landlord to Tenant.

                                       21
<PAGE>

             Notwithstanding anything to the contrary contained in Paragraph 15
above, if Tenant, within thirty (30) days after its receipt of a termination
notice from Landlord given pursuant to Paragraph 15 above, shall elect to extend
the then current term of this Lease in accordance with the provisions of
Addendum 3 hereto (assuming Tenant has the right to do so), then Landlord's
termination notice shall be rendered null and void, this Lease shall remain in
full force and effect, and Landlord, at its sole expense, shall perform
Landlord's Restoration Work.

             If the named Landlord herein (i.e., ProLogis Development Services
Incorporated) shall transfer its interest in the Premises to a third party,
then, from and after the effective date of such transfer, the following
provision of this Section 15(f) shall apply:

                    For purposes of this Lease, the term the "Depository" shall
       mean any commercial bank having a net worth of at least $500,000,000 as
       designated by Landlord and approved by Tenant (which approval shall not
       be unreasonably withheld, conditioned or delayed). All funds held by
       Depository shall at all times be deposited in trust for the benefit of
       Landlord and Tenant pursuant to the terms of this Lease in an account or
       accounts maintained in the State of Nevada.

                    All insurance required to be maintained by Landlord under
       Section 9 above shall name the Depository as the loss payee. All
       insurance proceeds to be paid (the "Deposited Sums") in connection with
       any insurance to be maintained by Landlord under such Section 9 shall be
       paid to the Depository. In the event, and to the extent, that Landlord is
       required to perform any Landlord's Restoration Work, the Depository shall
       disburse such proceeds to Landlord, from time to time and as and to the
       extent Landlord's Restoration Work progresses, but not more often than
       monthly upon receipt of a request therefor prepared by Landlord and
       consented to in writing by Tenant, which consent shall not be
       unreasonably withheld or delayed, provided that Landlord shall have
       provided Tenant with the following:

                              A certificate of Landlord (1) requesting payment
                    of a specified amount of the Deposited Sums to Landlord or
                    to persons whose names and addresses shall be stated, (2)
                    describing in reasonable detail the services or materials
                    theretofore applied to Landlord's Restoration Work, (3)
                    stating that such specified amount does not exceed the cost
                    of the services and materials previously supplied, and (4)
                    stating that the cost of the services and materials has not
                    been previously made the basis of any withdrawal of any of
                    the Deposited Sums; and

                              A certificate of an engineer or architect selected
                    and paid by Landlord who shall be reasonably satisfactory to
                    Tenant, stating (1) that the services and materials
                    described in the accompanying certificate of Landlord were
                    necessary or appropriate to Landlord's Restoration Work, (2)
                    that the amount specified in such certificate of Landlord is
                    not in excess of the cost of the services and materials
                    supplied,

                                       22
<PAGE>

                    (3) the additional amount, if any, estimated as being
                    required to complete and pay for Landlord's Restoration
                    Work, and (4) that the work theretofore has been done in
                    accordance with the plans and specifications thereof.

                    (III) After the completion of and payment for Landlord's
       Restoration Work, the balance, if any, of the Deposited Sums shall be
       paid first to Tenant, up to the amount that Tenant shall have paid to
       Landlord pursuant to Section 9 above (i.e., the amount of the deductible
       paid by Tenant to Landlord), and the balance to Landlord.

                    (IV) Upon the designation of the Depository or the
       substitution of a new Depository, the parties and the Depository shall
       execute an agreement, in form reasonably satisfactory to the Depository,
       which shall provide that the Depository shall receive, hold and disburse
       any monies deposited with it pursuant to and in accordance with the terms
       of this Lease

             Condemnation. If any part of the Premises should be taken for any
public or quasi-public use under governmental law, ordinance, or regulation, or
by right of eminent domain, or by private purchase in lieu thereof (a "Taking"
or "Taken"), and the Taking (a) is of more than (i) 20% of the rentable area of
the Building or (ii) 20% of the parking area on the Land or (b) would otherwise
prevent or materially interfere with Tenant's use of the Premises for the normal
conduct of its business, then upon written notice by Tenant this Lease shall
terminate and Base Rent and all other sums payable under this Lease shall be
apportioned as of said date. If part of the Premises shall be Taken, and this
Lease is not terminated as provided above, the Base Rent and all other sums
payable under this Lease payable hereunder during the unexpired Lease Term shall
be reduced to such extent as may be fair and reasonable under the circumstances
and Landlord shall proceed with due diligence to perform any work necessary to
restore the remaining portions of the Premises to the condition that they were
in immediately prior to the Taking, or as near thereto as possible. In the event
of the Taking of the entire Premises, this Lease shall terminate as of the date
of such Taking. In the event of any such Taking, Landlord shall be entitled to
receive the entire price or award from any such Taking without any payment to
Tenant, and Tenant hereby assigns to Landlord Tenant's interest, if any, in such
award. Tenant shall have the right, to the extent that same shall not diminish
Landlord's award, to make a separate claim against the condemning authority (but
not Landlord) for such compensation as may be separately awarded or recoverable
by Tenant for moving expenses, the unamortized amount of any Tenant-Made
Alterations, damage to Tenant's Trade Fixtures and Tenant's Property, if a
separate award for such items is made to Tenant.

             Assignment and Subletting. Without Landlord's prior written consent
which may only be withheld pursuant to the terms set forth below, Tenant shall
not assign this Lease or enter into a sublease that demises more than 300,000
rentable square feet of the Building (any such sublease being a "Triggering
Sublease") or mortgage, pledge, or hypothecate its leasehold interest, and any
attempt to do any of the foregoing shall be void and of no effect.
Notwithstanding the above, without Landlord's prior written consent, Tenant may
(x) assign this

                                       23
<PAGE>

Lease or sublet the entire Premises, or any part thereof, to any Tenant
Affiliate, or (y) sublet the Premises to any third party other than pursuant to
a Triggering Sublease. The term "Tenant Affiliate" shall mean an entity that is
a Qualified Business Group Holder, a Related Entity or a Successor. The term
"Qualified Business Group Holder" means any entity that acquires all or
substantially all of the business of any division of, or other operational group
within, Tenant, which division or other operational group occupied space in the
Premises prior to such acquisition (including an entity created pursuant to a
spin-off of such division or other group, or an entity acquiring such business
pursuant to an out-sourcing program). The term "Related Entity" means any
corporation or other business entity that controls, is controlled by or is under
common control with Tenant. For purposes of the preceding sentence, "control"
means either (i) ownership or voting control, directly or indirectly, of 30% or
more of the voting stock, membership, partnership interests or other beneficial
ownership interests of the entity in question or (ii) the power (whether by
contract or otherwise) to direct the management and policies of such entity.
Notwithstanding the foregoing, Landlord acknowledges and agrees that each of (a)
Barnes & Noble, Inc., (b) Bertelsmann, Inc. and (c) any entity that controls, or
is controlled by, or is under common control with either Barnes & Noble, Inc. or
Bertelsmann, Inc. (with control having the meaning described in the preceding
sentence) shall, for all purposes of this Section 17 constitute a Related Entity
at all times during the Lease Term. The term "Successor" means any one of the
following: (i) an entity resulting from a merger, consolidation, reorganization
or recapitalization of or with Tenant or (ii) a purchaser (or other transferee)
of all or substantially of (a) Tenant's assets and all or substantially all of
such Tenant's liabilities (including the liabilities of Tenant hereunder) or (b)
the stock, membership, or partnership interest in Tenant. Tenant shall reimburse
Landlord for all of Landlord's reasonable out-of-pocket expenses in connection
with any assignment or sublease.

             If Tenant desires to assign this Lease other than to a Tenant
Affiliate, or enter into a Triggering Sublease other than with a Tenant
Affiliate, then Tenant shall give Landlord notice (each, a "Transfer Notice") of
such desire. Each Transfer Notice shall be accompanied by a statement setting
forth in reasonable detail the identity of the proposed assignee or subtenant,
the nature of its business and its proposed use of the Premises. Landlord shall
approve or disapprove a proposed assignment or Triggering Sublease described in
any Transfer Notice within 10 business days after Landlord's receipt of such
Transfer Notice and the information required pursuant to the provisions of the
preceding sentence. If Landlord fails to approve or disapprove such proposed
assignment or Triggering Sublease within such 10 business day period, then such
proposed assignment or Triggering Sublease shall be deemed approved.
Notwithstanding anything in this Paragraph 17 to the contrary, if there is an
assignment or sublease involving any portion of the Premises, Tenant covenants
to promptly notify Landlord of such assignment or sublease within thirty (30)
days after such assignment or sublease becomes effective and to set forth in
reasonable detail the identity of the proposed assignee or subtenant, the nature
of its business and its use of the Premises. Landlord may withhold its consent
to any proposed assignment or any Triggering Sublease for only one of the
following reasons:

             (i) if the proposed assignee or subtenant will use Hazardous
Materials in materially larger quantities or of materially greater environmental
risk than the Hazardous Materials used

                                       24
<PAGE>

by Tenant at the Premises and Tenant will not execute Landlord's standard
environmental addendums attached hereto as Exhibit G to this Lease; 8.

             (ii) the proposed assignee or subtenant has a poor record or
reputation pertaining to environmental matters; and

             (iii) if the proposed assignee or subtenant's use of the Premises
is in violation of the Declaration or Legal Requirements.

             Any approved assignment or sublease shall be expressly subject to
the terms and conditions of this Lease. Tenant shall provide to Landlord all
information concerning the assignee or sublessee as Landlord may reasonably
request.

             Notwithstanding any assignment or subletting under this Lease,
including, without limitation, any assignment or sublease (including a
Triggering Sublease and any other type of sublease) to a Tenant Affiliate or to
an independent third party, Tenant shall at all times remain fully responsible
and liable for the payment of the rent (including, without limitation, Base Rent
and Additional Rent) and for compliance with all of Tenant's other obligations
under this Lease (regardless of whether Landlord's approval has been obtained
for any such assignments or sublettings). Except in connection with an
assignment to a Tenant Affiliate, in the event that Tenant shall receive rent
and any bonus or other consideration due and payable by an assignee (or a
combination of the rental payable under such assignment plus any bonus or other
consideration therefor or incident thereto) and such amount exceeds the rental
payable under this Lease (after deducting required tenant improvements,
reasonable brokerage fees, and reasonable attorney's fees and the net,
unamortized or undepreciated cost of Tenant's Initial Work, Tenant's Trade
Fixtures, Tenant's Property and any Tenant-Made Alterations, determined on the
basis of Tenant's Federal income tax returns), then Tenant shall be bound and
obligated to pay Landlord as additional rent hereunder 50% of all such excess
rental and other excess consideration within 10 days following receipt thereof
by Tenant. Tenant shall be entitled to receive 100% of all profits from a
sublease of the Premises.

             If this Lease is assigned or if the Premises is subleased (whether
in whole or in part) or in the event of the mortgage, pledge, or hypothecation
of Tenant's leasehold interest or grant of any concession or license within the
Premises or if the Premises is occupied in whole or in part by anyone other than
Tenant, then upon an Event of Default by Tenant hereunder Landlord may collect
rent from the assignee, sublessee, mortgagee, pledgee, party to whom the
leasehold interest was hypothecated, concessionee or licensee or other occupant
and apply the amount collected to the next rent payable hereunder; and all such
rentals collected by Tenant shall be held in trust for Landlord and immediately
forwarded to Landlord. No such transaction or collection of rent or application
thereof by Landlord, however, shall be deemed a waiver of these provisions or a
release of Tenant from the further performance by Tenant of its covenants,
duties, or obligations hereunder.

                                       25
<PAGE>

             Indemnification. (a) Except for the negligence or willful
misconduct of Landlord, its agents, employees or contractors, and to the extent
permitted by law, Tenant covenants and agrees to indemnify, defend and hold
harmless Landlord, and Landlord's agents and employees, from and against any and
all losses, liabilities, damages, costs and expenses (including attorneys' fees)
resulting from claims by third parties for injuries or death to any person
occurring in or about the Project and arising from the use and occupancy of the
Premises or from the negligence or willful misconduct of Tenant, its subtenants,
assignees, employees, contractors, invitees and agents. The furnishing of
insurance required hereunder shall not be deemed to limit Tenant's obligations
under this Paragraph 18.

             (b) Except for the negligence or willful misconduct of Tenant, any
assignee or subtenant of Tenant, or their agents, employees or contractors, and
to the extent permitted by law, Landlord covenants and agrees to indemnify and
save Tenant, its employees and agents harmless of and from any and all claims,
costs, expenses and liabilities, including, without limitation, attorneys' fees,
arising on account of or by reason of claims by third parties for injuries or
death to persons resulting from the negligence or willful misconduct of Landlord
or its agents, employees, or contractors; subject, however, to the provisions of
the last paragraph of Paragraph 25 of this Lease. This indemnity does not cover
claims arising from the presence or release of Hazardous Materials.

             (c) If any claim that is within the scope of any indemnity set
forth in this Lease is asserted against any indemnified party, or any legal
action with respect to any such claim is commenced against an indemnified party,
such indemnified party shall promptly notify the indemnifying party. The
indemnifying party shall have the right to assume the defense with counsel
chosen by the indemnifying party subject to the approval of the indemnified
party (such approval not to be unreasonably withheld) or by the indemnifying
party's insurance company. If the indemnifying party so assumes the defense, the
indemnifying party shall not be responsible for the fees of any separate counsel
employed by the indemnified party.

             Inspection and Access. Landlord and its agents, representatives,
and contractors may, upon reasonable prior notice to Tenant (except in the case
of an emergency), enter the Premises at any reasonable time to inspect the
Premises and to make such repairs as may be required or permitted pursuant to
this Lease and for any purpose that relates to the performance of Landlord's
obligations under this Lease. Landlord and Landlord's representatives may, upon
reasonable prior notice to Tenant, enter the Premises during business hours for
the purpose of showing the Premises to prospective purchasers and, during the
last 9 months of the Lease Term, to prospective tenants. Tenant may request that
any entry pursuant to this paragraph be at a reasonably convenient time other
than the time specified in Landlord's notice or that such entry be during hours
other than during business hours on business days (except in an emergency). Such
rights of entry shall be subject to Tenant's reasonable security regulations or
procedures, provided that Tenant shall have given Landlord prior written notice
thereof. Tenant shall have the right to designate one or more portions of the
Premises as "security areas" and if Tenant does so designate one or more
portions of the Premises as "security areas", then Landlord shall not have
access to such designated security areas, unless Landlord is accompanied by a

                                       26
<PAGE>

representative of Tenant. During the prosecution and immediately after the
completion of any repairs that Landlord is so required or permitted to make,
Landlord shall clean the Premises and shall remove any tools, equipment,
supplies and debris therefrom. Landlord shall not store materials or tools in
the Premises in connection with any such repairs and construction and shall not
bring onto the Premises any materials in excess of those materials reasonably
necessary to effect the repairs to be performed that day. Landlord shall use
commercially reasonable efforts to minimize interference with Tenant's business
operations on the Premises upon a Landlord entry onto the Premises.

             Quiet Enjoyment. Tenant shall, subject to the terms of this Lease,
at all times during the Lease Term, have peaceful and quiet enjoyment of the
Premises against any person claiming by, through or under Landlord.

             Surrender. Upon termination of the Lease Term or earlier
termination of Tenant's right of possession, Tenant shall surrender the Premises
to Landlord in compliance with the applicable provisions of Sections 12(b),
12(c) and 12(e) above and broom clean and in good order, condition and repair,
ordinary wear and tear, damages for which Landlord is responsible under this
Lease, and casualty loss and condemnation excepted. Any Tenant's Property,
Extraordinary Fixture, Tenant-Made Alterations and Tenant's Trade Fixtures not
removed by Tenant as permitted or required herein on the expiration or within 15
days after the termination of this Lease shall be deemed abandoned and may be
stored, removed, and disposed of by Landlord at Tenant's expense (except that
any Tenant-Made Alterations, any Extraordinary Fixtures, any Tenant's Trade
Fixtures and any items of Tenant's Property that Tenant was not required to
remove and that Landlord so stores, removes or disposes of shall be stored,
removed and disposed of at Landlord's expense, rather than at Tenant's expense),
and Tenant waives all claims against Landlord for any damages resulting from
Landlord's retention and disposition of such property. All obligations of Tenant
and Landlord hereunder not fully performed as of the termination of the Lease
Term shall survive the termination of the Lease Term, including without
limitation, indemnity obligations, payment obligations with respect to
Additional Rent for the Common Area Land and obligations concerning the
condition and repair of the Premises.

             Holding Over. If Tenant retains possession of the Premises after
the termination of the Lease Term, unless otherwise agreed in writing, such
possession shall be subject to immediate termination by Landlord at any time,
and all of the other terms and provisions of this Lease (excluding any expansion
or renewal option or other similar right or option) shall be applicable during
such holdover period, except that Tenant shall pay Landlord from time to time,
upon demand, as Base Rent for the holdover period, an amount equal to the
following (i) 150% of the Base Rent in effect on the termination date, computed
on a monthly basis for each month or part thereof during such holding over for
the first 60 days following the expiration of the Lease Term, (ii) 200% of the
Base Rent in effect on the termination date, computed on a monthly basis for
each month or part thereof during such holding over for the period commencing 61
days following the expiration of the Lease Term and ending 60 days later, (iii)
250% of the Base Rent in effect on the termination date, computed on a monthly
basis for each month or part thereof during such holding over for the period
commencing 122 days following the expiration of the

                                       27
<PAGE>

Lease Term and ending 60 days later, (iv) 300% of the Base Rent in effect on the
termination date, computed on a monthly basis for each month or part thereof
during such holding over for the period commencing 183 days following the
expiration of the Lease Term and ending when Tenant's holdover ends. All other
payments shall continue under the terms of this Lease. The amounts payable
pursuant to the two preceding sentences shall constitute the sole amounts for
which Tenant shall be responsible in the case of such a holdover, and in no
event shall Tenant be liable for any damages suffered by Landlord as a result
thereof. No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly provided, and
this Paragraph 22 shall not be construed as consent for Tenant to retain
possession of the Premises.

             Events of Default. Each of the following events shall be an event
of default ("Event of Default") by Tenant under this Lease:

                    Tenant shall fail to pay any installment of Base Rent or any
             other payment required herein when due, and such failure shall
             continue for a period of 5 business days after notice from Landlord
             to Tenant that such payment was due.

                    Tenant or any guarantor or surety of Tenant's obligations
             hereunder shall (A) make a general assignment for the benefit of
             creditors; (B) commence any case, proceeding or other action
             seeking to have an order for relief entered on its behalf as a
             debtor or to adjudicate it a bankrupt or insolvent, or seeking
             reorganization, arrangement, adjustment, liquidation, dissolution
             or composition of it or its debts or seeking appointment of a
             receiver, trustee, custodian or other similar official for it or
             for all or of any substantial part of its property (collectively a
             "proceeding for relief").

                    Any insurance required to be maintained by Tenant pursuant
             to this Lease shall be canceled or terminated or shall expire or
             shall be reduced or materially changed, except, in each case, as
             permitted in this Lease and after 3 days' prior notice by Landlord.

                    Intentionally deleted.

                    Tenant shall attempt or there shall occur any assignment or
             other transfer of Tenant's interest in or with respect to this
             Lease except as otherwise permitted in this Lease and such failure
             shall go uncured for a period of five (5) business days after
             notice from Landlord to Tenant.

                    Tenant shall fail to discharge or bond any lien placed upon
             the Premises in violation of this Lease within 45 days after notice
             of any such lien or encumbrance is filed against the Premises.

                    Tenant shall fail to comply with any provision of this Lease
             other than those specifically referred to in this Paragraph 23, and
             except as otherwise expressly provided herein, such default shall
             continue for more than 30 days after Landlord shall have given

                                       28
<PAGE>

             Tenant written notice of such default, provided that if any such
             failure cannot be remedied within such 30 day period, Tenant shall
             have failed to commence such remedy within such 30 day period and
             to diligently continue to pursue such remedy.

             Landlord's Remedies. Upon each occurrence of an Event of Default
and so long as such Event of Default shall be continuing, Landlord may at any
time thereafter at its election: terminate this Lease or Tenant's right of
possession, (but Tenant shall remain liable as hereinafter provided) and/or
pursue any other remedies at law or in equity except to the extent expressly
limited hereby. Upon the termination of this Lease or termination of Tenant's
right of possession, it shall be lawful for Landlord, without formal demand or
notice of any kind, to re-enter the Premises by summary dispossession
proceedings or any other legal proceeding and to remove Tenant and all persons
and property therefrom. If Landlord re-enters the Premises, Landlord shall have
the right to keep in place and use, or remove and store, all of the furniture,
fixtures and equipment at the Premises.

             If Landlord terminates this Lease, Landlord may recover from Tenant
the sum of: all Base Rent and all other amounts accrued hereunder to the date of
such termination; the cost of reletting the whole or any part of the Premises,
including without limitation brokerage fees and/or leasing commissions incurred
by Landlord, and costs of removing and storing Tenant's or any other occupant's
property, repairing, altering, remodeling, or otherwise putting the Premises
into condition acceptable to a new tenant or tenants, and all reasonable
expenses incurred by Landlord in pursuing its remedies, including reasonable
attorneys' fees and court costs; and the excess of the then present value of the
Base Rent and other amounts payable by Tenant under this Lease as would
otherwise have been required to be paid by Tenant to Landlord during the period
following the termination of this Lease measured from the date of such
termination to the expiration date stated in this Lease, over the then present
value of the aggregate fair market rental value for the same period which Tenant
establishes Landlord can reasonably expect to recover by reletting the Premises
for such period, taking into consideration the availability of acceptable
tenants and other market conditions affecting leasing. Such present values shall
be calculated at a discount rate equal to the 90-day U.S. Treasury bill rate at
the date of such termination.

             If Landlord terminates Tenant's right of possession (but not this
Lease), Landlord may relet the Premises for the account of Tenant for such rent
and upon such terms as shall be satisfactory to Landlord without thereby
releasing Tenant from any liability hereunder and without demand or notice of
any kind to Tenant. For the purpose of such reletting Landlord is authorized to
make any repairs, changes, alterations, or additions in or to the Premises as
Landlord deems reasonably necessary or desirable. If the Premises are not relet
for any period or periods, then Tenant shall pay to Landlord as liquidated
damages a sum equal to the amount of the rental reserved in this Lease for such
period or periods as and when such rents are due under this Lease in respect of
such period or periods, plus the cost of recovering possession of the Premises
(including attorneys' fees and costs of suit), the unpaid Base Rent and other
amounts accrued hereunder at the time of repossession, and the costs incurred in
any attempt by Landlord to relet the Premises. If the Premises are relet and a
sufficient sum shall not be realized from

                                       29
<PAGE>

such reletting [after first deducting therefrom, for retention by Landlord, the
unpaid Base Rent accrued as of the date of such re-letting and other amounts
accrued hereunder at the time of reletting, the cost of recovering possession
(including attorneys' fees and costs of suit), all of the costs and expense of
repairs, changes, alterations, and additions, the expense of such reletting
(including without limitation brokerage fees and leasing commissions) and the
cost of collection of the rent accruing therefrom] to satisfy the rent provided
for in this Lease to be paid, then Tenant shall pay, as liquidated damages, the
amount of any such deficiency between the Base Rent and all other amounts due
under this Lease for the applicable period prior to the scheduled expiration
date of this Lease and the net amount, if any, of the rents collected on account
of the lease or leases of the Premises for each month of the same period. Any
liquidated damages payable pursuant to this paragraph shall be paid in monthly
installments by Tenant on the first day of each month of the unexpired Lease
Term. Any such payments due Landlord shall be made upon demand therefor from
time to time and Tenant agrees that Landlord may file suit to recover any sums
falling due from time to time. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect in writing to terminate
this Lease for such previous breach. Notwithstanding anything contained herein
to the contrary, if Landlord terminates Tenant's right to possession without
terminating the Lease after an Event of Default, Landlord shall use commercially
reasonable efforts to relet the Premises; provided, however, (a) Landlord shall
not be obligated to accept any tenant proposed by Tenant, (b) Landlord shall
have the right to lease any other space controlled by Landlord first, and (c)
any proposed tenant shall meet all of Landlord's leasing criteria.

             Exercise by Landlord of any one or more remedies hereunder granted
or otherwise available shall not be deemed to be an acceptance of surrender of
the Premises and/or a termination of this Lease by Landlord, whether by
agreement or by operation of law, it being understood that such surrender and/or
termination can be effected only by the written agreement of Landlord and
Tenant. Any law, usage, or custom to the contrary notwithstanding, either party
shall have the right at all times to enforce the provisions of this Lease in
strict accordance with the terms hereof; and the failure of either party at any
time to enforce its rights under this Lease strictly in accordance with same
shall not be construed as having created a custom in any way or manner contrary
to the specific terms, provisions, and covenants of this Lease or as having
modified the same. Tenant and Landlord further agree that forbearance or waiver
by either party to enforce its rights pursuant to this Lease or at law or in
equity, shall not be a waiver of either party's right to enforce one or more of
its rights in connection with any subsequent default. A receipt by Landlord of
rent or other payment with knowledge of the breach of any covenant hereof shall
not be deemed a waiver of such breach, and no waiver by either party of any
provision of this Lease shall be deemed to have been made unless expressed in
writing and signed by either party. The terms "enter," "re-enter," "entry" or
"re-entry," as used in this Lease, are not restricted to their technical legal
meanings. Any reletting of the Premises shall be on such terms and conditions as
Landlord in its sole discretion may determine (including without limitation a
term different than the remaining Lease Term, rental concessions, alterations
and repair of the Premises, lease of less than the entire Premises to any tenant
and leasing any or all other portions of the Project before reletting the
Premises). Notwithstanding anything to the contrary contained in this Lease,
except as and to the extent otherwise set forth in this Paragraph

                                       30
<PAGE>

24, Landlord hereby waives any right it may have under Nevada law (whether
statutory, common law or otherwise) to accelerate Base Rent, the Additional
Rental Amount or Additional Rent for the Common Area Land.

             Notwithstanding any provisions of this Lease to the contrary, to
the extent permitted by applicable law, in no event shall either party be liable
to the other for consequential damages, even in cases of negligence, willful
misconduct or breach of this Lease, and each party hereby waives and releases
the other party from any and all liability for consequential damages suffered by
either party under this Lease.

             Tenant's Remedies/Limitation of Liability. Except as otherwise
expressly set forth in this Lease, Landlord shall not be in default hereunder
unless Landlord fails to perform any of its obligations under this Lease
(including, without limitation, its obligations under Paragraphs 10 and 43 of
this Lease and its obligations with respect to any Punch List items) within 7
days after receipt of written notice from Tenant specifying such failure (unless
such performance will, due to the nature of the obligation, require a period of
time in excess of 7 days, then provided that Landlord commences such performance
within such seven (7) day period, Landlord shall have as much time as is
reasonably necessary as long as Landlord diligently pursues such performance, up
to a maximum amount of 150 days). All obligations of Landlord hereunder shall be
construed as covenants, not conditions. If Landlord is in default hereunder,
Tenant's remedies shall include, without limitation, the right (a) to take
commercially reasonable actions to cure such default on behalf of and at the
sole cost and expense of Landlord, in which event Landlord shall reimburse
Tenant for its reasonable, out-of-pocket costs and expenses incurred and paid in
connection therewith within 30 days after Tenant's delivery to Landlord of an
invoice therefor, together with reasonable supporting documentation for such
reasonable costs and expenses, and/or (b) to exercise any other actions
available at law or to bring an action for injunctive relief, and/or (c) to
bring an action for damages. If Landlord fails to reimburse Tenant for the
reasonable costs, fees and expenses incurred by Tenant in taking curative
actions under clause (a) above within 30 days after demand therefor, Tenant may
bring an action for damages against Landlord to recover such costs, fees and
expenses, together with interest thereon at the Interest Rate from the due date
therefor (i.e. the date 30 business days after demand), and reasonable
attorney's fees incurred by Tenant in bringing such action for damages. Upon
Tenant obtaining a court ordered judgment against Landlord for damages as
described herein, Tenant may offset such amounts together with interest at the
Interest Rate from the due date therefor (being the date that is 30 days
following Landlord's receipt of a demand therefor) against the Base Rent,
Additional Rental Amount and all other amounts payable hereunder. Additionally,
if Landlord is in default under this Lease during the last six (6) months of the
Lease Term (including any renewals or extensions of the Lease Term), Tenant
exercises its right of self help under this Paragraph 25, and Landlord does not
timely reimburse Tenant for such costs and expenses incurred by Tenant in taking
such curative actions, then Tenant may pay its Base Rent and Additional Rental
Amount for the remainder of the Lease Term (up to six months only) into an
escrow account managed by an independent third party until the matter is decided
by a court of law.

                                       31
<PAGE>

             Tenant's exercise of its right to self help or to offset Base Rent
and the Additional Rental Amount or to escrow Base Rent and the Additional
Rental Amount under this Paragraph 25 shall in no way be an acknowledgment of or
be construed as an agreement by Landlord that such payment (or work) required is
the obligation of Landlord and shall in no way hinder the Landlord from
disputing such claims and Base Rent and Additional Rental Amount offsets and
escrows by Tenant. In the event of a dispute, and if Landlord prevails, Tenant
shall promptly reimburse Landlord for all amounts paid by Landlord to Tenant, or
any amounts offset or escrowed by Tenant or any amounts on which Landlord has
prevailed, whichever is appropriate, plus interest at the Interest Rate from the
date the amount was offset, escrowed or paid. Further the prevailing party shall
be entitled to reasonable attorneys' fees and costs incurred in the offset or
escrow dispute.

             All obligations of Landlord under this Lease will be binding upon
Landlord only during the period of its ownership of the Premises and not
thereafter. The term "Landlord" in this Lease shall mean only the owner, for the
time being of the Premises, and in the event of the transfer by such owner of
its interest in the Premises, such owner shall thereupon be released and
discharged from all obligations of Landlord thereafter accruing, and the new
owner shall automatically be deemed to have assumed all obligations of
"Landlord" under the Lease commencing from the Commencement Date.

             Any liability of Landlord for a default by Landlord under the
Lease, or a breach by Landlord of any of its obligations under the Lease, shall
be limited solely to its interest in the Project, and in no event shall any
personal liability be asserted against Landlord in connection with the Lease nor
shall any recourse be had to any other property or assets of Landlord. If Tenant
obtains a final court ordered judgment against Landlord, then Landlord's
interest in the Project shall be deemed to include: (i) the rents or other
income from the Project received by Landlord, (ii) the net proceeds received by
Landlord from the sale, financing or other disposition of all or any part of
Landlord's right, title and interest in the Project, (iii) the net proceeds
received by Landlord from any condemnation or conveyance in lieu of condemnation
of all or any portion of the Project, and (iv) the net proceeds of insurance
received by Landlord from any casualty loss of all or any portion of the
Project.

             Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL
BY JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS
LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.

             Subordination. Landlord represents and warrants that, as of the
date hereof, (i) there are no mortgages that constitute a lien or charge on the
whole or any portion of the Land, other than that certain mortgage (the
"Existing Mortgage"), dated June 11, 1998, made by Landlord's
predessor-in-interest in favor of ProLogis Trust, in the original principal
amount of $25,269,697.00, (ii) there are no ground or underlying leases covering
the whole or any portion

                                       32
<PAGE>

of the Land or the Building, and (iii) ProLogis Trust, a Maryland real estate
investment trust, is the holder of the Existing Mortgage. Simultaneously with
the execution of this Lease, Landlord shall obtain for and deliver to Tenant an
agreement in the form annexed hereto as Exhibit H from the present holder of the
Existing Mortgage. With respect to any mortgage (each a "Future Mortgage") that
hereafter become a lien or charge upon the Premises, Tenant agrees to
subordinate this Lease to the lien of such Future Mortgage, by written
agreement, but only if, simultaneously therewith, the holder of such Future
Mortgage executes and delivers to Tenant (whether as part of the agreement of
subordination or otherwise) a Non-Disturbance Agreement (as defined below). As
used in this Lease, the term "Non-Disturbance Agreement" shall mean an agreement
between the holder of a Future Mortgage and Tenant either in the form annexed
hereto as Exhibit H, or in such other form as shall be proposed by such holder
of a Future Mortgage, as long as such other form, as compared to the form
annexed hereto as Exhibit H does not, in any material respect, increase the
obligations or liabilities of Tenant or decrease the rights or remedies of
Tenant, and, in all cases, in recordable form. Notwithstanding the foregoing
provisions of this Paragraph 27, in no event shall Tenant be required to
subordinate this Lease to the lien of any Future Mortgage if the holder of such
Future Mortgage is an affiliate of Landlord. If Tenant and any mortgagee enter
into a Non-Disturbance Agreement and such Non-Disturbance Agreement contains a
provision that requires that the Tenant, upon request of such mortgagee, pay
directly to such mortgagee any or all Base Rent and additional rent thereafter
coming due under this Lease, then, whether or not Landlord is a party to such
Non-Disturbance Agreement, (i) Landlord hereby authorizes Tenant to pay directly
to such mortgagee all Base Rent and additional rent thereafter coming due under
this Lease, without any further authorization by Landlord and notwithstanding
any protest by Landlord, and (ii) Landlord hereby agrees that any sums paid by
Tenant to such mortgagee pursuant to such mortgagee's request shall be deemed to
have been paid by Tenant to Landlord under this Lease, and Tenant shall have no
liability to Landlord whatsoever for any sums so paid by Tenant directly to such
mortgagee, whether or not Landlord protest the same.

             Mechanic's Liens. Tenant has no express or implied authority to
create or place any lien or encumbrance of any kind upon, or in any manner to
bind the interest of Landlord or Tenant in, the Premises or to charge the
rentals payable hereunder for any claim in favor of any person dealing with
Tenant, including those who may furnish materials or perform labor for any
construction or repairs. Tenant covenants and agrees that it will pay or cause
to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed on the
Premises and that it will save and hold Landlord harmless from all loss, cost or
expense based on or arising out of asserted claims or liens against the
leasehold estate or against the interest of Landlord in the Premises or under
this Lease as a result of any such amount payable by Tenant. Tenant shall give
Landlord immediate written notice of the placing of any lien or encumbrance
against the Premises and cause such lien or encumbrance to be discharged or
bonded within 45 days of the notice of the filing or recording thereof;
provided, however, Tenant may contest such liens or encumbrances as long as such
contest prevents foreclosure of the lien or encumbrance and Tenant causes such
lien or encumbrance to be bonded or insured over in a manner satisfactory to
Landlord within such 45 day period.

                                       33
<PAGE>

             Estoppel Certificates. Both parties agree, from time to time,
within 20 days after request of the other, to execute and deliver to the other,
or the other's designee, an estoppel certificate reasonably requested by the
other, stating that this Lease is in full force and effect, the date to which
rent has been paid, that to the best knowledge of the certifying party, the
other party is not in default hereunder (or specifying in detail the nature of
the other's default), the termination date of this Lease and such other matters
pertaining to this Lease as may be requested by the other (provided that the
matters requested are reasonable and customary). If (i) either party (the
"certifying party") fails or refuses to execute and deliver an estoppel
certificate in a form annexed hereto as Exhibit I to the other party within
twenty (20) days after the certifying party receives such estoppel certificate,
and (ii) such failure continues for five (5) days after the certifying party
receives notice of such failure, then the certifying party shall automatically
and without further act be deemed to have certified that the information set
forth in such estoppel certificate is true and correct.

             Environmental Requirements. Except for Hazardous Material contained
in products used by Tenant (i) in de minimis quantities for ordinary cleaning,
(ii) in de minimis quantities for office purposes and (iii) in de minimis
quantities for warehouse purposes, Tenant shall not cause or permit its agents,
employees, subtenants, contractors or invitees to bring any Hazardous Material
upon the Premises or transport, store, use, generate, manufacture or release any
Hazardous Material in or about the Premises without Landlord's prior written
consent. Tenant, at its sole cost and expense, shall operate its business in the
Premises in strict compliance with all Environmental Requirements (defined
below) and shall remediate in a manner in compliance with Environmental
Requirements any Hazardous Materials released on or from the Project by Tenant,
its agents, employees, contractors, subtenants or invitees. Tenant shall
complete and certify to Landlord disclosure statements as reasonably requested
by Landlord from time to time (but not more often than twice in any calendar
year) relating to Tenant's transportation, storage, use, generation, manufacture
or release of Hazardous Materials on the Premises. The term "Environmental
Requirements" means all applicable present and future statutes, regulations,
ordinances, rules, codes, judgments, orders or other similar enactments of any
governmental authority or agency regulating or relating to health, safety, or
environmental conditions on, under, or about the Premises or the environment,
including without limitation, the following: the Comprehensive Environmental
Response, Compensation and Liability Act; the Resource Conservation and Recovery
Act; and all state and local counterparts thereto, and any regulations or
policies promulgated or issued thereunder. The term "Hazardous Materials" means
and includes any substance, material, waste, pollutant, or contaminant listed or
defined as hazardous or toxic, under any Environmental Requirements, asbestos
and petroleum, including crude oil or any fraction thereof, natural gas liquids,
liquified natural gas, or synthetic gas usable for fuel (or mixtures of natural
gas and such synthetic gas). As defined in Environmental Requirements, Tenant is
and shall be deemed to be the owner of all Hazardous Materials brought on the
Premises by Tenant, its agents, employees, contractors or invitees, and the
wastes, by-products, or residues generated, resulting, or produced therefrom.

                                       34
<PAGE>

             Subject to the provisions of Article 24 hereof, Tenant shall
indemnify, defend, and hold Landlord harmless from and against any and all
losses (including, without limitation, diminution in value of the Premises or
the Project and loss of rental income from the Project), claims, demands,
actions, suits, damages (including, without limitation, punitive damages),
expenses (including, without limitation, remediation, removal, repair,
corrective action, or cleanup expenses), and costs (including, without
limitation, reasonable attorneys' fees, consultant fees or expert fees and
including, without limitation, removal or management of any asbestos brought
into the property or disturbed in breach of the requirements of this Paragraph
30), which are brought or recoverable against, or suffered or incurred by
Landlord as a result of any release of Hazardous Materials for which Tenant is
obligated to remediate as provided above or any other breach of the requirements
under this Paragraph 30 by Tenant, its agents, employees, contractors,
subtenants, assignees or invitees, regardless of whether Tenant had knowledge of
such noncompliance. The obligations of Tenant under this Paragraph 30 shall
survive any termination of this Lease.

             Landlord shall have access to, and a right to perform reasonable
inspections and tests of the Premises to determine Tenant's compliance with
Environmental Requirements (but not more often than once in any calendar year),
its obligations under this Paragraph 30, or the environmental condition of the
Premises. Access shall be granted to Landlord upon Landlord's prior notice to
Tenant and at such times and in such a manner so as to minimize, so far as may
be reasonable under the circumstances, any disturbance to Tenant's operations.
Such inspections and tests shall be conducted at Landlord's expense, unless such
inspections or tests reveal that Tenant has not complied with any Environmental
Requirement in a manner which materially and adversely affects the value of the
Premises or the Project, in which case Tenant shall reimburse Landlord for the
reasonable cost of such inspection and tests. Landlord's receipt of or
satisfaction with any environmental assessment in no way waives any rights that
Landlord holds against Tenant.

             Notwithstanding anything to the contrary in this Paragraph 30,
Tenant shall have no liability of any kind to Landlord as to Hazardous Materials
on the Premises caused or permitted by: (i) Landlord, its agents, employees,
contractors or invitees; or (ii) any other tenants in the Project or their
agents, employees, contractors, subtenants, assignees or invitees; or (iii) any
other person or entity located outside of the Premises or the Project.

             If: (i) Hazardous Materials are hereafter discovered on the Project
during Landlord's (or any affiliate of Landlord's) ownership of the Project (or
the relevant portion thereof, including the Premises), and such Hazardous
Materials were not introduced onto the Project by Tenant or its agents,
employees, contractors, subtenants or invitees, and the presence of such
Hazardous Materials results in any contamination, damages, or injury to the
Premises that materially and adversely affects Tenant's occupancy or use of the
Premises or human health, or (ii) Landlord, its agents, contractors or employees
release any Hazardous Materials onto the Premises; then, in either such event,
Landlord shall promptly take all actions at its sole expense as are necessary to
remediate such Hazardous Materials as required by Environmental Requirements in
order to permit Tenant to use and occupy the Premises for the Intended Use and
without restrictions or

                                       35
<PAGE>

limitations on such use and occupancy that were not imposed on such use and
occupancy prior to the discovery of such Hazardous Materials. Actual or
threatened action or litigation by any governmental authority is not a condition
prerequisite to Landlord's obligations under this paragraph. If Landlord fails
to commence such remediation or if Landlord commences such remediation and fails
to diligently prosecute same to completion, then Tenant, as its sole and
exclusive remedies with respect to the matters referred to in clause (i) of this
paragraph only, (it being understood that Tenant's remedies shall not be so
limited in the event of an occurrence under clause (ii) of this paragraph) may
either: (a) terminate this Lease by written notice (a "Termination Notice") to
Landlord after expiration of 30 days following a notice to Landlord that Tenant
intends to terminate this Lease if Landlord does not promptly commence or
diligently prosecute the remediation to completion within such 30 day period; or
(b) commence an action against Landlord to enforce Landlord's obligations
hereunder. Base Rent and Additional Rent for Common Area Land shall be equitably
adjusted if and to the extent and during the period the Premises are unsuitable
for Tenant's business as the result of the presence of Hazardous Materials as
hereinabove described. Notwithstanding anything herein to the contrary, if
Landlord within ten (10) days after its receipt of a Termination Letter obtains
a letter from the appropriate governmental authority that no further remediation
is required prior to the effective date of any such termination, then such
termination shall be null and void and this Lease shall remain in full force and
effect.

             Landlord represents and warrants, to Landlord's knowledge, that as
of the Commencement Date, except for information contained in the Phase I
Environmental Assessment Report dated August 21, 1997, as amended by letter
report dated June 9, 1998 and prepared by SECOR International Incorporated,
there has not been (i) any violation of Environmental Requirements pertaining to
the Land, or (ii) any release of Hazardous Materials on the Land. For purposes
of this paragraph, Landlord's knowledge shall mean the actual knowledge of Dave
Morze and John Hanson, without any duty of inquiry or investigation. Landlord
represents and warrants to Tenant that no employee of Landlord has any material
knowledge that is not possessed by David Morze or John Hanson about any of the
matters that are the subject of the representations and warranties contained in
this paragraph.

             Rules and Regulations. Tenant shall, at all times during the Lease
Term and any extension thereof, comply with the rules and regulations attached
hereto. In the event of any conflict between said rules and regulations and
other provisions of this Lease, the other terms and provisions of this Lease
shall control. Landlord shall not have any liability or obligation for the
breach of any rules or regulations by other tenants in the Project.

             Security Service. Tenant acknowledges and agrees that, while
Landlord may patrol the Project, Landlord is not providing any security services
with respect to the Premises and that Landlord shall not be liable to Tenant
for, and Tenant waives any claim against Landlord with respect to, any loss by
theft or any other damage suffered or incurred by Tenant in connection with any
unauthorized entry into the Premises or any other breach of security with
respect to the Premises.

                                       36
<PAGE>

             Force Majeure. Neither Landlord nor Tenant shall be held
responsible for delays in the performance of its obligations hereunder when
caused by any of the following events to the extent beyond the applicable
party's reasonable control: strikes, lockouts, labor disputes, acts of God
(which for purposes of the performance by Landlord of the Base Building Work,
shall include weather delays, but only if and to the extent that weather delays
exceed 21 days on a cumulative basis or to such extent as there is a continual
weather delay beyond 7 consecutive days), inability to obtain labor or materials
or reasonable substitutes therefor, new governmental restrictions that are
promulgated after the Rent Commencement Date, governmental regulations that are
promulgated after the Rent Commencement Date, governmental controls that are
enacted after the Rent Commencement Date, delay in issuance of permits (provided
(x) that Landlord complies with industry standard in the submittal process of
such permits to the appropriate governmental authority and (y) with respect to
the Base Building Work, such delay shall be governed by Section 2.02(f) of
Addendum 2, rather than this definition), enemy or hostile governmental action,
civil commotion, fire or other casualty (any of the foregoing events, "Force
Majeure"). Notwithstanding the foregoing in this Paragraph 33, in no event shall
any of the following events constitute an event of Force Majeure (and the
applicable party shall not be relieved of its obligations hereunder as a result
thereof): (i) any financial inability of either party to perform its obligations
under this Lease, (ii) any contractor or subcontractor defaults, (iii) any
inability of Landlord to timely perform its obligations under Addendum 2 as a
result of (x) any delays in obtaining (or failure to obtain) any consents,
approvals or authorizations that are required to be obtained under the
Declaration, (y) any term, condition or provision of the Declaration that
affects the ability of Landlord to timely perform such obligations or (z) any
act, or failure to act, by the Declarant, the ALC or the TCMA (as all such terms
are defined in the Declaration).

             Entire Agreement. This Lease (together with all of the exhibits and
addenda attached hereto) and the guaranty delivered to Tenant by Prologis Trust
on the date hereof constitute the complete agreement of Landlord and Tenant with
respect to the subject matter hereof. No representations, inducements, promises
or agreements, oral or written, have been made by Landlord or Tenant, or anyone
acting on behalf of Landlord or Tenant, which are not contained herein or in
such guaranty, and any prior agreements, promises, negotiations, or
representations are superseded by this Lease and such guaranty. This Lease may
not be amended except by an instrument in writing signed by both parties hereto.

             Severability. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws, then and in that event,
it is the intention of the parties hereto that the remainder of this Lease shall
not be affected thereby. It is also the intention of the parties to this Lease
that in lieu of each clause or provision of this Lease that is illegal, invalid
or unenforceable, there be added, as a part of this Lease, a clause or provision
as similar in terms to such illegal, invalid or unenforceable clause or
provision as may be possible and be legal, valid and enforceable.

             Brokers. Landlord and Tenant represent and warrant to the other
that neither has dealt with any broker,

                                       37
<PAGE>

agent or other person in connection with this transaction and that no broker,
agent or other person brought about this transaction, other than the broker, if
any, set forth on the first page of this Lease, and Landlord and Tenant agree to
indemnify and hold the other harmless from and against any claims by any other
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Landlord or Tenant with regard to
this leasing transaction. Landlord and Tenant hereby acknowledge and agree that
the broker(s) referenced on the first page of this Lease shall be entitled to a
leasing commission from Landlord by virtue of this Lease, which leasing
commission shall be deemed earned and shall be paid by Landlord to said
broker(s) in accordance with, and subject to the terms of, a separate written
agreement.

             Miscellaneous. Any payments or charges due from Tenant to Landlord
hereunder shall be considered rent for all purposes of this Lease.

             This Lease may be executed in one or more counterparts each of
which shall together constitute a single document.

             All notices required or permitted to be given under this Lease
shall be in writing and shall be sent by registered or certified mail, return
receipt requested, or by a reputable national overnight courier service, postage
prepaid, or by hand delivery addressed to the parties at their addresses on the
signature page, and (i) in the case of notices to Landlord, with a copy sent to
Landlord at 14100 East 35th Place, Aurora, Colorado 80011, and (ii) in the case
of notices to Tenant, with a copy sent to: (aa) barnesandnoble.com llc, 76 Ninth
Avenue, 11th Floor, New York, NY 10011, Attn: William F. Duffy, Vice President
of Operations, and (bb) Robinson Silverman Pearce Aronsohn & Berman LLP, 1290
Avenue of the Americas, New York, New York 10104, Attn: Michael N. Rosen, Esq.
Either party may by notice given aforesaid change its address for all subsequent
notices. Except where otherwise expressly provided to the contrary, notice shall
be deemed given upon receipt or refusal of receipt.

             Except as otherwise expressly provided in this Lease or as
otherwise required by law, in any instance in this Lease for which Landlord's
consent or approval is required, such consent or approval shall not be
unreasonably withheld, conditioned or delayed.

             Intentionally deleted.

             Landlord, at anytime after the date hereof and within ten (10) days
after its receipt of a request therefor, shall execute, acknowledge and deliver
to Tenant (i) a memorandum of lease in respect of this Lease, sufficient for
recording and in form of Exhibit J annexed hereto and made a part hereof, which
memorandum may be recorded by Tenant, and (ii) any other instrument(s) necessary
to the effective recordation of such memorandum of lease. Simultaneously with
the execution of such a memorandum of lease, Tenant shall execute and deliver to
Landlord an instrument (the "Release") releasing such memorandum of lease from
the applicable real property records; provided, however, that the Release shall
be held in escrow by a third party law firm reasonably acceptable to Landlord
and Tenant, and shall not be released from escrow

                                       38
<PAGE>

until the expiration or sooner termination of this Lease (and Landlord, Tenant
and the escrow agent shall execute a mutually agreeable escrow agreement to that
effect).

             The normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Lease or any exhibits or amendments hereto. (n) (o) The
submission by Landlord to Tenant of this Lease shall have no binding force or
effect, shall not constitute an option for the leasing of the Premises, nor
confer any right or impose any obligations upon either party until execution of
this Lease by both parties.

             Words of any gender used in this Lease shall be held and construed
to include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires. The captions inserted
in this Lease are for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Lease, or any provision hereof, or in any
way affect the interpretation of this Lease.

             If Tenant fails to pay Landlord any Base Rent or other amounts due
under this Lease by the date such amount is due (any such failure, a
"Non-Payment Event") and such failure shall continue for a period of ten (10)
days after written notice (each, a "Late Notice"), then such past due amount
shall bear interest at the Interest Rate (as defined below) from the due date
therefor until the date paid. Notwithstanding the preceding sentence, if (and
only if) (a) a Non-Payment Event occurs and continues for five (5) days and (b)
within the 365-day period preceding the date of such occurrence, at least two
other Non-Payment Events shall have also occurred in respect of which Tenant
shall have received Late Notices, then (x) Landlord shall have no obligation to
give to Tenant a Late Notice in respect of the Non-Payment Event in question,
and (y) the past due amount in connection with such Non-Payment Event shall bear
interest at the Interest Rate from the due date therefor until the date paid,
and (z) Tenant shall pay Landlord a late charge equal to three percent (3%) of
the past due amount. For purposes hereof, the term "Interest Rate" shall mean
the lesser of (i) two percent (2%) above the so-called annual "Base Rate" of
interest publicly announced by Citibank, N.A., New York, New York (or any
successor thereof) from time to time, as its interest rate charged for unsecured
loans to its corporate customers, but in no event greater than the highest
lawful rate from time to time in effect and (ii) the highest rate permitted by
applicable law. It is expressly the intent of Landlord and Tenant at all times
to comply with applicable law governing the maximum rate or amount of any
interest payable on or in connection with this Lease. If applicable law is ever
judicially interpreted so as to render usurious any interest called for under
this Lease, or contracted for, charged, taken, reserved, or received with
respect to this Lease, then it is Landlord's and Tenant's express intent that
all excess amounts theretofore collected by Landlord or Tenant, as the case may
be, be credited on the applicable obligation (or, if the obligation has been or
would thereby be paid in full, refunded to Tenant or Landlord as the case may
be), and the provisions of this Lease immediately shall be deemed reformed and
the amounts thereafter collectible hereunder reduced, without the necessity of
the execution of any new document, so as to comply with the applicable law, but
so as to permit the recovery of the fullest amount otherwise called for
hereunder.

                                       39
<PAGE>

             Construction and interpretation of this Lease shall be governed by
the laws of the state in which the Project is located, excluding any principles
of conflicts of laws.

             Time is of the essence as to the performance of Tenant's and
Landlord's obligations under this Lease.

             All exhibits and addenda attached hereto are hereby incorporated
into this Lease and made a part hereof.

             Within two (2) years from the Commencement Date, upon Tenant's
request, from time to time within such two (2) year period, Landlord shall
provide up to $60,000.00 of Insight software logistics consulting services to
Tenant at no cost to Tenant.

             Landlord's Lien/Security Interest. Intentionally deleted.

             Limitation of Liability of Trustees, Shareholders, and Officers of
ProLogis Trust. Any obligation or liability whatsoever of ProLogis Trust, a
Maryland real estate investment trust, which may arise at any time under this
Lease or any obligation or liability which may be incurred by it pursuant to any
other instrument, transaction, or undertaking contemplated hereby shall not be
personally binding upon, nor shall resort for the enforcement thereof be had to
the property of, its trustees, directors, shareholders, officers, employees or
agents, regardless of whether such obligation or liability is in the nature of
contract, tort, or otherwise.

             Restriction on Transfer of the Premises. Landlord hereby covenants
and agrees that Landlord shall not, without Tenant's prior written consent,
which consent may be withheld by Tenant in its sole and absolute discretion,
sell, convey or otherwise transfer its interests in the Premises prior to the
Rent Commencement Date In the event of a breach by Landlord of the covenant
contained in this Paragraph 40, Tenant, in addition to any and all other rights
and remedies which Tenant may have against Landlord under this Lease, at law or
in equity, shall be entitled to terminate this Lease upon ten (10) days' prior
written notice to Landlord and, upon such termination, this Lease shall
terminate and be of no further force and effect. Landlord and Tenant hereby
represent and warrant to each other that the Landlord's restriction on transfer
of the Premises as set forth herein shall in no event restrict Landlord from
transferring its ownership interests in the Premises and this Lease at any time
following the Rent Commencement Date.

             Intentionally omitted.

             Corporate Authority. Tenant represents and warrants that (i) it has
full corporate right and authority to lease the Premises from Landlord and to
otherwise enter into this Lease on the terms and conditions set forth herein and
(ii) the officer executing this Lease on behalf of Tenant has the full corporate
right, authority and power to execute and deliver this Lease on behalf of
Tenant. Landlord represents and warrants that (i) it is the sole owner in fee
simple of the Land, (ii) it has full corporate right and authority to lease the
Premises to Tenant and to otherwise enter

                                       40
<PAGE>

into this Lease on the terms and conditions set forth herein and (iii) the
officer executing this Lease on behalf of Landlord has the full right, authority
and power to execute and deliver this Lease on behalf of Landlord.

             Warranties. Landlord warrants and covenants to Tenant that, upon
the Rent Commencement Date, the Base Building Work will be free from defects in
workmanship and material for the twenty-four (24) month period ("Warranty
Period") following the Rent Commencement Date. In amplification and not in
limitation of the preceding sentence, if at anytime during the Warranty Period,
any of the Base Building Work (including any equipment and/or materials
installed at the Premises in connection with the Base Building Work) (a) is
found to be defective, or (b) requires adjustment due to a defect or such
adjustment is customary in connection with the installation and initial
operation of such portion of the Base Building Work (e.g., a building system
which requires periodic adjustment in connection with the installation and "fine
tuning" of such system to make such system fully operational), or (c) fails to
conform to any Legal Requirements that were enacted prior to the Rent
Commencement Date, then Landlord shall correct such defect, adjustment or
nonconformity promptly after receipt of written notice from Tenant to do so.
Landlord shall bear the costs of correcting such defective or nonconforming Base
Building Work. On or prior to the Rent Commencement Date, (x) Landlord shall
cause Landlord's general contractor to issue all of the general contractor
warranties and guarantees relating to the Base Building Work to both Landlord
and Tenant and (y) Landlord shall deliver to Tenant an original of, and assign
to Tenant, all Landlord's right, title and interest in and to, each of the other
warranties and guarantees shown on Exhibit L annexed hereto, in the forms
annexed hereto, from each of the contractors, subcontractors and suppliers shown
on such warranties and guarantees. Landlord shall cooperate with Tenant, at
Tenant's expense, (unless any such warranty or guaranty relates to an item for
which Landlord is responsible under the terms of this Lease, in which case, such
cooperation shall be at Landlord's expense) in all of Tenant's efforts to
enforce any and all such warranties and/or guarantees (whether or not assigned
or assignable to Tenant).

             Notwithstanding the preceding paragraph or anything else in the
Lease to the contrary, if at anytime during the Lease Term (as the same may be
renewed or extended), it is determined that any of the Base Building Work
(including any equipment and/or materials installed at the Premises in
connection with the Base Building Work) was not constructed by Landlord and
delivered to Tenant on the Rent Commencement Date strictly in accordance with
the terms and provisions of the Performance Specifications, then Landlord shall
promptly correct any such matters after receipt of written notice from Tenant to
do so and Landlord shall bear all the costs of correcting such matter; provided,
however, that with respect to the items indicated in the Performance
Specifications as being required to comply with the Performance Specifications
only as of the Rent Commencement Date, Landlord shall have no further
obligations under this paragraph with respect thereto following Tenant's
acceptance of each such item on the Rent Commencement Date (it being agreed that
nothing contained herein shall relieve Landlord of its obligations and
liabilities under the immediately preceding paragraph with respect to each such
item).

                                       41
<PAGE>

             Attorneys' Fees. In the event of any legal action or proceeding
brought by either party against the other arising out of this Lease, the
prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred in such action. Such amounts shall be included in any judgment
rendered in any such action or proceeding.

             Declaration. (a) Landlord represents to Tenant that as of the
Commencement Date: (i) Landlord has delivered to Tenant a true and complete copy
(together with all exhibits thereto) of: (x) that certain Final Development
Agreement (the "Development Agreement") dated April 14, 1998, and made between
County of Washoe and Nevada Tri Partners, a memorandum of which was recorded on
May 15, 1999 in the Official Records of Washoe County in Book 5274, Page 734 as
Document No. 2221194; and (y) that certain declaration of covenants, conditions
and restrictions and reservation of easements (the "Covenants") for Damonte
Ranch Trade Center I (the "Development Agreement" and the "Covenants" are
hereinafter collectively referred to as the "Declaration"); (ii) to Landlord's
knowledge the Declaration has not been modified, amended or terminated; (iii) to
Landlord's knowledge, the Declaration is currently in full force and effect; and
(iv) to Landlord's knowledge, no default exists under the Declaration. For
purposes of this paragraph, Landlord's knowledge shall mean the actual knowledge
of David Morze and John Hanson, after appropriate due inquiry and investigation.
Landlord represents and warrants to Tenant that no employee of Landlord has any
material knowledge that is not possessed by David Morze and John Hanson about
any of the matters that are the subject of the representations and warranties
contained in the foregoing representations and warranties.

             Landlord shall throughout the Lease Term: (i) perform and observe
all of the material terms, covenants, provisions and conditions of the
Declaration on Landlord's part to be performed and observed; (ii) defend,
indemnify and hold harmless Tenant from and against any and all claims, demands,
causes of action, suits, actual damages, liabilities and actual expenses of any
nature arising out of or in connection with a default by Landlord under the
Declaration; and (iii) use commercially reasonable efforts (without the
obligation to commence litigation) to cause each of the other tenants and
occupants of any buildings owned by Landlord (or an affiliate of Landlord) and
located within the Project to comply with all of the material covenants,
provisions and conditions of the Declaration.

             Landlord shall, immediately upon receipt, forward to Tenant a copy
of any and all notices and/or demands received by Landlord under or pursuant to
the Declaration, which relate to, or could adversely affect, Tenant's use or
occupancy of the Premises, the conduct of Tenant's business therein or Tenant's
rights pursuant to this Lease.

             Landlord shall not amend or modify (or consent to any amendment or
modification of) the Declaration if such amendment or modification could
diminish the rights or increase the obligations of Tenant thereunder or under
this Lease, or could adversely affect Tenant's use or occupancy of the Premises
or the conduct of Tenant's business therein, without first obtaining Tenant's
prior written consent, such consent not to be unreasonably withheld or delayed.
Landlord agrees that it will place (or cause to be placed) a provision in all
future leases executed by Landlord (or an affiliate of Landlord) at the Project
setting forth that Landlord's

                                       42
<PAGE>

tenants must comply with applicable Legal Requirements and the Declaration.
Additionally, Landlord shall use commercially reasonable efforts (without the
obligation to commence litigation) to enforce the terms and provisions of the
Declaration on other property owned by Landlord (or an affiliate of Landlord)
within the Project.

             Landlord shall use commercial reasonable efforts to obtain from the
"Declarant" under the Declaration, within thirty (30) days after the date
hereof, a letter agreement made in favor of Tenant providing for Declarant's
agreement: (i) to make any material modifications or amendments to the
Declaration, without Tenant's reasonable prior approval; and (ii) to provide
Tenant with a copy of any notices of default sent by Declarant to Landlord under
the Declaration simultaneously with the delivery of such notice to Landlord,
provided, however, that Landlord's failure to obtain such letter agreement shall
not be deemed to be a default of Landlord under this Lease. 24.

             As between Landlord and Tenant, in the event of any conflict
between the terms and provisions of the Declaration and the terms and provisions
of this Lease, the terms and provisions of this Lease shall control in all
respects.

                                       43
<PAGE>

1.
2.       IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
3.
4.
5.
6.       TENANT:                      LANDLORD:

barnesandnoble.com llc                ProLogis Development Services Incorporated

By:    /s/ William Duffy              By:    /s/ John W. Seiple, Jr.
       ---------------------------           ---------------------------
Title: Vice President, Operations     Title: Senior Vice President
       ---------------------------           ---------------------------

Address:                              Address:
76 Ninth Avenue, 11th Floor           47775 Fremont Blvd.
New York, NY  10011                   Fremont, CA  94538

                                       44

<PAGE>

                              Rules and Regulations

1.       The sidewalk, entries, and driveways of the Project shall not be
         obstructed by Tenant, or its agents, or used by them for any purpose
         other than ingress and egress to and from the Premises.

1.       Landlord reserves the right to exclude or expel from the Project any
         person who, in the judgment of Landlord, is intoxicated or under the
         influence of liquor or drugs or who shall in any manner do any act in
         violation of these Rules and Regulations.

1.       No auction, public or private, will be permitted on the Premises or
         the Project.

1.       The Premises shall not be used for any immoral or illegal purposes
         or for any purpose other than that specified in the Lease. No gaming
         devices shall be operated in the Premises.

1.       Tenant assumes full responsibility for protecting the Premises from
         theft, robbery and pilferage.

                                       45
<PAGE>

                                   ADDENDUM 1

                              BASE RENT ADJUSTMENTS
                              ---------------------

                  ATTACHED TO AND A PART OF THE LEASE AGREEMENT
                        DATED SEPTEMBER 8, 1999, BETWEEN
                   PROLOGIS DEVELOPMENT SERVICES INCORPORATED
                                       and
                             barnesandnoble.com, llc

         The monthly Base Rent for Month 1 through Month 60 shall be $174,000,
subject to adjustments as provided in Addendum 2 to the Lease. Once the monthly
Base Rent for Month 1 through Month 60 is determined, then the monthly Base Rent
for Month 61 through Month 120 shall be determined by multiplying the monthly
Base Rent for Month 1 through Month 60 by 113%.

                                       46
<PAGE>

                                   ADDENDUM 2
                                   ----------

                  ATTACHED TO AND A PART OF THE LEASE AGREEMENT
                         DATED SEPTEMBER 8, 1999 BETWEEN
                   PROLOGIS DEVELOPMENT SERVICES INCORPORATED
                                       and
                             barnesandnoble.com llc

                                   WORKLETTER
                                   ----------

                                 I. DEFINITIONS

         1.01. Definitions. All capitalized terms used in this Workletter and
not defined herein shall have the meaning ascribed thereto in the lease (the
"Lease") to which this Workletter is annexed. In addition, for the purposes of
this Workletter the following terms shall have the following meanings:

                  "Performance Specifications" shall mean those certain
         performance specifications and criteria annexed to this Workletter as
         Schedule 1, together with all exhibits and attachments thereto
         (including, without limitation, the Operational Plan and the Site
         Plan), as the same may be modified or supplemented by any Change Order
         (as defined below).

                  "Base Building Work" shall mean all of the work, materials and
         equipment necessary to construct the Building and other improvements on
         the Land in accordance with the Performance Specifications, using at
         least the specifications set forth in the Minimum Design Criteria.

                  "Base Building Plans" shall mean the scaled, dimensioned and
         coordinated architectural and engineering working drawings that will
         describe the Base Building Work, as such scaled, dimensioned and
         coordinated architectural and engineering working drawings (a) have
         been approved (or deemed approved) by Tenant in accordance with Section
         2.01(c) below and (b) may be changed in accordance with the provisions
         of Section 2.01(e) and Section 2.03 below.

                  "Minimum Design Criteria" shall mean the minimum design
         criteria referenced in Schedule 3 annexed hereto.

                  "Tenant's Initial Work" shall mean all work, equipment and
         improvements which, in Tenant's opinion, are necessary or desirable to
         prepare the Premises for Tenant's occupancy, other than the Base
         Building Work.

                  "Milestone" shall have the meaning ascribed to it in Section
         2.07 below.

                                       47
<PAGE>

                  "Tenant Late Day" shall mean each day of actual delay suffered
         by Landlord in completing any Milestone as a result of one or more of
         the following events: (i) each day in any period beginning on the day
         after the day on which Tenant is required to furnish a response under
         this Workletter and ending on the day on which Tenant furnishes such a
         response; (ii) Tenant's improper or negligent interference with
         Landlord's obtainment of any Permit (as defined below), Tenant's
         improper interference with the work necessary to complete such
         Milestone or Tenant's unreasonable withholding of approval to the
         Proposed Base Building Plans; (iii) Tenant's failure to comply with its
         obligations under this Workletter; (iv) Tenant's failure to obtain the
         proper permits and governmental approvals for Tenant's Initial Work; or
         (v) the occurrence of one or more Tenant Late Payment Events (as
         defined below); provided, however, that no Tenant Late Day shall be
         deemed to have occurred unless (x) the Construction Minutes (as defined
         below) delivered to Tenant in accordance with Section 2.08(b) below
         immediately after the occurrence of the event that is the cause of such
         Tenant Late Day state that such occurrence could result in a Tenant
         Late Day and (y) the Construction Minutes delivered to Tenant in
         accordance with Section 2.08(b) below immediately after the occurrence
         of such Tenant Late Day indicate that the same has occurred.

                  "Substantially Completed" shall mean, with respect to any
         portion of the Base Building Work, that such portion of the Base
         Building Work has been completed, other than minor details or minor
         adjustments (collectively, "Punch List Items") that do not affect
         Tenant's ability to occupy the applicable portion of the Premises for
         the prosecution of Tenant's Initial Work or, as the case may be, for
         the ordinary use of the Building for the Intended Use (it being agreed
         that, in any event, Landlord shall nevertheless remain obligated to
         complete the Punch List Items applicable to each portion of the Base
         Building Work in accordance with the terms and provisions of this
         Workletter).

                  "Substantial Completion of the First-Half Dried-In
         Construction" shall mean that all of the following have occurred: (I)
         the following work has been completed (in accordance with the
         Performance Specifications, the Base Building Plans, all applicable
         Legal Requirements and the Declaration) with respect to the eastern
         one-half of the Building (the eastern one-half of the Building being
         referred to herein as the "Applicable Portion of the Building"): the
         exterior walls are erected, the roof structure and roofing work are
         complete to the point where the Building is dry, overhead electrical
         and mechanical work in the Building is complete to allow fixturizing of
         the Building, electrical service to the Building has been energized,
         overhead mechanical equipment in the Building has been installed, the
         high bay lighting fixtures in the Building have been installed and are
         functional, the Building floor has been cleaned and sealed and truck
         access to the Building from Old Virginia Road shall be available, (II)
         the Applicable Portion of the Building is in such a condition that
         Tenant is able to install its racking, conveyor and other equipment,
         subject to Tenant obtaining the permits described in the parenthetical
         in the immediately succeeding clause (III); and (III) Landlord has
         obtained all governmental licenses, permits and approvals with respect
         to the Applicable Portion of

                                       48
<PAGE>

         the Building that may be necessary for Tenant to commence and proceed
         with the prosecution of Tenant's Initial Work in the Applicable Portion
         of the Building (other than any licenses, permits and approvals
         required in connection with Tenant's Initial Work).

                  "Substantial Completion of the Dried-In Construction" shall
         mean that all of the following have occurred: (I) the following work
         has been completed (in accordance with the Performance Specifications,
         the Base Building Plans, the Declaration and all applicable Legal
         Requirements) with respect to the entire Building: the exterior walls
         are erected, the roof structure and roofing work are complete to the
         point where the Building is dry, overhead electrical and mechanical
         work in the Building is complete to allow fixturizing of the Building,
         electrical service to the Building has been energized, overhead
         mechanical equipment in the Building has been installed, the high bay
         lighting fixtures in the Building have been installed and are
         functional, the Building floor has been cleaned and sealed and truck
         access to the Building from Old Virginia Road shall be available; (II)
         the Building is in such a condition that Tenant is able to install its
         racking, conveyor and other equipment, subject to Tenant obtaining the
         permits described in the parenthetical in the immediately succeeding
         clause (III); and (III) Landlord has obtained all governmental
         licenses, permits and approvals with respect to the Building that may
         be necessary for Tenant to commence and proceed with the prosecution of
         Tenant's Initial Work (other than any licenses, permits and approvals
         required in connection with Tenant's Initial Work).

                  "Substantial Completion of the Building Shell" shall mean that
         all of the following have occurred: (I) Substantial Completion of the
         Dried-In Construction has occurred, (II) an operable restroom has been
         installed in the Building; and (III) Landlord has obtained a temporary
         certificate of occupancy for the Building that allows delivery and
         receipt of goods and products in connection with the Intended Use.

                  "Substantial Completion of the Base Building Work" shall mean
         that all of the following conditions have been satisfied: (I) the Base
         Building Work has been Substantially Completed in accordance with the
         Performance Specifications, the Base Building Plans, the Declaration
         and all applicable Legal Requirements (except for exterior painting and
         landscaping work, which shall be completed by Landlord within 30 days
         thereafter); (II) Landlord has delivered to Tenant a certificate,
         addressed to Tenant and executed by Landlord's architect, stating that
         the Base Building Work has been Substantially Completed in accordance
         with Performance Specifications, the Base Building Plans, the
         Declaration and all applicable Legal Requirements; (III) Landlord has
         obtained (and evidenced such obtainment to Tenant's reasonable
         satisfaction) (x) a "final" (not a temporary) certificate of occupancy
         or its equivalent for the entire Building that permits Tenant to use,
         operate and occupy the Premises for the Intended Use, and (y) all other
         certificates, permits and approvals with respect to the Building as may
         be necessary for Tenant lawfully to use, operate and occupy the
         Premises for the Intended Use; (IV) Tenant has vehicular and pedestrian
         access to and from the Land via Old Virginia Road at no less than the
         access points shown on the Site Plan annexed to the

                                       49
<PAGE>

         Performance Specifications; and (V) the entire Premises shall be
         available for, and tendered to, Tenant for its exclusive use and
         possession, broom clean and free of all construction debris, except for
         debris relating the completion of any Punch List items or any debris or
         other work being conducted in the Premises by Tenant to complete
         Tenant's Initial Work.

                  "Capped Base Building Work Items" shall mean all of the
         portions of the Base Building Work that, pursuant to the Performance
         Specifications, are subject to a monetary allowance or a monetary cap
         (by way of example only, the portions of the Base Building Work
         described in Sections 10.1.1 and 8.1.3 of the Performance
         Specifications are Capped Base Building Work Items).

                             II. BASE BUILDING WORK

         2.01. Base Building Plans; Permit Submissions. (a) Landlord, promptly
after the date hereof, shall cause Landlord's architect to prepare proposed
scaled, dimensioned and coordinated architectural and engineering working
drawings that describe the Base Building Work (the "Proposed Base Building
Plans"). The Proposed Base Building Plans shall fully incorporate, and shall be
fully consistent with, the Performance Specifications and shall provide for no
less than the specifications set forth in the Minimum Design Criteria. Tenant,
at no cost or expense to Tenant, shall (as and to the extent reasonably
requested by Landlord) cooperate with Landlord and Landlord's architect in
connection with the preparation of the Proposed Base Building Plans and shall
respond to any inquiries of Landlord during the development of the Proposed Base
Building Plans within five (5) days after Tenant's receipt of a written notice
requesting such response.

         (b) In connection with the construction of the Base Building Work on a
"fast track" basis, Landlord shall submit the Proposed Base Building Plans to
Tenant for its approval in the following parts on or before the following dates
(and the provisions of this Article II shall apply separately as to each such
part):

         Portion of Proposed Base Building Plans    Submission Date by Landlord
         ---------------------------------------    ---------------------------

         Preliminary Office Space Plan              September 15, 1999

         Preliminary Shell Drawings                 September 13, 1999
---------

         Shell Construction Drawings                September 24, 1999
---------

         Office Space Plan Construction Drawings    November 8, 1999

         (c) Within five (5) days after receipt by Tenant of any of the
foregoing parts of the Proposed Base Building Plans (together with a notice from
Landlord stating that the same

                                       50
<PAGE>

constitute the Proposed Base Building Plans), Tenant (i) shall give its written
approval thereto or (ii) if Tenant reasonably believes that such parts of the
Proposed Base Building Plans (x) are not consistent with, or do not adequately
incorporate, the Performance Specifications and/or do not provide for
specifications that are at least equal to the specifications contained in the
Minimum Design Criteria or (y) do not comply with applicable Legal Requirements
or the Declaration (the "Base Building Plans Approval Criteria"), shall request
in writing revisions or modifications to the Proposed Base Building Plans (but
only to the extent that the same fail to comply with the Base Building Plans
Approval Criteria). If Tenant shall fail to respond with its approval or request
for revisions/modification within the time period(s) provided above, such
failure shall be deemed Tenant's approval of the Proposed Base Building Plans.
Landlord, within five (5) days after its receipt of Tenant's request for
revisions or modifications to the Proposed Base Building Plans shall submit such
revisions or modifications to Tenant. Within five (5) days following receipt by
Tenant of such revisions or modifications, Tenant shall give its written
approval thereto or shall request other revisions or modifications therein (but
relating only to the extent Landlord has failed to comply with Tenant's earlier
requests).

         (d) Landlord expressly acknowledges and agrees that (notwithstanding
anything to the contrary in the Lease or this Workletter): (I) If there is any
conflict or inconsistency between the Minimum Design Criteria and any portion of
the Performance Specifications, then (x) such portion of the Performance
Specifications shall govern and control, and (y) the Base Building Plans shall
be prepared, and the Base Building Work shall be performed, in accordance with
such portion of the Performance Specifications (rather than the conflicting
portion(s) of the Minimum Design Criteria); (II) if there is any conflict or
inconsistency between the Base Building Plans and any portion of the Performance
Specifications, then (x) such portion of the Performance Specifications shall
govern and control, and (y) the Base Building Work shall be performed in
accordance with such portion of the Performance Specifications (rather than the
conflicting portion(s) of the Base Building Plans); and (III) Tenant's approval
of the Base Building Plans (or any component thereof or any changes thereto)
shall not in any way (A) be deemed to be an agreement by Tenant that the Base
Building Plans adequately reflect and incorporate the Performance
Specifications, (B) be deemed to be an agreement by Tenant that, upon completion
of the construction thereof, the Premises will be in conformance with the
Performance Specifications, (C) be deemed to be a waiver of, or to otherwise
relieve Landlord from, any of Landlord's obligations in Section 43 of the Lease,
(D) be deemed to be a waiver of, or to otherwise relive Landlord from, any of
Landlord's other obligations in the Lease and this Workletter, or (E) be deemed
to be an agreement that the work contemplated by the Base Building Plans
complies with applicable Legal Requirements or the Declaration.

         (e) Landlord shall not make any changes to the Base Building Plans
without the prior written consent of Tenant in each instance, except that
Landlord may make changes to the Base Building Plans without Tenant's consent if
(i) such changes are consistent with the Performance Specifications and (ii)
such changes will not result in any increased architectural or engineering costs
to Tenant in connection with Tenant's Plans (as defined below).

                                       51
<PAGE>

         (f) Landlord, in accordance with industry standards, (i) shall submit
accurate and complete applications for each of the permits (each, a "Permit"
and, collectively, the "Permits") described on Schedule 4 annexed hereto on or
before the submission date therefor that is specified on such Schedule 4 , and
(ii) shall thereafter take all commercially reasonable action necessary to
obtain each Permit by the anticipated obtainment date therefor that is specified
on such Schedule 4. If Landlord (i) complies with all of its obligations under
the preceding sentence with respect to any Permit and (ii) fails to obtain such
Permit by the anticipated obtainment date therefor (as specified on such
Schedule 4), then each day of actual delay suffered by Landlord in completing
any Milestone as a result of such failure shall constitute an event of Force
Majeure. Notwithstanding anything to the contrary contained in the Lease or this
Workletter, in no event shall Landlord's failure to obtain any permits,
approvals or licenses other than the Permits constitute an event of Force
Majeure.

         2.03 Change Orders (a) Tenant shall, subject to the provisions of this
Section 2.03, be permitted (i) prior to the completion of the Base Building
Plans, to direct changes to the Performance Specifications (in which event
Landlord shall cause Landlord's architect/engineer to incorporate such changes
into the Proposed Base Building Plans), and (ii) following the completion of the
Base Building Plans, to direct changes to the Performance Specifications and/or
the actual Base Building Plans (in which event Landlord shall cause Landlord's
architect/engineer to incorporate such changes into the Base Building Plans)
(any change described in the preceding clauses (i) and (ii), a "Change Order").
Tenant shall pay to Landlord, within 30 days after Tenant's receipt of a demand
therefor (together with such corroborating materials as may be reasonably
requested by Tenant), Landlord's reasonable out-of-pocket costs and expenses of
any third party architect, engineer, contractor or consultant employed by
Landlord for reviewing any proposed Change Order. Any Change Order requested by
Tenant shall be governed by the following provisions of this Section 2.03.

         (b) Price Adjustment/Time Adjustment: If Tenant proposes to make a
Change Order, then Tenant shall notify Landlord in writing of such proposed
Change Order. Within five (5) Business Days after its receipt of any proposed
Change Order, Landlord shall furnish Tenant with a statement (each, a
"Landlord's Change Order Statement") setting forth Landlord's good faith
reasonable estimate of (1) all the costs and expenses that will either be saved
or incurred by Landlord in connection with (x) incorporating the proposed Change
Order into the Base Building Plans and (y) the performance of the work necessary
to perform such proposed Change Order (the "Price Adjustment") and (2) the
number of days (either positive or negative) by which the time required to
complete one or more of the Milestones will be increased or decreased by such
Change Order (such number of days as applicable to any Milestone, the "Time
Adjustment"). Within five (5) Business Days after receipt by Tenant of the
applicable Landlord's Change Order Statement, Tenant shall in writing either (a)
accept the Price Adjustment and the Time Adjustment set forth in Landlord's
Change Order Statement, by signing same and returning it to Landlord (subject to
the final determination of the Price Adjustment and the Time Adjustment in
accordance with the provisions of Sections 2.03(c) and 2.03(d) below,
respectively), or (b) withdraw such Change Order (it being agreed that if Tenant
makes any changes to any Landlord's Change Order Statement and returns it to
Landlord, Tenant shall be

                                       52
<PAGE>

deemed to have rejected same). Landlord shall be obligated to implement only
those Change Orders that are accepted by Tenant in accordance with the preceding
sentence. Notwithstanding the foregoing, Landlord does not have to accept any
proposed Change Order (X) that will have an effect (to more than a de minimis
extent) on (i) the footprint of the Building, (ii) the Building elevation (other
than the elevation of the office areas and the cafeteria areas), (iii) the
Building's clear height, or (iv) the Building's structural design or (Y) that
requires Landlord to install any racking system, mezzanine structure, or
conveyor system in the Building. To the extent that Tenant, in connection with
any Change Order, specifies any items that Landlord reasonably indicates in
writing to Tenant are not recommended by Landlord, then Tenant shall assume full
responsibility during the Lease Term for the performance of such items.
Notwithstanding anything to the contrary in this Workletter, in no event shall
there be any Time Adjustment for any of the Change Orders described on Schedule
5 annexed hereto, provided that Tenant requests such Change Order by the outside
date therefor that is specified on such Schedule 5 .

         In connection with the Initial Slab Change Order (as defined below),
Landlord and Tenant, promptly after the date hereof, shall employ value
engineering to determine, by September 20, 1999, to what extent the Initial Slab
Change Order in its current scope will be required (in accordance with the
recommendation of Landlord's structural engineer). Landlord shall use reasonable
good faith efforts to eliminate the extent to which the Initial Slab Change
Order is required (it being agreed that in no event shall Landlord be required
to reduce the scope of the Initial Slab Change Order unless Landlord receives
written confirmation from its structural engineer that the reduced scope will be
adequate to accommodate the Performance Specifications). If and to the extent
that Landlord, in the good faith exercise of its judgment, determines that the
Initial Slab Change Order is required, then (notwithstanding anything to the
contrary contained herein) the following provisions shall apply thereto: (i)
Landlord shall competitively bid the work associated with the Initial Slab
Change Order in accordance with the Bidding Procedures (as defined below); (ii)
there shall be no Time Adjustment or Price Adjustment (as such terms are used in
this Workletter) for the Initial Slab Change Order; and (iii) in lieu of there
being a Price Adjustment with respect to the Initial Slab Change Order, the
lesser of the following amounts shall be added to the annual Base Rent (and
increased after the 60th month following the Rent Commencement Date in
accordance with Addendum 1 to the Lease): (a) $27,700 (i.e., 10% of 277,000) and
(b) 10% of the actual out-of-pocket costs incurred by Landlord in performing the
Initial Slab Change Order (in the scope required by Landlord). For purposes
hereof, the term "Initial Slab Change Order" means the change order relating to
the slab that is described on Schedule 5 annexed hereto.

         (c) Price Adjustment: For any Change Order, the final Price Adjustment
binding on Landlord and Tenant with respect to such Change Order shall be equal
to (I) in the case of any Change Order that results in an increase in the cost
to Landlord of the Base Building Work, the lesser of (x) the amount of the Price
Adjustment set forth in the Landlord's Change Order Statement, and (y) the
out-of-pocket costs and expenses actually incurred or paid by Landlord in
performing such Change Order; and (II) in the case of any Change Order that
results in a decrease in the cost to Landlord to perform the Base Building Work,
the greater of (x) the amount of the Price Adjustment set forth in the
Landlord's Change Order Statement, and (y) the

                                       53
<PAGE>

actual amount by which the cost to Landlord to perform the Base Building Work
was decreased as a result of such Change Order. In no event shall Landlord be
entitled to any supervision, overhead, administration or similar fee or charge
with respect to any Change Order. In connection with any Change Order that
Tenant reasonably believes will result in a positive Price Adjustment in excess
of $10,000, Tenant shall have the right to cause Landlord to competitively bid
the work associated with such Change Order in accordance with the Bidding
Procedures. Landlord shall keep and make available to Tenant itemized records
pertaining to each Price Adjustment. For purposes hereof, the term "Cumulative
Price Adjustment" shall mean the sum of the final Price Adjustments for all
Change Orders, other than (x) any Change Orders ("Non-Fixture Change Orders")
that relate to items of work that, when completed, will not be attached to or
built into the Building and (y) the Initial Slab Change Order. If there is any
dispute relating to the Price Adjustment for a Change Order that results in a
decrease in the cost to Landlord to perform the Base Building Work, then such
dispute shall be resolved by mutual agreement of Landlord's architect and
Tenant's architect; provided, however, that if such architects are unable to
reach mutual agreement within 15 days, then such dispute shall be resolved by
arbitration in accordance with Section 4.01 below (except that the arbitrator
shall be an independent third-party architect having at least 15 years
experience in the area of industrial/warehouse construction)

         (d) Time Adjustment: For any Change Order, the final Time Adjustment
binding on Landlord and Tenant in connection with such Change Order shall be
equal to (I) in the case of any Change Order that results in an increase in the
number of days to complete one or Milestones, the lesser of (x) the Time
Adjustment set forth in the applicable Landlord's Change Order and (y) the
number of days by which the time required to complete such Milestone(s) is
actually increased by such Change Order, and (II) in the case of any Change
Order that results in a decrease in the number of days to complete one or more
Milestones, the number of days by which the time required to complete such
Milestone(s) is actually decreased by such Change Order. Any dispute under this
subparagraph (d) shall be resolved by mutual agreement of Landlord's architect
and Tenant's architect; provided, however, that if such architects are unable to
reach mutual agreement within 15 days, then such dispute shall be resolved by
arbitration in accordance with Section 4.01 below (except that the arbitrator
shall be an independent third-party architect having at least 15 years
experience in the area of industrial/warehouse construction). For purposes
hereof, the term "Cumulative Time Adjustment", shall mean, as to any Milestone,
the sum of the final Time Adjustments applicable to such Milestone.

         2.04 Capped Base Building Work Items. (a) Landlord shall competitively
bid the work associated with each of the Capped Base Building Work Items in
accordance with the Bidding Procedures. For purposes of this Workletter, the
term "Bidding Procedures" means, with respect to (i) any work to be performed by
Landlord in connection with the Capped Base Building Work Items or (ii) any
other work that, pursuant to this Workletter or the Lease, Landlord is required
to competitively bid (in either case, the "Bid Work"), the following procedures:
Upon approval by Tenant of the applicable portions of the Base Building Plans,
Landlord shall solicit competitive bids for the Bid Work on a fixed price lump
sum basis from a minimum of two (2) qualified bidders (as reasonably determined
by Landlord) who are not affiliated with Landlord, consistent with construction
practices in Reno, Nevada (it being agreed,

                                       54
<PAGE>

however, that Landlord shall use commercially reasonable efforts to solicit
competitive bids from at least three (3) qualified bidders, as reasonably
determined by Landlord, who are not affiliated with Landlord). Landlord
simultaneously with the delivery of same to prospective bidders, shall submit
the bid packages and the invitations to bid to Tenant. Landlord shall review the
responsiveness of all bids in the presence of its respective representatives and
consultants (and Tenant and its representatives and consultants may, at Tenant's
option, participate in such review). Tenant and Tenant's representatives and
consultants shall have the right (but not the obligation) to attend and
participate in (i) the opening of the sealed bids and (ii) any meetings between
Landlord and the bidders at which Landlord negotiates the final contract price
(the "Final Contract Price") with each of the bidders. The "Selected Contract
Price" for the work in question shall mean the Final Contract Price of the
lowest responsive bidder (i.e., the lowest bidder that is responsive to bidding
documents), unless Landlord and Tenant agree to select a different bidder, in
which case the Selected Contract Price for such work shall mean the Final
Contract Price of the bidder so selected by Landlord and Tenant.

         (b) Upon completion by Landlord of all of the Capped Base Building Work
Items, Landlord shall furnish to Tenant a statement setting forth in reasonable
detail (i) the Selected Contract Price with respect to each of the Capped Base
Building Work Items, and (ii) the aggregate sum (the "Total Cost of the Capped
Items") of the Selected Contract Prices for all of the Capped Base Building Work
Items (which statement shall be accompanied by such corroborating documentation
as Tenant may reasonably request).

         (c) If the Total Cost of the Capped Items (as finally determined) shall
exceed the aggregate monetary allowance (the "Aggregate Capped Items Allowance")
allocated to all of the Capped Base Building Work Items under the Performance
Specifications, then the Rent Adjustment Amount (as defined below) shall be
increased by the amount of such excess. If the Total Cost of the Capped Items
shall be less than the Aggregate Capped Items Allowance, then the Rent
Adjustment Amount shall be decreased by the amount by which the Total Cost of
the Capped Items is less than the Aggregate Capped Items Allowances.

         2.05 Rent Adjustment; Payments to Landlord. (a) For purposes of this
Workletter, the term "Rent Adjustment Amount" shall mean, subject to Section
2.05(d) below, an amount equal to the sum of the following (as such amount shall
be increased or decreased in accordance with Section 2.04(c) above): (i) an
amount equal to zero, plus (ii) an amount equal to the Cumulative Price
Adjustment, if the Cumulative Price Adjustment is a positive number, or minus
(iii) an amount equal to the Cumulative Price Adjustment, if the Cumulative
Price Adjustment is a negative number.

         (b) Within sixty (60) days after both (i) the Cumulative Price
Adjustment has been determined, and (ii) the Total Cost of the Capped Items has
been determined, Landlord shall furnish Tenant with a statement (the "Rent
Adjustment Statement"), certified by Landlord, setting forth the Rent Adjustment
Amount, together with a list of the Price Adjustments used to compute the Rent
Adjustment Amount.

                                       55
<PAGE>

         (c) If the Rent Adjustment Amount is a positive amount that is less
than or equal to $900,000.00, then the annual Base Rent shall be increased by an
amount equal to 10% of the Rent Adjustment Amount. If the Rent Adjustment Amount
is a positive amount that is more than $900,000.00, then (in lieu of the Base
Rent increase described in the preceding sentence) (a) the annual Base Rent
shall be increased by an amount equal to $90,000.00, and (b) commencing on the
Rent Commencement Date, Tenant shall pay to Landlord as additional rent an
annual amount (the "Additional Rental Amount") equal to 15.86% of the amount by
which the Rent Adjustment Amount exceeds $900,000.00 but is less than or equal
to $2,400,000.00, which annual amount shall be payable in equal monthly
installments on the first day of each calendar month that occurs during the
period commencing on the Rent Commencement Date and ending on the last day of
the initial Lease Term. (i.e., the initial 10 year term of the Lease), and any
Additional Rental Amount payable for any partial calendar month shall be
appropriately prorated. If the Rent Adjustment Amount is a positive amount that
exceeds $2,400,000.00, then (in addition to the amounts described in the
preceding sentence) Tenant, within 30 days after demand therefor, shall pay to
Landlord the amount of such excess (without duplication of any of the amounts
payable pursuant to the immediately following subparagraph (d)).

         (d) Notwithstanding the foregoing, if either (I) (A) Tenant requests
and accepts a Change Order that will result in an increase in the cost to
Landlord of the Base Building Work, and (B) at the time such Change Order is
accepted, the sum of all the final Price Adjustments is a positive amount that
exceeds $2,400,000, or (II) Tenant requests and accepts a Change Order that is a
Non-Fixture Change Order, then (instead of adding the cost of such work to the
Rent Adjustment Amount as provided above) the following provisions shall apply
to such Change Order:

         (i)      Tenant, as and to the extent the work necessary to perform
                  such Change Order is completed, shall pay to Landlord the cost
                  of such work in progress payments (but no more often than
                  monthly), each of which progress payments shall be due and
                  payable to Landlord within 15 days after Tenant's receipt of
                  the following (collectively, a "Disbursement Request"): (x) an
                  invoice from Landlord requesting payment of a specified
                  portion of the cost of such work and describing in reasonable
                  detail the services or materials furnished in connection with
                  such work, and (y) a certificate from Landlord's architect (on
                  an appropriate AIA Form), certifying (1) that the services and
                  materials for which payment is being sought were necessary or
                  appropriate in connection with such work, (2) that the amount
                  specified in such invoice of Landlord is not in excess of the
                  cost of the services and materials supplied in connection with
                  such work and (3) that such work was completed in accordance
                  with the Base Building Plans and the Performance
                  Specifications.

         (ii)     Notwithstanding anything to the contrary contained
                  herein, in no event shall any of the amounts paid by Tenant
                  pursuant to this Section 2.05(d) be included in the
                  calculation of the Rent Adjustment Amount (and thereby added
                  to the Base Rent).

                                       56
<PAGE>

         (iii)    If Tenant fails to pay Landlord any amount due under
                  this Section 2.05(d) within 15 days after its receipt of a
                  Disbursement Request therefor, then such amount shall bear
                  interest at the Interest Rate from the due date therefor until
                  paid. If Tenant fails to pay Landlord any amount due under
                  this Section 2.05(d) within 25 days after its receipt of a
                  Disbursement Request therefor, and such failure continues for
                  5 days after William F. Duffy (or his successor) receives
                  written notice of such failure, then such failure shall
                  constitute a "Tenant Late Payment Event".

         (e) If the Rent Adjustment Amount is a negative amount that is less
than or equal to $900,000.00, then the annual Base Rent shall be decreased by an
amount equal to 10% of the Rent Adjustment Amount. There shall be no other
decrease in the annual Base Rent (other than the preceding sentence) if the Rent
Adjustment Amount is a negative amount, including, without limitation, if the
Rent Adjustment Amount is a negative amount greater than $900,000.

         (f) Promptly after the Rent Adjustment Amount is determined in
accordance with this Section 2.05, a retroactive adjustment in Base Rent shall
be made and the appropriate payment shall be made by one party hereto to the
other.

         2.06. Performance of Base Building Work. Landlord, at its sole cost and
expense (except as and to the extent expressly set forth above), shall perform
the Base Building Work. Landlord shall commence the Base Building Work promptly
after the date hereof and shall prosecute the same with diligence and continuity
until completion, using only new first-class materials. Landlord shall perform
the Base Building Work in accordance with (i) the Performance Specifications,
(ii) the Base Building Plans, (ii) all Change Orders approved by Tenant, (iii)
good construction practices, (iv) the Minimum Design Criteria and (v) all Legal
Requirements and the Declaration. Landlord shall at its sole cost and expense
obtain all proper zoning and land development approvals from all necessary
governmental authorities for the prosecution of the Base Building Work. Landlord
shall also obtain (i) the building permit and all other permits, licenses and
inspections necessary for the proper prosecution and completion of the Base
Building Work and (ii) all permits and licenses (including a permanent
certificate of occupancy or its equivalent) necessary for Tenant lawfully to use
and occupy the Premises pursuant to the Lease for the Intended Use. Landlord
shall pay for, as part of the Base Building Work, the cost of the building
permit and all other permits, licenses (including a permanent certificate of
occupancy), impact fees and inspections necessary for the proper prosecution and
completion of Base Building Work. In amplification and not in lieu of the
foregoing, (x) Landlord shall be responsible to obtain and pay for all
improvements (including, without limitation egress lines, fire extinguishers,
and emergency and exit lighting) necessary to obtain all such permits, licenses
and inspections and (y) all requirements of any governmental authority or other
governing body with respect to off-site improvements are to be provided by and
are the responsibility of Landlord at its sole cost and expense. Notwithstanding
anything in this Lease or Workletter to the contrary, Tenant shall be solely
responsible, at its sole cost and expense, to obtain any and all permits
necessary in connection with Tenant's Initial Work.

                                       57
<PAGE>

         2.07. Milestones and Milestone Dates. (a) Each of the following stages
of completion of the Base Building Work is herein called a "Milestone": (I)
Substantial Completion of the First-Half Dried-In Construction (hereinafter, the
"First Milestone"); (II) Substantial Completion of the Dried-In Construction
(hereinafter, the "Second Milestone"); (III) Substantial Completion of the
Building Shell (hereinafter, the "Third Milestone"); and (IV) Substantial
Completion of the Base Building Work (hereinafter, the "Fourth Milestone"). None
of the foregoing Milestones shall be deemed to have been completed unless and
until Tenant shall have received a statement, certified by Landlord's architect,
stating that the Milestone in question has been completed and setting forth the
date on which such Milestone was completed. Landlord shall use commercially
reasonable efforts to give Tenant at least 5 days prior notice of Landlord's
anticipated completion of each Milestone.

         (b) Landlord shall complete the First Milestone on or prior to February
23, 2000 (the "First Milestone Completion Date"); provided, however, that the
First Milestone Completion Date shall be postponed beyond February 23, 2000 for
each day that Landlord is actually delayed in completing the First Milestone as
a result of (x) one or more Tenant Late Days that occur between the date hereof
and the completion of the First Milestone and (y) one or more Force Majeure
Events that occur between the date hereof and the completion of the First
Milestone. Moreover, the First Milestone Completion Date shall be (aa) further
postponed by the number of days equal to the Cumulative Time Adjustment
applicable to the First Milestone, if such Cumulative Time Adjustment is a
positive number or (bb) accelerated by the number of days equal to the
Cumulative Time Adjustment applicable to the First Milestone, if such Cumulative
Time Adjustment is a negative number. Landlord shall complete the Second
Milestone on or prior to March 15, 2000 (the "Second Milestone Completion
Date"); provided, however, that the Second Milestone Completion Date shall be
postponed beyond March 15, 2000 for each day that Landlord is actually delayed
in completing the Second Milestone as a result of (x) one or more Tenant Late
Days that occur between the date hereof and the completion of the Second
Milestone and (y) one or more Force Majeure Events that occur between the date
hereof and the completion of the Second Milestone. Moreover, the Second
Milestone Completion Date shall be (aa) further postponed by the number of days
equal to the Cumulative Time Adjustment applicable to the Second Milestone, if
such Cumulative Time Adjustment is a positive number or (bb) accelerated by the
number of days equal to the Cumulative Time Adjustment applicable to the Second
Milestone, if such Cumulative Time Adjustment is a negative number. Landlord
shall complete the Third Milestone on or prior to March 31, 2000 (the "Third
Milestone Completion Date"); provided, however, that the Third Milestone
Completion Date shall be postponed beyond March 31, 2000 for each day that
Landlord is actually delayed in completing the Third Milestone as a result of
(x) one or more Tenant Late Days that occur between the date hereof and the
completion of the Third Milestone and (y) one or more Force Majeure Events that
occur between the date hereof and the completion of the Third Milestone.
Moreover, the Third Milestone Completion Date shall be (aa) further postponed by
the number of days equal to the Cumulative Time Adjustment applicable to the
Third Milestone, if such Cumulative Time Adjustment is a positive number or (bb)
accelerated by the number of days equal to the Cumulative Time Adjustment
applicable to the Third Milestone, if such Cumulative Time Adjustment is a
negative

                                       58
<PAGE>

number. Landlord shall complete the Fourth Milestone on or prior to April 15,
2000 (the "Fourth Milestone Completion Date"); provided, however, that the
Fourth Milestone Completion Date shall be postponed beyond April 15, 2000 for
each day that Landlord is actually delayed in completing the Fourth Milestone as
a result of (x) one or more Tenant Late Days that occur between the date hereof
and the completion of the Fourth Milestone and (y) one or more Force Majeure
Events that occur between the date hereof and the completion of the Fourth
Milestone. Moreover, the Fourth Milestone Completion Date shall be (aa) further
postponed by the number of days equal to the Cumulative Time Adjustment
applicable to the Fourth Milestone, if such Cumulative Time Adjustment is a
positive number or (bb) accelerated by the number of days equal to the
Cumulative Time Adjustment applicable to the Fourth Milestone, if such
Cumulative Time Adjustment is a negative number. Notwithstanding anything to the
contrary in the Lease or this Workletter, in no event shall Landlord be deemed
to have been actually delayed in causing any Milestone to occur by a Force
Majeure Event unless Landlord, within ten (10) business days after the
occurrence of such event of Force Majeure, shall notify Tenant of such event of
Force Majeure or such Force Majeure Event shall be set forth in the Construction
Minutes delivered to Tenant in accordance with Section 2.08(b) below and of the
fact that the same is going to delay Landlord in causing such Milestone to
occur. For purposes of this Workletter, the painting and landscape work shall be
substantially completed no later than May 15, 2000 and shall not be included as
part of the Base Building Work to be completed by the Fourth Milestone
Completion Date.

         (c) The term "Milestone Completion Date" shall mean (as the case may
be) (i) with respect to the First Milestone, the First Milestone Completion
Date; (ii) with respect to the Second Milestone, the Second Milestone Completion
Date; (iii) with respect to the Third Milestone, the Third Milestone Completion
Date; and (iv) with respect to Fourth Milestone, the Fourth Milestone Completion
Date. If Landlord shall fail for any reason to complete any Milestone by the
Milestone Completion Date applicable thereto (as such Milestone Completion Date
may be postponed pursuant to the express provisions of Section 2.07(b) above),
then, for each day that any Milestone is not completed by the Milestone
Completion Date applicable thereto (as such Milestone Completion Date may be
postponed pursuant to the express provisions of Section 2.07(b) above), Landlord
shall pay to Tenant the following amounts (collectively the "Liquidated
Damages"):

         (A)      For each of the first fourteen (14) days that Landlord fails
                  to complete any Milestone by the Milestone Completion Date
                  applicable thereto, Landlord shall pay to Tenant $5,800
                  (representing 1 day's Base Rent); and

         (B)      If such Milestone is not completed by the fourteenth day
                  (14th) following the Milestone Completion Date applicable
                  thereto, then (in addition to the amount set forth in the
                  preceding clause (A)), Landlord shall pay to Tenant an amount
                  equal to the product of (i) $17,400 (representing 3 day's Base
                  Rent), multiplied by (ii) the number of days in the period
                  commencing on the fifteenth (15th) day following such
                  Milestone Completion Date, and ending on the forty-second
                  (42nd) day

                                       59
<PAGE>

                  following such Milestone Completion Date, during which such
                  Milestone remains uncompleted; and

         (C)      If such Milestone is not completed by the forty-third (43rd)
                  day following the Milestone Completion Date applicable
                  thereto, then (in addition to the amounts set forth in the
                  preceding clauses (A) and (B)), Landlord shall pay to Tenant
                  an amount equal to the product of (i) $11,600 (representing 2
                  day's Base Rent), multiplied by (ii) the number of days in the
                  period commencing on the forty-third (43rd) day following such
                  Milestone Completion Date, and ending on the sixty-third
                  (63rd) day following such Milestone Completion Date, during
                  which such Milestone remains uncompleted; and

         (D)      If such Milestone is not completed by the sixty-fourth (64th)
                  day following the Milestone Completion Date applicable
                  thereto, then (in addition to the amounts set forth in the
                  preceding clauses (A), (B) and (C)), Landlord shall pay to
                  Tenant an amount equal to the product of (i) $5,800
                  (representing 1 days' Base Rent), multiplied by (ii) the
                  number of days in the period commencing on such sixty-fourth
                  (64th) day and ending on the date (if ever) on which such
                  Milestone is completed.

         Tenant hereby acknowledges and agrees that (except as provided in the
immediately succeeding sentence) the Liquidated Damages shall be Tenant's sole
and exclusive remedy under this Lease or at law or in equity for Landlord's
failure to complete the Milestones by the Milestone Completion Dates, Tenant
hereby waiving all other remedies available to Tenant under this Lease or at law
or in equity (except as provided in the immediately succeeding sentence) in the
event Landlord fails to timely meet the Milestone Completion Dates.
Notwithstanding the preceding sentence, Tenant shall be entitled to the remedy
of specific performance if Landlord fails to complete any Milestone by the
Milestone Completion Date applicable thereto. Landlord and Tenant hereby agree
that it would be impracticable or extremely difficult to affix damages if
Landlord fails to meet the Milestone Completion Dates as set forth above and the
Liquidated Damages represent a reasonable estimate of Tenant's damages. All
amounts payable by Landlord to Tenant under this Section 2.07(c) shall be paid
within thirty (30) days after a demand therefor. If Landlord fails to pay Tenant
all or any portion of any amount due under this Section 2.07(c) by the due date
therefor, then such past due amount shall bear interest at the Interest Rate
from the due date therefor until the date paid, and Tenant may deduct and
set-off such amount (together with such interest) until exhausted, against all
Base Rent and any other amounts due and payable under the Lease (at Tenant's
option, before or after the expiration of any other offsets or credits in
Tenant's favor). The obligations of Landlord under this Section 2.07(c) shall
survive the termination, cancellation or expiration of the Lease.

         2.08. Inspection and Monitoring by Tenant; Construction Meetings; "As
Built" Drawings. (a) Tenant, Tenant's architect, Tenant's engineers, Tenant's
contractors, Tenant's representatives, and any agents of Tenant shall have
access to the Building at all times during business hours, and at all other
reasonable times upon reasonable prior written notice, in order to

                                       60
<PAGE>

inspect the Base Building Work and monitor the progress thereof. Tenant may have
a representative present at the Premises at all times during the performance of
the Base Building Work.

         (b) From and after the date hereof, Landlord shall conduct weekly
construction meetings (to be held on Tuesday of each week) to discuss the
performance and progress of the Base Building Work; Landlord shall use
commercially reasonable efforts to give Tenant reasonable advance notice of each
such meeting and Tenant's representatives shall have the right to attend such
meetings. Landlord, within two (2) business days after each such weekly
construction meeting, shall deliver to the representatives of Tenant set forth
on Schedule 6 annexed hereto (at their addresses set forth on such Schedule 6) a
copy of the minutes (the "Construction Minutes") of each such construction
meeting, which minutes Landlord shall cause to be prepared by its contractor.
The Construction Minutes of each such weekly construction meeting shall clearly
specify (i) any events that have occurred since the previous weekly construction
meeting (or, in the case of the first such meeting, since the date hereof) that
could result in a Tenant Late Day and (ii) any Tenant Late Days that have
occurred since the previous weekly meeting (or, in the case of the first such
meeting, since the date hereof).

         (c) Landlord shall use commercially reasonable efforts to (i) keep
Tenant apprised of the progress of the Base Building Work on at least a weekly
basis, (ii) promptly notify Tenant of any actual or anticipated delays, and
(iii) promptly notify Tenant of any problems or anticipated problems with
respect to the Base Building Work or any portion thereof. Landlord shall
maintain at the Premises for inspection by Tenant and Tenant's architect during
Business Hours one record copy of (i) the Base Building Plans, together with all
field notes and changes of Landlord's contractor marked on said plans during the
course of construction, (ii) the progress schedule, any progress schedules
prepared by any subcontractor, and all updates, supplements and amendments
thereto; (iii) specifications and samples prepared in connection with the Base
Building Work; and (iv) all drawings, diagrams, schedules, brochures and other
data or information specially prepared for or otherwise provided in connection
with the Base Building Work to illustrate some portion of the Base Building Work
or any product, material or system to be installed or utilized in connection
therewith. All of the foregoing shall be maintained in good order and marked
currently to record all changes made during construction of the Building and the
Parking Area. Within ninety (90) days after the Base Building Work is
Substantially Completed, Landlord shall deliver to Tenant four (4) copies of
"as-built" drawings and plans for the Base Building Work showing all changes
made during the course of performing the Base Building Work, together with four
(4) copies of an "as-built" survey of the Building, the parking area and the
Land showing all existing easements, rights of way, building set-back lines and
improvements. Landlord shall also furnish to Tenant, promptly after completion
thereof, two complete sets of shop drawings and operation and maintenance
manuals with respect to the Base Building Work.

         2.09 Correcting Base Building Punch List Items and Defective Work. (a)
Within five (5) business days following the later to occur of (i) Substantial
Completion of the Base Building Work and (ii) the date that is ten (10) days
after Tenant receives notice that such

                                       61
<PAGE>

Milestone has been (or is about to be) completed, Landlord and Tenant shall
jointly inspect the Base Building Work and shall jointly compose a Punch List of
items needing completion (it being agreed, however, that if it is not possible
to determine at such time whether any components of the Base Building Work have
been completed, because of seasonal reasons or otherwise, then Landlord and
Tenant, as soon as practicable after such determination can be made, shall
inspect such components and compose a Punch List of items with respect thereto
needing completion). Within thirty (30) days after any Punch List is so
composed, Landlord shall install, complete, repair or otherwise remedy all such
items listed on such Punch List; provided, however, that it shall not be an
event of default if, because of the nature of the work at issue, Landlord cannot
complete such work within such thirty (30) day period, as long as Landlord
commences such work within such thirty day period and thereafter diligently
prosecutes the same to completion.

         2.10 Outside Termination Date. If for any reason (including Force
Majeure Events) Substantial Completion of the Base Building Work does not occur
by the Limitation Date (as defined below), then, in addition to Liquidated
Damages and the right to specific performance (but excluding all other rights
and remedies available to Tenant at law or in equity or otherwise under this
Lease), Tenant shall have the right, at any time after the Limitation Date, but
prior to the date upon which Substantial Completion of the Base Building Work
occurs, to terminate the Lease by serving written notice to Landlord, in which
event the Lease shall terminate and be deemed null and void. The failure of
Tenant to exercise its right of termination hereunder shall not relieve Landlord
of its obligation to cause the Substantial Completion of the Base Building Work
to occur or be deemed a waiver of the other remedies available to Tenant under
this Workletter (i.e., the Liquidated Damages and specific performance). For
purposes hereof, the term "Limitation Date" shall mean October 31, 2000;
provided, however, that the Limitation Date shall be postponed by one day for
each Tenant Late Day that occurs prior to the Substantial Completion of the Base
Building Work.

         2.11 Acceptance. Within thirty (30) days after the Rent Commencement
Date, Landlord and Tenant shall execute and deliver to Landlord a letter
confirming the Rent Commencement Date.

         2.12 Miscellaneous. (a) Landlord acknowledges that Tenant will use
non-union labor in connection with its prosecution of Tenant's Initial Work, and
in no event shall the utilization of such labor constitute a Tenant Late Day.
Landlord shall use only non-union contractors for the Base Building Work and
will insure that there will be no labor disputes relative to the prosecution of
Tenant's Initial Work.

         (b) Landlord hereby designates John Hanson to serve as Landlord's
representative and Tenant hereby designates Taner Kiranbay to serve as Tenant's
representative during the design and construction of the Base Building Work. All
communications between Landlord and Tenant relating to the design and
construction of the Base Building Work shall be forwarded to or made by such
party's representative.

                                       62
<PAGE>

         (c) Any dispute with respect to this Workletter (other than any
disputes under Section 2.01(c) above) that is not resolved by the parties within
15 days shall be settled by arbitration in accordance with Section 4.01 of this
Workletter.

         (d) Landlord represents and warrants that, to Landlord's knowledge,
based on Exhibit 1 to the Performance Specifications, smoke curtains, in-rack
sprinklers and fire proofing of steel are not required in order for the Premises
to comply with Legal Requirements (other than in-rack sprinklers in the
multi-level Pallet Pick Mezzanine area and bin supported mezzanine area). For
purposes of this paragraph, Landlord's knowledge shall mean the actual knowledge
of David Morze and John Hanson, after appropriate due inquiry and investigation.
Landlord represents and warrants to Tenant that no employee of Landlord has any
material knowledge that is not possessed by David Morze or John Hanson about any
of the matters that are the subject of the representation and warranty contained
in this paragraph.

         (e) For purposes of this Article II, the term "Legal Requirements" (as
defined in the Lease) shall include, without limitation, all onsite and offsite
drainage requirements, zoning, seismic (except as and to the extent set forth in
the Performance Specifications), NFPA and ADA requirements.

                                       63
<PAGE>

                           III. Tenant's Initial Work

         3.01. Tenant's Initial Work; Preparation and Approval of Tenant's
Plans. Except as and to the extent otherwise set forth in this Article III, the
installation, performance and removal of Tenant's Initial Work shall be governed
by Section 12 of the Lease (as if the same were Tenant-Made Alterations). If any
portion of Tenant's Initial Work shall constitute a Material Tenant-Made
Alteration, then Tenant, at its expense, shall prepare and submit to Landlord
(i) architectural drawings of such portion of Tenant's Initial Work and (ii)
specifications for such portion of Tenant's Initial Work (such architectural
drawings and specifications are herein collectively referred to as the "Tenant's
Plans"). Within ten (10) days after receipt by Landlord of Tenant's Plans,
Landlord (i) shall give its written approval thereto or (ii) if Landlord
reasonably believes that the work set forth on Tenant's Plans will have an
adverse effect on the structural integrity of the Building or will penetrate the
roof and thereby invalidate the roof warranty (the "Tenant's Initial Work
Approval Criteria"), shall request revisions or modifications to the Tenant's
Plans (but only to the extent the same fail to comply with the Tenant's Initial
Work Approval Criteria). Tenant may thereafter submit such revisions or
modifications to Landlord. Within seven (7) days following receipt by Landlord
of such revisions or modifications, Landlord shall give its written approval
thereto or shall request other revisions or modifications therein (but relating
only to the extent Tenant has failed to comply with Landlord's earlier
requests). The preceding two sentences shall be implemented repeatedly until
Landlord gives its written approval to the Tenant's Plans. If Landlord shall
fail to respond to Tenant's Plans with its approval or request for
revisions/modification within the time period(s) provided above, such failure
shall be deemed Landlord's approval of Tenant's Plans. The Tenant's Plans as
approved or deemed approved by Landlord shall herein be referred to as the
"Final Tenant's Plans". At any time after the Final Tenant's Plans are approved
(or deemed approved) by Landlord and thereafter throughout Tenant's prosecution
of the Tenant's Initial Work, Tenant shall be permitted to direct changes in the
Tenant's Initial Work (it being agreed, however, that Tenant must obtain
Landlord's consent in accordance with the foregoing provisions of this Section
3.01(a) before prosecuting any such change that constitutes a Material
Tenant-Made Alteration, and the foregoing approval provisions of this Section
3.01(a) shall be applied to such proposed change). Tenant, at Tenant's option,
may submit the Tenant's Plans to Landlord for its approval in one or more parts
(and, in any case where the same are submitted in more than one part, the
provisions of this Article III shall apply separately as to each such part).
Landlord, at no cost to Tenant, shall cooperate (and cause Landlord's architect
and contractor to cooperate) with Tenant and Tenant's architect in preparing the
Tenant's Plans.

         (b) Notwithstanding anything to the contrary in the Lease or this
Workletter, in no event shall Tenant be required to obtain Landlord's prior
consent in connection with (i) the installation of Tenant's racking systems in
the Building, (ii) the installation of any mezzanine in the Building, (iii) the
installation of any conveyors or other equipment in the Building or (iv) the
installation in the Building of any of the other items shown on the Operational
Plan attached to the Performance Specifications as Exhibit 1.

                                       64
<PAGE>

         (c) Commencing on Substantial Completion of the First-Half Dried-In
Construction and thereafter throughout Landlord's prosecution of the Base
Building Work, Tenant shall be permitted upon the Premises and may,
simultaneously with Landlord's prosecution of the Base Building Work, prosecute
Tenant's Initial Work. Without limiting the generality of the foregoing,
Landlord shall permit Tenant to bring and store on the Premises all equipment,
supplies and other property required or appropriate in connection with Tenant's
Initial Work, and shall furnish temporary power to the Premises. Notwithstanding
anything herein to the contrary, Tenant shall be solely responsible, at its sole
cost and expenses, for obtaining any and all applicable permits, approvals and
licenses in connection with Tenant's Initial Work. Tenant does hereby agree to
assume all risk of loss or damage to its machinery, equipment, fixtures, and
other personal property, except for any loss or damage resulting from the
negligence or willful misconduct of Landlord or its agents, employees or
contractors and to indemnify, defend, and hold Landlord harmless from any and
all liability, loss, or damage arising from any injury to the property of
Landlord, its contractors, subcontractors, or materialmen, and any death or
personal injury to any person or persons arising out of such occupancy or
installation, except to the extent that any such liability, loss, or damage is
occasioned by the negligence or willful misconduct of Landlord or its agents,
employees or contractors. To the extent Tenant uses any of Landlord's
contractors or subcontractors in connection with the installation of its
improvements, Tenant acknowledges and agrees that Landlord's work shall take
priority over that of the Tenant and that Tenant shall not divert Landlord's
contractors or subcontractors from the performance of their work obligations for
Landlord.

         (d) Landlord shall from time to time, upon request of Tenant,
supply, at no additional charge to Tenant, architectural services to assist
Tenant with its office layout and design in the Building (including, without
limitation, electrical, phone, data lines, etc.).

                                 IV. ARBITRATION

         Except as otherwise provided in this Workletter, any dispute under this
Workletter shall be resolved by arbitration in accordance with the Commercial
Arbitration Rules (Expedited Procedures) of the American Arbitration
Association, subject to the requirement that a single arbitrator unaffiliated
with either party shall decide each matter in dispute within 15 days of the date
of his selection, based solely upon the written statements of position submitted
by each party. The parties consent to the jurisdiction of any appropriate court
to enforce these arbitration provisions and to enter judgments upon the decision
of the arbitration. Unless otherwise required by state law, arbitration shall be
conducted in the Reno, Nevada area. In the event of an arbitration, the losing
party shall pay the cost of arbitrator and the arbitration, but each party shall
bear its own attorneys' fees and costs in preparing for and participating in
such arbitration.

                                       65
<PAGE>

                                   ADDENDUM 3

                              FOUR RENEWAL OPTIONS

                  ATTACHED TO AND A PART OF THE LEASE AGREEMENT
                     DATED AS OF SEPTEMBER 8, 1999, BETWEEN
                   PROLOGIS DEVELOPMENT SERVICES INCORPORATED
                                       AND
                             BARNESANDNOBLE.COM LLC

<PAGE>

(a) Provided that as of the time of the giving of the First Extension Notice no
Event of Default exists, then Tenant shall have the right to extend the Lease
Term for an additional term of five (5) years (such additional term is
hereinafter called the "First Extension Term") commencing on the day following
the expiration of the Lease Term (hereinafter referred to as the "Commencement
Date of the First Extension Term"). Tenant shall give Landlord notice
(hereinafter called the "First Extension Notice") of its election to extend the
term of the Lease Term at least nine (9) months prior to the scheduled
expiration date of the Lease Term.
(b)
(c) Provided that as of the time of the giving of the Second Extension Notice no
Event of Default exists and provided Tenant has exercised its option for the
First Extension Term; then Tenant shall have the right to extend the Lease Term
for an additional term of five (5) years (such additional term is hereinafter
called the "Second Extension Term") commencing on the day following the
expiration of the First Extension Term (hereinafter referred to as the
"Commencement Date of the Second Extension Term"). Tenant shall give Landlord
notice (hereinafter called the "Second Extension Notice") of its election to
extend the term of the Lease Term at least nine (9) months prior to the
scheduled expiration date of the First Extension Term.
(d)
(e) Provided that as
of the time of the giving of the Third Extension Notice no Event of Default
exists and provided Tenant has exercised its option for the Second Extension
Term; then Tenant shall have the right to extend the Lease Term for an
additional term of five (5) years (such additional term is hereinafter called
the "Third Extension Term") commencing on the day following the expiration of
the Second Extension Term (hereinafter referred to as the "Commencement Date of
the Third Extension Term"). Tenant shall give Landlord notice (hereinafter
called the "Third Extension Notice") of its election to extend the term of the
Lease Term at least nine (9) months prior to the scheduled expiration date of
the Second Extension Term.
(f)
(g) Provided that as of the time of the giving of
the Fourth Extension Notice no Event of Default exists and provided Tenant has
exercised its option for the Third Extension Term; then Tenant shall have the
right to extend the Lease Term for an additional term of five (5) years (such
additional term is hereinafter called the "Fourth Extension Term") commencing on
the day following the expiration of the Third Extension Term (hereinafter
referred to as the "Commencement Date of the Fourth Extension Term"). Tenant
shall give Landlord notice

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<PAGE>

(hereinafter called the "Fourth Extension Notice") of its election to extend the
term of the Lease Term at least nine (9) months prior to the scheduled
expiration date of the Third Extension Term.
(h)
(i) The Base Rent payable by Tenant to Landlord during the First Extension Term
shall be equal to the greater of: (i) the Base Rent applicable during the last
year of the initial Lease Term; and (ii) the lesser of: (1) 97% of the then
prevailing market rate for comparable space in the Project and comparable
buildings in the vicinity of the Project taking into account all relevant
factors; (2) the product obtained by multiplying the Base Rent for the twelve
(12) month period immediately prior to the relevant extension term by a
fraction, the denominator of which is the CPI in effect on the date that is five
(5) years prior to the "Commencement Date" of the then applicable extension term
and the numerator of which is the CPI most recently published prior to the date
that Landlord sends Landlord's Rent Notice (as hereinafter defined); and (3)
115% of the Base Rent in effect for the twelve (12) month period immediately
prior to the "Commencement Date" of the First Extension Term.
(j)
(k) The Base Rent payable by Tenant to Landlord during the Second Extension Term
shall be equal to the greater of: (i) the Base Rent applicable during the last
year of the First Extension Term; and (ii) the lesser of: (1) 97% of the then
prevailing market rate for comparable space in the Project and comparable
buildings in the vicinity of the Project taking into account all relevant
factors; (2) the product obtained by multiplying the Base Rent for the twelve
(12) month period immediately prior to the relevant extension term by a
fraction, the denominator of which is the CPI in effect on the date that is five
(5) years prior to the "Commencement Date" of the then applicable extension term
and the numerator of which is the CPI most recently published prior to the date
that Landlord sends the Landlord Rent Notice; and (3) 115% of the Base Rent in
effect for the twelve (12) month period immediately prior to the "Commencement
Date" of the Second Extension Term.
(l)
(m) The Base Rent payable by Tenant to Landlord during the Third Extension Term
shall be equal to the greater of: (i) the Base Rent applicable during the last
year of the Second Extension Term; and (ii) 100% of the then prevailing market
rate for comparable space in the Project and comparable buildings in the
vicinity of the Project taking into account all relevant factors.
(n)
(o) The Base Rent payable by Tenant to Landlord during the Fourth Extension Term
shall be equal to the greater of: (i) the Base Rent applicable during the last
year of the Third Extension Term; and (ii) 100% of the then prevailing market
rate for comparable space in the Project and comparable buildings in the
vicinity of the Project taking into account all relevant factors.
(p)
(q) Within fifteen (15) days after Landlord's receipt of each Extension Notice
(but, in no event, earlier then the date that is eight (8) months and fifteen
(15) days prior to the anticipated "Commencement Date" of the relevant Extension
Term), Landlord shall notify ("Landlord's Rent Notice") Tenant of its
determination of the Base Rent under each of the formula set forth above as may
be applicable to such extension term, and Tenant shall advise Landlord of any
objection (a "Tenant Objection Notice") to the Base Rent amounts contained in
Landlord's Rent Notice within fifteen (15) days after Tenant's receipt of
Landlord's Rent Notice. Failure to

                                       67
<PAGE>

respond within the fifteen (15) day period shall constitute Tenant's acceptance
of such Base Rent, provided that Landlord shall have included a statement in
Landlord's Rent Notice that Tenant's failure to respond to Landlord's Rent
Notice within fifteen (15) days shall be deemed to be Tenant's acceptance of the
Base Rent set forth in Landlord's Rent Notice. In addition, Tenant shall have
the right, within such fifteen (15) day period, to rescind the applicable
Extension Notice, in which event, the Lease Term (as the same may have been
previously extended) shall expire on the then scheduled expiration date and
Tenant shall have no further rights to extend the Lease Term. If Tenant sends
Landlord a Tenant Objection Notice, then Landlord and Tenant shall commence
negotiations to attempt to agree upon the Base Rent within thirty (30) days
after Landlord's receipt of Tenant Objection Notice. If the parties cannot agree
on the Base Rent for such extension term, each acting in good faith but without
any obligation to agree, then the Lease Term shall not be extended and shall
terminate on its scheduled termination date and Tenant shall have no further
right hereunder or any remedy by reason of the parties' failure to agree unless
Tenant invokes the arbitration procedure provided below to determine the Base
Rent for such extension term by sending Landlord notice of Tenant's election
within five (5) business days after the expiration of such thirty (30) day
period.
(r)
(s) Arbitration to determine the Base Rent (including the then prevailing market
rate) shall be in accordance with the Arbitration Rules of the American
Arbitration Association. Unless otherwise required by state law, arbitration
shall be conducted in the metropolitan area where the Project is located by a
single arbitrator unaffiliated with either party, which arbitrator shall have at
least ten (10) years' experience in commercial leasing in Reno, Nevada and shall
be a member of the American Institute of Certified Real Estate Appraisers.
Landlord and Tenant shall each submit to the arbitrator their respective
proposal of the Base Rent, including the then prevailing market rate, together
with any and all information that each such party believes is relevant to the
determination of the Base Rent, including the then prevailing market rent, as
applied to an extension of this Lease, provided, however, that the amount of the
Base Rent contained in Landlord's Rent Notice shall be the amount submitted by
Landlord to the arbitrator as Landlord's proposal. The arbitrator must choose
between Landlord's proposal and the Tenant's proposal and may not compromise
between the two or select some other amount. The cost of the arbitration shall
be paid by Landlord if the then prevailing market rate is that proposed by
Landlord and by Tenant if the then prevailing market rate is that proposed by
Tenant. If the arbitrator has not determined the Base Rent as of the end of the
Lease Term or applicable extension term thereof, Tenant shall pay 105 percent of
the Base Rent in effect under the Lease as of the end of the Lease Term or the
applicable extension term thereof until Base Rent is determined as provided
herein. Upon such determination, Landlord and Tenant shall make the appropriate
adjustments to the payments between them.
(t)
(u) The parties consent to the jurisdiction of any appropriate court to enforce
the arbitration provisions of this Addendum and to enter judgment upon the
decision of the arbitrator.
(v)
(w) Except for the Base Rent as determined above and except as otherwise
expressly provided for in Articles 6 and 10 of the Lease, Tenant's occupancy of
the Premises during the applicable

                                       68
<PAGE>

extension term shall be on the same terms and conditions as are in effect
immediately prior to the expiration of the initial Lease Term or the applicable
extension term.
(x)
(y) If Tenant does not send the applicable Extension Notice within the period
set forth in Paragraph (a), (b), (c) or (d), Tenant's right to extend the Lease
Term shall automatically terminate. Time is of the essence as to the giving of
the applicable extension notice as set forth herein and the notice of Tenant's
objection under Paragraph (i).
(z)
(aa) Except as otherwise agreed to in writing by Landlord or Tenant, Landlord
shall have no obligation to refurbish or otherwise improve the Premises for the
applicable extension term. Except as otherwise provided for herein and under the
Lease, the Premises shall be tendered on the commencement date of the applicable
extension term in "as-is" condition.
(bb)
(cc) If the Lease is extended for the applicable extension term, then Landlord
shall prepare and Tenant shall execute an amendment to the Lease confirming the
extension of the Lease Term and the other provisions applicable thereto.
(dd)
(ee) If Tenant exercises its right to extend the term of the Lease for the
applicable extension term pursuant to this Addendum, the term "Lease Term" as
used in the Lease, shall be construed to include, when practicable, the
applicable extension term except as provided in Paragraph (l) above.

                                       69
<PAGE>

                                   ADDENDUM 4

                              RIGHT OF FIRST OFFER
                              --------------------

                  ATTACHED TO AND A PART OF THE LEASE AGREEMENT
                        DATED SEPTEMBER 8, 1999, BETWEEN
                   PROLOGIS DEVELOPMENT SERVICES INCORPORATED
                                       and
                             BARNESANDNOBLE.COM LLC

         (a) For purposes hereof, the term "Offer Space" shall mean the Premises
or any portion thereof.

         (b) Landlord hereby agrees that if, from time to time and at any time
during the Lease Term (as the same may be renewed or extended), Landlord desires
to convey all or any portion of the Offer Space, then Landlord shall so notify
Tenant (each, an "Offer Notice"), which notice shall contain the following
information: (i) the proposed sales price; (ii) the desired closing date, which
shall not be less than forty-five (45) days after the date Tenant receives the
applicable Offer Notice; and (iii) all of the other material economic terms and
conditions that are material to a sale of such Offer Space. Each Offer Notice
shall constitute an offer to Tenant to purchase the Offer Space covered thereby
(the "Right of First Offer to Purchase") on the terms and conditions set forth
in such Offer Notice including, without limitation, the sales price set forth
therein.

         (c) Tenant shall have fifteen (15) business days to accept such an
offer with respect to any Offer Space. If Tenant fails to accept such an offer
with respect to any Offer Space within such fifteen (15) business day period,
then (1) Tenant shall be deemed to have rejected such offer, and (2) Landlord,
for a period of one (1) year from the date of the applicable Offer Notice, shall
be free to sell such Offer Space to any prospective purchaser (which sale shall
be subject to this Lease, if the Offer Space comprises the Premises), for a
price of not less than ninety five percent (95%) of the net effective sales
price set forth in the applicable Offer Notice and otherwise on terms and
conditions no more materially advantageous to the purchaser than the terms and
conditions set forth in such Offer Notice and in the event of such sale Tenant
shall have no further right with respect to the Offered Space under this
Addendum 4. If such Offer Space is not sold and title thereto transferred within
such one (1) year period (for a price of not less than ninety five percent (95%)
of the net effective sales price set forth in the Offer Notice and otherwise on
terms and conditions no more materially advantageous to the purchaser than the
terms and conditions set forth in the Offer Notice), then Tenant's Right of
First Offer to Purchase such Offer Space shall remain in full force and effect
(i.e., Landlord shall again offer such Offer Space to Tenant in accordance with
the foregoing). If (x) Tenant rejects or is deemed to have rejected any offer to
sell any Offer Space in accordance with this Addendum and (y) within twelve (12)
months after such rejection Landlord desires to sell such Offer Space to a third
party on terms and conditions (the "New Offer Terms") that are materially more
advantageous (economically) to such third party than the terms and conditions
contained in the Offer Notice in question (including, without limitation, if
Landlord desires to sell such Offer Space to a third

                                       70
<PAGE>

party for a net effective sales price that is less than ninety five percent
(95%) of the net effective sales price for such Offer Space, as set forth in the
applicable Offer Notice) then Landlord, before conveying such Offer Space to
such third party, shall again offer such Offer Space to Tenant in accordance
with the foregoing provisions of this Addendum on the New Offer Terms.

         (c) If Tenant accepts any such offer for any Offer Space, Landlord and
Tenant (or any designee of Tenant) shall close title to such Offer Space in
accordance with and pursuant to the terms and conditions set forth in the Offer
Notice. In connection therewith, Landlord and Tenant promptly shall enter into a
customary contract of sale that incorporates the terms and provisions set forth
in the Offer Notice.

                                       71
<PAGE>

                                   ADDENDUM 5

                            FORM OF LETTER OF CREDIT
                            ------------------------

                  ATTACHED TO AND A PART OF THE LEASE AGREEMENT
                   DATED _____________________, 1999, BETWEEN
                   PROLOGIS DEVELOPMENT SERVICES INCORPORATED
                                       and
                             barnesandnoble.com, llc

                      [LETTERHEAD OF LETTER OF CREDIT BANK]

                                     [DATE]

ProLogis Development Services Incorporated
14100 East 35th Place
Aurora, Colorado  80011
Attention:  Legal Department

         Re:      Irrevocable Transferrable Letter of Credit
                  No.____________________________

Beneficiary:

         By order of our client, ____________________ (the "Applicant"), we
hereby establish this Irrevocable Transferrable Letter of Credit No. ________ in
your favor for an amount up to but not exceeding the aggregate sum of Two
Hundred Eight Thousand Five Hundred and No/100 Dollars ($208,500.00) (as reduced
from time to time in accordance with the terms hereof, the "Letter of Credit
Amount"), effective immediately, and expiring on the close of business at our
office at the address set forth above one year from the date hereof unless
renewed as hereinafter provided.

         Funds under this Letter of Credit are available to you on or prior to
the expiry date against presentation by you of your (i) sight drafts drawn on us
in the form of Annex 1 hereto, indicating this Letter of Credit number and (ii)
request in the form of Annex 2 hereto (such sight draft and request, together
referred to as a "Drawing Request"), sight draft(s), completed and signed by one
of your officers. Presentation of your Drawing Requests may be made by you to us
at the address set forth above or may be made by facsimile transmission, to the
following facsimile number ___________. You may present to us one or more
Drawing Requests from time to time prior to the expiry date in an aggregate
amount not to exceed the Letter of Credit Amount

                                       72
<PAGE>

then in effect (it being understood that the honoring by us of each Drawing
Request shall reduce the Letter of Credit Amount then in effect).

         This Letter of Credit will be automatically renewed for a one-year
period upon the expiration date set forth above and upon each anniversary of
such date, unless at least sixty (60) days prior to such expiration date, or
prior to any anniversary of such date, we notify both you and the Applicant in
writing by certified mail that we elect not to so renew the Letter of Credit.

         This Letter of Credit sets forth in full the terms of our undertaking
and such undertaking shall not in any way be modified, amended or amplified by
reference to any document or instrument referred to herein or in which this
Letter of Credit is referred to or to which this Letter of Credit relates, and
no such reference shall be deemed to incorporate herein by reference any
document or instrument.

         All bank charges and commissions incurred in this transaction are for
the Applicant's account.

         This Letter of Credit is transferrable by you and your successors and
assigns any number of times in its entirety and not in part, but only by
delivery to us of a Notice of Assignment in the form of Annex 3 hereto.

         We hereby agree with the drawers, endorsers, and bona fide holders of
drafts drawn under and in compliance with the terms of this Letter of Credit
that such drafts will be duly honored upon presentation to the drawee from our
own funds and not the funds of the Applicant and shall be available to such
drawers, endorsers, and bona fide holders, as the case may be, on or before
noon, New York time, on the Business Day (defined below) next following the date
on which such drafts are received by us. "Business Day" shall mean any day which
is not a Saturday, Sunday or day on which we are required or authorized by law
to be closed in New York, New York.

         To the extent not inconsistent with the express terms hereof, this
Letter of Credit shall be governed by, and construed in accordance with, the
terms of the Uniform Customs and Practice for Commercial Documentary Credits
(1993 Revision), I.C.C. Publication No. 500 (the "UCP 500") and as to matters
not governed by the UCP 500, this Letter of Credit shall be governed by and
construed in accordance with the laws of the State of New York.

                                          Very truly yours,

                                          [NAME OF LETTER OF CREDIT BANK]

                                          By:
                                               ---------------------------------
                                               Name:
                                               Title:

                                       73
<PAGE>

                                                                         ANNEX 1

                                   SIGHT DRAFT

                                                        ______________ , 199_

         For value received, at sight pay to the order of [Name of Landlord],
the sum of [Amount in words] [Amount in Figures] United States Dollars drawn
under [Name of Letter of Credit Bank] Irrevocable Transferrable Letter of Credit
No. ________ dated _________________, 199_____.

                                      PROLOGIS DEVELOPMENT SERVICES INCORPORATED

                                      By:
                                           ---------------------------------
                                           Name:
                                           Title:

                                       74
<PAGE>

                                       75
<PAGE>

                                                                         ANNEX 2

                                 DRAWING REQUEST

                                                               _________ ,199_

[NAME AND ADDRESS OF LETTER
OF CREDIT BANK]

         Re: Irrevocable Transferrable Letter of Credit No._______ (the "Letter
of Credit")

         The undersigned (the "Beneficiary"), hereby certifies to [Name of
Letter of Credit Bank] (the "Issuer") that:

         (a) The Beneficiary is making a request for payment in lawful currency
of the United States of America under Irrevocable Transferrable Letter of Credit
No. (the "Letter of Credit") in the _______________ amount of $___________.

         (b) The Letter of Credit Amount (as defined in the Letter of Credit) as
of the date hereof and prior to payment of the amount demanded in this Drawing
Request is $___________ . The amount requested by this Drawing Request does not
exceed the Letter of Credit Amount.

         [(c) Demand is made for payment under the Letter of Credit as a result
of the occurrence and continuation of an Event of Default (as defined in the
Lease Agreement).]

         Please wire transfer the proceeds of the drawing to the following
account of the Beneficiary at the financial institution indicated below:

                                      ____________________________________

                      ____________________________________

                                      ____________________________________

         Unless otherwise defined, all capitalized terms used herein have the
meanings provided in, or by reference in, the Letter of Credit.

                                       76
<PAGE>
         IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Drawing Request as of the ___ day of _______________, 199__.

                                     PROLOGIS DEVELOPMENT SERVICES INCORPORATED

                                     By:
                                     ------------------------------------------
                                     Name:
                                     Title:

                                       77
<PAGE>

                                                                         ANNEX 3

                              NOTICE OF ASSIGNMENT

                                                              ____________, 199_

[NAME AND ADDRESS OF
LETTER OF CREDIT BANK]

                  Re:  Irrevocable Transferable Letter of Credit No.

         The undersigned (the "Beneficiary"), hereby notifies [Name of Letter of
Credit Bank] (the "Issuer") that it has irrevocably assigned the
above-referenced Letter of Credit to ______________ (the "Assignee") with an
address at ________________ effective as of the date the Issuer receives this
Notice of Assignment. The Assignee acknowledges and agrees that the Letter of
Credit Amount may have been reduced pursuant to the terms thereof, and that the
Assignee is bound by any such reduction.

         IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Notice of Assignment as of this _____ day of _______, 199_.

                                     PROLOGIS DEVELOPMENT SERVICES INCORPORATED

                                     By:
                                     ------------------------------------------
                                     Name:
                                     Title:

Agreed:

[Assignee]

____________________

                                       78
<PAGE>

                                       79
<PAGE>

                                       80
<PAGE>

                          Exhibit A to Lease Agreement
                          ----------------------------

                                    [Diagram]

                                       81

<PAGE>

                          Exhibit B to Lease Agreement
                          ----------------------------

                                    [Diagram]

                                       82

<PAGE>

                          Exhibit C to Lease Agreement
                          ----------------------------

                                    [Diagram]

                                       83

<PAGE>

                          Exhibit D to Lease Agreement
                          ----------------------------

         Those encumbrances listed on Schedule B to the Preliminary Report
#992107340, dated as of July 29, 1999, of Stewart Title of Northern Nevada,
Reno, Nevada, but only to the extent such encumbrances pertain to Parcel 1 of
Parcel Map. No. 3487 filed in the office of the County Recorder of Washoe
County, State of Nevada, on March 19, 1999 as File No. 2318611; provided,
however, that (notwithstanding the foregoing) the following exceptions described
on said Schedule B do not encumber the Property and shall not constitute
Permitted Encumbrances: 5, 6 and 21.

                                       84

<PAGE>

                          Exhibit E to Lease Agreement
                          ----------------------------

                                 DRAWING REQUEST

                                                           ______________, 199__

[NAME AND ADDRESS OF LETTER
OF CREDIT BANK]

Re: Irrevocable Transferrable Letter of Credit No. ____ (the "Letter of Credit")

         The undersigned (the "Beneficiary"), hereby certifies to [Name of
Letter of Credit Bank] (the "Issuer") that:

         (a) The Beneficiary is making a request for payment in lawful currency
of the United States of America under Irrevocable Transferrable Letter of Credit
No. ____ (the "Letter of Credit") in the amount of $ ________.

         (b) The Letter of Credit Amount (as defined in the Letter of Credit) as
of the date hereof and prior to payment of the amount demanded in this Drawing
Request is $__________ . The amount requested by this Drawing Request does not
exceed the Letter of Credit Amount.

         (c) Demand is made for payment under the Letter of Credit as a result
of the occurrence and continuation of an Event of Default (as defined in the
Lease Agreement).

         Please wire transfer the proceeds of the drawing to the following
account of the Beneficiary at the financial institution indicated below:

         __________________________
         __________________________
         __________________________

         Unless otherwise defined, all capitalized terms used herein have the
meanings provided in, or by reference in, the Letter of Credit.

         IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Drawing Request as of the ___ day of _______________, 199__.

                                              __________________________

                                     By:   __________________________
                                     Name:
                                     Title:

                                       85

<PAGE>

                          Exhibit F to Lease Agreement
                          ----------------------------

                             [Intentionally Omitted]

                                       86

<PAGE>

                          Exhibit G to Lease Agreement
                          ----------------------------

                STORAGE AND USE OF PERMITTED HAZARDOUS MATERIALS

                  ATTACHED TO AND A PART OF THE LEASE AGREEMENT
                         DATED __________, 19__, BETWEEN
                            _________________________
                                       and
                            _________________________

         Permitted Hazardous Materials and Use.

         Tenant has requested Landlord's consent to use the Hazardous Materials
listed below in its business at the Premises (the "Permitted Hazardous
Materials"). Subject to the conditions set forth herein, Landlord hereby
consents to the Use (hereinafter defined) of the Permitted Hazardous Materials.
Any Permitted Hazardous Materials on the Premises will be generated, used,
received, maintained, treated, stored, or disposed in a manner consistent with
good engineering practice and in compliance with all Environmental Requirements.

         Permitted Hazardous Materials (including maximum quantities):
         ______________
         ______________
         ______________

         The storage, uses or process involving the Permitted Hazardous
Materials (the "Use") are described below.

         Use [If limited to receiving and storage, so specify]:
         ______________
         ______________
         ______________

                  No Current Investigation. Tenant represents and warrants that
it is not currently subject to an inquiry, regulatory investigation, enforcement
order, or any other proceeding regarding the generation, use, treatment,
storage, or disposal of a Hazardous Material.

                  Notice and Reporting. Tenant immediately shall notify Landlord
in writing of any spill, release, discharge, or disposal of any Hazardous
Material in, on or under the Premises or the Project. All reporting obligations
imposed by Environmental Requirements are strictly the responsibility of Tenant.
Tenant shall supply to Landlord within 5 business days after Tenant

                                       87

<PAGE>

first receives or sends the same, copies of all claims, reports, complaints,
notices, warnings or asserted violations relating in any way to Tenant's use of
the Premises.

         Indemnification. Tenant's indemnity obligation under the Lease with
respect to Hazardous Materials shall include indemnification for the
liabilities, expenses and other losses described therein as a result of the Use
of the Hazardous Materials or the breach of Tenant's obligations or
representations set forth above. It is the intent of this provision that Tenant
be strictly liable to Landlord as a result of the Use of Hazardous Materials
without regard to the fault or negligence of Tenant, Landlord or any third
party.

         Disposal Upon Lease Termination. At the expiration or earlier
termination of the Lease, Tenant, at its sole cost and expense, shall: (i)
remove and dispose off-site any drums, containers, receptacles, structures, or
tanks storing or containing Hazardous Materials (or which have stored or
contained Hazardous Materials) and the contents thereof; (ii) remove, empty, and
purge all underground and above ground storage tank systems, including connected
piping, of all vapors, liquids, sludges and residues; and (iii) restore the
Premises to its original condition. Such activities shall be performed in
compliance with all Environmental Requirements and to the satisfaction of
Landlord. Landlord's satisfaction with such activities or the condition of the
Premises does not waive, or release Tenant from, any obligations hereunder.

                                       88

<PAGE>

                          Exhibit H to Lease Agreement
                          ----------------------------

                                       89

<PAGE>

             SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
             -------------------------------------------------------

THE STATE OF NEVADA      ss.
                         ss.
COUNTY OF WASHOE         ss.

         THIS AGREEMENT is made as of September 8, 1999, among Prologis Trust,
formerly known as Security Capital Industrial Trust ("Lender"),
barnesandnoble.com llc (hereinafter called "Tenant"), and ProLogis Development
Services Incorporated (hereinafter called "Landlord").

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, Lender has made or has agreed to make loans to Landlord (the
"Loan"), to be evidenced by promissory notes executed by Landlord payable to the
order of each Lender (the "Notes"), bearing interest as therein specified;

         WHEREAS, the Notes are secured by, among other things, a Deed of Trust,
Security Agreement, Financing Statement and Assignment of Rental (the "Deed of
Trust"), creating a first lien upon that certain tract of real property
described in Exhibit A attached hereto (the "Property"), and an Assignment of
Leases and Rents (all such security instruments and all security instruments now
or hereafter executed between Landlord and Lender in connection with the Loan,
the Notes, or the Property, and all renewals, extensions, modifications, and/or
increases thereof to be referred to hereinafter collectively as the "Collateral
Documents");

                                       90

<PAGE>

         WHEREAS, Tenant and Landlord have executed that certain written lease,
dated the 8th day of September, 1999 (the "Lease"), a memorandum of which was
recorded as Document No. _________________, Official Records, Washoe County,
Nevada, covering all or a portion of the Property (the "Demised Premises");

         WHEREAS, Tenant and Landlord have requested that Lender agree that it
will not disturb Tenant's possession of the Demised Premises and Lender has
agreed to do so provided that Tenant expressly subordinates the Lease and all of
Tenant's rights thereunder to the Collateral Documents and the liens and
security interests created thereby and that Tenant agrees to attorn to Lender or
a subsequent purchaser of the Demised Premises;

         NOW, THEREFORE, for and in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged, Lender, Landlord, and
Tenant hereby agree as follows:

         Subordination. The Lease and all of Tenant's rights thereunder are,
shall be, shall remain, and are expressly made subordinate and inferior to the
liens and security interests created by the Collateral Documents, and Tenant
also agrees that the liens and security interests created by the Collateral
Documents shall be and remain prior and superior to the Lease and to all of the
rights of the Tenant thereunder, regardless of how often or in what manner the
Notes, together with the liens securing the same, and any of the Collateral
Documents, may be renewed, extended, increased, changed, or altered.

         Non-Disturbance. So long as Tenant is not in default in the payment of
basic rent or percentage rent or additional rent (each as applicable under the
Lease) beyond any applicable notice and grace periods provided for under the
Lease or in the performance of any of the terms, covenants, or conditions of the
Lease on Tenant's part to be performed beyond any applicable notice and grace
periods provided for under the Lease, Tenant's use and possession of the Demised
Premises and Tenant's rights and privileges under the Lease, or any extensions

                                       91

<PAGE>

or renewals thereof approved by Lender, shall not be terminated, diminished or
interfered with or affected in any manner by Lender in the exercise of any of
its rights under the Deed of Trust or otherwise, (ii) Tenant's occupancy of the
Demised Premises shall not be disturbed by Lender in any manner in the exercise
of any of Lender's rights under the Collateral Documents during the term of the
Lease or any such extensions or renewals thereof, and (iii) Lender will not join
Tenant as a party defendant in any action or proceeding for the purpose of
terminating Tenant's interest and estate under the Lease because of any default
by Landlord, as grantor, under the Deed of Trust or otherwise.

         Attornment. In the event that any proceedings are brought for the
foreclosure of the Deed of Trust or if the Demised Premises are conveyed to
Lender by deed in lieu of foreclosure, Tenant shall attorn to Lender or the
purchaser upon any such conveyance or foreclosure sale or trustee's sale and
shall recognize Lender or such purchaser as Landlord under the Lease. Such
attornment shall be effective and self-operative without the execution of any
further instrument on the part of either of the parties hereto. Tenant agrees,
however, to execute and deliver at any time and from time to time, upon the
request of Landlord or of any holder(s) of any of the indebtedness or other
obligations secured by the Deed of Trust and other Collateral Documents or any
such purchaser (1) any instrument or certificate, reasonably requested by
Landlord or of such holder(s) or such purchaser, which may be necessary or
appropriate in any such foreclosure proceeding or otherwise to evidence such
attornment, and (2) an instrument of certificate regarding the status of the
Lease, consisting of statements, if true, (i) that the Lease is in full force
and effect, (ii) the date through which rentals have been paid, (iii) the date
of the commencement of the term of the Lease, (iv) the nature of any amendments
or modifications to the Lease, (v) that, to the best of Tenant's knowledge, no
default, or state of facts, which with the passage of time or notice would
constitute a default, exists on the part of either party to the Lease, and (vi)
the date on which payment of additional rents and/or percentage rents, if any,
are due under the terms of the Lease.

                                       92

<PAGE>

         Lender's Obligations. If Lender shall succeed to the interest of
Landlord under the Lease in any manner, of if any purchaser acquires the Demised
Premises upon any foreclosure of the Deed of Trust or any trustee's sale under
the Deed of Trust, Lender or such purchaser, as the case may be, in the event of
attornment shall have the same remedies by entry, action, or otherwise in the
event of any default by Tenant in the payment of rent or additional rent or in
the performance of any of the terms, covenants, and conditions of the Lease on
Tenant's part to be performed that Landlord had or would have had if Lender or
such purchaser had not succeeded to the interest of Landlord. From and after any
such attornment, Lender or such purchaser shall be bound to Tenant under all of
the terms, covenants, and conditions of the Lease as if Lender or such purchaser
had executed the Lease as Landlord, and Tenant shall from and after the
succession to the interest of Landlord under the Lease by Lender or such
purchaser have the same remedies against Lender or such purchaser for the breach
of an agreement contained in the Lease that Tenant might have had under the
Lease against the Landlord if Lender or such purchaser had not succeeded to the
interest of Landlord, provided further, however, that Lender or such purchaser
shall not be:

         (a)      liable for any action or omission of any prior landlord
                  (including Landlord), it being understood, however, that (i)
                  the foregoing is not intended to relieve Lender or such
                  purchaser of any liability arising by reason of its acts or
                  omissions from and after the date that it succeeds to the
                  interests of Landlord, including a continuation of the failure
                  of the prior Landlord to perform its obligations under the
                  Lease; and (ii) the foregoing shall in no way diminish
                  Tenant's Express Set-Off Rights (as hereinafter defined), even
                  if such rights exist by reason of circumstances occurring
                  before the date on which Lender or such purchaser succeeds to
                  Landlord's interest under the Lease; or

         (a)      bound by any rent which Tenant might have paid for more than
                  the current month to any prior landlord (including Landlord);
                  or

                                       93

<PAGE>

         (a)      bound by any amendment or modification of the Lease made
                  without its written consent, which consent shall not be
                  unreasonably withheld, conditioned or delayed; or

         (a)      subject to any offsets or defenses which Tenant might be
                  entitled to assert against Landlord it being understood,
                  however, that the foregoing shall in no way diminish Tenant's
                  Express Set-Off Rights, even if such rights exist by reason or
                  circumstances occurring before the date on which Purchaser
                  acquires Landlord's interest in the Lease; or

         (a)      liable for any security deposits except to the extent received
                  from Landlord.

         Notwithstanding the foregoing, in the event that Lender or any such
purchaser is an affiliate or is otherwise related to Landlord (or any prior
Landlord) then in such event, clauses 4(a) - 4(e) hereof shall have no
application and in the event that such Lender or purchaser shall succeed to the
interests of Landlord under the Lease then such Lender or purchaser shall be
responsible for all of the obligations of Landlord under the Lease as if such
Lender or purchaser shall have originally executed the Lease as the landlord
thereunder.

         For purposes of this Agreement, the term "Tenant's Express Set-Off
Rights" shall mean Tenant's rights to any abatement, credit or setoff that are
expressly provided for in the Lease or the exhibits annexed thereto, regardless
of whether such rights arise by reason of a failure or default by Landlord or a
failure or default by a Lender or a purchaser.

         No Waiver. Nothing herein contained is intended, nor shall it be
construed, to abridge or adversely affect any right or remedy of Landlord
provided for under the Lease in the event of default by Tenant in the payment of
any rent or in the performance of any of the terms, covenants or conditions of
the Lease on Tenant's part to be performed.

                                       94

<PAGE>

         Notices. Any notice or communication required or permitted hereunder
shall be given in writing, sent by United States mail, postage prepaid,
registered or certified mail, addressed as follows:

                  To Lender:    ProLogis Trust
                                14100 E. 35th Place
                                Aurora, Colorado 80011
                                Attention: Legal Department

                  To Tenant:    Barnes & Noble/Bn.com
                                76 Ninth Avenue, 11th Floor
                                New York, New York 10011
                                Attention: William F. Duffy

                  To Landlord:  ProLogis Development Services Incorporated
                                14100 E. 35th Place
                                Aurora, Colorado 80011
                                Attention: Legal Department

or to such other address or in care of such other person as hereinafter shall be
designated in writing by the applicable party, and shall be deemed to have been
given as of the date of deposit in an official receptacle of the United States
mail in the manner aforesaid.

         Governing Law. The validity and construction of this Agreement shall be
governed by the laws of the State of Nevada.

                                       95

<PAGE>

         Modifications and Successors. This Agreement may not be modified orally
or in any manner other than by an agreement in writing signed by the parties
hereto or their respective successors in interest. This Agreement shall inure to
the benefit of and be binding upon the parties hereto, their successors and
assigns, and any purchaser or purchasers at foreclosure of the Demised Premises,
and their respective heirs, personal representatives, successors and assigns.

         Counterparts. This Agreement may be executed in several counterparts,
and all so executed shall constitute one agreement, binding on all parties
hereto, notwithstanding that all parties are not signatories to the original or
the same counterpart.

                                       96

<PAGE>

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

                                     Lender:
                                     ProLogis Trust

                                     By:      /s/ David Morze
                                              --------------------------
                                     Name:    David Morze
                                              --------------------------
                                     Title:   Senior Vice President
                                              --------------------------

                                     LANDLORD:
                                     ProLogis Development Services Incorporated

                                     By:      /s/ John W. Seiple
                                              --------------------------
                                     Name:    John W. Seiple
                                              --------------------------
                                     Title:   Senior Vice President
                                              --------------------------

                                     TENANT:
                                     barnesandnoble.com llc
                                     ______________________

                                     By:      /s/  William F. Duffy
                                              --------------------------
                                     Name:    William F. Duffy
                                              --------------------------
                                     Title:   Vice President, Operations
                                              --------------------------

                                       97

<PAGE>

THE STATE OF __________  ss.
                         ss.
COUNTY OF _____________  ss.

         This instrument was acknowledged before me on this ______ day of
______________, 19___, by ________________________________________ of
__________________________, a ____________________________, on behalf of said
___________.

                                              _______________________
                                              Notary Public Signature
(PERSONALIZED SEAL, if any)

THE STATE OF __________  ss.
                         ss.
COUNTY OF _____________  ss.

         This instrument was acknowledged before me on this ______ day of
_______________, 19___, by ________________________________________ of
_____________________________________, on behalf thereof.

                                              _______________________
                                              Notary Public Signature
(PERSONALIZED SEAL, if any)

                                       98

<PAGE>

THE STATE OF __________  ss.
                         ss.
COUNTY OF _____________  ss.

         This instrument was acknowledged before me on this _______ day of
__________________, 19___, by ________________________________ of
_________________________________________________, on behalf thereof.

                                              _______________________
                                              Notary Public Signature
(PERSONALIZED SEAL, if any)

                                       99

<PAGE>

                    Exhibit A to Exhibit H to Lease Agreement
                    -----------------------------------------

         Parcel 1 of PARCEL MAP NO. 3487, according to the map thereof, filed in
the office of the County Recorder of Washoe County, State of Nevada, on March
19, 1999 as File No. 2318611, and any and all existing or future improvements
located thereon.

                                       100

<PAGE>

                          Exhibit I to Lease Agreement
                          ----------------------------

                      Form of Tenant's Estoppel Certificate

                             [Letterhead of Tenant]

                                              [Date]

[Name and Address of Landlord]

                  Re:   Lease (the "Lease", dated ____________, between
                        _________________ ("Landlord") and _____________________
                        ("Tenant") Premises:

Dear Sir or Madam:

         Tenant hereby certifies the following information as of the date of
this certificate:

         1.       The Lease is in full force and effect and has not been
                  modified, supplemented, or amended, except as set forth on
                  Schedule I annexed hereto.

                                       101
<PAGE>

         2.       The Base Rent due under the Lease has been paid through
                  ____________.

         3.       Except as otherwise provided in the Lease or on Schedule II
                  annexed hereto, no payment of Base Rent or additional rent has
                  been paid by Tenant more than thirty days in advance.

         4.       Except as set forth on Schedule III annexed hereto, to the
                  best of Tenant's knowledge, as of the date hereof, Landlord is
                  not in default under the terms of the Lease.

                                    [TENANT]

                                     By:    _____________________________
                                     Name:
                                     Title:

                                      102

<PAGE>

                      Form of Tenant's Estoppel Certificate
                      -------------------------------------

                            [Letterhead of Landlord]

                                                              [Date]

[Name and Address of Tenant]

                  Re:   Lease (the "Lease", dated ____________, between
                        _________________ ("Landlord") and _____________________
                        ("Tenant") Premises:

Dear Sir or Madam:

         Landlord hereby certifies the following information as of the date of
this certificate:

         1.       The Lease is in full force and effect and has not been
                  modified, supplemented, or amended, except as set forth on
                  Schedule I annexed hereto. ----------

         2.       The Base Rent due under the Lease has been paid through
                  ____________.

                                      103

<PAGE>

         3.       Except as otherwise provided in the Lease or on Schedule II
                  annexed hereto, no payment ----------- of Base Rent or
                  additional rent has been paid by Tenant more than thirty days
                  in advance.

         4.       Except as set forth on Schedule III annexed hereto, to the
                  best of Tenant's knowledge, as of the date hereof, Landlord is
                  not in default under the terms of the Lease.

                                   [LANDLORD]

                                     By:   _____________________________
                                     Name:
                                     Title:

                                      104

<PAGE>

                          Exhibit J to Lease Agreement
                          ----------------------------

RECORD AND RETURN TO:
--------------------

David Blaivas, Esq.
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104

PROPERTY DESCRIPTION
--------------------

Parcel 1 of Parcel Map No. 3487, APN: 140-010-09
County of Washoe
State of Nevada

         Memorandum of Lease

         This Memorandum of Lease is made the 8th day of September, 1999, by and
between PROLOGIS DEVELOPMENT SERVICES INCORPORATED, a Delaware corporation,
having its principal office at 14100 East 35th Place, Aurora, Colorado 80011

                                      105

<PAGE>

("Landlord") and barnesandnoble.com llc, a Delaware limited liability company
having an office at 76 Ninth Avenue, 11th Floor, New York, New York 10011
("Tenant").

                              W I T N E S S E T H :
                              - - - - - - - - - -

         WHEREAS, Landlord (as successor in interest to SCI Development Services
Incorporated) is the sole owner in fee simple of the piece, parcel or tract of
land lying and being in the County of Washoe and State of Nevada, more
particularly described in Schedule I annexed hereto (the "Land");

         WHEREAS, Landlord, as landlord, and Tenant, as tenant, have entered
into a lease, dated September 8, 1999 (the "Lease"), covering the Land and all
improvements now or hereafter erected thereon (including, without limitation,
that certain building (the "Building") that is to be erected by Landlord on the
Land and that is to contain approximately 600,000 square feet of space);

         WHEREAS, the Land and the Building are part of that certain industrial
project (the "Project") commonly known as Damonte Ranch Trade Center I, which
industrial project is composed of the parcels of land lying and being in the
County of Washoe, State of Nevada, as more particular described in Schedule II
annexed hereto, together with any improvements now or hereafter erected thereon;
and

         WHEREAS, Landlord and Tenant desire to have a Memorandum of Lease
recorded in the official public records of real property of Washoe County,
Nevada.

                                      106

<PAGE>

         NOW, THEREFORE, Landlord and Tenant hereby state the following for
recording:

                                       I.

                             Description of Premises

         The premises demised by the Lease (the "Premises") consist of, inter
alia, the Land and the Building, together with (x) any and all other
improvements and structures (now or hereafter erected) on the Land, and (y) all
of Landlord's right, title and interest in and to all easements, rights and
other matters appurtenant to the Land or the Building and in and to any land
lying in the bed of any roads adjacent to the Land.

                                       II.

                     Date of Commencement and Term of Lease

         1. The Commencement Date of the Lease is September 8, 1999. The Rent
Commencement Date (as defined in the Lease) will occur 30 days after the
Substantial Completion of the Base Building Work (as defined in the Lease),
which is estimated to occur on or before April 15, 2000, subject to certain
delays, as provided in the Lease.

         2. The initial term of the Lease will commence on the Commencement Date
and shall end on the last day of the 120th full calendar month following the
Rent Commencement Date.

                                      107

<PAGE>

                                      III.

                                 Extension Terms

         Tenant may extend the term of the Lease for four (4) additional
extension terms of five (5) years each, upon the terms and conditions set forth
in the Lease.

                                       IV.

                              Right of First Offer

         Tenant has a right of first offer to purchase the Premises, upon the
terms and conditions set forth in the Lease.

                                       V.

                                     Signage

         Tenant has the right, subject to the terms and conditions of the Lease,
to place directional signs as appropriate throughout the Project for the benefit
of its customers.

                                      108

<PAGE>

                                       VI.

                                Other Provisions

         Notice is hereby given that the Lease contains additional terms,
covenants, conditions and provisions not set forth in or referred to in this
Memorandum of Lease.

                                    * * * * *

         THIS MEMORANDUM OF LEASE IS NOT A COMPLETE SUMMARY OF THE LEASE. The
provisions of this Memorandum of Lease shall not be construed to interpret, vary
or modify the terms, covenants, conditions or provisions of the Lease and in the
event of any conflict between the terms hereof and the terms of the Lease, the
terms of the Lease shall control. A true copy of the Lease is located at the
Premises.

                     [Remainder of Page Intentionally Blank]

                                      109

<PAGE>

         EXECUTED IN MULTIPLE COUNTERPARTS each of which shall have the force
and effect of an original, as of the day and year first above written.

TENANT:                               LANDLORD:

barnesandnoble.com llc                ProLogis Development Services Incorporated

By:     /s/ William F. Duffy          By:      /s/ John W. Seiple, Jr.
   ------------------------------         -----------------------------
Title: Vice President, Operations     Title: Senior Vice President
      ---------------------------            ----------------------

Address:                              Address:
76 Ninth Avenue, 11th Floor           47775 Fremont Blvd.
New York, NY  10011                   Fremont, CA  94538

                                      110

<PAGE>

                             Schedule I to Exhibit J
                             -----------------------

         Parcel 1 of PARCEL MAP NO. 3487, according to the map thereof, filed in
the office of the County Recorder of Washoe County, State of Nevada, on March
19, 1999 as File No. 2318611.

                                      111

<PAGE>

                            Schedule II to Exhibit J
                            ------------------------

         Parcels 1 and 2 of PARCEL MAP NO. 3487, according to the map thereof,
filed in the office of the County Recorder of Washoe County, State of Nevada, on
March 19, 1999 as File No. 2318611.

         Parcels 1 and 2 of PARCEL MAP NO. 3488, according to the map thereof,
filed in the office of the County Recorder of Washoe County, State of Nevada, on
March 19, 1999 as File No. 2318612.

         An easement for temporary access as set forth in an instrument recorded
June 16, 1998, as Document No. 2221195 of Official Records.

         An easement for sanitary sewer as set forth in an instrument recorded
June 16, 1998, as Document No. 2221193 of Official Records.

                                      112

<PAGE>

                          Exhibit K to Lease Agreement
                          ----------------------------

                             [Intentionally Omitted]

                                      113

<PAGE>

                          Exhibit L to Lease Agreement
                          ----------------------------

                      [Forms of Warranties and Guarantees]

                                      114<PAGE>

================================================================================

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

                               AGREEMENT OF LEASE

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

                                 111 CHELSEA LLC

                                                             LANDLORD

                                       AND

                             BARNESANDNOBLE.COM LLC

                                                             TENANT
                                 ---------------

                  PREMISES:         Portions of the Ninth Floor
                                    111 Eighth Avenue
                                    (a/k/a 76 Ninth Avenue)
                                    New York, New York  10011

                  DATED:            as of October 1, 1999

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
DEFINITIONS      ............................................................ 1
ARTICLE 1.       DEMISE, PREMISES, TERM, RENT................................ 7
ARTICLE 2.       USE AND OCCUPANCY........................................... 8
ARTICLE 3.       ALTERATIONS.................................................11
ARTICLE 4.       CONDITION OF THE PREMISES; LANDLORD'S WORK..................14
ARTICLE 5.       REPAIRS; FLOOR LOAD.........................................17
ARTICLE 6.       REAL ESTATE TAXES AND LABOR RATE INCREASES..................19
ARTICLE 7.       LEGAL REQUIREMENTS..........................................24
ARTICLE 8.       SUBORDINATION AND NON-DISTURBANCE; ESTOPPEL CERTIFICATES....26
ARTICLE 9.       SERVICES....................................................29
ARTICLE 10.      INSURANCE...................................................40
ARTICLE 11.      DESTRUCTION OF THE PREMISES; PROPERTY LOSS OR DAMAGE........42
ARTICLE 12.      EMINENT DOMAIN..............................................44
ARTICLE 13.      ASSIGNMENT AND SUBLETTING...................................45
ARTICLE 14.      ACCESS TO PREMISES..........................................54
ARTICLE 15.      CERTIFICATE OF OCCUPANCY....................................56
ARTICLE 16.      DEFAULT.....................................................56
ARTICLE 17.      REMEDIES AND DAMAGES........................................59
ARTICLE 18.      FEES AND EXPENSES...........................................61
ARTICLE 19.      NO REPRESENTATIONS BY LANDLORD..............................61
ARTICLE 20.      END OF TERM.................................................62
ARTICLE 21.      QUIET ENJOYMENT.............................................62
ARTICLE 22.      NO WAIVER; NON-LIABILITY....................................63
ARTICLE 23.      WAIVER OF TRIAL BY JURY.....................................64
ARTICLE 24.      INABILITY TO PERFORM........................................64
ARTICLE 25.      BILLS AND NOTICES...........................................65
ARTICLE 26.      RULES AND REGULATIONS.......................................65
ARTICLE 27.      BROKER......................................................66
ARTICLE 28.      INDEMNITY...................................................66
ARTICLE 29.      REDUCED PREMISES............................................67
ARTICLE 30.      RIGHT OF FIRST OFFER........................................68
ARTICLE 31.      LANDLORD'S CONTRIBUTION.....................................71
ARTICLE 32.      SECURITY DEPOSIT............................................73
ARTICLE 33.      BUILDING NAME AND SIGNAGE; FLAGPOLE.........................77
ARTICLE 34.      GUARANTY OF LEASE...........................................78
ARTICLE 35.      MISCELLANEOUS...............................................78

                                      -i-

<PAGE>

                                    EXHIBITS

Exhibit A:        Floor Plan of Space A

Exhibit B:        Floor Plan of Space B

Exhibit C:        Floor Plan of Space C

Exhibit D:        Form of Letter of Credit

Exhibit E:        Rules and Regulations

Exhibit F:        Approved Contractors

Exhibit G:        Certificate of Occupancy

Exhibit H:        Form of Existing Mortgagee Non-Disturbance Agreement

Exhibit I:        Roof Space

Exhibit J:        Article 29 Space

Exhibit K:        Section 2.3 Occupancies

Exhibit L:        Section 30.2 Occupancies

Exhibit M:        Intentionally Deleted

Exhibit N:        Existing Emergency Stairwell

Exhibit O:        Form of Agreement and Guaranty

Exhibit P:        Floor Plan of the Remaining B Space

Exhibit P-1:      Lease Modifications Re:  Remaining B Space

Exhibit Q:        Louver Locations

Exhibit R:        Center Shaft Location

                                      -ii-
<PAGE>

                  AGREEMENT OF LEASE ("Lease"), dated as of October 1, 1999,
between 111 CHELSEA LLC, a Delaware limited liability company with an address
c/o Taconic Investment Partners LLC, 1500 Broadway, New York, New York 10036
("Landlord"), and BARNESANDNOBLE.COM LLC, a Delaware limited liability company
with an address at 111 Eighth Avenue (a/k/a 76 Ninth Avenue), New York, New York
10011 ("Tenant").

                              W I T N E S S E T H:

                  The parties hereto, for themselves, their legal
representatives, successors and assigns, covenant and agree as follows.

                                   DEFINITIONS

Additional Rent:  Tenant's Tax Payment, Tenant's Labor Rate Payment, and any and
                  all other sums, other than Fixed Rent, payable by Tenant to
                  Landlord under this Lease.

Affiliate:        With respect to any Person, any other Person that, directly or
                  indirectly, through one or more intermediaries, Controls, is
                  Controlled by, or is under common Control with, such first
                  Person.

Alterations:      Alterations, installations, improvements, additions or other
                  physical changes (other than decorations, movable fixtures and
                  equipment) in or about the Premises or elsewhere in the
                  Building.

Bertelsmann:      Bertelsmann AG, a business entity organized pursuant to the
                  laws of the Federal Republic of Germany.

B&N Inc.:         Barnes & Noble, Inc., a Delaware corporation.

Base Rate:        The annual rate of interest publicly announced from time to
                  time by Citibank, N.A., New York, New York (or any successor
                  thereto) as its "base rate", or such other term as may be used
                  by Citibank, N.A. from time to time for the rate presently
                  referred to as its base rate.

Building:         All the buildings, equipment and other improvements and
                  appurtenances of every kind and description now located or
                  hereafter erected, constructed or placed upon the land and any
                  and all alterations, renewals, replacements, additions and
                  substitutions thereto, presently known by the address of 111
                  Eighth Avenue (a/k/a 76 Ninth Avenue), New York, New York.

Building Systems: The mechanical, electrical, heating, ventilating, air
                  conditioning, elevator, plumbing, sanitary, life-safety and
                  other service systems of the Building, but shall not include
                  the portions of such systems installed in the Premises or
                  elsewhere in the Building by Tenant.

<PAGE>

Business Days:    All days, excluding Saturdays, Sundays, and all days observed
                  by either the State of New York, the United States of America
                  or by the labor unions servicing the Building as legal
                  holidays.

Commencement      As to Space A, October 1, 1999. As to Space B and Space C, the
Date:             respective Delivery Dates for Space B and Space C.

Control:          As to any Person: (a) the ownership, directly or indirectly,
                  of more than thirty per cent (30%) of (i) the outstanding
                  voting stock of a corporation, or (ii) the beneficial
                  ownership interests, however characterized, of any other
                  entity, or (b) the possession, directly or indirectly, of the
                  power to direct or cause the direction of the management and
                  policies of such Person, whether through the ownership of
                  voting securities or other ownership interests, by statute, or
                  by contract.

Default Rate:     A rate per annum equal to four (4) percentage points above the
                  Base Rate.

Delivery Date:    As to each of Space A, Space B and Space C, the date upon
                  which Landlord delivers possession of such Space, whether or
                  not the portions of Landlord's Work applicable to such Space
                  have been Substantially Completed.

Entity:           Defined in Section 13.10(a).

Environmental
Laws:             All Legal Requirements now or hereafter in effect relating to
                  the environment, health, safety or Hazardous Materials.

Expiration Date:  February 28, 2015.

Governmental
Authority:        Any of the United States of America, the State of New York,
                  the City of New York, any political subdivision thereof and
                  any agency, department, commission, board, bureau or
                  instrumentality of any of the foregoing, now existing or
                  hereafter created, having jurisdiction over the Real Property
                  or any portion thereof or the vaults, curbs, sidewalks,
                  streets and areas adjacent thereto.

Guarantor:        barnesandnoble.com inc., a Delaware corporation, and any other
                  Person which shall from time to time guaranty to Landlord the
                  payment and performance of all or any portion of the
                  obligations of Tenant under this Lease.

Guaranty:         The Agreement and Guaranty, dated as of the date hereof, made
                  by Guarantor to Landlord, in the form attached to this Lease
                  as Exhibit O, and any amendment, modification, restatement,
                  confirmation or extension thereof, and any other agreement
                  pursuant to which any Guarantor shall

                                       2
<PAGE>

                  from time to time guaranty to Landlord the payment and
                  performance of all or any portion of the obligations of Tenant
                  under this Lease.

Hazardous
Materials:        Any substances, materials or wastes regulated by any
                  Governmental Authority or deemed or defined as a "hazardous
                  substance", "hazardous material", "toxic substance", "toxic
                  pollutant", "contaminant", "pollutant", "solid waste",
                  "hazardous waste" or words of similar import under applicable
                  Legal Requirements, including oil and petroleum products,
                  natural or synthetic gas, polychlorinated biphenyls, asbestos
                  in any form, urea formaldehyde, radon gas, or the emission of
                  non-ionizing radiation, microwave radiation or electromagnetic
                  fields at levels in excess of those (if any) specified by any
                  Governmental Authority or which may cause a health hazard or
                  danger to property, or the emission of any form of ionizing
                  radiation.

Initial
Alterations:      Defined in Section 4.3.

Landlord's
Contribution:     Defined in Section 31.1.

Landlord's Work:  Defined in Section 4.2.

Legal
Requirements:     All present and future laws, rules, orders, ordinances,
                  regulations, statutes requirements, codes, executive orders,
                  rules of common law, and any judicial interpretations thereof,
                  extraordinary as well as ordinary, of all Governmental
                  Authorities, including the Americans with Disabilities Act (42
                  U.S.C.ss.12,101 et seq.), New York City Local Law 58 of 1987,
                  and any law of like import, and all rules, regulations and
                  government orders with respect thereto, and of any applicable
                  fire rating bureau, or other body exercising similar
                  functions, affecting the Real Property or the maintenance, use
                  or occupation thereof, or any street or sidewalk comprising a
                  part of or in front thereof or any vault in or under the
                  Building.

Mortgage:         Any mortgage or trust indenture which may now or hereafter
                  affect the Real Property, the Building or any Superior Lease
                  and the leasehold interest created thereby, and all renewals,
                  extensions, supplements, amendments, modifications,
                  consolidations and replacements thereof or thereto,
                  substitutions therefor, and advances made thereunder.

Mortgagee:        Any mortgagee, trustee or other holder of a Mortgage.

Permitted Use:    The use by Tenant of the Premises as executive, administrative
                  and/or general offices and the lawful uses ancillary thereto
                  described in Article 2, and for no other purpose.

                                       3
<PAGE>

Person:           Any individual, corporation, partnership, limited liability
                  company, limited liability partnership, joint venture, estate,
                  trust, unincorporated association, business trust,
                  tenancy-in-common or other entity, or any Governmental
                  Authority.

Premises:         Collectively, Space A, Space B and Space C, as and when
                  delivered to Tenant.

Premises Area:    The Rentable Square Foot area of (i) from the Space A Delivery
                  Date until the Space B Delivery Date, Space A, hereby deemed
                  and agreed to be 46,053 Rentable Square Feet; plus (ii) from
                  the Space B Delivery Date until the Space C Delivery Date,
                  Space B, hereby deemed and agreed to be 25,763 Rentable Square
                  Feet (such that during such period the Premises Area of the
                  entire Premises (comprising Space A and Space B) shall be
                  deemed to be 71,816 Rentable Square Feet); plus (iii) from the
                  Space C Delivery Date until the Expiration Date, Space C,
                  hereby deemed and agreed to be 18,324 Rentable Square Feet
                  (such that during such period the Premises Area of the entire
                  Premises (comprising Space A, Space B and Space C) shall be
                  deemed to be 90,140 Rentable Square Feet), as such Premises
                  Area may be increased or decreased from time to time pursuant
                  to this Lease.

Real Property:    The Building, together with the plot of land upon which it
                  stands.

Rentable Square
Feet:             The deemed rentable area of the Building or any portion
                  thereof, computed on the basis of the current standard
                  employed by Landlord on the date hereof with respect to the
                  calculation of the deemed Rentable Square Foot area of the
                  Building, and according to such calculation, the Building is
                  deemed to contain 2,300,000 Rentable Square Feet of Space;
                  provided, however, that in no event shall such deemed Rentable
                  Square Footage constitute or imply any representation or
                  warranty by Landlord as to the actual size of any floor or
                  other portion of the Building, including the Premises.

Rules and
Regulations:      The rules and regulations attached to this Lease as Exhibit E,
                  and such additional rules and regulations as Landlord may
                  reasonably adopt from time to time in accordance with the
                  provisions of Article 26.

Roof
Equipment:        As defined in Section 9.7.

Roof Space:       As defined in Section 9.7.

Security Deposit: As defined in Section 32.1.

                                       4
<PAGE>

Space:            Any of Space A, Space B or Space C.

Space  A:         A portion of the ninth (9th) floor of the Building,
                  substantially as shown on the floor plan attached as Exhibit A
                  to this Lease.

Space B:          A portion of the ninth (9th) floor of the Building,
                  substantially as shown on the floor plan attached as Exhibit B
                  to this Lease.

Space C:          A portion of the ninth (9th) floor of the Building,
                  substantially as shown on the floor plans attached as Exhibit
                  C to this Lease.

Space A Rent
Commencement      March 1, 2000.
Date:

Space B Rent
Commencement      The later of (i) 150 days following the Space B Delivery Date,
Date:             or (ii) June 1, 2000.

Space C Rent
Commencement      The later of (i) 150 days following the Space C Delivery Date,
Date:             or (ii) November 1, 2000.

Substantial
Completion:       As to any construction performed by any party in the Premises,
                  including the Initial Alterations, any other Alterations, or
                  Landlord's Work, that such work has been completed
                  substantially in accordance with (i) the provisions of this
                  Lease applicable thereto, (ii) the plans and specifications
                  for such work, and (iii) all applicable Legal Requirements,
                  except for minor details of construction, decoration and
                  mechanical adjustments, if any, the noncompletion of which
                  does not materially interfere with Tenant's use of the
                  Premises, or which, in accordance with good construction
                  practice, should be completed after the completion of other
                  work to be performed in the Premises.

Superior Lease:   Any ground or underlying lease of the Real Property or any
                  part thereof heretofore or hereafter made by Landlord and all
                  renewals, extensions, supplements, amendments and
                  modifications thereof.

Superior Lessor:  A lessor under a Superior Lease.

Tenant's
Alterations:      All Alterations, including the Initial Alterations and the
                  installation of Roof Equipment, in and to the Premises and
                  elsewhere in the Building which may be made by or on behalf of
                  Tenant prior to and during the Term, or any renewal thereof.

                                       5
<PAGE>

Tenant Delay:     Any delay which results from any act, neglect, failure to act
                  (where this Lease or Legal Requirements impose a duty to act)
                  or omission of any Tenant Party, including delays due to
                  Tenant's changes in or additions to, or interference with, any
                  work to be done by Landlord, or delays by Tenant beyond the
                  periods set forth herein in submission of information,
                  approving working drawings or estimates or giving
                  authorizations or approvals.

Tenant  Party:    Any of Tenant, any Affiliate of Tenant, any subtenant or any
                  other occupant of the Premises, or any of their respective
                  direct or indirect partners, officers, shareholders,
                  directors, members, trustees, beneficiaries, employees,
                  principals, contractors, licensees, servants, agents or
                  representatives.

Tenant's Other
Lease:            That certain Agreement of Lease, dated as of June 30, 1997,
                  between Landlord's predecessor-in-interest, as landlord, and
                  Tenant's predecessor-in-interest, as tenant, as amended by (i)
                  letter agreement of even date therewith, (ii) letter
                  agreement, dated July 1, 1997, (iii) Modification of Lease
                  Agreement dated as of January ___, 1998, (iv) Amendment of
                  Lease dated as of September 1, 1998, and (v) Assignment,
                  Assumption and Consent Agreement and Amendment to Lease, of
                  even date herewith, pursuant to which the tenant's interest in
                  Tenant's Other Lease is being assigned to and assumed by
                  Tenant. Landlord and Tenant mutually acknowledge that, except
                  as may be expressly set forth herein, this Lease and Tenant's
                  Other Lease represent separate and distinct agreements and
                  legal interests.

Tenant's
Property:         Tenant's movable fixtures and movable partitions, telephone
                  and other communications equipment, computer systems,
                  furniture, trade fixtures, furnishings, and other items of
                  personal property which are removable without material damage
                  to the Premises or Building.

Term:             The term of this Lease, which shall commence on the
                  Commencement Date and shall expire on the Expiration Date.

Transaction
Expenses:         All actual, reasonable and customary costs and expenses
                  incurred by Tenant in effectuating a subletting or assignment,
                  including brokerage commissions, advertising costs, attorney's
                  fees and disbursements, remodeling and redecorating costs in
                  connection with such subletting or assignment, rental
                  abatements or concessions to the subtenant or assignee, and
                  any fees or cost reimbursements paid to Landlord pursuant to
                  this Lease in connection with Landlord's review or approval of
                  such subletting or assignment.

                                       6
<PAGE>

Unavoidable
Delays:           As defined in Article 24.

                  ARTICLE 1.     DEMISE, PREMISES, TERM, RENT

                  Section 1.1 Landlord hereby leases to Tenant, and Tenant
hereby hires from Landlord, the Premises, for the Term to commence, as to Space
A on October 1, 1999 and as to each of Space B and Space C on the applicable
Delivery Date for such Space, and to end on the Expiration Date, at an annual
rent ("Fixed Rent") as follows:

                  (a) For the portion of the Term commencing on the Space A Rent
Commencement Date and ending on the Expiration Date, Tenant shall pay Fixed Rent
for Space A as follows:

                           (i) One Million Three Hundred Eighty One Thousand
         Five Hundred Ninety and 00/100 Dollars ($1,381,590.00) per annum
         ($115,132.50 per month) for the period commencing on the Space A Rent
         Commencement Date and ending one day prior to the fifth (5th)
         anniversary of the Commencement Date for Space A;

                           (ii) One Million Five Hundred Nineteen Thousand Seven
         Hundred Forty Nine and 00/100 Dollars ($1,519,749.00) per annum
         ($126,645.75 per month) for the period commencing on the fifth (5th)
         anniversary of the Commencement Date for Space A and ending one day
         prior to the tenth (10th) anniversary of the Commencement Date for
         Space A; and

                           (iii) One Million Six Hundred Fifty Seven Thousand
         Nine Hundred Eight and 00/100 Dollars ($1,657,908.00) per annum
         ($138,159.00 per month) for the period commencing on the tenth (10th)
         anniversary of the Commencement Date for Space A and ending on the
         Expiration Date.

                  (b) For the portion of the Term commencing on the Space B Rent
Commencement Date and ending on the Expiration Date, Tenant shall pay Fixed Rent
for Space B as follows:

                           (i) Seven Hundred Seventy Two Thousand Eight Hundred
         Ninety and 00/100 Dollars ($772,890.00) per annum ($64,407.50 per
         month) for the period commencing on the Space B Rent Commencement Date
         and ending one day prior to the fifth (5th) anniversary of the
         Commencement Date for Space A;

                           (ii) Eight Hundred Fifty Thousand One Hundred Seventy
         Nine and 00/100 Dollars ($850,179.00) per annum ($70,848.25 per month)
         for the period commencing on the fifth (5th) anniversary of the
         Commencement Date for Space A and ending one day prior to the tenth
         (10th) anniversary of the Commencement Date for Space A; and

                           (iii) Nine Hundred Twenty Seven Thousand Four Hundred
         Sixty Eight and 00/100 Dollars ($927,468.00) per annum ($77,289.00 per
         month) for the period

                                       7
<PAGE>

         commencing on the tenth (10th) anniversary of the Commencement Date for
         Space A and ending on the Expiration Date.

                  (c) For the portion of the Term commencing on the Space C Rent
Commencement Date and ending on the Expiration Date, Tenant shall pay Fixed Rent
for Space C as follows:

                           (i) Five Hundred Forty Nine Thousand Seven Hundred
         Twenty and 00/100 Dollars ($549,720.00) per annum ($45,810.00 per
         month) for the period commencing on the Space C Rent Commencement Date
         and ending one day prior to the fifth (5th) anniversary of the
         Commencement Date for Space A; and

                           (ii) Six Hundred Four Thousand Six Hundred Ninety Two
         and 00/100 Dollars ($604,692.00) per annum ($50,391.00 per month) for
         the period commencing on the fifth (5th) anniversary of the
         Commencement Date for Space A Rent and ending one day prior to the
         tenth (10th) anniversary of the Commencement Date for Space A; and

                           (iii) Six Hundred Fifty Nine Thousand Six Hundred
         Sixty Four and 00/100 Dollars ($659,664.00) per annum ($54,972.00 per
         month) for the period commencing on the tenth (10th) anniversary of the
         Commencement Date for Space A and ending on the Expiration Date.

Tenant agrees to pay Fixed Rent to Landlord, without notice or demand, in lawful
money of the United States, in monthly installments in advance on the first
(1st) day of each calendar month during the Term, at the office of Landlord or
such other place as Landlord may designate, without any set-off, offset,
abatement or deduction whatsoever, except as expressly set forth herein. Fixed
Rent and Additional Rent shall be payable by check drawn upon a bank which is a
member of the New York Clearinghouse Association or by wire transfer of
immediately available funds.

                  Section 1.2 Notwithstanding anything to the contrary set forth
in Section 1.1, Tenant shall have no obligation to pay Tenant's Tax Payment or
Tenant's Labor Rate Payment applicable to (a) Space A, on account of the period
commencing on the Commencement Date for Space A and ending on the day prior to
the Space A Rent Commencement Date; (b) Space B, on account of the period
commencing on the Delivery Date for Space B and ending on the day prior to the
Space B Rent Commencement Date; and (c) Space C, on account of the period
commencing on the Delivery Date for Space C and ending on the day prior to the
Space C Rent Commencement Date. Nothing contained herein shall affect Tenant's
obligation to make any other payment under this Lease during the aforementioned
periods.

                  ARTICLE 2.        USE AND OCCUPANCY

                  Section 2.1 (a) Tenant shall use and occupy the Premises for
the Permitted Use and for no other purpose. Tenant shall not use or occupy or
permit the use or occupancy of any part of the Premises in any manner not
permitted hereunder, or which in Landlord's reasonable judgment would adversely
affect (a) the rendition of any service required to be

                                       8
<PAGE>

furnished to any tenant or other occupant of the Building, (b) the use or
enjoyment of any part of the Building by any other tenant or other occupant, or
(c) the appearance of the Building.

                  (b) Tenant, incidental to its executive, administrative and
general office use, shall have the right to use a portion or portions of the
Premises (i) for storage of office supplies and (ii) as a pantry or pantries for
use solely by Tenant, which may contain reheating but not cooking equipment,
including items such as a microwave, coffee maker, sink, ice maker, dishwasher,
hot water heater and refrigerator, upon and subject to the satisfaction of the
following conditions, at Tenant's sole cost and expense and subject to and in
accordance with all applicable Legal Requirements and the provisions of this
Lease (including the provisions of Article 3) and with such other reasonable
regulations as Landlord may adopt from time to time in accordance with the
provisions of Article 26: (x) no cooking or other preparation of food (other
than the reheating of food by microwave and the preparation of beverages) shall
be done in any such pantry, (y) no food or beverages will be kept or served in
the Premises in a manner or under any conditions which result in fumes or odors
being emitted from, or detectable outside of, the Premises, and (z) such portion
or portions of the Premises shall be at all times maintained by Tenant in a
clean and sanitary condition and free of refuse (including use of extermination
services whenever reasonably required).

                  Section 2.2 Tenant shall not use or permit the Premises or any
part thereof to be used: (a) for the business of printing or other manufacturing
of any kind, (b) as a retail branch of a bank or savings and loan association,
or as a retail loan company, or as a retail stock broker's or dealer's office,
(c) except as permitted herein, for the storage of merchandise, (d) for the
distribution, by mail-order or otherwise, of merchandise, except in connection
with Tenant's business of selling books at retail by means of the Internet, (e)
as a restaurant or bar or for the sale of food or beverages, (f) as a news or
cigar stand, (g) as an employment agency, labor union office, school,
physician's or dentist's office, dance or music studio, (h) as a barber shop or
beauty salon, (i) for the sale to the public visiting the Premises, at retail or
otherwise, of any goods or products, (j) by the United States Government, the
City or State of New York, any Governmental Authority, any foreign government,
the United Nations or any agency or department of any of the foregoing or any
Person having sovereign or diplomatic immunity, (k) for the rendition of
medical, dental or other therapeutic or diagnostic services, or (l) for the
conduct of an auction.

                  Section 2.3 (a) Landlord anticipates that the Delivery Date
for Space B will occur on January 1, 2000 and that the Delivery Date for Space C
will occur on June 1, 2000; provided, however, that Landlord shall not be
subject to any liability for failure of either such Delivery Date to occur on
such dates (or on any other date or dates), and the validity of this Lease shall
not be impaired under such circumstances, nor shall the same be construed to
extend the term of this Lease. The foregoing shall constitute an express
negation of Section 223-a of the New York Real Property Law or any successor law
or ordinance, which shall be inapplicable hereto, and Tenant hereby waives any
right to rescind this Lease which Tenant might otherwise have thereunder.

                  (b) Notwithstanding the foregoing provisions of Section
2.3(a), if the Delivery Date for Space B shall not occur on or before September
1, 2000, unless such failure is due to Tenant Delay, then, as Tenant's sole and
exclusive remedy for such delay in the Delivery Date for

                                       9
<PAGE>

Space B, Tenant shall have the right to terminate this Lease with respect to
both Space B (subject to the final sentence of this Section 2.3(b)) and Space C.
Tenant shall exercise such termination right by giving notice to Landlord no
later than September 10, 2000, and such termination will be effective on the
date which shall be thirty (30) days after the date such notice is given, upon
which date this Lease with respect to Space B (subject to the final sentence of
this Section 2.3(b)) and Space C shall come to an end and terminate, and
thereafter neither party shall have any liability to the other hereunder with
respect to Space B (subject to the final sentence of this Section 2.3(b)) and
Space C; provided, however, however, that if the Delivery Date for Space B shall
occur at any time within thirty (30) days following Landlord's receipt of such
notice by Tenant, such termination shall be void and of no force and effect,
and, subject to Tenant's rights pursuant to Section 2.3(c), Tenant shall have no
further right to terminate this Lease with respect to Space B and Space C
pursuant to this Section 2.3(b). Notwithstanding the foregoing, if Tenant shall
terminate this lease with respect to Space B and Space C pursuant hereto, such
termination shall not apply to that portion of Space B shown on Exhibit P (the
"Remaining B Space"), and the Remaining B Space shall be deemed automatically to
be added to the Premises as a part of Space A, the floor plan in Exhibit P shall
be deemed added to Exhibit A, the provisions of Sections 1.1, 6.1(b), 6.4, and
31.1(a) shall be modified as provided in Exhibit P-1 (and any other appropriate
adjustments shall be made to the amounts payable by Tenant on account of other
items of Additional Rent to reflect such reduction in the Premises), and the
provisions of Sections 2.3(a) and 2.3(d) shall apply as if the date of such
termination with respect to Space B (except the Remaining B Space) and Space C
were the Delivery Date for the Remaining B Space.

                  (c) Notwithstanding the foregoing provisions of Section
2.3(a), if the Delivery Date for Space C shall not occur on or before February
1, 2001, unless such failure is due to Tenant Delay, then, as Tenant's sole and
exclusive remedy for such delay in the Delivery Date for Space C, Tenant shall
have the right to terminate this Lease with respect to Space C only, by notice
to Landlord given no later than February 10, 2001, such termination to be
effective on the date which shall be thirty (30) days after the date such notice
is given, upon which date this Lease with respect to Space C only shall come to
an end and terminate, and thereafter neither party shall have any liability to
the other hereunder with respect to Space C. Notwithstanding anything to the
contrary contained herein, if the Delivery Date for Space C shall occur at any
time within thirty (30) days following Landlord's receipt of such notice by
Tenant, such termination shall be void and of no force and effect, and Tenant
shall have no further right to terminate this Lease with respect to Space C only
pursuant to this Section 2.3(c).

                  (d) In the event of any holding over by any tenant or occupant
of Space B beyond January 1, 2000, or by any tenant or occupant of Space C
beyond June 1, 2000, Landlord will (i) promptly take commercially reasonable
actions to obtain possession of such Space, including commencing and diligently
prosecuting (to completion, if necessary) appropriate legal proceedings against
any such holdover tenant or occupant, and (ii) keep Tenant advised of the
progress of such proceedings.

                  (e) Landlord represents that to the best of its knowledge, as
of the date of this Lease, the tenants and other occupants of each Space, and
the respective expiration dates with respect to each such Space, are as set
forth on Exhibit K attached to this Lease.

                                       10
<PAGE>

                  Section 2.4 Tenant shall have the right to use the existing
emergency stairwell shown on Exhibit N as a means of ingress and egress for
Tenant's employees solely between the Premises and the premises demised pursuant
to Tenant's Other Lease, provided that Tenant first installs a card-key security
system satisfactory to Landlord which permits access to and from such stairwell
solely for such purpose. Such installation by Tenant shall be deemed an
Alteration for all purposes of this Lease. Landlord makes no representation with
respect to the compliance with applicable Legal Requirements of Tenant's use of
such stairwell pursuant to this Section 2.4.

                  ARTICLE 3.        ALTERATIONS

                  Section 3.1 Tenant shall not make any Alterations without
Landlord's prior written consent in each instance, provided that Tenant's
changing of wall coverings, carpeting, paint or other decorative Alterations
(collectively, "Decorative Alterations") shall not be deemed to be Alterations
requiring such consent. Landlord's consent shall be granted or denied in
Landlord's sole discretion; provided, however, that Landlord shall not
unreasonably withhold its consent to Alterations proposed to be made by Tenant
provided that such Alterations (a) are non-structural and do not affect the
Building Systems or services, (b) are performed only by contractors approved in
writing by Landlord (subject to and in accordance with the provisions of Section
3.2(b) below), (c) do not affect any part of the Building other than the
Premises and (d) do not adversely affect any service required to be furnished by
Landlord to Tenant or to any other tenant or occupant of the Building.

                  Section 3.2 (a) Prior to making any Alterations (excluding
Decorative Alterations), Tenant shall (i) submit to Landlord, for Landlord's
written approval, detailed plans and specifications therefor in form reasonably
satisfactory to Landlord, (ii) if such Alterations require a filing with any
Governmental Authority or require the consent of such authority, then such plans
and specifications shall (A) be prepared and certified by a registered architect
or licensed engineer, and (B) comply with all Legal Requirements to the extent
necessary for such governmental filing or consent, (iii) at its expense, obtain
all required permits, approvals and certificates, (iv) furnish to Landlord
duplicate original policies or certificates of insurance which evidence worker's
compensation coverage (covering all persons to be employed by Tenant, and all
contractors and subcontractors supplying materials or performing work in
connection with such Alterations), comprehensive general liability (including
property damage coverage) insurance, comprehensive form automobile liability
insurance and Builder's Risk coverage (issued on a completed value basis) all in
such form, with such companies, for such periods and in such amounts as Landlord
may reasonably require, naming Landlord and any Superior Lessor and any
Mortgagee whose name and address has been furnished to Tenant as additional
insureds, and (v) with respect to any Alteration (other than the Initial
Alterations) costing more than $100,000.00 to complete, furnish to Landlord such
evidence of Tenant's ability to complete and to fully and completely pay for
such Alteration as is reasonably satisfactory to Landlord. All Alterations shall
be performed by Tenant at Tenant's sole cost and expense (A) in a good and
workmanlike manner using materials of first class quality, (B) in compliance
with all Legal Requirements, and (C) substantially in accordance with the plans
and specifications previously approved by Landlord. Tenant shall at its cost and
expense obtain all approvals, consents and permits required for such Alterations
from every Governmental Authority having or claiming jurisdiction prior to,
during and upon completion of such Alterations. Tenant shall promptly

                                       11
<PAGE>

reimburse Landlord, as Additional Rent and upon demand, for any and all
reasonable costs and expenses incurred by Landlord in connection with Landlord's
review of Tenant's plans and specifications (not to exceed $5,000.00 for any
such Alterations for which Tenant's plans and specifications are submitted
concurrently (i.e., on a non-"fast track" basis)).

                  (b) Landlord shall not unreasonably withhold, condition or
delay its approval of the contractors proposed to be used by Tenant for Tenant's
Alterations, provided that in the case of the mechanical, electrical, plumbing
and fire safety trades, Tenant shall select its contractors and sub-contractors
from Landlord's list of approved contractors. Attached hereto as Exhibit F is a
list of contractors currently approved by Landlord for the performance of work
in the Building, which list may be modified by Landlord from time to time.

                  (c) Notwithstanding the foregoing provisions of this Article
3, Tenant shall be permitted to make minor, non-structural alterations to the
Premises ("Minor Alterations") upon prior notice to Landlord, but without the
necessity of procuring Landlord's consent thereto, provided that the estimated
cost of each such Minor Alteration does not exceed $200,000.00 in any one
instance. The provisions of Sections 3.2(a) and 3.2(b) shall be applicable to
Minor Alterations. Prior to commencing any Minor Alteration, Tenant shall
furnish Landlord with (i) working drawings or plans for such Minor Alteration in
sufficient detail to permit Landlord to determine that such Alteration complies
with the requirements hereof, and (ii) the names of the contractors proposed to
be used by Tenant for such Minor Alteration.

                  (d) Upon completion of any Alterations, Tenant, at its
expense, shall promptly obtain certificates of final approval of such
Alterations as may be required by any Governmental Authority, and (except with
respect to Decorative Alterations), shall furnish Landlord with copies thereof
(together with "as-built" plans and specifications for such Alterations (or, in
case of any Minor Alterations, final plans and specifications reflecting the
final configuration thereof) prepared on an Autocad Computer Assisted Drafting
and Design System (or such other system or medium as Landlord may reasonably
accept) using naming conventions issued by the American Institute of Architects
in June, 1990 (or such other naming convention as Landlord may reasonably
accept) and magnetic computer media of such record drawings and specifications,
translated into DXF format or another format reasonably acceptable to Landlord).

                  Section 3.3 (a) All Tenant's Alterations shall become the
property of Landlord upon the expiration or sooner termination of this Lease.
Landlord may condition its approval of kitchen facilities, vaults, raised
floors, internal stairways, slab penetrations, private bathrooms or any other
Alterations not constituting ordinary office installations on a requirement that
Tenant agrees in writing to remove such Alterations at the end of the Term as
set forth in this Section 3.3 (any such Alterations which Landlord so requires
Tenant to agree to remove, "Non-Standard Alterations"). If Landlord does not
specify at the time of its approval that an Alteration constitutes a
Non-Standard Alteration, Tenant shall have no obligation to remove such
Alteration upon the expiration or sooner termination of this Lease. On the
Expiration Date or earlier termination of the Term or any renewal thereof (i)
Tenant shall remove Tenant's Property from the Premises, and (ii) unless
Landlord notifies Tenant no later than sixty (60) days prior to the Expiration
Date that any or all of the Non-Standard Alterations shall not be removed from
the Premises, Tenant shall remove the Non-Standard Alterations from the
Premises, at Tenant's sole

                                       12
<PAGE>

cost and expense. Tenant shall repair and restore in a good and workmanlike
manner (reasonable wear and tear excepted) any damage to the Premises and the
Building caused by such removal of Tenant's Property and the Non-Standard
Alterations. Any of the Non-Standard Alterations or Tenant's Property which
Tenant is required to remove and which are not so removed by Tenant at or prior
to the Expiration Date or earlier termination of the Term shall be deemed
abandoned and may, at the election of Landlord, either be retained as Landlord's
property or be removed from the Premises by Landlord at Tenant's expense.
Notwithstanding the foregoing, Tenant's HVAC System (as defined in Section 9.7)
and any electric generator and other related equipment, including mountings,
supports, fuel lines, pumps, piping, and meters, if any, which Landlord may
permit Tenant to install in the Premises or elsewhere in the Building, shall not
be so removed from the Premises by Tenant. The covenants and agreements set
forth in this Section 3.3 shall survive the expiration or earlier termination of
this Lease.

                  (b) Landlord agrees to respond to any written request for
approval of contractors proposed to be engaged to perform Alterations within
five (5) Business Days after Tenant's request therefor. Landlord agrees to
respond to any written request for approval of plans and specifications for
Alterations proposed to be made by Tenant within twelve (12) Business Days (or
within fifteen (15) Business Days, in case such request relates to Tenant's
Initial Alterations) after receipt by Landlord of such written request, together
with substantially complete and detailed architectural, structural, mechanical
and engineering plans and specifications as required for such Alteration
(collectively, "Tenant's Plans"), and Landlord agrees that Tenant's Plans may be
submitted, and will be reviewed by Landlord, on a "fast track" basis (i.e.,
architectural, mechanical and structural plans may be submitted sequentially).
In addition, Landlord agrees to respond to any resubmission of Tenant's Plans
within five (5) Business Days after written resubmission, unless substantial
revisions are required to Tenant's Plans, in which event in which event Landlord
shall respond to Tenant within a reasonable time thereafter. If Landlord shall
disapprove all or any portion of Tenant's Plans, Landlord shall inform Tenant of
the grounds for such disapproval with reasonable specificity. If Landlord fails
to approve or disapprove Tenant's Plans or a contractor proposed by Tenant on or
before the end of the applicable review period set forth herein, Tenant shall
have the right to provide Landlord with a second written request for approval (a
"Second Request"), which shall specifically identify Tenant's Plans or the
contractor, as the case may be, to which such request relates, and set forth in
bold capital letters the following statement: IF LANDLORD FAILS TO RESPOND
WITHIN FIVE (5) BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE, THEN TENANT SHALL BE
ENTITLED TO COMMENCE CONSTRUCTION IN ACCORDANCE WITH THE PLANS AND
SPECIFICATIONS (OR TO ENGAGE THE CONTRACTOR) PREVIOUSLY SUBMITTED TO LANDLORD
AND TO WHICH LANDLORD HAS FAILED TO TIMELY RESPOND. In the event that Landlord
fails to respond to a Second Request within five (5) Business Days after receipt
by Landlord, then the Tenant's Plans or revisions thereto, or Tenant's
engagement of a contractor, as the case may be, for which the Second Request is
submitted, shall be deemed to be approved by Landlord, and Tenant shall be
entitled to engage the contractor for which approval was requested, or commence
construction of the Alteration or portion thereof to which Tenant's Plans
relate, provided that in the case of performing Alterations, Tenant's Plans have
been appropriately filed in accordance with applicable Legal Requirements, all
permits and

                                       13
<PAGE>

approvals required to be issued by any Governmental Authority shall have been
duly issued, and Tenant shall otherwise have complied with all provisions of
this Lease applicable to Alterations.

                  Section 3.4 If, because of any alleged act or omission of
Tenant or any Tenant Party, any mechanic's lien, U.C.C. financing statement or
other lien, charge or order for the payment of money shall be filed against
Landlord, or against all or any portion of the Premises, the Building or the
Real Property, Tenant shall, at its own cost and expense, cause the same to be
discharged of record, by bonding or otherwise, within thirty (30) days after
receipt of notice thereof, and Tenant shall indemnify, defend and save Landlord
harmless against and from all costs, expenses, liabilities, suits, penalties,
claims and demands (including reasonable attorneys' fees and disbursements)
resulting therefrom (subject to reimbursement by Landlord in the event that it
shall be finally adjudicated that the acts or omissions of Landlord or another
tenant in the building shall have given rise to such lien, charge or order).

                  Section 3.5 Tenant shall not, at any time prior to or during
the Term, directly or indirectly employ, or permit the employment of, any
contractor, mechanic or laborer in the Premises, whether in connection with any
Alteration or otherwise, if in Landlord's sole judgment such employment will
interfere or cause any conflict with other contractors, mechanics, or laborers
engaged in the construction, maintenance or operation of the Building by
Landlord, Tenant or others, or the use and enjoyment of other tenants or
occupants of the Building.

                  ARTICLE 4.   CONDITION OF THE PREMISES; LANDLORD'S WORK

                  Section 4.1 Tenant has examined the Premises and agrees to
accept possession of each Space in its "as is" condition on the applicable
Delivery Date subject to the performance of Landlord's Work, and Tenant further
agrees that, except for the performance of such Landlord's Work and the making
of Landlord's Contribution as expressly set forth in this Article 4, Landlord
shall have no obligation to perform any work, supply any materials, incur any
expenses or make any installations in order to prepare the Premises for Tenant's
occupancy. The taking of possession of each Space by Tenant shall be conclusive
evidence as against Tenant that at the time such possession was so taken, such
Space was in the condition required hereunder, provided, however, that if Tenant
shall subsequently become aware of any latent defects in Landlord's Work or
latent defects existing in the Premises (or the Building Systems serving the
Premises) at the time such possession was so taken, which latent defects are the
responsibility of Landlord to repair pursuant to Article 5 (but excluding any
latent defects in Tenant's Alterations or arising from the negligence or
misconduct of Tenant or any Tenant Party), Tenant shall give Landlord notice of
any such latent defects promptly upon Tenant's becoming aware thereof, and
Landlord shall repair the same in accordance with the provisions of Article 5,
but the existence of any such latent defects shall not be deemed to modify the
Delivery Date hereunder.

                  Section 4.2 (a) With due diligence and reasonable promptness
following (y) the Commencement Date, as to Space A, and (z) the Delivery Date
for each of Space B and Space C, Landlord shall perform the following work in
the applicable Space, at Landlord's sole cost and in accordance with all Legal
Requirements ("Landlord's Work"): (i) demolish any existing improvements,
including piping and electrical conduit, which (x) are not then being used by
tenants or other occupants of any space in the Building (including use by
Landlord for any

                                       14
<PAGE>

purpose relating to operation of the Building or any Building Systems), and (y)
Landlord reasonably anticipates will not subsequently be used by tenants or
other occupants of any space in the Building (unless Tenant notifies Landlord
that any such improvements will subsequently be used by Tenant in connection
with the Permitted Use), and abate any asbestos containing materials ("ACM")
within such Space in accordance with all Legal Requirements, and provide Tenant
with a New York City Department of Environmental Protection Form ACP-5 in
connection therewith; (ii) provide Class E System tie-in points for Tenant's use
in accordance with Legal Requirements; (iii) remove all remaining 9" x 9" floor
tiles in such Space; (iv) remove the two (2) fresh air intake ducts and attached
louver located in Space B; and (v) remove the existing air handling unit located
in Space C. Landlord shall provide Tenant reasonable access to the Premises
during the process of Landlord's demolition work pursuant hereto, and shall use
reasonable efforts to accommodate Tenant's suggestions relating to adjustments
in the demolition process to accommodate conditions disclosed by such process;
provided, however, that Landlord shall have no obligation to employ contractors
or labor at "overtime" or other premium pay rates or to incur any other
"overtime" costs or any other additional expenses whatsoever, unless Tenant
shall pay to Landlord all of Landlord's incremental increased costs to do so. In
such event Tenant shall pay, as Additional Rent upon presentation of appropriate
invoices, all such additional costs incurred by Landlord in connection
therewith. Notwithstanding anything to the contrary set forth in Section 1.1, in
the event that Landlord shall not have Substantially Completed, as to (X) Space
A, the items of Landlord's Work identified in Sections 4.2(a)(i), (ii) and (iii)
on or prior to November 17, 1999, (Y) Space B, the items of Landlord's Work
identified in Sections 4.2(a)(i), (ii), (iii) and (iv) on or prior to the date
which shall be twenty-one (21) days following the Delivery Date for Space B, and
(Z) Space C, the items of Landlord's Work identified in Sections 4.2(a)(i),
(ii), (iii) and (v) on or prior to the date which shall be twenty-one (21) days
following the Delivery Date for Space C, then in each such case, as Tenant's
sole and exclusive remedy for such failure to timely Substantially Complete such
Landlord's Work, the Rent Commencement Date with respect to such Space shall be
extended by one (1) day for each day of delay beyond November 17, 1999 or such
twenty-first (21st) day, as applicable, in the Substantial Completion of
Landlord's Work in such Space until the date upon which Landlord shall
Substantially Complete such Landlord's Work to such Space.

                  (b) Notwithstanding Landlord's compliance with its obligations
to abate ACM pursuant to Section 4.2(a)(i), in the event the performance of
Tenant's Initial Alterations, in accordance with Tenant's plans for the Initial
Alterations as approved by Landlord, causes the Premises to become out of
compliance with any Legal Requirements applicable to ACM, Tenant shall within
seven (7) days of the occurrence of such state of facts provide to Landlord a
copy of a written report prepared at Tenant's expense by a New York City
Department of Environmental Protection-certified asbestos investigator setting
forth in reasonable detail (i) such state of facts, and (ii) the abatement work
(solely within the Premises) such investigator reasonably deems necessary in
order to abate such condition in accordance with all Legal Requirements. Subject
to Unavoidable Delays and Landlord's right to contest such Legal Requirements,
Landlord shall reasonably promptly thereafter cause the abatement work specified
in such report to be commenced and thereafter prosecuted to completion with
reasonable diligence by a contractor selected by Landlord in its sole
discretion; and throughout the performance of such abatement work by Landlord,
Fixed Rent, Tenant's Tax Payment and Tenant's Labor Rate Payment shall

                                       15
<PAGE>

abate as to the affected portion of the Premises to the extent, and for the
period of time that Tenant shall be displaced from such portion of the Premises
as a result of such work by Landlord (or, if Fixed Rent, Tenant's Tax Payment
and Tenant's Labor Rate Payment are then currently abated pursuant to Section
1.2, such abatement shall be extended day-for-day by such period of time).
Landlord shall give Tenant reasonable advance notice of the commencement of such
work (and phases thereof) and Tenant shall, at Tenant's sole cost and without
any liability to Landlord whatsoever (except for the rent abatement hereinabove
set forth), delay the commencement or continuance of Tenant's Initial
Alterations, relocate its operations and personnel within the Premises and
otherwise cooperate with Landlord as necessary in order to facilitate such work
by Landlord. Landlord shall use reasonable efforts to minimize interference with
Tenant's access to and use and occupancy of the Premises in performing such
work; provided, however, that Landlord shall have no obligation to employ
contractors or labor at "overtime" or other premium pay rates or to incur any
other "overtime" costs or additional expenses whatsoever. Any such work shall be
at the expense of Landlord, provided, however, that Tenant shall bear such
expense with respect to any and all such abatement work performed due to Tenant
bringing any ACM into the Building in connection with the performance of
Tenant's Alterations or Tenant's Property (and Tenant shall directly pay
Landlord's contractor with respect to all such work within ten (10) Business
Days after receipt from Landlord of an invoice therefor).

                  Section 4.3 Landlord acknowledges that Tenant intends to
perform certain Alterations in order to prepare the Premises for its occupancy
(collectively, the "Initial Alterations"), which alterations shall, subject to
all the terms, covenants and conditions of this Lease applicable to Alterations,
include (i) the installation of a sprinkler system or other fire suppression
system reasonably satisfactory to Landlord, (ii) the installation of exterior
louvers as reasonably required by Tenant through the Building's existing window
openings at the locations on the Fifteenth Street and Sixteenth Street sides of
the Building shown on the floor plan attached as Exhibit Q to this Lease, (iii)
connection to the existing Building toilet exhaust riser for one (1)
supplemental private bathroom, (iv) the installation of noise suppression
materials and/or equipment with respect to any of Tenant's Property reasonably
designated by Landlord, including Tenant's HVAC System (as defined in Section
9.7), if any, reasonably satisfactory to Landlord, and (v) the renovation of the
two (2) existing bathrooms on the ninth avenue side lobby of the ninth floor of
the Building in order to meet the requirements of the Americans With
Disabilities Act of 1990, as amended (the "ADA") in Space A, which bathrooms
shall throughout the Term remain accessible to the common areas of the ninth
floor of the Building and which renovations shall be completed by Tenant as a
part of the Initial Alterations, all in compliance with applicable Legal
Requirements. Notwithstanding anything set forth in this Article 4, Landlord
agrees to make Landlord's Contribution toward the cost of the Initial
Alterations, subject to and in accordance with Article 31.

                  Section 4.4 Upon the request of Tenant, Landlord, at Tenant's
cost and expense (limited to an amount equal to all out of pocket expenses
incurred by Landlord to third parties), shall join in any applications for any
permits, approvals or certificates from any Governmental Authority required to
be obtained by Tenant, and shall sign such applications reasonably promptly
after request by Tenant (provided that (i) the provisions of the applicable
Legal Requirement shall require that Landlord join in such application, and (ii)
such application is acceptable to Landlord) and shall otherwise cooperate with
Tenant in connection therewith,

                                       16
<PAGE>

provided that Landlord shall not be obligated to incur any cost or expense,
including attorneys' fees and disbursements, or suffer or incur any liability,
in connection therewith.

                  Section 4.5 Notwithstanding anything set forth in Article 2 or
this Article 4, Landlord and Tenant acknowledge that following the Delivery Date
for each Space, the performance of Landlord's Work in such Space will in
accordance with good construction practice (and except as expressly set forth
below) necessitate that Tenant not commence the Initial Alterations in such
Space until Landlord's Work in such Space is Substantially Complete.
Notwithstanding the foregoing, Landlord may, but shall not be obligated to,
afford Tenant access to Space A, Space B and Space C following the Delivery Date
for such Space but prior to the completion of Landlord's Work therein (any such
access subsequent to the Delivery Date but prior to the completion of Landlord's
Work in such Space being herein referred to as "Early Access") in order for
Tenant to commence performance of the Initial Alterations in such Space (but
Landlord shall use reasonable efforts to afford Tenant Early Access to Space C).
Landlord's grant of permission to Tenant for Early Access shall be at Landlord's
sole discretion, and shall be revocable by Landlord at will, immediately upon
notice from Landlord to Tenant that any of following conditions have not been
satisfied or no longer continue to be satisfied: (A) Tenant shall not commence
any portion of the Initial Alterations which is dependent upon the completion of
a related item of Landlord's Work until, in accordance with sound construction
practice, such item of Landlord's Work has been substantially completed, (B)
Tenant's access to or activities in such Space during the period of Early Access
shall not increase the cost to Landlord of Landlord's Work, unless Tenant agrees
in writing to pay Landlord for any such increase in the cost of Landlord's Work,
and shall not delay the progress of Landlord's Work, and (C) Tenant shall have
complied with all applicable provisions of this Lease with respect to the
commencement of the Initial Alterations, including the provisions of Articles 3
and 10.

                  ARTICLE 5.        REPAIRS; FLOOR LOAD

                  Section 5.1 (a) Landlord shall maintain in condition customary
for buildings similar to the Building in Manhattan, and shall repair and
replace, to the extent necessary to achieve such condition, the Building Systems
and the public portions of the Building, both exterior and interior, and the
structural elements thereof, including the roof, foundation and curtain wall.
Tenant, at Tenant's expense, shall take good care of the Premises and the
fixtures, systems, equipment and appurtenances therein, and make all
non-structural repairs thereto as and when needed to preserve them in good
working order and condition, except for reasonable wear and tear, obsolescence
and damage for which Tenant is not responsible pursuant to the provisions of
Articles 11 and 12. Tenant shall throughout the Term, at Tenant's sole cost and
expense, cause the Premises to be exterminated on a periodic basis such that the
Premises and adjoining portions of the Building do not become infested with
vermin, employing such exterminators and such exterminating company or companies
as shall be reasonably acceptable to Landlord. Landlord shall throughout the
Term maintain Landlord's standard vermin extermination program in the Building's
public areas. Notwithstanding the foregoing, all damage or injury to the
Premises or to any other part of the Building, or to its fixtures, equipment and
appurtenances, caused by or resulting from negligence or misconduct of, or
Alterations made by, Tenant or any Tenant Party shall be repaired at Tenant's
expense, (a) by Tenant to the satisfaction of Landlord (if the required repairs
are non-structural and do not affect any Building System), or (b) by Landlord
(if the

                                       17
<PAGE>

required repairs are structural or affect any Building System). Tenant also
shall repair all damage to the Building and the Premises caused by the making of
any Alterations by Tenant or by the moving of Tenant's Property. All of such
repairs shall be of quality or class equal to the original work or construction.
If Tenant fails after twenty (20) days' notice to proceed with due diligence to
make repairs required to be made by Tenant, Landlord may make such repairs at
the expense of Tenant, and Tenant shall pay the costs and expenses thereof
incurred by Landlord, with interest at the Default Rate, as Additional Rent
within fifteen (15) days after rendition of a bill or statement therefor.

                  (b) Landlord represents to Tenant that, to the best of
Landlord's knowledge, all Building Systems for which Landlord is responsible
under this Lease, including elevators, heating systems, sprinkler systems, fire
detection and life safety systems and other Building Systems, will remain fully
functional and perform their normal operations on and after January 1, 2000,
without interruption or malfunction as a result of the passage from the year
1999 to the year 2000. Landlord shall make all repairs, alterations or
replacements to any Building Systems required in order to eliminate any such
interruptions or malfunctions resulting from the passage from the year 1999 to
the year 2000.

                  Section 5.2 Tenant shall not place a load upon any floor of
the Premises exceeding the floor load per square foot which such floor was
designed to carry and which is allowed by law. Tenant shall not move any safe,
heavy equipment, business machines, freight, bulky matter or fixtures into or
out of the Building without Landlord's prior consent. If such safe, equipment,
freight, bulky matter or fixtures requires special handling, Tenant shall employ
only persons holding a Master Rigger's license to do such work.

                  Section 5.3 There shall be no allowance to Tenant for a
diminution of rental value, no constructive eviction of Tenant and no liability
on the part of Landlord by reason of inconvenience, annoyance or injury to
business arising from Landlord making, or failing to make, any repairs,
alterations, additions or improvements in or to any portion of the Building or
the Premises, or in or to fixtures, appurtenances or equipment thereof. Landlord
shall use reasonable efforts to minimize interference with Tenant's access to
and use and occupancy of the Premises in making any repairs, alterations,
additions or improvements; provided, however, that Landlord shall have no
obligation to employ contractors or labor at overtime or other premium pay rates
or to incur any other overtime costs or additional expenses whatsoever.

                  Section 5.4 Notwithstanding anything to the contrary contained
in any other provision of this Lease, in the event that (a) Tenant is unable to
use the Premises for the ordinary conduct of Tenant's business, due to
Landlord's breach of an obligation under this Lease to provide services, perform
repairs, or comply with Legal Requirements, in each case other than as a result
of Unavoidable Delays, and such condition continues for a period in excess of
seven (7) consecutive days (or, if Tenant's inability to use the Premises
results, in whole or in part, from Unavoidable Delays and such condition
continues for a period in excess of fifteen (15) consecutive days) after Tenant
gives a notice to Landlord (the "Abatement Notice") stating that Tenant's
inability to use the Premises is solely due to such condition, (b) Tenant does
not actually use or occupy the Premises during such period, and (c) such
condition has not resulted from the negligence or misconduct of Tenant or any
Tenant Party, then Fixed Rent, Tenant's Tax Payment

                                       18
<PAGE>

and Tenant's Labor Rate Payment shall be abated as to the Premises or affected
portion on a per diem basis for the period commencing on the eighth (8th) day
(or sixteenth (16th) day, if such condition results, in whole or in part, from
Unavoidable Delays, as the case may be) after Tenant gives the Abatement Notice,
and ending on the earlier of (i) the date Tenant reoccupies the Premises for the
ordinary conduct of its business, or (ii) the date on which such condition is
substantially remedied and Landlord has notified Tenant thereof.

                  Section 5.5 Tenant shall not require, permit, suffer or allow
the cleaning of any window in the Premises from the outside in violation of
Section 202 of the New York Labor Law or any successor statute thereto, or of
any other Legal Requirement.

                  ARTICLE 6.    REAL ESTATE TAXES AND LABOR RATE INCREASES

                  Section 6.1 The following terms shall have the meanings set
forth below:

                  (a) "Taxes" shall include the aggregate amount of (i) all real
estate taxes, assessments (special or otherwise), sewer and water rents, rates
and charges and any other governmental levies, impositions or charges, whether
general, special, ordinary, extraordinary, foreseen or unforeseen, which may be
assessed, levied or imposed upon all or any part of the Real Property, and (ii)
any expenses (including attorneys' fees and disbursements and experts' and other
witness' fees) incurred in contesting any of the foregoing or the Assessed
Valuation (as defined in Section 6.1(d)) of all or any part of the Real
Property. If at any time after the date hereof the methods of taxation
prevailing at the date hereof shall be altered so that in lieu of or as an
addition to or as a substitute for the whole or any part of the taxes,
assessments, rents, rates, charges, levies or impositions now assessed, levied
or imposed upon all or any part of the Real Property, there shall be assessed,
levied or imposed (A) a tax, assessment, levy, imposition or charge based on the
rents received therefrom whether or not wholly or partially as a capital levy or
otherwise, (B) a tax, assessment, levy, imposition or charge measured by or
based in whole or in part upon all or any part of the Real Property and imposed
upon Landlord, (C) a license fee measured by the rents or (D) any other tax,
assessment, levy, imposition, charges or license fee however described or
imposed, then all such taxes, assessments, levies, impositions, charges or
license fees or the part thereof so measured or based shall be deemed to be
Taxes; provided, however, that any such taxes, fees or charges which are in
"addition to" taxes otherwise payable under this Section 6.1(a) shall (1) only
be deemed Taxes if such taxes shall be imposed upon owners of commercial office
buildings in Manhattan generally, and treated by such owners as constituting
real estate taxes for the purpose of calculating similar lease tax escalation
provisions, and (2) be calculated on the basis that the Real Property is the
only asset of Landlord. Taxes shall not include franchise, gift, inheritance,
estate, sales, income or profit taxes imposed upon Landlord, any Superior Lessor
or any Mortgagee by any Governmental Authority, or any penalties imposed for
late payment of Taxes.

                  (b) "Tenant's Share" means Two and 2/1000ths percent (2.002%);
provided, however, that, from and after the Space B Delivery Date, "Tenant's
Share" shall be and be deemed modified to mean Three and 122/1000ths percent
(3.122%); provided, further, that, from and after the Space C Delivery Date,
"Tenant's Share" shall be and be deemed modified to mean Three and 92/100ths
percent (3.92%).

                                       19
<PAGE>

                  (c) "Base Taxes" means the Taxes payable for the Tax Year
commencing on July 1, 1999 and ending June 30, 2000.

                  (d) "Assessed Valuation" means the amount for which the Real
Property is assessed pursuant to applicable provisions of the New York City
Charter and of the Administrative Code of the City of New York for the purpose
of imposition of Taxes.

                  (e) "Tax Year" means the period July 1 through June 30 (or
such other period as may be duly adopted by the City of New York as its fiscal
year for real estate tax purposes).

                  (f) "Comparison Year" means, with respect to Taxes, any Tax
Year commencing subsequent to the 1999/2000 Tax Year.

                  (g) "Landlord's Statement" means an instrument or instruments
containing a comparison of either (i) the Base Taxes and the Taxes payable for
any Comparison Year, or (ii) the Base Labor Rates and the Labor Rates applicable
to any Comparison Year.

                  (h) "Tenant's Tax Payment" means Tenant's Share of the excess
of the Taxes payable for any Comparison Year over the Base Taxes.

                  Section 6.2 (a) If the Taxes payable for any Comparison Year
(any part or all of which falls within the Term) shall exceed the Base Taxes,
Tenant shall pay Tenant's Tax Payment to Landlord. Tenant shall pay Tenant's Tax
Payment in two semiannual installments in advance on the first day of June (with
respect to the period July 1 through December 31 following such payment date)
and December (with respect to the period January 1 through June 30 following
such payment date), each installment equal to one-half of Tenant's Tax Payment
for such Comparison Year, except that if Landlord has not received tax bills for
the following Tax Year in time to bill the June 1 installment of Tenant's Tax
Payment, Landlord may estimate the payment due on June 1, based on Landlord's
estimate of Taxes for the following Tax Year. If, upon issuance of the tax bills
for any Tax Year, the estimated amount resulted in (i) an underpayment by
Tenant, Tenant shall pay to Landlord the amount of the underpayment within ten
(10) Business Days after notice from Landlord, or (ii) an overpayment by Tenant,
Landlord shall apply a credit in the amount of the overpayment against future
installments of Fixed Rent under this Lease, and if any such credit remains
outstanding as of the Expiration Date, Landlord will pay the amount thereof to
Tenant within a reasonable time thereafter. Each of the parties' respective
obligations hereunder in the case of overpayment or underpayment shall survive
the expiration or earlier termination of this Lease.

                  (b) If at any time during the Term, Taxes are required to be
paid (either to the appropriate taxing authorities or as a tax escrow to the
holder of a Superior Lease or Mortgage) on any other date or dates than as
presently required, then Tenant's Tax Payments shall be correspondingly
accelerated or revised so that such payments are due at least thirty (30) days
prior to the date payments are due to the taxing authorities, Lessor or
Mortgagee, as appropriate. The benefit of any discount for any early payment or
prepayment of Taxes relating to all or any part of the Real Property shall
accrue solely to the benefit of Landlord and Taxes shall be computed without
subtracting such discount. Upon request by Tenant, Landlord will furnish

                                       20
<PAGE>

Tenant with copies of all available tax bills for the current Tax Year or the
immediately preceding Tax Year with respect to the Real Property.

                  (c) Only Landlord shall be eligible to institute Tax reduction
or other proceedings to reduce the Assessed Valuation of the Real Property, and
the filing of any such proceeding by Tenant without Landlord's prior written
consent shall constitute a default hereunder. At no time shall any recomputation
be made hereunder of Base Taxes for any Comparison Year, nor shall any
adjustment be made of Additional Rent theretofore paid or payable on account of
Tenant's Tax Payment hereunder, by reason of any reduction or increase in the
Taxes payable for the 1999/2000 Tax Year by final determination of legal
proceedings, settlement or otherwise, and Tenant shall not receive or be
entitled to claim any credit or refund in connection therewith. The provisions
of this Section 6.2 shall survive the expiration or earlier termination of this
Lease. Nothing herein contained shall obligate Landlord to file any application
or institute any proceeding seeking a reduction in Taxes or Assessed Valuation.
To the best of Landlord's knowledge as of the date of this Lease, the Real
Property is not (and will not be) the subject of any tax abatement, tax
exemption or tax incentive program, or otherwise specially assessed or
classified for purposes of the imposition of Taxes, which would affect the
amount of Base Taxes, and Landlord has not applied for any such abatement,
exemption or incentive program.

                  (d) Tenant's Tax Payment shall be made as provided in this
Section 6.2 regardless of the fact that Tenant may be exempt, in whole or in
part, from the payment of any taxes by reason of Tenant's diplomatic or other
tax exempt status or for any other reason whatsoever, it being understood that
the foregoing shall not be construed to affect the calculation of Taxes pursuant
to Section 6.1(a).

                  (e) Tenant shall pay to Landlord, as Additional Rent upon
demand, any occupancy tax or rent tax now in effect or hereafter enacted, if
payable by Landlord in the first instance or hereafter required to be paid by
Landlord.

                  (f) If the Expiration Date shall occur on a date other than
June 30, any Additional Rent payable by Tenant to Landlord under this Section
6.2 for the Comparison Year in which the Expiration Date shall occur shall be
apportioned in that percentage which the number of days in the period from June
30 to the Expiration Date, inclusive, shall bear to the total number of days in
such Comparison Year. In the event of a termination of this Lease, any
Additional Rent under this Section 6.2 shall be paid or adjusted within thirty
(30) days after submission of Landlord's Statement. In no event shall Fixed Rent
ever be reduced by operation of this Section 6.2 and the rights and obligations
of Landlord and Tenant under the provisions of this Section 6.2 with respect to
any Additional Rent shall survive the expiration or earlier termination of this
Lease.

                  Section 6.3 The following terms shall have the meanings set
forth below:

                  (a) "R.A.B." shall mean the Realty Advisory Board on Labor
Relations, Incorporated, or its successor.

                                       21
<PAGE>

                  (b) "Local 32B-32J" shall mean Local 32B-32J of the Building
Service Employees International Union, AFL-CIO, or its successor.

                  (c) "Class A Office Buildings" shall mean office buildings so
categorized under any agreement between R.A.B. and Local 32B-32J, regardless of
the designation given to such office buildings in any such agreement.

                  (d) "Labor Rates" shall mean a sum equal to the regular hourly
wage rate required to be paid to Others (as defined below) employed in Class A
Office Buildings pursuant to an agreement between R.A.B. and Local 32B-32J;
provided, however, that:

                           (i) if any such agreement shall require Others in
         Class A Office Buildings to be regularly employed on days or during
         hours when overtime or other premium pay rates are in effect pursuant
         to such agreement, then the term "regular hourly wage rate", as used in
         this Section 6.3 shall mean the average hourly wage rate for the hours
         in a calendar week during which Others are required to be regularly
         employed;

                           (ii) if no such agreement is in effect as of October
         1st of any Comparison Year with respect to Others, then the term
         "regular hourly wage rate", as used in this Section 6.3 shall mean the
         regular hourly wage rate actually paid to Others employed in the
         Building by Landlord or by an independent contractor engaged by
         Landlord, provided, however, that upon the effectiveness of such
         agreement, such regular hourly wage rate shall be adjusted to that
         provided in such agreement, effective retroactively to the effective
         date of such agreement; and

                           (iii) the term "regular hourly wage rate" shall
         exclude all benefits of any kind, including those payable directly to
         taxing authorities or others on account of the employment and all
         welfare, pension and fringe employee benefits and payments of any kind
         paid or given pursuant to such agreement.

                  (e) "Others" shall mean that classification of employee
engaged in the general maintenance and operation of Class A Office Buildings
most nearly comparable to the classification now applicable to "others" in the
current agreement between R.A.B. and Local 32B-32J.

                  (f) "Base Labor Rates" shall mean an amount equal to the sum
of (i) one-half (1/2) of the Labor Rates in effect for calendar year 1999, plus
(ii) one-half (1/2) of the Labor Rates in effect for calendar year 2000.

                  (g) "Tenant's Labor Rate Payment" is defined in Section
6.4(a).

                  (h) "Comparison Year" means, with respect to Labor Rates, any
calendar year commencing subsequent to December 31, 1999.

                  Section 6.4 (a) If the Labor Rates in effect for any
Comparison Year (any part or all of which falls within the Term) shall be
greater than the Base Labor Rates, then Tenant shall pay, as Additional Rent for
such Comparison Year and continuing thereafter until a new

                                       22
<PAGE>

Landlord's Statement is rendered to Tenant, an amount ("Tenant's Labor Rate
Payment") equal to (i) the number of cents (inclusive of any fractions of a
cent) by which the Labor Rates in effect for such Comparison Year exceed the
Base Labor Rates, multiplied by (ii) (X) 46,053 (from and after the Space A
Delivery Date), plus (Y) 25,763 (from and after the Space B Delivery Date), plus
(Z) 18,324 (from and after the Space C Delivery Date).

                  (b) At any time prior to, during or after any Comparison Year
Landlord shall render to Tenant a Landlord's Statement showing (i) a comparison
of the Labor Rates for the Comparison Year with the Base Labor Rates, and (ii)
the amount of Tenant's Labor Rate Payment resulting from such comparison.
Landlord's failure to render a Landlord's Statement during or with respect to
any Comparison Year shall not prejudice Landlord's right to render a Landlord's
Statement during or with respect to any subsequent Comparison Year and shall not
eliminate or reduce Tenant's obligation to pay Tenant's Labor Rate Payment
pursuant to this Article 6 for such Comparison Year, provided that Landlord
shall not be entitled to issue a Landlord's Statement or corrected Landlord's
Statement later than two (2) years after the end of the Comparison Year to which
such Landlord's Statement relates. Upon written request to do so, Landlord shall
promptly give Tenant a copy of any written notice actually received by Landlord
of changes in the Labor Rates which will result in an increase in Tenant's Labor
Rate Payment for the Comparison Year in which such request is made.

                  (c) Tenant's Labor Rate Payment shall be payable by Tenant on
the first day of the month following the furnishing to Tenant of a Landlord's
Statement, in equal monthly installments, each such installment to be equal to
1/12th of Tenant's Labor Rate Payment for such Comparison Year multiplied by the
number of months (and any fraction thereof) of the Term then elapsed since the
commencement of such Comparison Year, continuing monthly thereafter until
rendition of the next succeeding Landlord's Statement.

                  (d) The provisions of this Section 6.4 shall be effective
irrespective of whether or not (i) the Building is classified as a Class A
office building from time to time, or (ii) any Building employees are members of
Local 32B-32J. Tenant acknowledges and agrees that the computation of Labor
Rates hereunder is intended to serve solely as a formula for an agreed rental
adjustment, rather than an actual operating expense calculation, and is not
intended to reflect the actual cost to Landlord of wages at the Building or any
increases or decreases in such cost.

                  Section 6.5 (a) If the Expiration Date shall occur on a date
other than December 31, any Additional Rent under this Article 6 for the
Comparison Year in which the Expiration Date shall occur shall be apportioned in
that percentage which the number of days in the period from January 1 to the
Expiration Date, inclusive, shall bear to the total number of days in such
Comparison Year. In the event of a termination of this Lease, any Additional
Rent under this Article 6 shall be paid or adjusted within thirty (30) days
after submission of a Landlord's Statement. In no event shall Fixed Rent ever be
reduced by operation of this Section 6.5 and the rights and obligations of
Landlord and Tenant under the provisions of this Article 6 with respect to any
Additional Rent shall survive the expiration or earlier termination of this
Lease.

                                       23
<PAGE>

                  (b) The computations of Additional Rent under this Article 6
relating to Labor Rates are intended to constitute a formula for an agreed
rental adjustment and may or may not constitute an actual reimbursement to
Landlord for costs and expenses paid by Landlord with respect to the Building.

                  Section 6.6 Landlord's failure to render a Landlord's
Statement with respect to any Comparison Year shall not prejudice Landlord's
right to thereafter render a Landlord's Statement with respect thereto or with
respect to any subsequent Comparison Year, nor shall the rendering of a
Landlord's Statement prejudice Landlord's right to thereafter render a corrected
Landlord's Statement for that Comparison Year, provided that Landlord shall not
be entitled to issue a Landlord's Statement or corrected Landlord's Statement
later than two (2) years after the end of the Comparison Year to which such
Landlord's Statement relates. Subject to the foregoing, nothing herein contained
shall restrict Landlord from issuing a Landlord's Statement at any time there is
an increase in Taxes or Labor Rates during any Comparison Year or any time
thereafter.

                  Section 6.7 If any capital improvement is made to the Real
Property during any calendar year during the Term to effectuate compliance with
any Legal Requirements enacted after the date of this Lease (including the cost
of compliance with Legal Requirements enacted prior to the date of this Lease if
such compliance is required pursuant to any amendment, modification or
reinterpretation thereof which is imposed or enacted after the date of this
Lease), then Tenant shall pay to Landlord, within ten (10) Business Days after
demand therefor, Tenant's Proportionate Share of the reasonable annual
amortization (based upon the reasonable useful life of the item, but in no event
less than ten (10) years), with interest at the Base Rate, of the cost of such
improvement in each calendar year during the Term during which such amortization
occurs.

                  ARTICLE 7.    LEGAL REQUIREMENTS

                  Section 7.1 Tenant, at its sole expense, shall comply with all
Legal Requirements applicable to the Premises or the use and occupancy thereof
by Tenant, and make all repairs or Alterations required thereby, whether
structural or nonstructural, ordinary or extraordinary, unless otherwise
expressly provided herein; provided, however, that Tenant shall not be obligated
to comply with any Legal Requirement requiring any structural Alteration to the
Premises unless the application of such Legal Requirement arises from (i)
Tenant's manner of use or occupancy of the Premises (as distinguished from the
use or occupancy of the Premises for office purposes generally), (ii) any cause
or condition created by or on behalf of any Tenant Party (including any
Alterations), (iii) the breach of any of Tenant's obligations under this Lease,
(iv) any Hazardous Material having been brought into the Building by any Tenant
Party or (v) the enforcement, by any Governmental Authority or as a consequence
of private action, of Title I of the Americans With Disabilities Act. 42 U.S.C.
ss. 12101 (et seq.) or New York City Local Law 58 of 1987 with respect to any
condition at the Premises. Tenant shall not do or permit to be done any act or
thing upon the Premises which will invalidate or be in conflict with Landlord's
insurance policies, and shall not do or permit anything to be done in or upon
the Premises, or use the Premises in a manner, or bring or keep anything
therein, which shall increase the rates for casualty or liability insurance
applicable to the Building. If, as a result of any act or omission by Tenant or
by reason of Tenant's failure to comply with the provisions of this Article 7,
the

                                       24
<PAGE>

insurance rates for the Building shall be increased, then Tenant shall desist
from doing or permitting to be done any such act or thing and shall reimburse
Landlord, as Additional Rent hereunder, for that part of all insurance premiums
thereafter paid by Landlord which shall have been charged because of such act,
omission or failure by Tenant, and shall make such reimbursement within ten (10)
Business Days after demand by Landlord.

                  Section 7.2 Tenant, at its expense, shall comply with all
Environmental Laws and with any directive of any Governmental Authority which
shall impose any violation, order or duty upon Landlord or Tenant under any
Environmental Laws with respect to the Premises or the use or occupation
thereof. Tenant's obligations hereunder with respect to Hazardous Materials
shall extend only to those matters arising or resulting from (a) the actual or
alleged presence of Hazardous Materials on the Premises or in the Building which
is actually caused or permitted to be brought into the Premises by Tenant
subsequent to the delivery of the Premises to Tenant hereunder, and (b) any
Environmental Claim (defined below) relating in any way to Tenant's operation or
manner of use of the Premises or the Building.

                  Section 7.3 Tenant shall provide Landlord with copies of all
communications and related materials regarding the Premises which Tenant shall
receive from or send to (a) any Governmental Authority relating in any way to
any Environmental Laws, or (b) any Person with respect to any claim based upon
any Environmental Laws or relating in any way to Hazardous Materials (any such
claim, an "Environmental Claim"). Landlord or its agents may perform an
environmental inspection of the Premises for any commercially reasonable purpose
at any time during the Term, upon prior notice to Tenant except in an emergency.
Landlord shall use reasonable efforts to minimize interference with Tenant's use
and occupancy of the Premises for any commercially reasonable purpose and shall
promptly restore any damage to the Premises which may be caused by any such
inspection, provided that Landlord shall have no obligation to employ
contractors or labor at overtime or other premium pay rates or to incur any
other overtime costs or additional expenses whatsoever, unless Tenant shall
first pay to Landlord Landlord's reasonable estimate of all incremental cost
increases to do so. In such event Tenant shall pay, as Additional Rent upon
presentation of appropriate invoices, all additional costs incurred by Landlord
in connection therewith.

                  Section 7.4 Tenant, at its expense, after notice to Landlord,
may contest by appropriate proceedings prosecuted diligently and in good faith,
the validity or applicability to the Premises or Tenant of any Legal
Requirement, provided that: (a) Landlord shall not be subject to criminal
penalty or to prosecution for a crime, or any other fine or charge, nor shall
the Premises or any part thereof or the Real Property or any part thereof be
subject to being condemned or vacated, nor shall the Real Property or any part
thereof be subjected to any lien or encumbrance, by reason of non-compliance or
otherwise by reason of such contest; (b) no unsafe or hazardous condition shall
remain unremedied; (c) such non-compliance or contest shall not constitute or
result in any violation of any Superior Lease or Superior Mortgage, or if any
such Superior Lease or Superior Mortgage shall permit such non-compliance or
contest on condition of the taking of action or furnishing of security by
Landlord, such action shall be taken and such security shall be furnished at the
expense of Tenant; (d) if Landlord so requires, Tenant shall furnish to Landlord
the bond of a surety company, in form and substance reasonably satisfactory to
Landlord, in an amount equal to one hundred ten percent (110%) of the cost (as
reasonably

                                       25
<PAGE>

estimated by Landlord) of compliance with such contested Environmental Law or
other Legal Requirement, or such other security reasonably satisfactory in all
respect to Landlord; (e) such non-compliance or contest shall not prevent
Landlord from obtaining any and all permits and licenses in connection with the
operation of the Building; and (f) Tenant shall keep Landlord advised as to the
status of such proceedings, including any settlement thereof. Tenant agrees to
indemnify, defend and save Landlord harmless from and against any loss,
liability, damage or expense arising out of any such deferral of compliance or
contest, including reasonable attorneys' fees and disbursements.

                  Section 7.5. (a) Landlord, at its expense (except as otherwise
provided herein), shall comply with all Legal Requirements, including those
requiring the performance of alterations, additions, improvements, replacements
or repairs (whether the same are structural or non-structural, ordinary or
extraordinary, foreseen or unforeseen) in, to or upon the Building (excluding
the Premises, to the extent Tenant is obligated to comply with such Legal
Requirements pursuant to Section 7.1), only to the extent that the failure to
effect such compliance would subject Tenant to material liability or materially
adversely affect (A) Tenant's use or occupancy of the Premises for the Permitted
Use, (B) Tenant's access to the Premises, (C) the provision of Building services
which Landlord is required by this Lease to provide to Tenant, or (D) Tenant's
ability to perform Alterations which would otherwise be permitted hereunder.

                  (b) Notwithstanding the provisions of Section 7.5(a), Landlord
may defer compliance with any Legal Requirements which it is obligated to comply
with hereunder, so long as Landlord shall be contesting the validity or
applicability thereof in good faith by appropriate proceedings, provided that
(i) Tenant shall not be subject to criminal penalty or to prosecution for a
crime, or any other fine or charge (unless Landlord pays such other fine or
charge), (ii) neither the Premises (or any part thereof) nor any part of the
Building or Real Property which affects the Premises or Tenant's use and
occupancy thereof, shall be subject to being condemned or vacated, by reason of
non-compliance or otherwise by reason of such contest, (iii) such non-compliance
or contest shall not prevent Tenant from lawfully occupying the Premises for the
Permitted Use or performing any Alterations in the Premises, or obtaining any
and all permits and licenses required to be obtained by it in connection
therewith, and (iv) Landlord, after request by Tenant, shall use reasonable
efforts to keep Tenant advised as to the status of such proceedings.

                  ARTICLE 8.    SUBORDINATION AND NON-DISTURBANCE; ESTOPPEL
CERTIFICATES

                  Section 8.1 This Lease, and all rights of Tenant hereunder,
are and shall be subject and subordinate in all respects to all Mortgages and
Superior Leases. This Section 8.1 shall be self-operative and no further
instrument of subordination shall be required. In confirmation of such
subordination, Tenant shall promptly execute and deliver any instrument that
Landlord or any Superior Lessor or Mortgagee may reasonably request to evidence
such subordination.

                  Section 8.2 In the event of any act or omission of Landlord
which would give Tenant the right, immediately or after lapse of a period of
time, to cancel or terminate this lease,

                                       26
<PAGE>

or to claim a partial or total eviction, Tenant shall not exercise such right
(a) until it has given written notice of such act or omission to each Mortgagee
and Superior Lessor whose name and address shall previously have been furnished
to Tenant in writing, and (b) unless such act or omission shall be one which is
not capable of being remedied by Landlord or such Mortgagee or Superior Lessor
within a reasonable period of time, until a reasonable period for remedying such
act or omission shall have elapsed following the giving of such notice and
following the time when such Mortgagee or Superior Lessor shall have become
entitled under such Mortgage or Superior Lease, as the case may be, to remedy
the same (which reasonable period shall in no event be less than the period to
which Landlord would be entitled under this Lease or otherwise, after similar
notice, to effect such remedy), provided such Mortgagee or Superior Lessor shall
with due diligence give Tenant written notice of its intention to remedy such
act or omission, and such Mortgagee or Superior Lessor shall commence and
thereafter continue with reasonable diligence to remedy such act or omission. If
more than one Mortgagee or Superior Lessor shall become entitled to any
additional cure period under this Section 8.2, such cure periods shall run
concurrently, not consecutively.

                  Section 8.3 If a Mortgagee or Superior Lessor shall succeed to
the rights of Landlord under this Lease, whether through possession or
foreclosure action or delivery of a new lease or deed, then at the request of
such party so succeeding to Landlord's rights ("Successor Landlord") and upon
Successor Landlord's written agreement to accept Tenant's attornment, Tenant
shall attorn to and recognize Successor Landlord as Tenant's landlord under this
Lease, and shall promptly execute and deliver any instrument that Successor
Landlord may reasonably request to evidence such attornment. Upon such
attornment this Lease shall continue in full force and effect as, or as if it
were, a direct lease between Successor Landlord and Tenant upon all of the
terms, conditions and covenants as are set forth in this Lease and shall be
applicable after such attornment except that Successor Landlord shall not:

                           (a) be liable for any previous act or omission of
         Landlord under this Lease (provided, however, that nothing contained
         herein shall be deemed to relieve Mortgagee or Successor Landlord of
         any liability arising by reason of Mortgagee's or Successor Landlord's
         acts or omissions from and after the date that Mortgagee or Successor
         Landlord shall become landlord under this Lease, and Mortgagee or
         Successor Landlord, as landlord under this Lease, shall be obligated to
         properly maintain, operate and repair the Premises in accordance with
         the provisions of this Lease, notwithstanding the fact that any
         condition requiring such maintenance or repair may have arisen prior to
         the date of any such foreclosure, or assignment in lieu of foreclosure,
         of this Mortgage);

                           (b) be subject to any offset which shall have
         theretofore accrued to Tenant against Landlord; or

                           (c) be bound by any previous modification of this
         Lease, not expressly provided for in this Lease, or by any previous
         prepayment of more than one month's fixed rent, unless such
         modification or prepayment shall have been expressly approved in
         writing by such Mortgagee or Superior Lessor.

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<PAGE>

                  SECTION 8.4 Notwithstanding the foregoing provisions of this
Article 8, as a condition to Tenant's agreement hereunder to subordinate
Tenant's interest in this Lease to any Mortgages or Superior Leases, Landlord
shall obtain from each Mortgagee or Superior Lessor an agreement, in recordable
form (and (i) with respect to the existing Mortgage, in the form attached to
this Lease as Exhibit H, and (ii) with respect to any Mortgages or Superior
Leases entered into after the date hereof, in the form attached to this Lease as
Exhibit H with such modifications thereto as shall be reasonably requested by
the Mortgagee under such Mortgage, provided that such modifications shall not
substantially (A) decrease Tenant's rights or increase Tenant's obligations
under such Non-Disturbance Agreement or (B) decrease the Mortgagee's obligations
or increase Mortgagee's rights under such Non-Disturbance Agreement), pursuant
to which such Mortgagee or Superior Lessor shall agree that if and so long as no
Event of Default hereunder shall have occurred and be continuing, the leasehold
estate granted to Tenant and the rights of Tenant pursuant to this Lease to
quiet and peaceful possession of the Premises shall not be terminated, modified,
affected or disturbed by any action which such Mortgagee or Lessor may take to
foreclose any such Mortgage or Superior Lease, and that any Successor Landlord
shall recognize this Lease as being in full force and effect as if it were a
direct lease between such Successor Landlord and Tenant upon all of the terms,
covenants, conditions and options granted to Tenant under this Lease, except as
otherwise provided in Section 8.3 (any such agreement, a "Non-Disturbance
Agreement"). Upon written request from Landlord, Tenant shall promptly execute
and deliver any such Non-Disturbance Agreement. Landlord represents to Tenant
that as of the date of this Lease (i) 111 8th Funding Company, Inc. ("Lender")
is the sole Mortgagee of the Building and the Real Property; and (ii) there are
no Superior Leases affecting the Building or the Real Property. If Landlord
fails to deliver to Tenant a Non-Disturbance Agreement executed by Lender within
thirty (30) days following the execution and delivery of this Lease, then Tenant
shall have the right to terminate this Lease by notice to Landlord, such
termination to be effective on the date which shall be thirty (30) days after
the date such notice is given, upon which date this Lease shall come to an end
and terminate, and neither party shall have any liability to the other
hereunder, and Landlord shall return to Tenant the Security Deposit (as defined
in Section 32.1) and any prepaid rent deposited by Tenant hereunder.
Notwithstanding anything to the contrary contained herein, if Landlord shall
deliver such Non Disturbance Agreement executed by Lender, to Tenant at any time
within ten (10) days following Landlord's receipt of such notice by Tenant, such
termination shall be void and of no force and effect, and Tenant shall have no
further right to terminate this Lease pursuant to this Section 8.4. Tenant shall
have the right to record any Non-Disturbance Agreement in the Register's Office,
provided that Tenant shall pay all costs, taxes and expenses necessary for the
recordation of such Non-Disturbance Agreement.

                  Section 8.5 Each party agrees, at any time and from time to
time, as requested by the other party, upon not less than ten (10) Business
Days' prior notice, to execute and deliver to the other a written statement
executed and acknowledged by such party (a) stating that this Lease is then in
full force and effect and has not been modified (or if modified, setting forth
all modifications), (b) setting forth the then annual Fixed Rent, (c) setting
forth the date to which the Fixed Rent and Additional Rent have been paid, (d)
stating whether or not, to the best knowledge of the signatory, the other party
is in default under this Lease, and if so, setting forth the specific nature of
all such defaults, (e) stating the amount of the Security Deposit, (f) stating
whether there are any subleases affecting the Premises, (g) stating the address
of the signatory to which all

                                       28
<PAGE>

notices and communication under the Lease shall be sent, the Commencement Date
and the Expiration Date, and (h) as to any other matters reasonably requested by
the party requesting such certificate. The parties acknowledge that any
statement delivered pursuant to this Section 8.5 may be relied upon by others
with whom the party requesting such certificate may be dealing, including any
purchaser or owner of the Real Property or the Building, or of Landlord's
interest in the Real Property or the Building or any Superior Lease, or by any
Mortgagee or Superior Lessor, or by any prospective or actual sublessee of the
Premises or assignee of this Lease, or permitted transferee of or successor to
Tenant.

                  ARTICLE 9.        SERVICES

                  Section 9.1 Landlord shall provide, at Landlord's expense,
except as otherwise set forth herein, the following services:

                  Section 9.2       Electricity

                  (a) Landlord, at Landlord's expense, subject to the provisions
of this Article 9, shall make available to Tenant 1400 amperes (from a 1600
ampere switch), 460 volts, 3-phase, 4-wire AC electric capacity dedicated to
Tenant for use in the Premises (the "Basic Capacity"). Landlord, at Tenant's
expense, shall, as an Alteration, bring all such Basic Capacity from the bus
duct in Landlord's electrical closet "C" on the ninth floor of the Building to
the Premises and distribute it therein. In the event that Tenant shall require
electric capacity in excess of the Basic Capacity, then upon request, and
subject to the availability of additional electrical capacity in the Building,
as determined by Landlord in its sole judgment, Landlord shall make additional
electric power available to Tenant, at a location in the basement of the
Building to be designated by Landlord, and Tenant shall be solely responsible,
at Tenant's sole cost and expense for the installation of all risers and other
electrical facilities and equipment required in order to deliver such additional
electric power to the Premises and distribute it therein (and shall use
Landlord's designated electrical contractor to perform the tap into the
Building's electrical system in the basement of the Building), and Tenant shall
pay to Landlord a one-time charge equal to Landlord's then-applicable rate per
ampere (which is currently equal to $300.00 per ampere) for additional power,
multiplied by each ampere in excess of the Basic Capacity so provided by
Landlord. Tenant covenants that Tenant's use and consumption of electric current
shall not at any time exceed the electric capacity required to be supplied to
the bus duct on the ninth floor by Landlord from time to time pursuant to this
Section 9.2, nor exceed the capacity of any of the electrical facilities and
installations in or otherwise serving or being used in the Premises. Tenant
shall pay Landlord, as Additional Rent, at any time and from time to time, but
no more frequently than monthly, for its consumption of electrical energy at the
Premises, as provided herein. Notwithstanding the foregoing, in the event Tenant
shall terminate this Lease with respect to Space B or Space C in accordance with
Section 2.3, the Basic Capacity shall be reduced by an amount proportionate to
the ratio of the area of such Space to the aggregate area of Spaces A, B and C.

                  (b) The calculations and determinations of the charges for
electric energy consumed by Tenant shall be based on the readings of one or more
submeters to be installed reasonably promptly by Landlord at Tenant's sole
expense, applied to Landlord's Electricity Cost,

                                       29
<PAGE>

as defined in Section 9.2(c). Tenant shall pay for electricity consumed as
determined thereunder as measured and calculated from time to time by such
submeter or submeters, plus Landlord's charge for overhead and supervision,
which charge shall not exceed seven percent (7%) of such payment by Tenant. In
addition, Tenant shall pay to Landlord, as Additional Rent (i) the fees and
expenses of Landlord's electrical contractor for services rendered by such
contractor in the maintenance and repair of such submeter(s), and (ii) the
amount of any taxes imposed by any Governmental Authority on Landlord's receipts
from the sale of electricity to Tenant.

                  (c) "Landlord's Electricity Cost" means the cost per kilowatt
hour and cost per kilowatt demand, adjusted by time of day factors, fuel
adjustment charges and other applicable rate adjustments, to Landlord for the
purchase of electricity from the public utility or other electricity provider
furnishing electricity service to the Building from time to time (the
"Electricity Provider"), including sales and other taxes imposed by any
Governmental Authority on Landlord's purchase of electricity. If at any time
during the Term the cost elements comprising Landlord's Electricity Cost shall
be increased by the Electricity Provider, or Landlord's Electricity Cost shall
be increased for any other reason, then effective as of the date of such
increase, Tenant's payment for submetered electricity under this Section 9.2
shall be proportionately increased. Landlord reserves the right to contract with
different Electricity Providers from time to time in its sole judgment, and
without reference to whether any Electricity Provider selected by Landlord
provides lower rates than any other electricity supplier. Currently, Landlord's
Electricity Cost is based upon Consolidated Edison Company's Service
Classification rate schedule S.C. #4 Rate II as in effect on the Commencement
Date.

                  (d) During the period beginning on the Commencement Date and
ending on the date upon which the submeters to be installed by Landlord in the
Premises become operational, Tenant shall pay to Landlord a fixed fee for
electric energy supplied to the Premises of (i) during the period prior to the
date upon which Tenant first occupies all or any portion of the Premises for the
conduct of its business, an amount per annum equal to One and 00/100 Dollar
($1.00) multiplied by the number of Rentable Square Feet in the delivered
portion of the Premises, in equal monthly installments on the first (1st) day of
each month during such period, and (ii) from and after the date upon which
Tenant first occupies all or any portion of the Premises for the conduct of its
business, an amount per annum equal to Four and 00/100 Dollars ($4.00)
multiplied by the number of Rentable Square Feet in the delivered portion of the
Premises, in equal monthly installments on the first (1st) day of each month
during such period, through the date upon which such submeters become
operational.

                  (e) Tenant covenants that Tenant's use and consumption of
electric current shall not at any time exceed the capacity of any of the
electrical facilities and installations in or otherwise serving or being used in
any Space and Tenant shall, upon the submission by Landlord to Tenant of written
notice, promptly cease the use of any of Tenant's electrical equipment which
Landlord reasonably believes will cause Tenant to exceed such capacity. Any
additional feeders, risers, electrical facilities and other such installations
required for electric service to the Premises will be supplied by Landlord, at
Tenant's expense, upon Landlord's prior consent in each instance, which consent
shall not be unreasonably withheld or delayed, provided that, in Landlord's
reasonable judgment, such additional electrical facilities and installations,
feeders or risers are necessary and are permissible under Legal Requirements
(including the New York

                                       30
<PAGE>

State Energy Conservation Construction Code) and insurance regulations and the
installation of such feeders or risers will not cause permanent damage or injury
to the Building or the Premises or cause or create a dangerous or hazardous
condition or entail excessive or unreasonable alterations or repairs or
interfere with, or disturb, other tenants or occupants of the Building. In
addition, Landlord shall have no obligation to consent to such additional
feeders, risers, electrical facilities and installations if in Landlord's
reasonable judgment, the same would give Tenant a disproportionate amount of the
electrical current supplied to the Building at the expense of, or in derogation
of the needs of other tenants or occupants of the Building. Notwithstanding
anything to the contrary set forth in the immediately preceding sentence,
Landlord will cooperate with Tenant if Tenant seeks to obtain additional
electric service to the Building from the Electricity Provider, provided that
Landlord shall not be required to incur any expenses (unless Landlord shall be
reimbursed therefor by Tenant within ten (10) days after demand) or incur any
liability in connection with such action by Tenant.

                  (f) Except as otherwise expressly provided herein, Landlord
shall not in any way be liable or responsible to Tenant for any loss, damage or
expense which Tenant may sustain or incur as a result of the unavailability of
or interruption in the supply of electric current to the Premises or a change in
the quantity or character or nature of such current and such change,
interruption or unavailability shall not constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any abatement or diminution
of rent (except that Tenant's liability to pay Landlord for electricity under
this Section 9.2 shall cease as of the date of such disturbance), or relieve
Tenant from any of its obligations under this Lease, or impose any liability
upon Landlord or its agents, by reason of inconvenience or annoyance to Tenant,
or injury to or interruption of Tenant's business, or otherwise.

                  (g) Landlord reserves the right to discontinue furnishing
electricity to Tenant in the Premises on not less than sixty (60) days' notice
to Tenant. If Landlord exercises such right to discontinue, or is compelled to
discontinue furnishing electricity to Tenant, this Lease shall continue in full
force and effect and shall be unaffected thereby, except only that from and
after the effective date of such discontinuance, Landlord shall not be obligated
to furnish electricity to Tenant, and Tenant shall have no further obligation to
pay Landlord for electricity supplied to the Premises. If Landlord so
discontinues furnishing electricity to Tenant, Tenant shall arrange to obtain
electricity directly from the Electricity Provider. Such electricity may be
furnished to Tenant by means of the then existing electrical facilities serving
the Premises to the extent that the same are available, suitable and safe for
such purposes. All meters and all additional panel boards, feeders, risers,
wiring and other equipment which may be required by Tenant to obtain electricity
directly from the Electricity Provider shall be installed by Landlord, at the
sole cost and expense of (i) Landlord, if Landlord voluntarily discontinues such
service, or (ii) Tenant, if (A) Landlord is compelled to discontinue such
service by the Electricity Provider or pursuant to applicable Legal
Requirements, or (B) such discontinuance arises out of the acts or omissions of
Tenant. Landlord will not voluntarily discontinue furnishing electricity to
Tenant until Tenant is able to receive electricity directly from the Electricity
Provider unless the Electricity Provider is not prepared to furnish electricity
to the Premises on the date required as a result of Tenant's delay or negligence
in arranging for service or Tenant's refusal to take any other action reasonably
requested by the Electricity Provider.

                                       31
<PAGE>

                  (h) If submetering of electricity in the Building is hereafter
prohibited by any Legal Requirement, or by any order or ruling of the Public
Service Commission of the State of New York, then Tenant shall apply, within ten
(10) days of Tenant's receiving notice thereof, to the Electricity Provider in
order to obtain direct electric service, and Tenant shall bear all costs and
expenses necessary to comply with all rules and regulations of the Electricity
Provider pertinent thereto, and from and after the date upon which Tenant
procures direct electric service, Landlord shall be relieved of any further
obligation to furnish electricity to Tenant pursuant to this Section 9.2. Such
electricity may be furnished to Tenant by means of the then existing electrical
facilities serving the Premises, including Building feeders and risers, to the
extent that the same are suitable and safe for such purposes.

                  (i) Landlord acknowledges that Tenant has advised Landlord
that: (i) Tenant and the New York City Industrial Development Agency, a New York
public benefit corporation (the "IDA"), intend to enter into an agreement,
detailing a package of financial incentives that are to be made available to
Tenant or an Affiliate of Tenant (the "Incentive Program") by the New York City
Economic Development Corp. ("EDC"), (ii) pursuant to the Incentive Program,
Tenant shall be entitled to certain exemptions, abatements and/or savings in the
cost of electricity used by Tenant at the Premises (including certain savings
pursuant to Con Ed's Business Incentive Rate Program) (collectively,
"Electricity Savings"), and (iii) Electricity Savings may be made available to
Tenant pursuant to reductions in the total cost incurred by Landlord to provide
electricity to the Building (whether the Electricity Provider is Con Ed or any
other entity). In connection with the foregoing, Landlord hereby agrees that if
and to the extent the total cost incurred by Landlord to provide electricity to
the Building during a particular billing period is reduced as a result of
Electricity Savings pursuant to the Incentive Program, then such Electricity
Savings shall be for the account of and the sole property of Tenant, directly
payable solely to and/or earned by Tenant. If and so long as Tenant is paying
Landlord for electricity pursuant to Sections 9.2(a), 9.2(b) and/or 9.2(d), then
the amount of any Electricity Savings which are expressly indicated (including
the specific amount of such reduction) on Landlord's statement from the
Electricity Provider, shall be offset against and deducted from Additional Rent
otherwise due from Tenant to Landlord for the next following billing period. If
Tenant shall not be paying Landlord for electricity (including if electricity is
obtained by Tenant pursuant to Sections 9.2(g) or 9.2(h)), then such Electricity
Savings shall be for the account of and the sole property of Tenant, directly
payable solely to and/or earned by Tenant. Landlord agrees (at no cost to
Landlord) to cooperate with Tenant (by, for example, executing any necessary
documents, forms, applications and surveys) to facilitate Tenant's obtaining the
Electricity Savings pursuant to the Incentive Program.

                  Section 9.3       Heat, Ventilation And Air-Conditioning

                  (a) Landlord shall provide heat to the Premises on Business
Days from 8:00 A.M. to 6:00 P.M., when required in Landlord's judgment for the
comfortable use and occupancy of the Premises, through use of the Building
standard perimeter radiator heating system serving the Premises (the "Building
Heating System").

                  (b) Anything in this Section 9.3 to the contrary
notwithstanding, Landlord shall not be responsible if the normal operation of
the Building Heating System shall fail to

                                       32
<PAGE>

provide heat to all interior portions of the Premises at reasonable
temperatures. Tenant at all times shall cooperate fully with Landlord and shall
abide by the regulations and requirements which Landlord may reasonably
prescribe for the proper functioning and protection of the Building Heating
System.

                  (c) Landlord shall not be required to furnish heat during
periods other than the hours and days set forth in this Section 9.3 for the
furnishing and distributing of such services ("Overtime Periods"), unless
Landlord has received advance notice from Tenant requesting such service not
less than twenty-four (24) hours prior to the time when such service shall be
required; provided, however, that Landlord shall use reasonable efforts to
furnish heat during Overtime Periods on less than twenty-four (24) hours notice
if requested to do so by Tenant. Accordingly, if Landlord shall furnish heat to
the Premises at the request of Tenant during Overtime Periods, Tenant shall pay
Landlord, as Additional Rent within ten (10) days after demand, for such
services at the standard rate then fixed by Landlord for the Building, which
rate as of the date of this Lease is $75.00 per hour, subject to increase during
the Term to reflect increases in Landlord's costs.

                  (d) Landlord shall have no obligation to provide
air-conditioning or ventilation services to the Premises. Landlord acknowledges
that Tenant desires to install Tenant's HVAC System (as defined in Section 9.7),
as part of the Initial Alterations to be installed, subject to the provisions of
Article 3, at a location on the roof of the Building as provided in Section 9.7.

                  Section 9.4 Elevators. (a) Landlord shall provide passenger
elevator service to the Premises on Business Days from 8:00 A.M. to 6:00 P.M.
and freight elevator facilities on a non-exclusive basis, on Business Days from
8:00 A.M. to 4:45 P.M. ("Freight Business Hours"), without charge, and shall
have one passenger elevator available at all other times. Such elevator service
shall be subject to such rules and regulations as Landlord may reasonably
promulgate from time to time with respect thereto. Landlord shall have the right
to change the operation or manner of operation of any of the elevators in the
Building and/or to discontinue, temporarily or permanently, the use of any one
or more cars in any of the passenger, freight or truck elevator banks; provided
that in no event (other than for repairs or maintenance or due to Unavoidable
Delays) shall the Premises be serviced during Business Hours by fewer than three
(3) passenger elevator cars and one (1) freight elevator car. Landlord shall
afford Tenant access to the Premises 24 hours per day, 7 days per week. In
addition, if Tenant shall terminate this Lease with respect to Space B and Space
C pursuant to Section 2.3(c), then all Tenant Parties and their respective
invitees shall thereafter exclusively use the passenger elevators located on the
Ninth Avenue side of the Building, and shall not use the passenger elevators
located on the Eighth Avenue side of the Building.

                  (b) During the performance of Tenant's Initial Alterations and
during Tenant's move-in, Tenant shall have the right to use the freight elevator
without charge during Freight Business Hours for the delivery of construction
materials and for moving into (but not out of) the Premises provided that such
usage (i) shall be on a non-exclusive "first come first served" basis, and (ii)
shall be subject to Landlord's reasonable determination as to the availability
of such freight elevators. Landlord will make the freight elevator available to
Tenant during other than

                                       33
<PAGE>

Freight Business Hours, reasonably promptly (subject to availability) after
request by Tenant, and Tenant shall pay as Additional Rent the charge therefor
established by Landlord from time to time, payable within ten (10) Business Days
of rendition of a bill therefor. As of the date hereof, Landlord's current
charge for freight elevator service during other than Freight Business Hours is
$115.00 per hour, which charge is subject to increase to reflect increases in
Landlord's costs of providing such service (including the charges for a hoisting
engineer).

                  Section 9.5 Cleaning and Rubbish Removal. Tenant shall, at
Tenant's sole cost, provide cleaning services at the Premises pursuant to
reasonable rules and regulations established by Landlord from time to time, and
use a cleaning contractor approved by Landlord in the exercise of its reasonable
judgment. Tenant shall, at Tenant's sole cost, provide refuse and rubbish
removal service at the Premises at times, and pursuant to regulations,
reasonably established by Landlord from time to time.

                  Section 9.6 Water. Landlord shall furnish cold water in such
quantities as Landlord deems sufficient for ordinary drinking, lavatory and
cleaning purposes to the Premises. If Tenant requires, uses or consumes water
for any purpose in addition to ordinary lavatory, cleaning and drinking purposes
(including any water required for use in any pantry), Landlord may install a
water meter and thereby measure Tenant's consumption of water for all purposes.
Tenant shall (a) pay to Landlord the cost of any such meters and their
installation, (b) at Tenant's sole cost and expense, keep any such meters and
any such installation equipment in good working order and repair, and (c) pay to
Landlord, as Additional Rent, as and when billed therefor for water consumed,
Landlord's cost for water plus seven percent (7%) which Landlord's cost may
include (without duplication of any Tenant's Tax Payment) sewer rents, charges
or any other taxes, rents, levies or charges which now or hereafter are
assessed, imposed or shall become a lien upon the Premises or the Real Property
pursuant to law, order or regulation made or issued in connection with any such
metered use, consumption, maintenance or supply of water, water system, or
sewage or sewage connection or system (and in default in making such payment
Landlord may pay such charges and collect the same from Tenant). Landlord agrees
that Tenant shall have the right to connect Tenant's sprinkler system to the
standpipe provided therefor, and there shall be no charge for use of water from
such standpipe.

                  Section 9.7       Roof Equipment

                  (a) Landlord hereby grants to Tenant, for Tenant's own use
commencing on the Commencement Date and not for resale purposes, a license of an
area of the roof above the 17th floor of the Building, as shown on Exhibit I to
this Lease, containing approximately 700 square feet (the "Roof Space") for the
installation by Tenant of (i) a floor packaged direct expansion water cooled air
conditioning system, including a two cell, cross flow induced draft cooling
tower with a capacity not in excess of 454 tons of condenser water and with
pumps and auxiliary equipment ("Tenant's HVAC System") and (ii) Tenant's
telecommunications equipment, antenna and satellite dish (collectively, together
with related cabling, pumps, mountings and supports, the "Roof Equipment"), at a
location or locations within the Roof Space reasonably designated by Landlord
and reasonably acceptable to Tenant. In connection therewith, and subject to the
rights of other existing tenants in the Building, Landlord shall make available
to Tenant reasonable access to the roof for the construction, installation,
upgrade,

                                       34
<PAGE>

maintenance, repair, operation and use of the Roof Equipment. Tenant shall be
responsible for all reinforcement and bracing, if any, reasonably required by
Landlord to enable the roof of the Building to support the Roof Equipment. If
any of the Roof Equipment generates noise likely, in Landlord's reasonable
judgment, to disturb other tenants or occupants of the Building, then Tenant
shall install sound attenuated acoustic enclosures reasonably satisfactory to
Landlord designed to eliminate such noise or reduce such noise to acceptable
levels. If Tenant requires riser space for conduit connecting the Premises to
the Roof Equipment, Landlord shall make available to Tenant, for Tenant's use
solely in connection with the Roof Equipment, in the "Center Shaft" as shown on
the floor plan attached as Exhibit R, riser space sufficient for the
installation, at Tenant's expense, of telecommunications lines, cabling and
supply and condenser water return lines reasonably required for the operation of
the Roof Equipment, as more particularly set forth in Section 9.8. All work in
connection with the installation of such riser, including core drilling, if
required, shall be performed by Tenant at Tenant's sole cost and expense,
including the reasonable cost of a fire watch and related supervisory costs
relating to any core drilling, which shall be performed in such a manner and at
such times as Landlord shall reasonably prescribe. Landlord shall make available
to Tenant reasonable access within the core for purposes of such installation
work. References herein to the Roof Equipment shall be deemed to include such
riser and any conduits therein.

                  (b) The installation of the Roof Equipment shall constitute an
Alteration and shall be performed by Tenant at Tenant's sole cost and expense
(including any costs and expenses in connection with reinforcing the roof of the
Building, if required) in accordance with and subject to the provisions of
Article 3. Tenant shall pay a license fee to Landlord for the Roof Space, as
Additional Rent in advance on the first day of each month during the Term, as
follows: (i) during the period from the Commencement Date through the day before
the fifth (5th) anniversary of the Commencement Date, the product of the square
foot area of the Roof Space, multiplied by Eighteen and 00/100 Dollars ($18.00),
(ii) during the period from the fifth (5th) anniversary of the Commencement Date
through the day before the tenth (10th) anniversary of the Commencement Date,
the product of the square foot area of the Roof Space, multiplied by Twenty-One
and 00/100 Dollars ($21.00), and (iii) during the period from the tenth (10th)
anniversary of the Commencement Date through the Expiration Date, the product of
the square foot area of the Roof Space, multiplied by Twenty-Four and 00/100
Dollars ($24.00). All of the provisions of this Lease shall apply to the
installation, use and maintenance of the Roof Equipment, including all
provisions relating to compliance with Legal Requirements (including all FCC
rules and regulations), insurance, indemnity, repairs and maintenance. The
license granted to Tenant in this Section 9.7 shall not be assignable by Tenant
separately from this Lease.

                  (c) Landlord retains the right to use the portion of the roof
on which the Roof Equipment is located for any purpose whatsoever. Tenant shall
have reasonable access to the Roof Equipment at all times, and Landlord shall
not interfere with Tenant's use of the Roof Equipment so as to cause Tenant's
operation thereof to be materially interrupted or impaired. Tenant shall use the
Roof Equipment so as not to cause any material interference with Landlord's use
of the roof, including the use by Landlord or other tenants or occupants of the
Building of other equipment thereon (including data transmission or other
similar or dissimilar equipment), or damage to or interference with the
operation of the Building or the Building Systems. If any of Tenant's Roof
Equipment materially interferes with any equipment installed by Landlord or

                                       35
<PAGE>

any tenant leasing space in the Building as of the date of this Lease, or
interferes with the operation of the Building or the Building Systems, then
Tenant, at its sole cost and expense, shall take all steps necessary to
eliminate such interference, and if Tenant shall fail to eliminate such
interference, Tenant shall relocate the Roof Equipment to another area on the
roof reasonably designated by Landlord. Notwithstanding the foregoing, if
Landlord shall require Tenant to relocate Tenant's cooling tower pursuant
hereto, Landlord shall bear all costs and expenses in connection with such
relocation, and Landlord shall provide condenser water to Tenant on an interim
basis until Tenant's cooling tower is relocated and operational. In the event
Tenant fails, within ten (10) days after notice, to relocate or remove the Roof
Equipment, Landlord may do so, and Tenant shall promptly reimburse Landlord for
any costs and expenses incurred by Landlord in connection therewith. If such
interference or disturbance still occurs despite such relocation, or if Landlord
shall determine, in its reasonable judgment, that the Roof Equipment (i) may
cause a health hazard or danger to property, or (ii) is not in accordance with
governmental or quasi-governmental standards for non-ionizing radiation for
occupational and/or general public levels, then Tenant, at its sole cost and
expense, shall promptly remove the Roof Equipment from the roof of the Building.

                  (d) Landlord may at its option, at any time during the Term
after reasonable prior notice to Tenant (except in the event of an emergency)
relocate the Roof Equipment to another area on the roof designated by Landlord,
provided that such relocation of the Roof Equipment does not cause the operation
thereof to be interrupted or impaired, other than temporarily, and except as set
forth in Section 9.7(c), such relocation is performed at Landlord's sole cost
and expense. Landlord shall use reasonable efforts to minimize the duration of
such interruption, and agrees to employ contractors or labor at overtime or
other premium pay rates and to incur other reasonable overtime costs and
additional expenses, provided that Tenant shall first pay to Landlord Landlord's
reasonable estimate of all incremental cost increases to do so. In such event
Tenant shall pay, as Additional Rent upon presentation of appropriate invoices,
all additional costs incurred by Landlord in connection therewith.

                  (e) Landlord shall not have any obligations with respect to
the Roof Equipment or compliance with any Legal Requirements (including the
obtaining of any required permits or licenses, or the maintenance thereof)
relating thereto, nor shall Landlord be responsible for any damage that may be
caused to Tenant or the Roof Equipment by any other tenant or occupant of the
Building. Landlord makes no representation that the Roof Equipment (if same
includes communications equipment) will be able to receive or transmit
communication signals without interference or disturbance (whether or not by
reason of the installation or use of similar equipment by others on the roof)
and Tenant agrees that Landlord shall not be liable to Tenant therefor.
Notwithstanding the foregoing, upon request by Tenant, Landlord, at Tenant's
cost and expense, shall join in any applications for any permits, approvals or
certificates from any Governmental Authority required to be obtained by Tenant,
and shall sign such applications reasonably promptly after request by Tenant,
and shall otherwise cooperate with Tenant in connection therewith, provided that
Landlord shall not be obligated to incur any cost or expense (other than
incidental administrative expenses), including attorneys' fees and
disbursements, or suffer or incur any liability, in connection therewith.

                                       36
<PAGE>

                  (f) Tenant shall (i) be solely responsible for any damage
caused as a result of its use of the Roof Equipment, (ii) promptly pay any tax,
license, permit or other fees or charges imposed pursuant to any Legal
Requirements relating to the installation, maintenance or use of the Roof
Equipment, (iii) promptly comply with all precautions and safeguards required by
Landlord's insurance company and all Governmental Authorities, and (iv) promptly
and diligently perform all necessary repairs or replacements to, or maintenance
of, the Roof Equipment, provided, however, that if Tenant's failure after five
(5) days' notice from Landlord to so repair, replace or maintain the Roof
Equipment materially jeopardizes in any way Landlord's or any other tenant's
property located on the roof or within the Building, Landlord may, at Landlord's
option, elect to perform such repairs, replacements or maintenance at Tenant's
sole cost and expense. Landlord shall give Tenant reasonable prior notice of its
election to perform such repairs, except in an emergency.

                  (g) The privileges granted Tenant under this Section 9.7
merely constitute a license and shall not, now or at any time after the
installation of the Roof Equipment, be deemed to grant Tenant a leasehold or
other real property interest in the Building or any portion thereof, including
the Building's roof. The license granted to Tenant in this Section 9.7 shall
continue until and automatically terminate and expire upon the expiration or
earlier termination of this Lease and the termination of such license shall be
self-operative and no further instrument shall be required to effect such
termination. Notwithstanding the foregoing, upon request by Landlord, Tenant, at
Tenant's sole cost and expense, shall promptly execute and deliver to Landlord,
in recordable form, any certificate or other document reasonably required by
Landlord confirming the termination of Tenant's right to use the roof of the
Building upon the expiration or sooner termination of this Lease.

                  (h) The Roof Equipment shall be treated for all purposes of
this Lease as Tenant's Property. If requested by Landlord, Tenant shall cause
the Roof Equipment and all equipment and installations appurtenant thereto to be
designated as one or more separate tax lots by the City of New York for all
purposes of assessment and payment of Taxes, and Tenant shall pay all Taxes
imposed thereon directly to the taxing authorities, without deduction or offset
against Rent under this Lease. If for any reason Tenant fails (with or without
Landlord's consent thereto) to so cause the Roof Equipment to be designated as
one or more separate tax lots, Tenant shall pay to Landlord monthly, as
Additional Rent upon demand, the amount, determined by Landlord in its
reasonable discretion, by which Taxes imposed upon the Building have been
increased on account of Tenant's installation of the Roof Equipment.

                  Section 9.8 Conduit. Landlord will make available to Tenant,
without additional charge, riser space in the "Center Shaft" as shown on Exhibit
R (except as set forth in (b) below) sufficient to accommodate the following:
(a) the two (2) two1/2-inch (2 1/2") diameter electrical conduits and such other
electrical conduits as shall be required in order to deliver the Basic Capacity
to the Premises, (b) four (4) four-inch (4"), one (1) one1/2-inch (1 1/2") and
one (1) one-inch (1") diameter riser conduit sleeves for telecommunications
lines and cabling and security systems in the number eighteen freight elevator
shaft, (c) two (2) ten-inch (10") diameter riser conduit sleeves for condenser
water supply and return lines connecting the Roof Equipment to the Premises, (d)
the electrical conduits required in order to deliver EPS (if any) to the
Premises, and (e) four (4) four-inch (4") diameter riser conduit sleeves
connecting the Premises

                                       37
<PAGE>

to the premises demised to Tenant pursuant to Tenant's Other Lease. If Tenant
requires additional riser space for electrical and telecommunications conduits
or for use in connection with the Roof Equipment, then upon request by Tenant,
subject to availability of riser space in the Building, Landlord will make
available riser space at Landlord's then-current rates for riser space in the
Building, which rates are currently as follows: (i) for riser space not
exceeding two inches (2") in diameter, an annual charge of $5.00 per lineal
foot, and (ii) for riser space in excess of two inches (2") in diameter but not
exceeding four inches (4") in diameter, an annual charge of $10.00 per lineal
foot. All work in connection with the installation of such conduit, including
core drilling, if required, shall be performed by Tenant at Tenant's sole cost
and expense, including the reasonable cost of a fire watch and related
supervisory costs relating to any core drilling, which shall be performed in
such a manner and at such times as Landlord shall reasonably prescribe. Landlord
shall make available to Tenant reasonable access within the Building core for
purposes of such installation work.

                  Section 9.9 Listings in Building Directory. Landlord shall, at
the request of Tenant, maintain listings on the Building directory in the
Building lobby of the names of Tenant and any officers or employees of Tenant
(or any permitted Subtenant) provided that the number of listings shall be in
the same proportion to the capacity of the Building directory as the rentable
area of the Premises is to the rentable area of the Building. Tenant shall
deliver to Landlord, on or prior to the Commencement Date, a list of all names
to be included in the directory. Tenant may deliver revised listings to Landlord
from time to time throughout the Term (but Landlord shall not be obligated to
revise the directory more often than once a month).

                  Section 9.10 No Warranty of Landlord. Landlord does not
warrant that any of the services to be provided by Landlord to Tenant hereunder,
or any other services which Landlord may supply (a) will be adequate for
Tenant's particular purposes or as to any other particular need of Tenant, or
(b) will, subject to the provisions of the fourth sentence of this Section 9.10,
be free from interruption, and Tenant acknowledges that any one or more such
services may be interrupted or suspended by reason of Unavoidable Delays.
Landlord reserves the right to stop, interrupt or reduce service of the Building
Systems by reason of Unavoidable Delays, or for repairs, additions, alterations,
replacements or improvements which are, in the judgment of Landlord, necessary
to be made, until said repairs, alterations, replacements or improvements shall
have been completed. Any such interruption or discontinuance of service, or the
exercise of such right by Landlord to suspend or interrupt such service shall
not (i) constitute an actual or constructive eviction, or disturbance of
Tenant's use and possession of the Premises, in whole or in part, (ii) entitle
Tenant to any compensation or to any abatement or diminution of Fixed Rent or
Additional Rent, (iii) relieve Tenant from any of its obligations under this
Lease, or (iv) impose any responsibility or liability upon Landlord or its
agents by reason of inconvenience or annoyance to Tenant, or injury to or
interruption of Tenant's business, or otherwise. Landlord shall use reasonable
efforts to minimize interference with Tenant's access to and use and occupancy
of the Premises in making any repairs, alterations, additions, replacements,
decorations or improvements; provided, however, that Landlord shall have no
obligation to employ contractors or labor at "overtime" or other premium pay
rates or to incur any other "overtime" costs or additional expenses whatsoever.
Landlord shall not be required to furnish any services except as expressly
provided in this Article 9.

<PAGE>

                  Section 9.11 Life Safety System. Landlord shall provide life
safety service to the Premises, in accordance with Legal Requirements, through
the Building's Class E System to the data gathering panels serving the Premises.
In connection therewith Landlord will provide points of connection to Building's
Class E System sufficient for the Permitted Use.

                  Section 9.12      Emergency Generator.

                  (a) Landlord shall make available to Tenant for use in the
Premises 350 amperes of 460-volt emergency electric power service ("EPS")
available to Tenant for use in the Premises from the Building's emergency
electric generator (the "Generator") as provided in this Section 9.12, for the
balance of the Term. Landlord shall install (i) an automatic transfer switch
(the "Transfer Switch"), in the Premises at a location to be reasonably
designated by Tenant, sufficient to supply a total connected load of up 350
amperes of EPS at 460 volts to the Premises, and (ii) a connection from the
Generator to the Transfer Switch.

                  (b)      Tenant shall pay Landlord for EPS as follows:

                           (i) Tenant shall pay all actual costs and expenses
                  incurred by Landlord in making EPS available to the
                  Premises, including the actual costs to furnish and install
                  the Transfer Switch and all cabling and other devices
                  necessary to connect the Generator to the Transfer Switch,
                  within ten (10) days after demand by Landlord; and

                           (ii) (A) Tenant shall pay an annual fee (the "EPS
                  Fee") for the period commencing on the date on which Landlord
                  makes EPS available to the Premises but not earlier than
                  January 1, 2000 through the Expiration Date, irrespective of
                  whether or not emergency power is ever required or used by
                  Tenant, in the amount of $150.00 per ampere per year. The EPS
                  Fee shall be payable by Tenant to Landlord as Additional Rent
                  in advance in equal monthly installments on the first day of
                  each month during the Term in which EPS is made available to
                  Tenant pursuant to this Section 9.12.

                  (c) Tenant understands and agrees that EPS will be supplied to
Tenant only if there is an interruption or failure in the supply of electric
current to the Premises due to service failure or in connection with customary,
routine testing of Tenant's electrical systems and under no other circumstances.

                  (d) Tenant shall be responsible for the payment of any
occupancy tax and any other tax (other than Landlord's income tax) imposed upon
the Additional Rent paid by Tenant pursuant to this Section 9.12.

                  (e) The privilege of using the EPS service described in this
Section 9.12 cannot be transferred or assigned by Tenant except in connection
with an assignment of this Lease permitted under Sections 13.1, 13.10 or 13.11,
or otherwise with the express written consent of Landlord, which may be withheld
in Landlord's sole discretion, and under no circumstances can this privilege be
transferred or assigned to any party who is not a tenant under this Lease.
Tenant

                                       39

<PAGE>

acknowledges that the Generator (and any replacement or substitute therefor),
and all connections thereto, are and shall remain the sole property of Landlord
and may not be removed by Tenant.

                  (f) Landlord shall have the right, in Landlord's sole
discretion, at any time and from time to time during the EPS Term, upon not less
than thirty (30) days' prior written notice to Tenant, to relocate the Generator
to another area of the Building, and/or to substitute another Building generator
in lieu of the Generator, in either case at Landlord's expense. Tenant shall
cooperate with Landlord to effectuate any such relocation or substitution of the
Generator, provided that Landlord shall promptly reimburse any reasonable
out-of-pocket expenses incurred by Tenant in connection therewith.

                  (g) Upon and subject to the provisions of this Lease, Landlord
shall, at Landlord's expense, maintain and repair the Generator in accordance
with the manufacturer's recommendations and good industry standards, and shall
maintain such service contracts and take such other actions as may be necessary
in Landlord's reasonable judgment to keep the Generator in good working order
during the EPS Term; provided, however, so long as Landlord shall comply with
its obligations pursuant to this subsection (g), Landlord shall not be liable in
any way to Tenant for any delay, interruption, failure, variation or defect in
or with regard to the Generator or EPS. In no event shall Landlord be liable to
Tenant for special, indirect or consequential damages which may result from any
such delay, interruption, failure, variation or defect.

                  ARTICLE 10.         INSURANCE

                  Section 10.1 Tenant, at its expense, shall obtain and keep in
full force and effect a policy of commercial general liability insurance
including premises - operations and contractual liability under which the
insurer agrees to insure Tenant's obligations under Article 28 and under which
Tenant is named as the insured and Landlord, Landlord's asset manager,
Landlord's managing agent for the Building and any Superior Lessors and any
Mortgagees (whose names shall have been furnished to Tenant) are named as
additional insureds, which insurance shall provide primary coverage without
contribution from any other insurance carried by or for the benefit of Landlord,
Landlord's asset manager, Landlord's managing agent and any Superior Lessors or
Mortgagees named as additional insureds. Tenant's primary commercial general
liability policy shall contain a provision that the policy shall be
noncancellable unless thirty (30) days' written notice shall have been given to
Landlord and Landlord shall similarly receive thirty (30) days' notice of any
material change in coverage. The minimum limits of liability shall be a combined
single limit with respect to each occurrence in an amount of not less than
$5,000,000 per location general aggregate limit; provided, however, that
Landlord shall retain the right to require Tenant to increase said coverage to
that amount of insurance which in Landlord's reasonable judgment is then being
customarily required by prudent landlords of comparable buildings in the City of
New York, and provided further that Landlord shall require similar increases of
other tenants of space in the Building comparable to the Premises, to the extent
Landlord shall then have the right to do so under applicable leases. Tenant
shall also obtain and keep in full force and effect during the Term (a)
insurance against loss or damage by fire, and such other risks and hazards as
are insurable under then available standard forms of "all risk" insurance
policies with extended coverage (including theft, sprinkler leakage, and boiler

                                       40

<PAGE>

and machinery, if applicable), to Tenant's Property and Tenant's Alterations for
the full insurable value thereof or on a replacement cost basis; (b) Workers'
Compensation Insurance, as required by law; (c) New York Disability Benefits Law
Policy; (d) Business Interruption Insurance; and (e) such other insurance in
such amounts as Landlord may reasonably require from time to time. All insurance
required to be carried by Tenant pursuant to the terms of this Lease shall be
effected under valid and enforceable policies issued by reputable and
independent insurers permitted to do business in the State of New York, and
rated in Best's Insurance Guide, or any successor thereto (or if there be none,
an organization having a national reputation) as having a Best's Rating of "A-"
and a "Financial Size Category" of at least "XI" or if such ratings are not then
in effect, the equivalent thereof.

                  Section 10.2 (a) Each party hereto does hereby waive any and
all rights of recovery against the other and against the officers, employees,
partners, agents and representatives of the other, for loss of or damage to the
property of the waiving party to the extent such loss or damage is insured
against under any insurance policy carried by Landlord or Tenant hereunder. In
addition, the parties hereto shall procure an appropriate clause in, or
endorsement on, any fire or extended coverage insurance covering the Premises,
the Building and personal property, fixtures and equipment located thereon or
therein, pursuant to which the insurance companies waive subrogation or consent
to a waiver of right of recovery and subject to obtaining such clauses or
endorsements of waiver of subrogation or consent to a waiver of right of
recovery, hereby agree not to make any claim against or seek to recover from the
other for any loss or damage to its property or the property of others resulting
from fire or other hazards covered by such fire and extended coverage insurance;
provided, however, that the release, discharge, exoneration and covenant not to
sue herein contained shall be limited by and coextensive with the terms and
provisions of the waiver of subrogation clause or endorsements or clauses or
endorsements consenting to a waiver of right of recovery. If the payment of an
additional premium is required for the inclusion of such waiver of subrogation
or consent to waiver provision, each party shall advise the other of the amount
of any such additional premiums and the other party at its own election may, but
shall not be obligated to, pay the same. If such other party shall not elect to
pay such additional premium, the first party shall not be required to obtain
such waiver of subrogation or consent to waiver provision. Tenant acknowledges
that Landlord shall not carry insurance on and shall not be responsible for
damage to, Tenant's Alterations (if any) or Tenant's Property, and that Landlord
shall not carry insurance against, or be responsible for any loss suffered by
Tenant due to, interruption of Tenant's business.

                  (b) As to each party hereto, provided such party's right of
full recovery under the applicable insurance policy is not adversely affected,
such party hereby releases the other (its servants, agents, contractors,
employees and invitees) with respect to any claim (including a claim for
negligence) which it might otherwise have against the other party for loss,
damages or destruction of the type covered by such insurance with respect to its
property by fire or other casualty i.e., in the case of Landlord, as to the
Building, and, in the case of Tenant, as to Tenant's Property and Tenant's
Alterations (including rental value or business interruption, as the case may
be) occurring during the Term.

                                       41

<PAGE>

                  Section 10.3 On or prior to the Commencement Date, Tenant
shall deliver to Landlord appropriate certificates of insurance required to be
carried by Tenant pursuant to this Article 10, including evidence of waivers of
subrogation required pursuant to Section 10.2. Evidence of each renewal or
replacement of a policy shall be delivered by Tenant to Landlord at least ten
(10) days prior to the expiration of such policy.

                  Section 10.4 Landlord agrees to maintain (a) insurance against
loss or damage to the Building by fire and such other risks and hazards as are
insurable under then available forms of "all risk" insurance policies with
extended coverage, and (b) a policy of commercial general liability insurance,
in each case with minimum limits of liability in amounts comparable to insurance
maintained by other prudent landlords of comparable office buildings in the City
of New York.

                  ARTICLE 11.  Destruction of the Premises; Property Loss or
Damage

                  Section 11.1 (a) If the Premises shall be damaged by fire or
other casualty, or if the Building shall be so damaged that Tenant shall be
deprived of reasonable access to the Premises, Tenant shall give prompt notice
thereof to Landlord, and the damage shall be repaired by and at the expense of
Landlord to substantially the condition prior to the damage, including Tenant's
Alterations, but excluding Tenant's Property. Until such repairs shall be
substantially completed, Fixed Rent and Additional Rent shall be reduced in the
proportion which the area of the part of the Premises which is neither usable
nor used by Tenant bears to the Premises Area (provided, however, in the event
that ninety percent (90%) or more of the floor area of the Premises shall be so
damaged so as not to be usable, and Tenant is unable to conduct its business in
the remaining portion of the Premises, or if the Premises shall be rendered
inaccessible, then Fixed Rent and Additional Rent shall be entirely abated).
Tenant shall pay to Landlord all proceeds of insurance policies covering
Tenant's Alterations, and such proceeds shall be used by Landlord in the repair
of Tenant's Alterations. Landlord shall have no obligation to repair any damage
to, or to replace, any of Tenant's Property.

                  (b) Concurrently with the collection of any insurance proceeds
attributable to damage to Tenant's Alterations (or the payment by Tenant to
Landlord of an amount equal to such insurance proceeds, pending collection of
such proceeds from its insurer), and as a condition precedent to Landlord's
obligation to commence those repairs to Tenant's Alterations required to be
performed by Landlord pursuant to this Section 11.1, Tenant shall pay to
Landlord (i) the amount of any deductible under the policy insuring Tenant's
Alterations, and (ii) the amount, if any, by which the cost of repairing and
restoring Tenant's Alterations, as estimated by a reputable independent
contractor designated by Landlord, exceeds the available insurance proceeds
therefor; provided, however, that Tenant may dispute the reasonableness of such
estimate by arbitration of the issue in accordance with the procedural
provisions set forth in Section 30.6. If the arbitrator determines such estimate
to have been reasonable, Tenant's payment shall be calculated based upon such
estimate; and if the arbitrator determines such estimate to have been
unreasonable, the arbitrator shall, without hearing any additional submission of
evidence or arguments by the parties, further determine the highest reasonable
estimate, and Tenant's payment shall be calculated based upon such estimate. The
amounts

                                       42
<PAGE>

finally determined to be due in accordance with this Section 11.1(b) constitute
Additional Rent under this Lease and shall be payable by Tenant to Landlord upon
demand.

                  Section 11.2 (a) If the Building shall be so damaged by fire
or other casualty that, in Landlord's reasonable opinion, substantial
alteration, demolition, or reconstruction of the Building shall be required
(whether or not the Premises shall have been damaged or rendered untenantable),
then in any of such events, Landlord may, not later than sixty (60) days
following the date of the damage, give Tenant a notice in writing terminating
this Lease, provided (i) Landlord similarly terminates the leases of other
tenants in the Building covering at least twenty-five percent (25%) of the
Rentable Square Footage (exclusive of the Premises) of the then leased space in
the Building, and (ii) Landlord does not restore the Premises and lease the same
for office purposes.

                  (b) If this Lease is so terminated, the Term shall expire upon
the tenth (10th) day after such notice is given, and Tenant shall vacate the
Premises and surrender the same to Landlord. Upon the termination of this Lease
under the conditions provided for in this Section 11.2, Tenant's liability for
Fixed Rent and Additional Rent shall cease as of the date of such fire or other
casualty, and any prepaid portion of Fixed Rent or Additional Rent for any
period after such date shall be refunded by Landlord to Tenant.

                  (c) If this Lease is terminated pursuant to the provisions of
this Article 11, then Landlord shall collect the insurance proceeds of policies
providing coverage for Tenant's Alterations as provided in Section 11.1(a).
Landlord shall retain such proceeds to the extent of sums, if any, advanced by
Landlord to Tenant with respect to any of Tenant's Alterations. The balance of
such proceeds, if any, shall be paid to Tenant.

                  Section 11.3 (a) If the Premises are damaged by fire or other
casualty and are rendered wholly untenantable thereby, or if the Building shall
be so damaged that Tenant shall be deprived of reasonable access to the
Premises, and if Landlord shall not elect to terminate this Lease as permitted
by this Article 11, Landlord shall, within sixty (60) days following the date of
the damage, cause a contractor or architect selected by Landlord to give notice
(the "Restoration Notice") to Tenant of the date by which such contractor or
architect believes the restoration of the Premises shall be Substantially
Completed. If the Restoration Notice shall indicate that reasonable access to
the Premises shall not be restored, or the restoration shall not be
Substantially Completed on or before the date which shall be nine (9) months
following the date of such damage or destruction or prevention of access, Tenant
shall have the right to terminate this Lease by giving written notice (the
"Termination Notice") to Landlord not later than thirty (30) days following
receipt of the Restoration Notice. If Tenant gives a Termination Notice, this
Lease shall be deemed cancelled and terminated as of the date of the giving of
the Termination Notice as if such date were the Expiration Date, and Fixed Rent
and Additional Rent shall be apportioned and shall be paid or refunded, as the
case may be up to and including the date of such damage or destruction.
Notwithstanding anything set forth to the contrary in this Article 11, in the
event that a fire or other casualty rendering the Premises wholly untenantable
shall occur during the final year of the Term, either Landlord or Tenant may
terminate this Lease by giving the other party a Termination Notice as set forth
herein. As used in this Section 11.3(a), the term "wholly untenantable" shall be
deemed to include a condition

                                       43

<PAGE>

whereby less than all of the Premises shall be untenantable, but the undamaged
portion shall be inadequate for the reasonable operation of Tenant's business at
the Premises.

                  (b) If (i) Tenant shall have had the right to give a
Termination Notice pursuant to Section 11.3(a) but shall not have done so, and
Landlord fails thereafter to Substantially Complete the restoration of the
Premises on or before the date which is thirty (30) days following the later to
occur of (y) nine (9) months following the date of such damage or destruction,
or (z) the date set forth in the Restoration Notice, or (ii) if Tenant shall not
have had the right to give a Termination Notice pursuant to Section 11.3(a) and
thereafter Landlord shall fail to substantially complete the restoration of the
Premises on or before the date which is nine (9) months following the date of
such damage or destruction, then in either of such events Tenant shall again
have the right to terminate this Lease by giving a Termination Notice (a "Second
Termination Notice"), and, unless Landlord Substantially Completes the
restoration of the Premises within thirty (30) days following the giving of such
Second Termination Notice, this Lease shall be deemed canceled and terminated as
set forth in Section 11.3(a).

                  Section 11.4 This Article 11 constitutes an express agreement
governing any case of damage or destruction of the Premises or the Building by
fire or other casualty, and Section 227 of the Real Property Law of the State of
New York, which provides for such contingency in the absence of an express
agreement, and any other law of like nature and purpose now or hereafter in
force shall have no application in any such case.

                  ARTICLE 12.       EMINENT DOMAIN

                  Section 12.1 (a) If (i) all of the floor area of the Premises,
or so much thereof as shall render the Premises wholly untenantable, shall be
acquired or condemned for any public or quasi-public use or purpose, or (ii) a
portion of the Real Property, not including the Premises, shall be so acquired
or condemned, but by reason of such acquisition or condemnation, Tenant no
longer has means of access to the Premises, then this Lease and the Term shall
end as of the date of the vesting of title with the same effect as if that date
were the Expiration Date. In the event of any termination of this Lease and the
Term pursuant to the provisions of this Article 12, Fixed Rent and Additional
Rent shall be apportioned as of the date of such termination and any prepaid
portion of Fixed Rent or Additional Rent for any period after such date shall be
refunded by Landlord to Tenant.

                  (b) If the part of the Real Property so acquired or condemned
contains more than twenty-five percent (25%) of the total area of the Premises
immediately prior to such acquisition or condemnation, or if, by reason of such
acquisition or condemnation Tenant no longer has reasonable means of access to
the Premises, Tenant may terminate this Lease by notice to Landlord given within
thirty (30) days following the date upon which Tenant receives notice of such
acquisition or condemnation. If Tenant so notifies Landlord, this Lease shall
terminate and the Term shall end and expire upon the thirtieth (30th) day
following the giving of such notice.

                  Section 12.2 In the event of any such acquisition or
condemnation of all or any part of the Real Property, Landlord shall be entitled
to receive the entire award for any such

                                       44

<PAGE>

acquisition or condemnation. Tenant shall have no claim against Landlord or the
condemning authority for the value of any unexpired portion of the Term or
Tenant's Alterations, and Tenant hereby expressly assigns to Landlord all of its
right in and to any such award. Nothing contained in this Section 12.2 shall be
deemed to prevent Tenant from making a separate claim in any condemnation
proceedings for the then value of any Tenant's Property included in such taking
and for any moving expenses, provided such award shall be made by the condemning
authority in addition to, and shall not result in a reduction of, the award made
by it to Landlord.

                  Section 12.3 If only a part of the Real Property shall be so
acquired or condemned then, subject to Section 12.1, this Lease and the Term
shall continue in force and effect. If a part of the Premises shall be so
acquired or condemned and this Lease and the Term shall not be terminated,
Landlord, at Landlord's expense, shall restore that part of the Premises not so
acquired or condemned so as to constitute tenantable Premises. From and after
the date of the vesting of title, Fixed Rent and Additional Rent shall be
reduced in the proportion which the area of the part of the Premises so acquired
or condemned bears to the total area of the Premises immediately prior to such
acquisition or condemnation.

                  ARTICLE 13.       ASSIGNMENT AND SUBLETTING

                  Section 13.1 Except as otherwise expressly provided herein,
Tenant, for itself, its heirs, distributees, executors, administrators, legal
representatives, successors and assigns, expressly covenants that it shall not
assign, mortgage, pledge, encumber, or otherwise transfer this Lease, nor sublet
(nor underlet), nor suffer, nor permit the Premises or any part thereof to be
used or occupied by others (whether for desk space, mailing privileges or
otherwise), without the prior written consent of Landlord in each instance. If
this Lease is assigned, or if the Premises or any part thereof are sublet or
occupied by anybody other than Tenant, or if this Lease or the Premises are
encumbered (whether by operation of law or otherwise) without Landlord's
consent, then Landlord may, after default by Tenant beyond applicable grace or
notice periods, collect rent from the assignee, subtenant or occupant, and apply
the net amount collected to Fixed Rent and Additional Rent, but no assignment,
subletting, occupancy or collection shall be deemed a waiver by Landlord of the
provisions hereof, the acceptance by Landlord of the assignee, subtenant or
occupant as a tenant, or a release by Landlord of Tenant from the further
performance by Tenant its obligations under this Lease, and Tenant shall remain
fully liable therefor. The consent by Landlord to any assignment or subletting
shall not in any way be construed to relieve Tenant from obtaining the express
consent in writing of Landlord to any further assignment or subletting. In no
event shall any permitted subtenant assign or encumber its sublease or further
sublet all or any portion of its sublet space, or otherwise suffer or permit the
sublet space or any part thereof to be used or occupied by others, without
Landlord's prior written consent in each instance. Any assignment, sublease,
mortgage, pledge, encumbrance or transfer in contravention of the provisions of
this Article 13 shall be void.

                  Section 13.2 (a) If Tenant shall, at any time or from time to
time, during the Term desire to assign this Lease or sublet all or part of the
Premises, Tenant shall give notice (a "Tenant's Notice") thereof to Landlord,
which Tenant's Notice shall set forth: (i) with respect to an assignment of this
Lease, the date Tenant desires the assignment to be effective and any
consideration Tenant would receive under such assignment, (ii) with respect to a
sublet of all or a

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part of the Premises (x) the dates upon which Tenant desires the sublease term
to commence and expire, (y) the rental rate and other material business terms
upon which Tenant would sublet such premises, and (z) a description of the
Premises showing the portion to be sublet, the effective or commencement date of
which shall be not less than thirty (30) nor more than one hundred and eighty
(180) days after the giving of such notice, (iii) a statement setting forth in
reasonable detail the identity of the proposed assignee or subtenant, the nature
of its business and its proposed use of the Premises, (iv) current financial
information with respect to the proposed assignee or subtenant, including its
most recent financial report, and (v) an agreement by Tenant to indemnify
Landlord against liability resulting from any claims that may be made against
Landlord by the proposed assignee or subtenant or by any brokers or other
Persons claiming a commission or similar compensation in connection with the
proposed assignment or sublease. Tenant's Notice shall be deemed an offer from
Tenant to Landlord whereby Landlord (or Landlord's designee) may, at its option,
(I) sublease such space (the "Leaseback Space") from Tenant upon the terms and
conditions set forth in Section 13.4, or terminate the Lease with respect to
only the Leaseback Space, or (II) if the proposed transaction is (1) an
assignment of this Lease or (2) a subletting of fifty percent (50%) or more of
the rentable area of the Premises, terminate this Lease.

                  (b) Landlord agrees to respond to any Tenant's Notice given in
accordance with Section 13.2(a) within twenty (20) days after request, provided
the Tenant's Notice complies in all material respects with the requirements of
Section 13.2(a). If Landlord fails to either approve or disapprove the requested
assignment or subletting on or before the end of such twenty-day period, Tenant
shall have the right to provide Landlord with a second written request for
approval (a "Second Request"), which shall include all material previously
delivered to Landlord together with Tenant's Notice, and set forth in bold
capital letters the following statement: IF LANDLORD FAILS TO RESPOND WITHIN
FIVE (5) BUSINESS DAYS AFTER RECEIPT OF THIS NOTICE, THEN TENANT SHALL BE
ENTITLED TO ENTER INTO THE PROPOSED [ASSIGNMENT] [ SUBLEASE] DESCRIBED IN THE
NOTICE ENCLOSED HEREWITH, WHICH WAS PREVIOUSLY SUBMITTED TO LANDLORD AND TO
WHICH LANDLORD HAS FAILED TO TIMELY RESPOND. In the event that Landlord fails to
respond to a Second Request within five (5) Business Days after receipt by
Landlord, the proposed assignment or sublease as to which the Second Request is
submitted shall be deemed to be approved by Landlord, and Tenant shall be
entitled to enter into such transaction, provided that such assignment or
sublease complies with the requirements of this Article 13 and all other
provisions of this Lease applicable thereto.

                  Section 13.3 If Landlord exercises its option to terminate
this Lease with respect to all or a portion of the Premises pursuant to Section
13.2, then this Lease shall terminate and expire (in its entirety or as it
relates to the portion of the Premises identified in the Tenant's Notice, as
applicable) on the date that such assignment or sublease was to be effective or
commence, as the case may be, and the Fixed Rent and Additional Rent due
hereunder shall be paid and apportioned to such date. In such event, Landlord
and Tenant, upon request of either party, shall enter into an amendment of this
Lease ratifying and confirming such total or partial termination, and setting
forth appropriate modifications, if any, to the terms and provisions hereof.
Following such termination, Landlord shall be free to and shall have no
liability to

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Tenant if Landlord should lease the Premises (or any part thereof) to Tenant's
prospective assignee or subtenant.

                  Section 13.4 If Landlord exercises its option to sublet the
Leaseback Space, such sublease to Landlord or its designee (as subtenant) shall
be at a rental rate equal to the product of (i) the lesser of (A) the rental
rate per rentable square foot of Fixed Rent and Additional Rent then payable
pursuant to this Lease, or (B) the rental rate per rentable square foot of rent
and additional rent set forth in Tenant's Notice, multiplied by (ii) the number
of rentable square feet of the Leaseback Space, and shall be for the same term
as that of the proposed subletting, and such sublease shall:

                           (a) be upon such other terms and conditions as are
         contained in Tenant's Notice, and be expressly subject to all of the
         covenants, agreements, terms, provisions and conditions of this Lease,
         except such as are irrelevant or inapplicable, and except as expressly
         set forth in this Article 13 to the contrary;

                           (b) give the subtenant the unqualified and
         unrestricted right, without Tenant's permission, to assign such
         sublease or any interest therein and/or to sublet the space covered by
         such sublease or any part or parts of such space and to make any and
         all changes, alterations and improvements in the space covered by such
         sublease, provided that such changes, alterations or improvements do
         not materially adversely affect Tenant's use and occupancy of the
         portion of the Premises other than the Leaseback Space; and if the
         proposed sublease will result in all or substantially all of the
         Premises being sublet, grant Landlord or its designee the option to
         extend the term of such sublease for the balance of the Term less one
         day, and provided further that, if the term of such sublease is twelve
         (12) or more months shorter than the Term, the Premises being sublet
         shall be suitable for the Permitted Use upon expiration of the sublease
         term;

                           (c) provide that any assignee or further subtenant of
         Landlord or its designee, may, at Landlord's option, be permitted to
         make alterations, decorations and installations in such space or any
         part thereof, provided that such changes, alterations or improvements
         do not materially adversely affect Tenant's use and occupancy of the
         portion of the Premises other than the Leaseback Space, and shall also
         provide in substance that any such alterations, decorations and
         installations in such space therein made by any assignee or subtenant
         of Landlord or its designee may be removed, in whole or in part, by
         such assignee or subtenant, at its option, prior to or upon the
         expiration or other termination of such sublease; provided, however,
         that such assignee or subtenant shall, at its sole cost and expense,
         repair any damage and injury caused by such removal; and provided
         further that, if the term of such sublease is twelve (12) or more
         months shorter than the Term, the Premises being sublet shall be
         suitable for the Permitted Use upon expiration of the sublease term;
         and

                           (d) provide that (i) the parties to such sublease
         expressly negate any intention that any estate created under such
         sublease be merged with any other estate held by either of said
         parties, (ii) any assignment or sublease by Landlord or its designee
         (as the subtenant) may be for any purpose or purposes that Landlord, in
         Landlord's

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<PAGE>

         uncontrolled discretion, shall deem suitable or appropriate,
         provided that the use of the Leaseback Space for such purpose or
         purposes shall not unreasonably interfere with Tenant's use and
         occupancy of the portion of the Premises other than the Leaseback
         Space, (iii) Tenant shall, at Tenant's sole cost and expense, at all
         times provide and permit reasonably appropriate means of ingress to and
         egress from such space so sublet by Tenant to Landlord or its designee,
         (iv) Landlord may make such alterations as may be required or deemed
         necessary by Landlord to physically separate the subleased space from
         the balance of the Premises and to comply with any legal or insurance
         requirements relating to such separation (all at Tenant's sole cost and
         expense, unless such alterations would be the subtenant's obligation to
         perform or pay for pursuant to the proposed sublease), provided,
         however, that Landlord shall use reasonable efforts to minimize the
         duration of such alterations and interference by reason thereof with
         Tenant's access to and use and occupancy of the portion of the Premises
         other than the Leaseback Space, (v) at the expiration of the term of
         such sublease, Tenant will accept the space covered by such sublease in
         its then existing condition, subject to the obligations of the
         subtenant to make such repairs thereto as may be necessary to preserve
         the premises demised by such sublease in good order and condition, and
         provided that Tenant shall have no obligation under this Lease to
         restore any Alterations or other changes, decorations or installations
         made by or on behalf of such subtenant, or any damage caused by
         Landlord's removal of alterations, decorations or installations, and
         provided further that, if the term of such sublease is twelve (12) or
         more months shorter than the Term, the Premises being sublet shall be
         suitable for the Permitted Use upon expiration of the sublease term;
         and (vi) Tenant shall have no obligation to provide services of any
         kind to the Leaseback Space, provided, however, that Tenant shall
         permit Landlord, Landlord's agents and public utilities servicing the
         Leaseback Space to erect, use and maintain all concealed ducts, pipes
         and conduits in and through the Premises as Landlord shall reasonably
         require, provided that the exercise of such rights shall not materially
         affect the layout or reduce the floor area of the Premises.

                  Section 13.5 (a) If Landlord exercises its option to sublet
the Leaseback Space, Landlord shall indemnify and save Tenant harmless from all
obligations under this Lease as to the Leaseback Space during the period of time
it is so sublet to Landlord, except as to any obligation which arises out of or
results from the negligence or willful misconduct of Tenant or any Tenant Party.

                  (b) Performance by Landlord, or its designee, under a sublease
of the Leaseback Space shall be deemed performance by Tenant of any similar
obligation under this Lease and any default under any such sublease shall not
give rise to a default under a similar obligation contained in this Lease nor
shall Tenant be liable for any default under this Lease or deemed to be in
default hereunder, unless such default is occasioned by or arises from the
negligence or willful misconduct of Tenant or any Tenant Party.

                  (c) Tenant shall have no obligation, at the expiration or
earlier termination of the Term, to remove any alteration, installation or
improvement made in the Leaseback Space by Landlord (or Landlord's designee).

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<PAGE>

                  (d) Any consent required of Tenant, as Landlord under the
sublease, shall be deemed granted if consent with respect thereto is granted by
Landlord under this Lease, and any failure of Landlord (or its designee) to
comply with the provisions of the sublease other than with respect to the
payment of Fixed Rent and Additional Rent to Tenant, shall not constitute a
default thereunder or hereunder if Landlord shall have consented to such
non-compliance.

                  Section 13.6 In the event Landlord does not exercise either
option provided to it pursuant to Section 13.2, and provided that no Event of
Default shall have occurred and be continuing under this Lease as of the time
Landlord's consent is requested by Tenant, Landlord's consent (which must be in
writing, subject to the provisions of Section 13.2(b)) to the proposed
assignment or sublease shall not be unreasonably withheld or delayed; provided,
however, that:

                           (a) Tenant shall have complied with the provisions of
         Section 13.2, and Landlord shall not have exercised any of its options
         thereunder within the time permitted therefor;

                           (b) In Landlord's judgment, the proposed assignee or
         subtenant is engaged in a business or activity, and the Premises, or
         the relevant part thereof, will be used in a manner, which (i) is in
         keeping with the then standards of the Building, and (ii) does not
         violate the restrictions set forth in Article 2;

                           (c) The proposed assignee or subtenant has sufficient
         financial worth considering the responsibility involved, and Landlord
         has been furnished with evidence thereof;

                           (d) In the event Landlord has comparable space in the
         Building available for lease, then (i) neither the proposed assignee or
         subtenant nor any Person which, directly or indirectly, controls, is
         controlled by, or is under common control with, the proposed assignee
         or subtenant, is then an occupant of any part of the Building, and (ii)
         the proposed assignee or subtenant is not a Person (or Affiliate of a
         Person) with whom Landlord or Landlord's agent is then, or has been
         within the previous four (4) month period, negotiating in connection
         with rental of space in the Building;

                           (e) The form of the proposed sublease or instrument
         of assignment shall be reasonably satisfactory to Landlord and shall
         comply with the applicable provisions of this Article 13, and Tenant
         shall deliver a true and complete original, fully executed counterpart
         of such sublease or other instrument to Landlord promptly upon the
         execution and delivery thereof;

                           (f) Tenant and its proposed subtenant or assignee, as
         the case may be, shall execute and deliver to Landlord an agreement, in
         form and substance reasonably satisfactory to Landlord, setting forth
         the terms and conditions upon which Landlord shall have granted its
         consent to such assignment or subletting, and the agreement of Tenant
         and such subtenant or assignee, as the case may be, to be bound by the
         provisions of this Article 13;

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<PAGE>

                           (g) There shall not be more than four (4) subtenants
         of the Premises;

                           (h) The amount of the aggregate rent to be paid by
         the proposed subtenant shall not be twenty percent (20%) or more below
         the then current market rent per rentable square foot for the Premises,
         determined as though the Premises were vacant, and the rental and other
         terms and conditions of the sublease shall be substantially the same as
         those contained in Tenant's Notice;

                           (i) Tenant shall reimburse Landlord, as Additional
         Rent upon demand, for (A) the reasonable costs and expenses incurred by
         Landlord in connection with the assignment or sublease, including the
         costs of investigations as to the acceptability of the proposed
         assignee or subtenant and the cost of reviewing plans and
         specifications proposed to be made in connection therewith, and (B)
         Landlord's reasonable legal fees and disbursements incurred in
         connection with the granting of any requested consent and the
         preparation of Landlord's written consent to the sublease or
         assignment;

                           (j) Tenant shall not have (i) advertised or
         publicized in any way the availability of the Premises without prior
         notice of and approval by Landlord, or (ii) advertised or publicized in
         any way (or caused or permitted to be advertised or publicized in any
         way) the Premises for sublease or assignment at a rental rate
         materially less than the fixed rent and additional rent at which
         Landlord is then offering to lease comparable space in the Building for
         a comparable term;

                           (k) The proposed occupancy shall not impose a
         material extra burden upon services to be supplied by Landlord to
         Tenant, unless Tenant and such proposed subtenant or assignee shall
         agree with Landlord in writing to pay the costs of such additional
         services; and

                           (l) The proposed subtenant or assignee shall not be
         entitled, directly or indirectly, to diplomatic or sovereign immunity
         and shall be subject to the service of process in, and the jurisdiction
         of the courts of New York State.

Except for any sublease by Tenant to Landlord or its designee pursuant to this
Article 13, each sublease pursuant to this Section 13.6 shall be subject to all
of the covenants, agreements, terms, provisions and conditions contained in this
Lease. Notwithstanding any such sublease to Landlord or any such sublease to any
other subtenant, or any acceptance of Fixed Rent or Additional Rent by Landlord
from any subtenant, Tenant will remain fully liable for the payment of the Fixed
Rent and Additional Rent due and to become due hereunder and for the performance
of all the covenants, agreements, terms, provisions and conditions contained in
this Lease on Tenant's part to be observed and performed, and for all acts and
omissions of any licensee or subtenant or anyone claiming under or through any
subtenant which shall be in violation of any of the obligations of this Lease,
and any such violation shall be deemed to be a violation by Tenant. If Landlord
shall decline to give its consent to any proposed assignment or sublease, or if
Landlord shall exercise either of its options under Section 13.2, Tenant shall
indemnify, defend and hold harmless Landlord against and from any and all
losses, liabilities, damages, costs, and expenses (including reasonable
attorneys' fees and disbursements) resulting from any claims that

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<PAGE>

may be made against Landlord by the proposed assignee or subtenant arising from
or in connection with such proposed assignment or subletting, or by any brokers
or other Persons (with whom Tenant or its proposed assignee or subtenant may
have dealt) claiming a commission or similar compensation in connection with the
proposed assignment or sublease.

                  Section 13.7 In the event that (a) Landlord fails to exercise
either of its options under Section 13.2 and consents to a proposed assignment
or sublease, and (b) Tenant fails to execute and deliver the assignment or
sublease to which Landlord consented within one hundred twenty (120) days after
the giving of such consent, then, Tenant shall again comply with all of the
provisions and conditions of Section 13.2 before assigning this Lease or
subletting all or part of the Premises.

                  Section 13.8 With respect to each and every sublease
authorized by Landlord under the provisions of this Lease, it is further agreed
that:

                           (a) No sublease shall be for a term ending later than
         one day prior to the Expiration Date of this Lease;

                           (b) No sublease shall be delivered, and no subtenant
         shall take possession of the Premises or any part thereof, until an
         executed counterpart of such sublease has been delivered to Landlord
         and approved in writing by Landlord (or deemed approved pursuant to
         Section 13.2(a) or (b)); and

                           (c) Each sublease shall be subject and subordinate to
         this Lease and to the matters to which this Lease is or shall be
         subordinate, and each subtenant by entering into a sublease is deemed
         to have agreed that in the event of termination, re-entry or
         dispossession by Landlord under this Lease, Landlord may, at its
         option, take over all of the right, title and interest of Tenant, as
         sublandlord, under such sublease, and such subtenant shall, at
         Landlord's option, attorn to Landlord pursuant to the then executory
         provisions of such sublease, except that Landlord shall not (i) be
         liable for any previous act or omission of Tenant under such sublease
         (except to the extent such act or omission is a default under the
         Sublease and continues beyond the date on which Landlord succeeds to
         Tenant's interest, provided that the subtenant gives notice of such act
         or omission to Landlord prior to such takeover by Landlord), (ii) be
         subject to any counterclaim, offset or defense, not expressly provided
         in such sublease, which theretofore accrued to such subtenant against
         Tenant, (iii) be bound by any previous modification of such sublease
         not consented to in writing by Landlord, or by any previous prepayment
         of more than one month's Fixed Rent or of any Additional Rent, or (iv)
         be obligated to perform any work in the subleased space or to prepare
         it for occupancy, and in connection with such attornment, the subtenant
         shall execute and deliver to Landlord any instruments Landlord may
         reasonably request to evidence and confirm such attornment. Each
         subtenant or licensee of Tenant shall be deemed, automatically upon and
         as a condition of its occupying or using the Premises or any part
         thereof, to have agreed to be bound by the terms and conditions set
         forth in this Article 13. The provisions of this Article 13 shall be
         self-operative and no further instrument shall be required to give
         effect to this provision.

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                  Section 13.9 If Landlord shall consent to any assignment of
this Lease or to any sublease, or if Tenant shall enter into any other
assignment or sublease permitted hereunder, Tenant shall, in consideration
therefor, pay to Landlord, as Additional Rent:

                           (a) In the case of an assignment, on the effective
         date of the assignment, an amount equal to fifty percent (50%) of (i)
         all sums and other consideration paid to Tenant by the assignee for or
         by reason of such assignment (including sums paid for Tenant's
         Property, less, in the case of a sale thereof, the then net unamortized
         or undepreciated cost thereof, determined on the basis of Tenant's
         federal income tax returns) less (ii) all Transaction Expenses
         reasonably and actually incurred by Tenant in connection with such
         assignment; or

                           (b) In the case of a sublease, an amount equal to
         fifty percent (50%) of (i) all rents, additional charges or other
         consideration payable to Tenant under the sublease in excess of the
         Fixed Rent and Additional Rent accruing during the term of the sublease
         in respect of the subleased space (at the rate per square foot payable
         by Tenant hereunder) pursuant to the terms hereof (including sums paid
         for the sale or rental of Tenant's Property, less, in the case of the
         sale thereof, the then net unamortized or undepreciated cost thereof,
         determined on the basis of Tenant's federal income tax returns) less
         (ii) all Transaction Expenses reasonably and actually incurred by
         Tenant in connection with such sublease. The sums payable under this
         clause shall be paid by Tenant to Landlord as Additional Rent as and
         when paid by the subtenant to Tenant.

                  Section 13.10 (a) Subject to the provisions of Section 13.11,
if Tenant is a corporation, limited liability company, limited partnership,
limited liability partnership, general partnership, business trust, foundation,
or any other legal entity (any of the foregoing, an "Entity"), and a majority of
the outstanding voting stock, membership interests, partnership interests or
other legal or equitable ownership interests of any kind (any of the foregoing,
"Ownership Interests") are not publicly traded on a recognized stock exchange or
over-the-counter market, then any transfer (by one or more transfers), of a
majority of the Ownership Interests of Tenant shall be deemed an assignment of
this Lease for all purposes of this Article 13. The term "transfer" shall be
deemed to include the issuance of new Ownership Interests resulting in a
majority of the Ownership Interests of Tenant being held by Persons (other than
barnesandnoble.com inc.) which do not hold a majority of the Ownership Interests
of Tenant on the date hereof, except in the case of a public offering of
Ownership Interests on a recognized stock exchange or over-the-counter market.
The transfer of a majority of the Ownership Interests of Tenant through one or
more transfers on a recognized stock exchange or over-the-counter market shall
not be deemed an assignment of this Lease for purposes of this Article 13.

                  (b) If Tenant is an Entity, and Tenant is merged or
consolidated with another Entity, or if substantially all of Tenant's assets are
transferred to another Entity, then such merger, consolidation or transfer of
assets shall be deemed an assignment of this Lease for all purposes of this
Article 13. Notwithstanding the foregoing, Landlord's consent shall not be
required for such assignment, and the provisions of Sections 13.2, 13.6 and 13.9
shall not be applicable thereto, so long as each of the following conditions
have been satisfied: (i) such merger, consolidation or transfer of assets shall
have been made for a legitimate independent business purpose and not for

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the principal purpose of transferring this Lease, (ii) the successor to Tenant
or transferee of substantially all of Tenant's assets shall have a net worth,
computed in accordance with generally accepted accounting principles
consistently applied of not less than $300,000,000.00 (the "Successor Net
Worth"), (unless barnesandnoble.com inc. is the successor to Tenant or is the
transferee of such assets, in which case barnesandnoble.com inc. shall have a
net worth, computed in accordance with generally accepted accounting principles
consistently applied, at least equal to the net worth of Tenant immediately
prior to such merger, consolidation or transfer) and (iii) proof satisfactory to
Landlord of the Successor Net Worth (or, in the case of Guarantor
(barnesandnoble.com inc.), a net worth at least equal to the net worth of Tenant
immediately prior to such merger, consolidation or transfer) shall have been
delivered to Landlord at least ten (10) days prior to the effective date of any
such transaction. Notwithstanding the foregoing, in the event that the Successor
Net Worth shall be less than $300,000,000.00, Tenant may satisfy the condition
set forth in Subsection 13.10(b)(ii) as follows: (A) if the Successor Net Worth
is less than $300,000,000.00 but more than $250,000,000.00, Tenant shall
increase the Security Deposit by $500,000.00 above the Security Deposit then
held by Landlord, (B) if the Successor Net Worth is less than $250,000,000.00
but more than $200,000,000.00, Tenant shall increase the Security Deposit by
$1,000,000.00 above the Security Deposit then held by Landlord, and (C) if the
Successor Net Worth is less than $200,000,000.00, Tenant shall provide Landlord
with a Guaranty or Guarantys, substantially in the form attached as Exhibit O to
this Lease, of Tenant's obligations under this Lease executed by B&N Inc. and/or
by Bertelsmann, provided that at the time of execution and delivery of such
Guaranty, Tenant shall provide to Landlord reasonable evidence that such
guarantor(s) shall have a net worth, computed in accordance with generally
accepted accounting principles consistently applied, of not less than
$300,000,000.00 in the aggregate.

                  (c) The limitations set forth in this Section 13.10 shall be
deemed to apply to assignees of this Lease, if any, and any transfer of
Ownership Interests in, or any merger, consolidation or transfer of assets of,
any such assignee in violation of this Section 13.10 shall be deemed to be an
assignment of this Lease in violation of Section 13.1.

                  (d) A material modification or amendment or an extension of a
sublease shall be deemed a sublease for the purposes of Section 13.1, and a
takeover agreement shall be deemed a transfer of this Lease for the purposes of
Section 13.1.

                  Section 13.11 Tenant may, without Landlord's consent but upon
not less than ten (10) days prior notice to Landlord, assign this Lease or
sublet all or any portion of the Premises to any wholly owned subsidiary,
Affiliate or parent of Tenant, Bertelsmann or B&N Inc. (any of the foregoing, a
"Permitted Occupant"), or permit any Permitted Occupant to occupy all or any
portion of the Premises, provided that each Permitted Occupant shall be engaged
in a business or activity which is in keeping with the standards of the Building
and which is a Permitted Use. The provisions of Sections 13.2, 13.6, 13.9 and
13.10 shall not be applicable to any such assignment, subleasing or occupancy.
Any assignment or subleasing to, or occupancy by, any such Permitted Occupant
shall not relieve, release, impair or discharge any of Tenant's obligations
under this Lease. Each notice to Landlord with respect to any assignment,
subleasing or occupancy granted pursuant to this Section 13.11 shall include (i)
the name and the nature of

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<PAGE>

the business or occupation of such Permitted Occupant, and (ii) the terms of
such assignment, subleasing or occupancy.

                  Section 13.12 (a) Any assignment or transfer, whether made
with Landlord's consent pursuant to Section 13.1 or without Landlord's consent
to the extent permitted under Sections 13.10 and 13.11, shall be made only if,
and shall not be effective until, the assignee shall execute, acknowledge and
deliver to Landlord an agreement in form and substance reasonably satisfactory
to Landlord whereby the assignee shall assume the obligations of this Lease on
the part of Tenant to be performed or observed from and after the effective date
of such assignment or transfer, and whereby the assignee shall agree that the
provisions in Section 13.1 shall, notwithstanding such assignment or transfer,
continue to be binding upon it in respect of all future assignments and
transfers.

                  (b) The joint and several liability of Tenant and any
immediate or remote successor in interest of Tenant and the due performance of
the obligations of this Lease on Tenant's part to be performed or observed shall
not be discharged, released or impaired in any respect by any agreement or
stipulation made by Landlord, or any grantee or assignee of Landlord by way of
mortgage or otherwise, extending the time, or modifying any of the obligations
of this Lease, or by any waiver or failure of Landlord, or any grantee or
assignee of Landlord by way of mortgage or otherwise, to enforce any of the
obligations of this Lease.

                  (c) The listing of any name other than that of Tenant, whether
on the doors of the Premises or the Building directory, or otherwise, shall not
operate to vest any right or interest in this Lease or in the Premises, nor
shall it be deemed to be the consent of Landlord to any assignment or transfer
of this Lease or to any sublease of Premises or to the use or occupancy thereof
by others. Any such listing shall constitute a privilege extended by Landlord,
revocable at Landlord's will by notice to Tenant, provided that Landlord shall
not unreasonably revoke such privilege as to any Affiliate of Tenant, or any
subtenant of Tenant or assignee of this Lease approved by Landlord pursuant to
this Article 13 (or without Landlord's approval, to the extent permitted
pursuant to Section 13.11).

                  ARTICLE 14.  ACCESS TO PREMISES

                  Section 14.1 Tenant shall permit Landlord, Landlord's agents
and public utilities servicing the Building to erect, use and maintain concealed
ducts, pipes and conduits in and through the Premises. Landlord or Landlord's
agents shall have the right to enter the Premises at all reasonable times upon
reasonable prior notice (except no such prior notice shall be required in case
of emergency), which notice may be oral, to examine the same, to show them to
prospective purchasers, Mortgagees, Superior Lessors or lessees of the Building
and their respective agents and representatives or (during the last twelve (12)
months of the Term) prospective tenants of the Premises, and to make such
repairs, alterations, improvements or additions (a) as Landlord may deem
necessary to the Premises or to any other portion of the Building, or (b) which
Landlord may elect to perform following Tenant's failure to make repairs or
perform any work which Tenant is obligated to make or perform under this Lease
after expiration of any applicable notice and cure periods, or (c) for the
purpose of complying with Legal Requirements, and Landlord shall be allowed to
take all material into and upon the Premises that may be reasonably required

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therefor without the same constituting an eviction or constructive eviction of
Tenant in whole or in part and Fixed Rent and Additional Rent will not be abated
while said repairs, alterations, improvements or additions are being made, by
reason of loss or interruption of business of Tenant, or otherwise. Landlord
shall use reasonable efforts to minimize the duration thereof and interference
by reason thereof with Tenant's access to and use and occupancy of the Premises
in making any repairs, alterations, additions or improvements pursuant to this
Section 14.1, provided that Landlord shall have no obligation to employ
contractors or labor at overtime or other premium pay rates or to incur any
other overtime costs or additional expenses whatsoever, unless Tenant shall
first pay to Landlord Landlord's reasonable estimate of all incremental cost
increases to do so. In such event Tenant shall pay, as Additional Rent upon
presentation of appropriate invoices, all additional costs incurred by Landlord
in connection therewith. Notwithstanding the foregoing, as to any rights
exercised by Landlord to make repairs, alterations, conditions and improvements
within the Premises, Landlord agrees that such exercise shall not affect the
layout or reduce the floor area of the Premises, except to a de minimis extent.
Landlord shall promptly repair and restore any damage to the Premises, including
Tenant's Alterations or Tenant's Property, caused by such exercise of Landlord's
rights, at Tenant's sole cost and expense (if such exercise was in response to
any act or omission constituting a default by Tenant), or at Landlord's sole
cost and expense (in all other cases).

                  Section 14.2 If Tenant shall not be present when for any
reason entry into the Premises shall be necessary, Landlord or Landlord's agents
may enter the same without rendering Landlord or such agents liable therefor (if
during such entry Landlord or Landlord's agents shall accord reasonable care to
Tenant's Property), and without in any manner affecting this Lease. Nothing
herein contained, however, shall be deemed or construed to impose upon Landlord
any obligation, responsibility or liability whatsoever for the care, supervision
or repair of the Building or any part thereof, other than as herein provided.

                  Section 14.3 Landlord shall have the right from time to time
to alter the Building and, without the same constituting an actual or
constructive eviction and without incurring any liability to Tenant therefor, to
change the arrangement or location of entrances or passageways, doors and
doorways, and corridors, elevators, stairs, toilets, or other public parts of
the Building and (subject to the provisions of Article 33) to change the name,
number or designation by which the Building is commonly known, provided that
(except as may be permitted pursuant to the provisions of Article 29) such
alterations or changes do not interfere (except to a de minimis extent) with
Tenant's layout, usable floor area, use or enjoyment of the Premises, or access
to the Building or Premises. All parts (except surfaces facing the interior of
the Premises) of all walls, windows and doors bounding the Premises (including
exterior Building walls, exterior core corridor walls, exterior doors and
entrances other than doors and entrances solely servicing the Premises), all
balconies, terraces and roofs adjacent to the Premises, all space in or adjacent
to the Premises used for shafts, stacks, stairways, chutes, pipes, conduits,
ducts, fan rooms, heating, air cooling, plumbing and other mechanical
facilities, service closets and other Building facilities are not part of the
Premises, and Landlord shall have the use thereof, as well as access thereto
through the Premises for the purposes of operation, maintenance, alteration and
repair.

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                  ARTICLE 15.  CERTIFICATE OF OCCUPANCY

                  Tenant shall not at any time use or occupy the Premises in
violation of the certificate of occupancy at such time issued for the Premises
or for the Building and in the event that any department of the City or State of
New York shall hereafter contend or declare by notice, violation, order or in
any other manner whatsoever that the Premises are used for a purpose which is a
violation of such certificate of occupancy, Tenant shall, upon five (5) days'
written notice from Landlord or any Governmental Authority, immediately
discontinue such use of the Premises. Failure by Tenant to discontinue such use
after such notice shall be considered a default in the fulfillment of a material
covenant of this Lease and Landlord shall have the right to terminate this Lease
immediately, and in addition thereto shall have the right to exercise any and
all rights and privileges and remedies given to Landlord by and pursuant to the
provisions of Articles 16 and 17. Landlord represents that a true and complete
copy of the current certificate of occupancy for the Building is attached as
Exhibit G. Landlord will not amend or modify the existing Certificate of
Occupancy for the Building as to prevent the use of the Premises for the
Permitted Use.

                  ARTICLE 16.  DEFAULT

                  Section 16.1 Each of the following events shall be an "Event
of Default" hereunder:

                           (a) if Tenant defaults in the payment when due of any
         installment of Fixed Rent or Additional Rent, and such default shall
         continue for a period of seven (7) days after notice thereof from
         Landlord; provided, however, that if Tenant shall default in the timely
         payment of Fixed Rent or Additional Rent such that Landlord has given a
         notice hereunder more than three (3) times in any period of twelve (12)
         consecutive months which notices shall have made specific reference to
         Landlord's right to terminate pursuant to this Section 16.1, then,
         notwithstanding that such defaults shall have each been cured within
         the applicable period provided above, upon any further similar default,
         Landlord may serve a five days' notice of termination upon Tenant
         without affording to Tenant an opportunity to cure such further
         default; or

                           (b) if Tenant's interest in this Lease is transferred
         in violation of Article 13; or

                           (c) if the Premises are abandoned; or

                           (d)      (i)  if Tenant or any Guarantor admits in
         writing its inability to pay its debts as they become due; or

                                    (ii) if Tenant or any Guarantor commences or
                  institutes any case, proceeding or other action (A) seeking
                  relief as a debtor, or to adjudicate it a bankrupt or
                  insolvent, or seeking reorganization, arrangement, adjustment,
                  winding-up, liquidation, dissolution, composition or other
                  relief with respect to it or its debts under any existing or
                  future law of any jurisdiction, domestic or

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                  foreign, relating to bankruptcy, insolvency, reorganization or
                  relief of debtors, or (B) seeking appointment of a receiver,
                  trustee, custodian or other similar official for it or for all
                  or any substantial part of its property; or

                                    (iii)   if Tenant or any Guarantor makes a
                  general assignment for the benefit of creditors; or

                                    (iv) if any case, proceeding or other action
                  is commenced or instituted against Tenant or any Guarantor (A)
                  seeking to have an order for relief entered against it as
                  debtor or to adjudicate it a bankrupt or insolvent, or seeking
                  reorganization, arrangement, adjustment, winding-up,
                  liquidation, dissolution, composition or other relief with
                  respect to it or its debts under any existing or future law of
                  any jurisdiction, domestic or foreign, relating to bankruptcy,
                  insolvency, reorganization or relief of debtors, or (B)
                  seeking appointment of a receiver, trustee, custodian or other
                  similar official for it or for all or any substantial part of
                  its property, which either (1) results in any such entry of an
                  order for relief, adjudication of bankruptcy or insolvency or
                  such an appointment or the issuance or entry of any other
                  order having a similar effect, or (2) remains undismissed for
                  a period of one hundred twenty (120) days; or

                                    (v) if any case, proceeding or other action
                  is commenced or instituted against Tenant or any Guarantor
                  seeking issuance of a warrant of attachment, execution,
                  distraint or similar process against all or any substantial
                  part of its property which results in the entry of an order
                  for any such relief which has not been vacated, discharged, or
                  stayed or bonded pending appeal within one hundred twenty
                  (120) days from the entry thereof; or

                                    (vi) if Tenant or any Guarantor takes any
                  action in furtherance of, or indicating its consent to,
                  approval of, or acquiescence in, any of the acts set forth in
                  Subsections 16.1(d)(ii), (iii), (iv) or (v); or

                                    (vii) if a trustee, receiver or other
                  custodian is appointed for any substantial part of the assets
                  of Tenant or any Guarantor, which appointment is not vacated
                  or effectively stayed within seven (7) Business Days, or if
                  any such vacating or stay does not thereafter remain in
                  effect; or

                           (e) if Tenant defaults in the observance or
         performance of any other term, covenant or condition of this Lease on
         Tenant's part to be observed or performed and Tenant fails to remedy
         such default within thirty (30) days after notice by Landlord to Tenant
         of such default, or, if such default is of such a nature that it cannot
         be completely remedied within said period of thirty (30) days, if
         Tenant fails to commence to remedy such default within such thirty-day
         period, or fails thereafter to diligently prosecute to completion all
         steps necessary to remedy such default; or

                           (f) if any Guarantor defaults beyond applicable grace
         and notice periods in the payment or performance of any of its
         obligations under any Guaranty; or

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                           (g)  if there shall be any default beyond applicable
         grace and notice periods under Tenant's Other Lease.

Notwithstanding the foregoing, if any of the acts set forth in Subsections
16.1(d)(i), (ii), (iii), (iv) or (v) is the act of any Guarantor, such act shall
not be an Event of Default if Tenant shall, within five (5) days after the date
on which such act occurs, deliver to Landlord proof satisfactory to Landlord
that Tenant (or a substitute Guarantor acceptable to Landlord in its sole
discretion which provides Landlord with a Guaranty, substantially in the form
attached as Exhibit O to this Lease) then has a net worth, computed in
accordance with generally accepted accounting principles consistently applied,
of not less than $300,000,000.00.

                  Section 16.2 If an Event of Default occurs, Landlord may at
any time thereafter give written notice to Tenant stating that this Lease and
the Term shall expire and terminate on the date specified in such notice, which
date shall not be less than seven (7) days after the giving of such notice. If
Landlord gives such notice, this Lease and the Term and all rights of Tenant
under this Lease shall expire and terminate as if the date set forth in such
notice were the Fixed Expiration Date and Tenant immediately shall quit and
surrender the Premises, but Tenant shall remain liable as hereinafter provided.
Anything contained herein to the contrary notwithstanding, if such termination
shall be stayed by order of any court having jurisdiction over any proceeding
described in Section 16.1(d), or by federal or state statute, then, following
the expiration of any such stay, or if the trustee appointed in any such
proceeding, Tenant or Tenant as debtor-in-possession shall fail to assume
Tenant's obligations under this Lease within the period prescribed therefor by
law or within one hundred twenty (120) days after entry of the order for relief
or as may be allowed by the court, or if said trustee, Tenant or Tenant as
debtor-in-possession shall fail to provide adequate protection of Landlord's
right, title and interest in and to the Premises or adequate assurance of the
complete and continuous future performance of Tenant's obligations under this
Lease, Landlord, to the extent permitted by law or by leave of the court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on seven (7) days' notice to Tenant, Tenant as
debtor-in-possession or said trustee and upon the expiration of said seven (7)
day period this Lease shall cease and expire as set forth above and Tenant,
Tenant as debtor-in-possession or said trustee shall immediately quit and
surrender the Premises as aforesaid.

                  Section 16.3 If, at any time, (a) Tenant shall comprise two
(2) or more Persons, (b) Tenant's obligations under this Lease shall have been
guaranteed by any Person other than Tenant, or (c) Tenant's interest in this
Lease shall have been assigned, the word "Tenant," as used in Section 16.1(d),
shall be deemed to mean any one or more of the Persons primarily or secondarily
liable for Tenant's obligations under this Lease. Any monies received by
Landlord from or on behalf of Tenant during the pendency of any proceeding of
the types referred to in Section 16.1(d) shall be deemed paid as compensation
for the use and occupation of the Premises and the acceptance of any such
compensation by Landlord shall not be deemed an acceptance of Fixed Rent and/or
Additional Rent or a waiver on the part of Landlord of any rights under this
Lease.

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                  ARTICLE 17.       REMEDIES AND DAMAGES

                  Section 17.1 (a) If an Event of Default shall occur, and this
Lease and the Term shall expire and come to an end as provided in Article 16:

                           (i) Tenant shall quit and peacefully surrender the
         Premises to Landlord, and Landlord and its agents may immediately, or
         at any time after such Event of Default or after the date upon which
         this Lease and the Term shall expire and come to an end, re-enter the
         Premises or any part thereof, without notice, either by summary
         proceedings, or by any other applicable action or proceeding, or by
         legal force or other legal means (without being liable to indictment,
         prosecution or damages therefor), and may repossess the Premises and
         dispossess Tenant and any other Persons from the Premises and remove
         any and all of their property and effects from the Premises; and

                           (ii) Landlord, at Landlord's option, may relet the
         whole or any part or parts of the Premises from time to time, either in
         the name of Landlord or otherwise, to such tenant or tenants, for such
         term or terms ending before, on or after the Expiration Date, at such
         rental or rentals and upon such other conditions, which may include
         concessions and free rent periods, as Landlord, in its sole discretion,
         may determine; provided, however, that Landlord shall have no
         obligation to relet the Premises or any part thereof and shall in no
         event be liable for refusal or failure to relet the Premises or any
         part thereof, or, in the event of any such reletting, for refusal or
         failure to collect any rent due upon any such reletting, and no such
         refusal or failure shall operate to relieve Tenant of any liability
         under this Lease or otherwise affect any such liability, and Landlord,
         at Landlord's option, may make such repairs, replacements, alterations,
         additions, improvements, decorations and other physical changes in and
         to the Premises as Landlord, in its sole discretion, considers
         advisable or necessary in connection with any such reletting or
         proposed reletting, without relieving Tenant of any liability under
         this Lease or otherwise affecting any such liability.

                  (b) Tenant hereby waives the service of any notice of
intention to re-enter or to institute legal proceedings to that end which may
otherwise be required to be given under any present or future law. Tenant, on
its own behalf and on behalf of all Persons claiming through or under Tenant,
including all creditors, does further hereby waive any and all rights which
Tenant and all such Persons might otherwise have under any present or future law
to redeem the Premises, or to re-enter or repossess the Premises, or to restore
the operation of this Lease, after (i) Tenant shall have been dispossessed by a
judgment or by warrant of any court or judge, (ii) any re-entry by Landlord, or
(iii) any expiration or termination of this Lease and the Term, whether such
dispossess, re-entry, expiration or termination shall be by operation of law or
pursuant to the provisions of this Lease. The words "re-enter", "re-entry" and
"re-entered" as used in this Lease shall not be deemed to be restricted to their
technical legal meanings. In the event of a breach or threatened breach by
Tenant, or any Persons claiming through or under Tenant, of any term, covenant
or condition of this Lease, Landlord shall have the right to enjoin such breach
and the right to invoke any other remedy allowed by law or in equity as if
re-entry, summary proceedings and other special remedies were not provided in
this Lease for such

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breach. The rights to invoke the remedies hereinbefore set forth are cumulative
and shall not preclude Landlord from invoking any other remedy allowed at law or
in equity.

                  Section 17.2 (a) If this Lease and the Term shall expire and
come to an end as provided in Article 16, or by or under any summary proceeding
or any other action or proceeding, or if Landlord shall re-enter the Premises as
provided in Section 17.1, or by or under any summary proceeding or any other
action or proceeding, then, in any of such events:

                           (i) Tenant shall pay to Landlord all Fixed Rent and
         Additional Rent payable under this Lease by Tenant to Landlord to the
         date upon which this Lease and the Term shall have expired and come to
         an end or to the date of re-entry upon the Premises by Landlord, as the
         case may be;

                           (ii) Tenant also shall be liable for and shall pay to
         Landlord, as damages, any deficiency (the "Deficiency") between (A)
         Fixed Rent and Additional Rent for the period which otherwise would
         have constituted the unexpired portion of the Term (conclusively
         presuming the Additional Rent for each year thereof to be the same as
         was payable for the year immediately preceding such termination or
         re-entry), and (B) the net amount, if any, of rents collected under any
         reletting effected pursuant to the provisions of Subsection 17.1(a)(ii)
         for any part of such period (first deducting from the rents collected
         under any such reletting all of Landlord's expenses in connection with
         the termination of this Lease, Landlord's re-entry upon the Premises
         and with such reletting including all repossession costs, brokerage
         commissions, legal expenses, attorneys' fees and disbursements,
         alteration costs and other expenses of preparing the Premises for such
         reletting). Tenant shall pay the Deficiency in monthly installments on
         the days specified in this Lease for payment of installments of Fixed
         Rent, and Landlord shall be entitled to recover from Tenant each
         monthly Deficiency as the same shall arise. No suit to collect the
         amount of the Deficiency for any month shall prejudice Landlord's right
         to collect the Deficiency for any subsequent month by a similar
         proceeding; and

                           (iii) whether or not Landlord shall have collected
         any monthly Deficiency as aforesaid, Landlord shall be entitled to
         recover from Tenant, and Tenant shall pay to Landlord, on demand, in
         lieu of any further Deficiency as and for liquidated and agreed final
         damages, a sum equal (A) to the amount by which the Fixed Rent and
         Additional Rent for the period which otherwise would have constituted
         the unexpired portion of the Term (conclusively presuming the
         Additional Rent for each year thereof to be the same as was payable for
         the year immediately preceding such termination or re-entry) exceeds
         (B) the then fair and reasonable rental value of the Premises,
         including Additional Rent for the same period, both discounted to
         present value at the rate of five percent (5%) per annum less (C) the
         aggregate amount of Deficiencies previously collected by Landlord
         pursuant to the provisions of Subsection 17.2(a)(ii) for the same
         period. If, before presentation of proof of such liquidated damages to
         any court, commission or tribunal, Landlord shall have relet the
         Premises or any part thereof for the period which otherwise would have
         constituted the unexpired portion of the Term, or any part thereof, the
         amount of net rents collected in connection with such reletting shall
         be

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<PAGE>

         deemed, prima facie, to be the fair and reasonable rental value for the
         part or the whole of the Premises so relet during the term of the
         reletting.

                  (b) If Landlord shall relet the Premises, or any part thereof,
together with other space in the Building, the net rents collected under any
such reletting and the expenses of any such reletting shall be equitably
apportioned for the purposes of this Section 17.2. Tenant shall in no event be
entitled to any rents collected or payable under any reletting, whether or not
such rents shall exceed the Fixed Rent reserved in this Lease. Nothing contained
in Article 16 or this Article 17 shall be deemed to limit or preclude the
recovery by Landlord from Tenant of the maximum amount allowed to be obtained as
damages by any statute or rule of law, or of any sums or damages to which
Landlord may be entitled in addition to the damages set forth in this Section
17.2.

                  ARTICLE 18.  FEES AND EXPENSES

                  Section 18.1 If an Event of Default shall occur under this
Lease, or if Tenant shall fail to comply with its obligations under this Lease
and the preservation of property or the safety of any tenant, occupant or other
person is threatened, Landlord may, after reasonable prior notice to Tenant
except in an emergency, perform the same for the account of Tenant or make any
expenditure or incur any obligation for the payment of money for the account of
Tenant. All amounts expended by Landlord in connection with the foregoing,
including reasonable attorneys' fees and disbursements in instituting,
prosecuting or defending any action or proceeding or recovering possession, and
the cost thereof, with interest thereon at the Default Rate, shall be deemed to
be Additional Rent hereunder and shall be paid by Tenant to Landlord within
twenty (20) days of rendition of any bill or statement to Tenant therefor.

                  Section 18.2 If Tenant shall fail to pay any installment of
Fixed Rent and/or Additional Rent when due, Tenant shall pay to Landlord, in
addition to such installment of Fixed Rent and/or Additional Rent, as the case
may be, as a late charge and as Additional Rent, a sum equal to interest at the
Default Rate on the amount unpaid, computed from the date such payment was due
to and including the date of payment, provided, however, that on not more than
one (1) occasion during any twelve (12) consecutive monthly period during the
Term, Tenant's failure to pay an installment of Fixed Rent or Additional Rent
when due shall not require the payment of interest at the Default Rate on such
overdue amount, provided such installment of Fixed Rent or Additional Rent shall
be paid prior to the expiration of the applicable grace period provided in
Section 16.1 or elsewhere in this Lease.

                  ARTICLE 19.  NO REPRESENTATIONS BY LANDLORD

                  Except as expressly set forth in this Lease, Landlord and
Landlord's agents have made no warranties, representations, statements or
promises with respect to (a) the rentable and usable areas of the Premises or
the Building, (b) the amount of any current or future Labor Rates or Taxes, (c)
the compliance with applicable Legal Requirements of the Premises or the
Building, or (d) the suitability of the Premises for any particular use or
purpose. No rights, easements or licenses are acquired by Tenant under this
Lease, by implication or otherwise, except as expressly set forth herein. This
Lease (including any Exhibits referred to herein and all

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supplementary agreements provided for herein) contains the entire agreement
between the parties and all understandings and agreements previously made
between Landlord and Tenant are merged in this Lease, which alone fully and
completely expresses their agreement. Tenant is entering into this Lease after
full investigation, and is not relying upon any statement or representation made
by Landlord not embodied in this Lease.

                  ARTICLE 20.  END OF TERM

                  Section 20.1 Upon the expiration or other termination of this
Lease, Tenant shall quit and surrender to Landlord the Premises, vacant, broom
clean, in good order and condition, ordinary wear and tear and damage for which
Tenant is not responsible under the terms of this Lease excepted, and Tenant
shall remove all of Tenant's Property from the Premises, and this obligation
shall survive the expiration or sooner termination of the Term. If the last day
of the Term or any renewal thereof falls on Saturday or Sunday, this Lease shall
expire on the Business Day immediately preceding. Tenant expressly waives, for
itself and for any Person claiming through or under Tenant, any rights which
Tenant or any such Person may have under the provisions of Section 2201 of the
New York Civil Practice Law and Rules and of any successor law of like import
then in force in connection with any holdover summary proceedings which Landlord
may institute to enforce the foregoing provisions of this Article 20.

                  Section 20.2 Tenant acknowledges that Tenant or any Tenant
Party remaining in possession of the Premises after the expiration or earlier
termination of this Lease would create an unusual hardship for Landlord and for
any prospective tenant. Tenant therefore covenants that if for any reason Tenant
or any Tenant Party shall fail to vacate and surrender possession of the
Premises or any part thereof on or before the expiration or earlier termination
of this Lease and the Term, then Tenant's continued possession of the Premises
shall be as a "month-to-month" tenant, during which time, without prejudice and
in addition to any other rights and remedies Landlord may have hereunder or at
law, Tenant shall pay to Landlord for each month and for each portion of any
month during which Tenant holds over, an amount equal to one and one half (1
1/2) times the total monthly amount of Fixed Rent and Additional Rent payable
hereunder. The provisions of this Section 20.2 shall not in any way be deemed to
(a) permit Tenant to remain in possession of the Premises after the Expiration
Date or sooner termination of this Lease or (b) imply any right of Tenant to use
or occupy the Premises upon expiration or termination of this Lease and the
Term, and no acceptance by Landlord of payments from Tenant after the Expiration
Date or sooner termination of the Term shall be deemed to be other than on
account of the amount to be paid by Tenant in accordance with the provisions of
this Article 20. Tenant's obligations under this Article 20 shall survive the
expiration or earlier termination of this Lease.

                  ARTICLE 21.  QUIET ENJOYMENT

                  For so long as this Lease is in full force and effect, Tenant
may peaceably and quietly enjoy the Premises without hindrance by Landlord or
any Person lawfully claiming through or under Landlord, subject, nevertheless,
to the terms and conditions of this Lease.

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                  ARTICLE 22.    NO WAIVER; NON-LIABILITY

                  Section 22.1 No act or thing done by Landlord or Landlord's
agents during the Term shall be deemed an acceptance of a surrender of the
Premises, and no agreement to accept such surrender shall be valid unless in
writing and signed by Landlord. No employee of Landlord or of Landlord's agents
shall have any power to accept the keys of the Premises prior to the termination
of this Lease. The delivery of keys to any employee of Landlord or of Landlord's
agents shall not operate as a termination of this Lease or a surrender of the
Premises. Any Building employee to whom any property shall be entrusted by or on
behalf of Tenant shall be deemed to be acting as Tenant's agent with respect to
such property and neither Landlord nor its agents shall be liable for any damage
to property of Tenant or of others entrusted to employees of the Building, nor
for the loss of or damage to any property of Tenant by theft or otherwise.

                  Section 22.2 The failure of Landlord to seek redress for
violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease, or any of the Rules and Regulations set forth or
hereafter adopted by Landlord, shall not prevent a subsequent act, which would
have originally constituted a violation, from having all of the force and effect
of an original violation. The receipt by Landlord of Fixed Rent and/or
Additional Rent with knowledge of the breach of any covenant of this Lease shall
not be deemed a waiver of such breach. The failure of Landlord to enforce any of
the Rules and Regulations set forth, or hereafter adopted, against Tenant or any
other tenant in the Building shall not be deemed a waiver of any such Rules and
Regulations. Landlord shall not enforce the Rules and Regulations against Tenant
in a discriminatory manner. No provision of this Lease shall be deemed to have
been waived by Landlord, unless such waiver be in writing signed by Landlord. No
payment by Tenant or receipt by Landlord of a lesser amount than the monthly
Fixed Rent or any Additional Rent shall be deemed to be other than on account of
the next installment of Fixed Rent or Additional Rent, as the case may be, or as
Landlord may elect to apply same, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as Fixed Rent or
Additional Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Fixed Rent or Additional Rent or pursue any other remedy in this
Lease provided. Any executory agreement hereafter made shall be ineffective to
change, modify, discharge or effect an abandonment of this Lease in whole or in
part unless such executory agreement is in writing and signed by the party
against whom enforcement of the change, modification, discharge or abandonment
is sought. All references in this Lease to the consent or approval of Landlord
shall be deemed to mean the written consent or approval of Landlord and no
consent or approval of Landlord shall be effective for any purpose unless such
consent or approval is set forth in a written instrument executed by Landlord.

                  Section 22.3 (a) Except to the extent arising from the
negligence or willful misconduct of Landlord or its agents, employees or
contractors, neither Landlord nor its agents shall be liable for any injury or
damage to persons or property or interruption of Tenant's business resulting
from fire, explosion, falling plaster, steam, gas, electricity, water, rain or
snow or leaks from any part of the Building or from the pipes, appliances or
plumbing works or from the roof, street or subsurface or from any other place or
by dampness or by any other cause of whatsoever nature provided, however, that
Tenant shall, in accordance with Section 10.2, first

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look for recovery to any insurance required to be carried by Tenant pursuant to
the terms of this Lease; nor shall Landlord or its agents be liable for any such
damage caused by other tenants or persons in the Building or caused by
construction of any private, public or quasi-public work; nor shall Landlord be
liable for any latent defect in the Premises or in the Building (except that
Landlord shall be required to repair the same to the extent provided in Article
5). Nothing in the foregoing shall affect any right of Landlord to the indemnity
from Tenant to which Landlord may be entitled under Article 28 in order to
recoup for payments made to compensate for losses of third parties.

                  (b) If, at any time or from time to time, any windows of the
Premises are temporarily closed, darkened or bricked-up for any reason
whatsoever, or any of such windows are permanently closed, darkened or
bricked-up if required by any Legal Requirement or related to any construction
upon property adjacent to the Real Property by parties other than Landlord,
Landlord shall not be liable for any damage Tenant may sustain thereby and
Tenant shall not be entitled to any compensation therefor nor abatement of Fixed
Rent or Additional Rent nor shall the same release Tenant from its obligations
hereunder nor constitute an eviction or constructive eviction of Tenant from the
Premises. Landlord shall take such reasonable measures as may be available to
Landlord (without the commencement or prosecution of legal action or the
expenditure of money) to minimize the period of time during which any such
windows are temporarily closed, darkened or bricked up. Landlord shall not
voluntarily close or darken such windows except temporarily in connection with
repairs or maintenance permitted or required hereunder.

                  ARTICLE 23.       WAIVER OF TRIAL BY JURY

                  The respective parties hereto shall and they hereby do waive
trial by jury in any action, proceeding or counterclaim brought by either of the
parties hereto against the other (except for personal injury or property damage)
on any matters whatsoever arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the
Premises, or for the enforcement of any remedy under any statute, emergency or
otherwise. If Landlord commences any summary proceeding against Tenant, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding (unless failure to impose such counterclaim would preclude
Tenant from asserting in a separate action the claim which is the subject of
such counterclaim), and will not seek to consolidate such proceeding with any
other action which may have been or will be brought in any other court by
Tenant.

                  ARTICLE 24.       INABILITY TO PERFORM

                  This Lease and the obligation of Tenant to pay Fixed Rent and
Additional Rent hereunder and the obligations of Landlord and Tenant to perform
all of the other covenants and agreements hereunder will not be affected,
impaired or excused because the other party hereto is unable to fulfill any of
its obligations under this Lease expressly or impliedly to be performed by such
party or because such party is unable to make, or is delayed in making any
repairs, additions, alterations, improvements or decorations or is unable to
supply or is delayed in supplying any equipment or fixtures, if either Landlord
or Tenant is prevented or delayed from so

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doing by reason of strikes or labor troubles or by accident, or by any cause
whatsoever reasonably beyond such party's control, including laws, governmental
preemption in connection with a national emergency or by reason of any Legal
Requirements or by reason of the conditions of supply and demand which have been
or are affected by war or other emergency ("Unavoidable Delays"), but a party's
inability to pay any amount of money shall in no event be deemed an Unavoidable
Delay.

                  ARTICLE 25.       BILLS AND NOTICES

                  Except as otherwise expressly provided in this Lease, any
bills, statements, consents, notices, demands, requests or other communications
given or required to be given under this Lease shall be in writing and shall be
deemed sufficiently given or rendered if delivered by hand (against a signed
receipt), sent by a nationally recognized overnight courier service, or sent by
registered or certified mail (return receipt requested) and addressed:

                  if to Tenant, (a) at Tenant's address at the Premises,
         Attention: Marie J. Toulantis (or, if a regularly scheduled rent bill
         or rent escalation statement, Mike Caputo), or (b) at any place where
         Tenant or any agent or employee or Tenant may be found if mailed
         subsequent to Tenant's abandoning or surrendering the Premises, in
         either case (except if a routine bill or statement), with a copy to
         Robinson Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the
         Americas, New York, New York 10104, Attention: Michael N. Rosen, Esq.;
         or

                  if to Landlord, as follows: 111 Chelsea LLC, c/o Taconic
         Investment Partners LLC, 1500 Broadway, New York, New York 10036,
         Attention: Mr. Paul Pariser, with a copy to: Schulte Roth & Zabel LLP,
         900 Third Avenue, New York, New York 10022, Attention: Robert S. Nash,
         Esq.

Any such bill, statement, consent, notice, demand, request or other
communication given as provided in this Article 25 shall be deemed to have been
rendered or given (i) on the date when it shall have been hand delivered, (ii)
three (3) Business Days from the date when it shall have been mailed, or (iii)
one (1) Business Day from the date when it shall have been sent by overnight
courier service.

                  ARTICLE 26.       RULES AND REGULATIONS

                  Landlord reserves the right, from time to time, to adopt
additional reasonable and non-discriminatory Rules and Regulations and to
reasonably amend the Rules and Regulations then in effect on a nondiscriminatory
basis. Tenant and all Tenant Parties shall comply with the Rules and
Regulations, as so supplemented or amended. Nothing contained in this Lease
shall be construed to impose upon Landlord any duty or obligation to enforce the
Rules and Regulations or terms, covenants or conditions in any other lease
against any other tenant, and Landlord shall not be liable to Tenant for
violation of the same by any other tenant, its employees, agents, visitors or
licensees. If there shall be any inconsistencies between this Lease and the
Rules and Regulations, the provisions of this Lease shall prevail.

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                  ARTICLE 27.       BROKER

                  Section 27.1 Each of Landlord and Tenant represents and
warrants to the other that it has not dealt with any broker in connection with
this Lease other than Insignia/Edward S. Gordon Company, Inc. ("Broker") and
that to the best of its knowledge and belief, no other broker, finder or similar
Person procured or negotiated this Lease or is entitled to any fee or commission
in connection herewith. Landlord has agreed to pay or cause to be paid a
commission to Broker in connection with this Lease pursuant to a separate
written agreement.

                  Section 27.2 Each of Landlord and Tenant shall indemnify,
defend, protect and hold the other party harmless from and against any and all
losses, liabilities, damages, claims, judgments, fines, suits, demands, costs,
interest and expenses of any kind or nature (including reasonable attorneys'
fees and disbursements) which the indemnified party may incur by reason of any
claim of or liability to any broker, finder or like agent (other than Broker)
arising out of any dealings claimed to have occurred between the indemnifying
party and the claimant in connection with this Lease, or the above
representation being false. The provisions of this Article 27 shall survive the
expiration or earlier termination of the Term.

                  ARTICLE 28.       INDEMNITY

                  Section 28.1 Tenant shall not do or permit any act or thing to
be done upon the Premises which may subject Landlord to any liability or
responsibility for injury, damages to persons or property or to any liability by
reason of any violation of law or of any Legal Requirement, but shall exercise
such control over the Premises as to fully protect Landlord against any such
liability. Tenant shall defend, indemnify and save harmless Landlord from and
against (a) all claims of whatever nature against Landlord arising from any act,
omission or negligence of Tenant or any Tenant Party, (b) all claims against
Landlord arising from any accident, injury or damage whatsoever caused to any
person or to the property of any person and occurring during the Term in or
about the Premises, (c) all claims against Landlord arising from any accident,
injury or damage occurring outside of the Premises but anywhere within or about
the Real Property, where such accident, injury or damage results or is claimed
to have resulted from an act, omission or negligence of Tenant or any Tenant
Party, and (d) any breach, violation or nonperformance of any covenant,
condition or agreement in this Lease set forth and contained on the part of
Tenant to be fulfilled, kept, observed and performed. This indemnity and hold
harmless agreement shall include indemnity from and against any and all
liability, fines, suits, demands, costs and expenses of any kind or nature
(including reasonable attorneys' fees and disbursements) incurred in or in
connection with any such claim or proceeding brought thereon, and the defense
thereof.

                  Section 28.2 Tenant agrees to defend, indemnify and hold
harmless Landlord and any partner, shareholder, director, officer, principal,
employee or agent, directly and indirectly, of Landlord, from and against all
obligations (including removal and remedial actions), losses, claims, suits,
judgments, liabilities, penalties, damages (including consequential and punitive
damages), costs and expenses (including reasonable attorneys' and consultants'
fees and expenses) of any kind or nature whatsoever that may at any time be
incurred by, imposed on or asserted against Landlord or any such party directly
or indirectly based on, or arising or

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resulting from (a) the actual or alleged presence of Hazardous Materials on the
Premises or in the Building which is caused or (provided same is within Tenant's
reasonable control) permitted by Tenant, and (b) any Environmental Claim
relating in any way to Tenant's operation or use of the Premises or the
Building. The provisions of this Section 28.2 shall survive the expiration or
sooner termination of this Lease.

                  Section 28.3 In no event shall Tenant be obligated to defend,
indemnify or save harmless Landlord or any partner, shareholders, director,
officer, principal, employee or agent of Landlord against any loss, cost or
damage to the extent such loss, cost or damage is caused solely by the
negligence or misconduct of such party claiming a right to be indemnified.

                  ARTICLE 29.       REDUCED PREMISES

                  Throughout the Term, including renewals and extensions, Tenant
agrees that Landlord shall have the right, upon Landlord's giving Tenant not
less than thirty (30) days prior written notice, to recapture a portion or
portions of the Premises solely for the purpose of (a) installing additional
elevator(s) in the Building, together with such space as may be required for
lobbies and other common areas, (b) improving the Building Systems, or (c)
constructing public corridors to create access to rentable space now existing or
to be constructed in the future on the floor(s) on which the Premises are
located (any or all of the foregoing work, "Building Improvements"). The amount
of such recaptured space which may be taken by Landlord pursuant to this Article
29 shall be limited to the areas shown on Exhibit J to this Lease (which
Landlord and Tenant hereby deem and agree consists of 1,800 Rentable Square Feet
of space), and within such areas, such space as is reasonably and actually
required for the proper installation, access and operation of such Building
Improvements. Tenant shall provide Landlord with access to the Premises to
perform the work to install and maintain the Building Improvements, including
the right to take all necessary materials and equipment into the Premises,
without the same constituting an eviction, and Tenant shall not be entitled to
any damages by reason of loss or interruption of business or otherwise. Landlord
shall use reasonable efforts to minimize interference with Tenant's access to
and use and occupancy of the Premises in making any Building Improvements;
provided, however, that Landlord shall have no obligation to employ contractors
or labor at overtime or other premium pay rates or to incur any other overtime
costs or additional expenses whatsoever, unless reimbursed by Tenant therefor
within ten (10) days after demand. Promptly following the completion of any
Building Improvements, Landlord shall at Landlord's expense make such repairs to
and restoration of the Premises and reasonable access thereto (including
installation of demising walls) as may be reasonably required as a direct result
thereof. Upon the earlier of (i) the date set forth for such recapture in
Landlord's notice described above, or (ii) the date on which Landlord's work in
the space to be recaptured renders such space unusable by Tenant for the
ordinary conduct of its business therein, the Lease shall be deemed
automatically amended by the deletion of such recaptured space from the
Premises, Fixed Rent and Additional Rent shall be reduced in the proportion
which the area of the part of the Premises so recaptured bears to the total area
of the Premises immediately prior thereto, and Tenant shall promptly vacate and
surrender such portion of the Premises to Landlord, and Landlord shall pay
Tenant an amount equal to (i) Tenant's actual out-of-pocket costs in performing
any Tenant's Alterations made to such recaptured space, minus (ii) the amount of
Landlord's Contribution applied to the performance of such Tenant's

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Alterations, amortized on a straight-line basis over a ten-year period (measured
from the date of substantial completion of the Alteration in question). Except
as otherwise specifically set forth in this Article 29, the terms and conditions
of this Lease shall not be modified by reason of any such recapture of space,
Building Improvements or the maintenance thereof.

                  ARTICLE 30.       RIGHT OF FIRST OFFER

                  Section 30.1 If at any time prior to the tenth (10th)
anniversary of the Commencement Date, Landlord shall propose to lease all or any
portion of the space on the ninth (9th) floor of the Building which is
contiguous to the Premises as then constituted (all or any such portion of such
space, an "Expansion Space"), Landlord shall in each such case deliver notice
thereof to Tenant (the "Expansion Notice") setting forth (i) a description of
the Expansion Space in question, (ii) the Fixed Rent, (iii) the number of
Rentable Square Feet (determined in accordance with the standard set forth in
Section 30.4(e), (iv) the amount of electrical power (which shall be the
then-Building standard number of watts per square foot) for the Expansion Space,
and (v) the date Landlord anticipates that such Expansion Space will become
available for leasing. Provided that all of the conditions precedent set forth
in this Article 30 are fully satisfied by Tenant, Tenant shall have the option
(the "Expansion Option"), exercisable by Tenant delivering written notice to
Landlord (an "Acceptance Notice") within ten (10) business days of the giving by
Landlord of the Expansion Notice, to lease the Expansion Space upon the terms
and conditions set forth in this Article 30, and this Lease shall thereupon be
modified as provided in Section 30.4. Time shall be of the essence as to
Tenant's giving of any Acceptance Notice. The Expansion Option may be exercised
only with respect to all of the Expansion Space which is the subject of an
Expansion Notice. If Tenant fails to timely give an Acceptance Notice with
respect to any Expansion Space, Landlord shall be free to lease such Expansion
Space to any third party or to otherwise dispose of such Expansion Space, and
Tenant shall have no further rights hereunder to lease any such Expansion Space;
provided, however, that if Landlord leases such Expansion Space to a third
party, and subsequently (but prior to the tenth anniversary of the Commencement
Date) such Expansion Space becomes available for leasing, then Tenant's rights
under this Article 30 shall again be applicable to such Expansion Space.

                  Section 30.2 For purposes of this Article 30, the phrase
"available for leasing" shall mean that on the date set forth in the Expansion
Notice as being the date Landlord anticipates that such Expansion Space will
become available for leasing, (a) no party leases or occupies the Expansion
Space, whether pursuant to a written lease or other written agreement, and (b)
no party holds any written option or right to lease and/or occupy the Expansion
Space, or to renew its lease and/or right(s) of occupancy therefor. In addition,
so long as a tenant or other occupant leases or occupies a portion of the
Expansion Space, Landlord shall be free to extend any such tenancy or occupancy,
whether or not pursuant to a written lease or other agreement, and such space
shall not be deemed to be available for leasing, unless Landlord shall then have
given Tenant an Expansion Notice with respect to such space. In no event shall
Landlord be liable to Tenant for any failure by any then existing tenant or
occupant to vacate any of the Expansion Space. Landlord agrees that from and
after the date hereof, it will not grant any rights to any tenant or other
occupant of the Building with respect to the Expansion Space unless such rights
are subordinate to the rights granted Tenant hereunder, except (i) to tenants or
other occupants leasing or occupying such portions of the Expansion Space as of
the date hereof, or (ii)

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to new tenants or occupants of a portion of the Expansion Space after Landlord
shall have duly offered such Expansion Space to Tenant pursuant to this Article
30 and Tenant shall have failed to timely give an Acceptance Notice with respect
to such Expansion Space. Landlord represents that to the best of its knowledge,
as of the date of this Lease, the tenants and other occupants leasing or
occupying premises which may become subject to the provisions of Section 30.1
are as set forth on Exhibit L annexed hereto.

                  Section 30.3 Tenant shall have no right to exercise the
Expansion Option unless all of the following conditions have been satisfied on
the date of the Acceptance Notice and on the Expansion Space Commencement Date
(as defined in Section 30.4):

                           (a) No Event of Default shall have occurred and be
         continuing under this Lease; and

                           (b) The named Tenant hereunder (or a permitted
         assignee, sublessee, successor or transferee pursuant to Section 13.10,
         but not any other assignee or successor tenant), or its Affiliates
         shall occupy not less than seventy five percent (75%) of the rentable
         area of the Premises.

                  Section 30.4 Provided that Tenant timely delivers an
Acceptance Notice, then, effective as of the date on which Landlord delivers the
Expansion Space to Tenant (the "Expansion Space Commencement Date"):

                           (a) the Expansion Space shall be added to and be
         deemed to be a part of the Premises for all purposes of this Lease
         (except as otherwise provided in this Article 30);

                           (b) the Expansion Space shall be delivered "as is",
         and Landlord shall not be obligated to perform any work with respect
         thereto;

                           (c) Fixed Rent for the Expansion Space shall be
         determined as of the Expansion Space Commencement Date, and shall be
         the greater of (i) ninety five percent (95%) of the fair market rental
         (the "FMV") for the Expansion Space as set forth in the Expansion
         Notice, or (ii) the total of the per square foot amount of Fixed Rent
         then payable under this Lease, multiplied by the number of rentable
         square feet contained in the Expansion Space;

                           (d) Tenant shall pay Tenant's Tax Payment and
         Tenant's Labor Rate Payment with respect to the Expansion Space in
         accordance with the Base Taxes and the Base Labor Rate applicable
         thereto as set forth in Article 6;

                           (e) Tenant's Share shall be proportionately increased
         to reflect the inclusion of the Expansion Space in the Premises, and
         the Premises Area shall be deemed to have been increased by the number
         of Rentable Square Feet contained in the Expansion Space (as determined
         in accordance with the standard of measurement then employed by
         Landlord); and

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                           (f)  Each Guarantor shall execute and deliver to
         Landlord a reconfirmation of its guaranty, in form and substance
         satisfactory to Landlord.

                  Section 30.5 If Landlord shall be prevented from delivering
possession of any portion of the Expansion Space to Tenant as provided for in
this Article 30 due to the holding over or retention of possession of any tenant
or any other occupant after using reasonable efforts to obtain possession
thereof, including, if necessary in Landlord's reasonable judgment, the
initiation and diligent prosecution of appropriate legal proceedings against any
such holdover tenant or other occupant, Landlord shall not be subject to any
liability for failure to give possession of the Expansion Space to Tenant, the
validity of this Lease shall not be impaired thereby, and Tenant shall take
possession of the Expansion Space when, as and if such space can be delivered to
Tenant; provided, however, that (a) Landlord shall keep Tenant advised of the
progress of Landlord's efforts to obtain possession of such space, and (b)
Tenant shall have no obligation to lease any Expansion Space as to which
Landlord offers to deliver possession to Tenant more than one (1) year after the
date of the applicable Acceptance Notice.

                  Section 30.6 (a) If Tenant shall, within ten (10) days of the
giving by Landlord of the Expansion Notice, dispute Landlord's calculation of
the FMV for the Expansion Space as set forth in an Expansion Notice, such
dispute shall be submitted to arbitration and shall be determined by a single
arbitrator appointed in accordance with the American Arbitration Association
Real Estate Valuation Arbitration Proceeding Rules. Such arbitrator shall be
impartial and shall have not less than ten (10) years' experience in the New
York metropolitan area in a calling related to the leasing of commercial space
in buildings comparable to the Building, and the fees of such arbitrator shall
be shared by Landlord and Tenant.

                  (b) Within fifteen (15) days following the appointment of such
arbitrator, each party shall attend a hearing before such arbitrator wherein
each party shall submit a report setting forth its determination of the FMV of
the Expansion Space, together with such information on comparable rentals, or
such other evidence, as such party shall deem relevant.

                  (c) The arbitrator shall, within fifteen (15) days following
such hearing and submission of evidence, render his or her decision by selecting
the determination of FMV of the Expansion Space submitted by either Landlord or
Tenant which, in the judgment of the arbitrator, most nearly reflects the FMV of
the Expansion Space. It is expressly understood that the decision of such
arbitrator shall be final and binding upon the parties hereto.

                  (d)      (i) For purposes of the foregoing arbitration
the Expansion Space shall be considered in its "as is" condition, reasonable
wear and tear excepted.

                           (ii) Additionally, for purposes of the determination
of the FMV of the Expansion Space, whether by estimate of Landlord or by
arbitration, Landlord or such arbitrator shall take into account the then
current rentals or occupancy fees which Landlord shall then be receiving for the
renting of or granting of use or occupancy rights for comparable office space in
the Building for the Permitted Use, taking into account rent concessions,
abatement periods and construction allowances then being granted for comparable
space. The Base Taxes and the Base Labor Rate applicable to Tenant's Tax Payment
and Tenant's Labor Rate Payment, respectively,

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to be made by Tenant with respect to the Expansion Space pursuant to Article 6,
shall not be modified for purposes of the determination of the FMV for the
Expansion Space hereunder; provided, however, that the determination of the FMV
hereunder shall take into account the Base Taxes, the Base Labor Rates, and the
amounts payable hereunder for Tenant's Tax Payment and Tenant's Labor Rate
Payment, in assessing comparable rental rates.

                           (iii) It is expressly understood that any
determination of the FMV for the Expansion Space shall be based on the
assumptions and criteria stated in this Article 30, and that the arbitrator
shall not have the power to add to, modify or change any of the provisions of
this Lease.

                  (e) After a determination has been made of the FMV for the
Expansion Space (whether or not determined in accordance with this Section
30.6), the parties shall execute and deliver to each other an agreement setting
forth the Fixed Rent therefor as hereinabove determined, and the other terms,
provisions, covenants and conditions of the leasing of the Expansion Space,
which terms, conditions, covenants and provisions shall be as set forth in
Section 30.4.

                  (f) If the final determination of Fixed Rent for the Expansion
Space shall not be made on or before the Expansion Space Commencement Date in
accordance with the provisions of this Article 30, then pending such final
determination, Tenant shall pay as the Fixed Rent for the Expansion Space the
amount of Fixed Rent as set forth by Landlord in the Rental Notice. If, based
upon the final determination of such Fixed Rent as provided herein, the payments
made by Tenant on account of Fixed Rent were (i) less than the Fixed Rent as
finally determined in accordance with the provisions hereof, Tenant shall pay to
Landlord the amount of such deficiency within ten (10) days after demand
therefor, or (ii) greater than Fixed Rent as finally determined in accordance
with the provisions hereof, Landlord shall, at Landlord's option, either credit
the amount of such excess against the next installments of Fixed Rent due under
this Lease, or refund the amount of such excess to Tenant.

                  ARTICLE 31.       LANDLORD'S CONTRIBUTION

                  Section 31.1 (a) Landlord shall contribute toward the actual
cost of the Initial Alterations (including carpeting, wall covering, telephone
and computer installations and wiring, and "soft costs" incurred in connection
with such alterations, including architectural, consulting, engineering and
legal fees, provided that such "soft costs" shall not exceed ten percent (10%)
of Landlord's Contribution) an amount ("Landlord's Contribution") equal to the
lesser of (a) One Million Eight Hundred Seventeen Thousand Eight Hundred and
00/100 Dollars ($1,817,800.00) (subject, however, to reduction in the amounts
set forth in Subsections 31.1(a)(ii) and 31.1(a)(iii) in the event that Tenant
shall exercise one or more of its rights of partial termination pursuant to
Section 2.3), or (b) the aggregate amount of all costs and expenses actually
incurred by Tenant in connection with the Initial Alterations; provided,
however, that this Lease shall be in full force and effect and no Event of
Default shall have occurred and be continuing hereunder, and provided, further,
that Landlord's Contribution shall be payable in stages commencing on the
Delivery Date with respect to each Space, in the following maximum amounts:

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                           (i) with respect to Space A, (a) Fifteen Thousand and
         00/100 Dollars ($15,000.00) toward Tenant's renovation of the two (2)
         existing bathrooms on the ninth avenue side lobby of the ninth floor of
         the Building in order to comply with the requirements of the ADA in
         Space A as more particularly set forth in Section 4.3(v), and (b) Nine
         Hundred Twenty One Thousand Sixty and 00/100 Dollars ($921,060.00) for
         the other items of Tenant's Initial Alterations applicable to Space A;

                           (ii)  with respect to Space B, Five Hundred Fifteen
         Thousand Two Hundred Sixty and 00/100 Dollars ($515,260.00); and

                           (iii) with respect to Space C, Three Hundred Sixty
         Six Thousand Four Hundred Eighty and 00/100 Dollars ($366,480.00).

                  (b) Any cost of the Initial Alterations in excess of
Landlord's Contribution shall be paid by Tenant. Tenant shall not be entitled to
receive any portion of Landlord's Contribution with respect to each Space (and
with respect to Tenant's bathroom renovations as set forth in Section
31.1(a)(i)) if such funds are not actually expended by Tenant in the performance
of the Initial Alterations for such Space (or in the performance of such
bathroom renovations, as applicable), nor shall Tenant have any right to apply
any unexpended portion of Landlord's Contribution as a credit against Fixed
Rent, Additional Rent or any other obligation of Tenant hereunder. No part of
Landlord's Contribution may be assigned by Tenant prior to actual payment
thereof by Landlord to Tenant.

                  (c) A portion of the Initial Alterations, to be constructed at
a cost of $1,817,800 (subject to reduction as set forth in Section 31.1(a)),
shall be deemed to be paid for from Landlord's Contribution, and such portion of
the Initial Alterations shall not be deemed alterations, additions or
improvements made at Tenant's expense, and Landlord shall be the owner of such
portion of the Initial Alterations for all purposes (including financial
reporting and income tax purposes).

                  Section 31.2 Landlord shall make progress payments to Tenant
on a monthly basis, for the work performed during the previous month, less a
retainage of 10% of each progress payment (the "Retainage"). Each of Landlord's
progress payments will be limited to an amount equal to (a) the aggregate
amounts (reduced by the Retainage) theretofore paid by Tenant (as certified by
an authorized officer of Tenant and by Tenant's independent, licensed architect)
to Tenant's contractors, subcontractors and material suppliers (excluding any
payments for which Tenant has previously been reimbursed out of previous
disbursements from Landlord's Contribution), multiplied by (b) a fraction, the
numerator of which is the amount of Landlord's Contribution applicable to the
Space (or such bathroom renovations, if applicable) which is the subject of the
advance requested by Tenant, and the denominator of which is the total contract
price (or, if there is no specified or fixed contract price for the Initial
Alterations, then Landlord's reasonable estimate thereof) for the performance of
all of the Initial Alterations to be made to the Space (or such bathroom
renovations, if applicable) which is the subject of the advance requested by
Tenant, as shown on the plans and specifications approved by Landlord. Provided
that Tenant delivers requisitions to Landlord on or prior to the first (1st) day
of any month, such progress payments shall be made within thirty (30) days next
following the delivery to Landlord of

                                       72
<PAGE>

requisitions therefor, signed by a financial officer of Tenant, which
requisitions shall set forth the names of each contractor and subcontractor to
whom payment is due, and the amount thereof, and shall be accompanied by (i)
with the exception of the first requisition, copies of partial waivers of lien
from all contractors, subcontractors and material suppliers covering all work
and materials which were the subject of previous progress payments by Landlord
and Tenant, (ii) a written certification from Tenant's architect that the work
for which the requisition is being made has been completed substantially in
accordance with the plans and specifications approved by Landlord, and (iii)
such other documents and information as Landlord may reasonably request. Any
requisitions made following the first (1st) day of any month shall be paid no
later than the last day of the month following the month in which such
requisitions are made. Landlord shall disburse the Retainage with respect to any
Space upon submission by Tenant to Landlord of a requisition therefor,
accompanied by all documentation required under this Section 31.2, together with
(A) proof of the satisfactory completion of all required inspections and
issuance of any required approvals, permits and sign-offs for the Initial
Alterations for such Space by all Governmental Authorities having jurisdiction
thereover, (B) final "as-built" plans and specifications for the Initial
Alterations for such Space as required pursuant to Section 3.2(d), and (C) the
issuance of final lien waivers by all contractors, subcontractors and material
suppliers covering all of the Initial Alterations for such Space; provided,
however, that notwithstanding Tenant's failure to deliver final lien waivers
from one or more such contractors, subcontractors or suppliers providing
materials or services costing, in the aggregate, no more than five percent (5%)
of the total amount of Landlord's Contribution, and provided that Tenant shall
deliver to Landlord a written notification stating that Tenant is engaged in a
bona fide dispute with such contractor, subcontractor or supplier, then Landlord
shall disburse to Tenant that portion of the Retainage for which Tenant has duly
delivered lien waivers to Landlord. Notwithstanding anything to the contrary set
forth in this Section 31.2, if Tenant fails to pay when due any sums due and
payable to any of Tenant's contractors or material suppliers, then unless Tenant
shall have notified Landlord that Tenant is disputing sums due to such
contractor or material supplier, and subject to the provisions of the
immediately preceding sentence, Landlord shall have the right, but not the
obligation, upon fifteen (15) days notice to Tenant, to promptly pay to such
contractor or supplier all sums so due from Tenant, and sums so paid by Landlord
shall be deducted from the amount of Landlord's Contribution then unpaid (to the
extent of such unpaid amount), and the balance of such sums so due from Tenant
shall be deemed Additional Rent and shall be paid by Tenant within ten (10) days
after Landlord delivers to Tenant an invoice therefor. If Landlord fails to
disburse Landlord's Contribution or any portion thereof when required after all
conditions therefor have been met by Tenant as set forth in this Section 31.2,
then, if such failure of Landlord shall continue for thirty (30) days following
notice from Tenant of such failure, Tenant shall have the right to apply the
amount of such installment of Landlord's Contribution not paid by Landlord as an
offset against the next ensuing installment(s) of Fixed Rent becoming due under
this Lease.

                  ARTICLE 32.       SECURITY DEPOSIT

                  Section 32.1 Tenant has deposited with Landlord the sum of
Five Million and 00/100 Dollars ($5,000,000.00) as security for the full and
faithful performance of every provision of this Lease to be performed by Tenant
(all or any part of such amount, the "Security Deposit"). If an Event of Default
shall have occurred with respect to any provision of this Lease,

                                       73

<PAGE>

including but not limited to (i) the provisions relating to the payment of Fixed
Rent and Additional Rent, or (ii) any default beyond applicable notice and grace
periods under Tenant's Other Lease; then Landlord may use, apply or retain all
or any part of the Security Deposit for the payment of any Fixed or Additional
Rent or any other sum in default or for the payment of any other amount which
Landlord may spend or become obligated to spend by reason of such Event of
Default, or to compensate Landlord for any other loss, cost or damage to which
Landlord is entitled pursuant to this Lease by reason of such Event of Default.
Landlord shall give Tenant notice contemporaneously with such use or application
of any portion of the Security Deposit. Tenant shall, within five (5) days after
the giving of such notice, deposit with Landlord cash in an amount sufficient to
restore the Security Deposit to the amount then required pursuant to the terms
of this Article 32 (Tenant's obligation to make such payment shall be deemed a
requirement that Tenant pay an item of Additional Rent) and Tenant's failure to
do so shall be a breach of this Lease. Landlord shall deposit the Security
Deposit, if in cash, in an interest-bearing account in a bank with a branch in
New York State; however, Landlord shall not, unless otherwise required by Legal
Requirements, pay interest to Tenant on the Security Deposit, and if Landlord is
required to maintain the Security Deposit in an interest bearing account,
Landlord will retain the maximum amount permitted under Legal Requirements as a
bookkeeping and administrative charge. Tenant shall not assign or encumber any
part of the Security Deposit, and no assignment or encumbrance by Tenant of all
of any part of the Security Deposit shall be binding upon Landlord, whether made
prior to, during, or after the Term. Landlord shall not be required to exhaust
its remedies against Tenant or against the Security Deposit before having
recourse to any other form of security held by Landlord and recourse by Landlord
to any Security Deposit shall not affect any remedies of Landlord which are
provided in this Lease or which are available to Landlord in law or in equity.
If Tenant shall fully and faithfully perform every covenant and provision of
this Lease to be performed and observed by Tenant, the Security Deposit or any
balance thereof shall be returned to Tenant within thirty (30) days after the
expiration or sooner termination (other than a termination pursuant to Article
16) of the Term and Tenant's surrender to Landlord of the Premises. In the event
the Building is sold, Landlord shall transfer the Security Deposit to the new
owner and Landlord shall thereupon be released by Tenant from all liability for
the return of said Security Deposit; and Tenant agrees to look to the new owner
solely for the return of the Security Deposit. A lease of the entire Building
shall be deemed a transfer within the meaning of the foregoing sentence.
Landlord shall use reasonable efforts to notify or cause Tenant to be notified
in the event of any transfer of the Building.

                  Section 32.2 In lieu of a cash deposit, Tenant may deliver to
Landlord a clean, irrevocable, non-documentary and unconditional letter of
credit (the "Letter of Credit") issued by and drawn upon any commercial bank,
trust company, national banking association or savings and loan association
having offices for banking purposes in the City of New York and which is a
member of the New York Clearinghouse Association (the "Issuing Bank") and which
(or the parent company of which) shall have outstanding unsecured, uninsured and
unguaranteed indebtedness, or shall have issued a letter of credit or other
credit facility that constitutes the primary security for any outstanding
indebtedness (which is otherwise uninsured and unguaranteed), that is then
rated, without regard to qualification of such rating by symbols such as "+" or
"-" or numerical notation, "Aa" or better by Moody's Investors Service and "AA"
or better by Standard & Poor's Corporation, and has combined capital, surplus
and undivided profits

                                       74
<PAGE>

of not less than $500,000,000.00, which Letter of Credit shall have a term of
not less than one year, be in form and content satisfactory to Landlord (and
substantially as shown on Exhibit D to this Lease), be for the account of
Landlord, be in the amount of the Security Deposit then required to be deposited
hereunder, and be fully transferable by Landlord to successor owners of the
Building without the payment of any fees or charges, it being agreed that if any
such fees or charges shall be so imposed, such fees or charges shall be paid by
Tenant. The Letter of Credit shall provide that it shall be deemed automatically
renewed, without amendment, for consecutive periods of one year each thereafter
during the term of this Lease, unless the Issuing Bank sends notice (the
"Non-Renewal Notice") to Landlord by certified mail, return receipt requested,
not less than thirty (30) days next preceding the then expiration date of the
Letter of Credit that it elects not to have such Letter of Credit renewed.
Additionally, the Letter of Credit shall provide that Landlord shall have the
right, exercisable within twenty (20) days of its receipt of the Non-Renewal
Notice, by sight draft on the Issuing Bank, to receive the monies represented by
the existing Letter of Credit and to hold such proceeds pursuant to the terms of
this Section 32.2 as a cash security pending the replacement of such Letter of
Credit. If an Event of Default shall have occurred and be continuing with
respect to any provision of this Lease, including but not limited to the
provisions relating to the payment of Fixed Rent and Additional Rent, Landlord
may apply or retain the whole or any part of the cash security so deposited or
may notify the Issuing Bank and thereupon receive all the monies represented by
the Letter of Credit and use, apply, or retain the whole or any part of such
proceeds, as provided in this Section 32.2. Any portion of the cash proceeds of
the Letter of Credit not so used or applied by Landlord in satisfaction of the
obligations of Tenant as to which such Event of Default shall have occurred
shall be deposited by Landlord and retained in an interest-bearing account as
provided in Section 32.1. If Landlord applies or retains any part of the cash
security or proceeds of the Letter of Credit, as the case may be, Tenant shall,
within five (5) days after written demand therefor, deposit with Landlord the
amount so applied or retained so that Landlord shall have the full Security
Deposit required pursuant to Section 32.1 on hand at all times during the Term.
If Tenant shall fully and faithfully comply with all of the terms, provisions,
covenants and conditions of this Lease, the Letter of Credit shall be returned
to Tenant within thirty (30) days after the Expiration Date and after delivery
of possession of the Premises to Landlord. In the event of a sale of Landlord's
interest in the Premises, within thirty (30) days of notice of such sale or
leasing, Tenant, at Tenant's sole cost and expense, shall arrange for the
transfer of the Letter of Credit to the new landlord, as designated by Landlord,
or have the Letter of Credit reissued in the name of the new landlord and
Landlord shall thereupon be released by Tenant from all liability for the return
of the Letter of Credit; provided, however, that if the Letter of Credit is
reissued, Landlord shall return the original Letter of Credit issued in
Landlord's name to Tenant.

                  Section 32.3 (a) Notwithstanding anything set forth in this
Article 32 to the contrary, and provided that each of the conditions set forth
in Section 32.3(b) shall have been satisfied, then reasonably promptly after
notice from Tenant to Landlord, signed by an authorized financial officer of
Tenant and certifying that the condition set forth in Section 32.3(b)(ii) has
been satisfied, the Security Deposit shall be reduced to $3,002,292.00.

                  (b) The following are the conditions precedent to the
reduction of the Security Deposit as provided in Section 32.3(a):

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<PAGE>

                  (i) no Event of Default shall have occurred and be continuing
         with respect to any provision of this Lease, including the provisions
         relating to the payment of Fixed Rent and Additional Rent;

                  (ii) Tenant shall have submitted to Landlord true and complete
         copies of (A) if Tenant is a publicly traded Entity, Tenant's annual
         financial statements as filed with the Securities and Exchange
         Commission, or (B) if Tenant is not a publicly traded Entity, Tenant's
         annual financial statements for the preceding three (3) fiscal years of
         Tenant (the "Financial Statements"), audited by a firm of certified
         public accountants reasonably satisfactory to Landlord, (including
         B.D.O. Seidman), and substantially in the form of Tenant's financial
         statement delivered by Tenant to Landlord immediately prior to the
         execution and delivery of this Lease, showing that:

                           (A) for the eight (8) immediately preceding fiscal
                  quarters of Tenant (which shall not include any fiscal quarter
                  all or part of which falls within calendar year 1999 or
                  earlier years), Tenant shall have achieved positive "Net Cash
                  Flow from Operating Activities" after payment of all operating
                  expenses and debt service, as evidenced in the Statement of
                  Cash Flows contained in the Financial Statements; and

                           (B) Tenant has a net worth, computed in accordance
                  with generally accepted accounting principles consistently
                  applied, of not less than Three Hundred Million and 00/100
                  Dollars ($300,000,000.00).

                  (c) If Tenant has deposited the Security Deposit in cash,
Landlord shall refund to Tenant the amounts by which the Security Deposit is
reduced pursuant hereto, within fifteen (15) days after notice from Tenant
pursuant to Section 32.3(a). If Tenant has provided a Letter of Credit, then,
provided that Tenant tenders to Landlord a replacement Letter of Credit (which
replacement must meet the applicable requirements set forth in Section 32.2) for
the appropriately reduced amount of the Security Deposit, Landlord shall
exchange the Letter of Credit then held by Landlord for the replacement Letter
of Credit tendered by Tenant. Tenant may, in lieu of replacing the Letter of
Credit, cause the Letter of Credit to be amended as of the date of such
reduction to reflect the reduced Security Deposit pursuant hereto.

                  Section 32.4 Notwithstanding anything set forth in this
Article 32 to the contrary: (a) if Tenant shall provide Landlord with a
Guaranty, substantially in the form attached as Exhibit O to this Lease, of
Tenant's obligations under this Lease executed by Bertelsmann, then the Security
Deposit shall be reduced to $1,500,000.00; and (b) if Tenant shall provide
Landlord with a guaranty, substantially in the form attached as Exhibit O to
this Lease, of Tenant's obligations under this Lease executed by B&N Inc., then
the Security Deposit shall be reduced to $3,002,292.00, provided that at the
time of execution and delivery of any such Guaranty, Tenant shall provide to
Landlord reasonable evidence that such guarantor shall have a net worth,
computed in accordance with generally accepted accounting principles
consistently applied, of not less than $300,000,000.00.

                                       76
<PAGE>

                  ARTICLE 33.       BUILDING NAME AND SIGNAGE; FLAGPOLE

                  Section 33.1 The Building may be designated and known by any
name Landlord may choose and such designated name may be changed from time to
time in Landlord's sole discretion. Tenant shall not refer to or otherwise
characterize the Building, in any written material generated or circulated by
Tenant, as the "barnesandnoble.com Building" or any other name identifying the
Building with Tenant, and shall not place any signage anywhere in or on the
Building or the Premises, except as specifically permitted in this Section 33.1.
So long as the named Tenant hereunder and its Affiliates ("Original Tenant")
(i.e., exclusive of any subtenants who are not Affiliates) shall be in actual
occupancy for the conduct of its business of not less than the greater of (a)
ninety (90%) percent of the then Demised Premises or (b) 125,000 Rentable Square
Feet of space (the "Signage Threshold"), Original Tenant may install and
maintain, at Tenant's sole cost, at locations reasonably designated by Landlord:
(i) two signs identifying Original Tenant, to be located below the existing
signs identifying Insignia/Edward S. Gordon Company, Inc. or the then managing
agent of the Building on the exterior of the Ninth Avenue side of the Building,
(ii) two signs identifying Original Tenant, to be located on the wall currently
housing the Building directory in the lobby on the Ninth Avenue side of the
Building and (iii) a flag identifying Original Tenant on one of the existing
flagpoles (designated by Landlord) attached to the exterior of the ninth floor
side of the Building; provided that such signage and flag (A) shall not diminish
access to and from the Building by other tenants, other occupants of the
Building and the general public, (B) shall not reduce the size or accessibility
of the Ninth Avenue Building entrance, (C) shall be subject to and in accordance
with all Legal Requirements and all precautions and safeguards required by
Landlord's insurance company, and (D) shall be approved by Landlord as to size,
materials and design (which approval shall not be unreasonably withheld or
delayed). Landlord may at any time during the Term after reasonable prior notice
to Tenant and at Landlord's sole cost and expense relocate any of Tenant's signs
or flag to locations designated by Landlord and reasonably acceptable to Tenant,
in order to accommodate any changes in the arrangement or location of, or other
renovations, improvements or modifications to, any public parts of the Building,
provided that such relocation does not cause the visibility of such signs or
flag to be interrupted or impaired, other than temporarily. Tenant shall be
solely responsible for any damage caused as a result of its use of, and shall be
solely responsible to promptly and diligently perform all necessary repairs or
replacements to, or maintenance of, the flagpole used by Tenant, provided,
however, that if Tenant's failure after five (5) days' notice from Landlord to
so repair, replace or maintain the flagpole materially jeopardizes in any way
Landlord's or any other tenant's property located on or within the Building,
Landlord may, at Landlord's option, elect to perform such repairs, replacements
or maintenance at Tenant's sole cost and expense. Landlord shall give Tenant
reasonable prior notice of its election to perform such repairs, except in an
emergency. Landlord represents that to the best of its knowledge, as of the date
of this Lease, no other Person has the right to use the flagpole to be
designated for Tenant's use; provided, however, that Tenant shall, at Landlord's
request, promptly remove its flag if Landlord shall become aware of any such
right of any other Person, and Tenant agrees that Landlord shall not be liable
to Tenant in connection therewith.

                  Section 33.2 If and when Original Tenant is no longer in
actual occupancy of the Signage Threshold, then (i) Tenant shall, at Landlord's
request, remove all of the signage

                                       77
<PAGE>

theretofore installed by Tenant pursuant to Section 33.1 and repair and restore
in a good and workmanlike manner any damage to the Building caused by such
removal.

                  Section 33.3 So long as Original Tenant shall be in actual
occupancy of not less than the Signage Threshold, Landlord shall not name the
Building for Borders Booksellers or Amazon.com, and, to the extent that
Landlord's consent or approval is required or Landlord is otherwise in a
position to make such determination, Landlord shall not cause or permit to be
placed in the Building lobbies or on the Building exterior any signage
identifying such companies, provided, however, that Landlord may maintain
listings on the Building directory of the names of such companies, their
Affiliates, officers or employees for so long as any of such Persons occupy
space in the Building.

                  ARTICLE 34.       GUARANTY OF LEASE

                  Simultaneously with the execution and delivery of this Lease
and as a condition to the effectiveness hereof, Tenant has delivered to Landlord
an Agreement and Guaranty, executed by barnesandnoble.com inc., a Delaware
corporation, in the form attached to this Lease as Exhibit O.

                  ARTICLE 35.       MISCELLANEOUS

                  Section 35.1 (a) The obligations of Landlord under this Lease
shall not be binding upon Landlord named herein after the sale, conveyance,
assignment or transfer by such Landlord (or upon any subsequent landlord after
the sale, conveyance, assignment or transfer by such subsequent landlord) of its
interest in the Building or the Real Property, as the case may be, and in the
event of any such sale, conveyance, assignment or transfer, Landlord shall be
and hereby is entirely freed and relieved of all covenants and obligations of
Landlord hereunder, and the transferee of Landlord's interest in the Building or
the Real Property, as the case may be, shall be deemed to have assumed all
obligations under this Lease, whether accruing prior or subsequent to such sale,
conveyance, assignment or transfer. Prior to any such sale, conveyance,
assignment or transfer, the liability of Landlord for Landlord's obligations
under this Lease shall be limited to Landlord's interest in the Real Property
and Tenant shall not look to any other property or assets of Landlord or the
property or assets of any of the Exculpated Parties (defined below) in seeking
either to enforce Landlord's obligations under this Lease or to satisfy a
judgment for Landlord's failure to perform such obligations.

                  (b) Notwithstanding anything contained herein to the contrary,
Tenant shall look solely to Landlord to enforce Landlord's obligations hereunder
and no partner, shareholder, director, officer, principal, employee or agent,
directly or indirectly, of Landlord (collectively, the "Exculpated Parties")
shall be personally liable for the performance of Landlord's obligations under
this Lease. Tenant shall not seek any damages against any of the Exculpated
Parties.

                  Section 35.2 (a) Wherever in this Lease Landlord's consent or
approval is required, if Landlord shall refuse such consent or approval, Tenant
in no event shall be entitled to make, nor shall Tenant make, any claim, and
Tenant hereby waives any claim, for money damages (nor shall Tenant claim any
money damages by way of set-off, counterclaim or defense)

                                       78
<PAGE>

based upon any claim or assertion by Tenant that Landlord unreasonably withheld
or unreasonably delayed its consent or approval. Tenant's sole remedy shall be
an action or proceeding to enforce any such provision, for specific performance,
injunction or declaratory judgment.

                  (b) In any instance where Landlord has specifically agreed
that it will not unreasonably withhold its consent to a proposed assignment of
this Lease or a subletting of all or a portion thereof, Tenant may dispute the
reasonableness of the withholding by Landlord of such consent by arbitration of
the issue in the City of New York in accordance with the rules and regulations
for commercial matters then prevailing of the American Arbitration Association
or its successor (the "AAA") pursuant to a submission effected within ten (10)
Business Days after notice of the withholding of consent has been given by
Landlord to Tenant. Provided the rules and regulations of the AAA so permit, (i)
the AAA shall, within two (2) Business Days after such submission or
application, select a single arbitrator having at least ten (10) years'
experience in the leasing management and/or operation commercial properties
similar to the Building, (ii) the arbitration shall commence two Business Days
thereafter, and (iii) the arbitrator shall make a determination within three
Business Days after the conclusion of the presentation of Landlord's and
Tenant's cases, which determination shall be limited to a decision upon whether
Landlord's withholding of consent was reasonable. The arbitrator's determination
shall be final and binding upon the parties, whether or not a judgment shall be
entered in any court. All actions necessary to implement such decision shall be
undertaken as soon as possible, but in no event later than ten (10) Business
Days after the rendering of such decision. The arbitrator's determination may be
entered in any court having jurisdiction thereof. All fees payable to the AAA
for services rendered in connection with the resolution of the dispute shall be
paid by the unsuccessful party.

                  Section 35.3 (a) All of the Exhibits attached to this Lease
are incorporated in and made a part of this Lease, but, in the event of any
inconsistency between the terms and provisions of this Lease and the terms and
provisions of the Exhibits hereto, the terms and provisions of this Lease shall
control. This Lease may not be changed, modified, terminated or discharged, in
whole or in part, except by a writing, executed by the party against whom
enforcement of the change, modification, termination or discharge is to be
sought. Wherever appropriate in this Lease, personal pronouns shall be deemed to
include the other genders and the singular to include the plural. Wherever a
period of time is stated in this Lease as commencing or ending on any particular
date, such period of time shall be deemed inclusive of such stated commencement
and ending dates. The captions hereof are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
of this Lease nor the intent of any provision thereof. All Article and Section
references set forth herein shall, unless the context otherwise specifically
requires, be deemed references to the Articles and Sections of this Lease.
Whenever the words "include", "includes", or "including" are used in this Lease,
they shall be deemed to be followed by the words "without limitation".

                  (b) This Lease shall be governed in all respects by the laws
of the State of New York applicable to agreements executed in and to be
performed wholly within said State.

                  (c) If any term, covenant, condition or provision of this
Lease, or the application thereof to any person or circumstance, shall ever be
held to be invalid or

                                       79
<PAGE>

unenforceable, then in each such event the remainder of this Lease or the
application of such term, covenant, condition or provision to any other person
or any other circumstance (other than those as to which it shall be invalid or
unenforceable) shall not be thereby affected, and each term, covenant, condition
and provision hereof shall remain valid and enforceable to the fullest extent
permitted by law.

                  (d) If at the commencement of, or at any time or times during
the Term, the Fixed Rent and Additional Rent reserved in this Lease shall not be
fully collectible by reason of any Legal Requirement, Tenant shall enter into
such agreements and take such other steps (without additional expense to Tenant)
as Landlord may request and as may be legally permissible to permit Landlord to
collect the maximum rents which may from time to time during the continuance of
such legal rent restriction be legally permissible (and not in excess of the
amounts reserved therefor under this Lease). Upon the termination of such legal
rent restriction prior to the expiration of the Term, (i) Fixed Rent and
Additional Rent shall become and thereafter be payable hereunder in accordance
with the amounts reserved in this Lease for the periods following such
termination, and (ii) Tenant shall pay to Landlord, if legally permissible, an
amount equal to (A) the items of Fixed Rent and Additional Rent which would have
been paid pursuant to this Lease but for such legal rent restriction less (B)
the rents paid by Tenant to Landlord during the period or periods such legal
rent restriction was in effect.

                  (e) The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Landlord and Tenant and their
respective legal representatives, successors, and, except as otherwise provided
in this Lease, their assigns.

                  Section 35.4 Except as expressly provided to the contrary in
this Lease, Tenant agrees that all disputes arising, directly or indirectly, out
of or relating to this Lease, and all actions to enforce this Lease, shall be
dealt with and adjudicated in the state courts of New York or the Federal courts
sitting in New York City; and for that purpose hereby expressly and irrevocably
submits itself to the jurisdiction of such courts. Tenant hereby irrevocably
appoints the Secretary of the State of New York as its authorized agent upon
which process may be served in any such action or proceeding.

                  Section 35.5 Tenant hereby irrevocably waives, with respect to
itself and its property, any diplomatic or sovereign immunity of any kind or
nature, and any immunity from the jurisdiction of any court or from any legal
process, to which Tenant may be entitled, and agrees not to assert any claims of
any such immunities in any action brought by Landlord under or in connection
with this Lease. Tenant acknowledges that the making of such waivers, and
Landlord's reliance on the enforceability thereof, is a material inducement to
Landlord to enter into this Lease.

                         [NO FURTHER TEXT ON THIS PAGE]

                            [SIGNATURE PAGE FOLLOWS]

                                       80
<PAGE>

                  IN WITNESS WHEREOF, Landlord and Tenant have respectively
executed this Lease as of the day and year first above written.

                                    111 CHELSEA LLC, Landlord
                                    a Delaware limited liability company

                         By:      Taconic Chelsea Holdings LLC,
                                  a Delaware limited liability company,
                                  managing member

                                  By:      Taconic SL Principals LLC,
                                           a Delaware limited liability company,
                                           managing member

                                           By:     /s/Paul E. Pariser
                                               ----------------------------
                                               Name:  Paul E. Pariser
                                               Title: Member

                                    BARNESANDNOBLE.COM LLC, Tenant
                                    a Delaware limited liability company

                                    By:    /s/Marie J. Toulantis
                                        -----------------------------------
                                        Name: Marie J. Toulantis
                                        Title: Chief Financial Officer

Tenant's Federal Tax Identification Number:  13-4027879

<PAGE>

                                    EXHIBIT A
                                    ---------

                              FLOOR PLAN OF SPACE A
                              ---------------------

The floor plan which follows is intended solely to identify the general outline
of Space A, and should not be used for any other purpose. All areas, dimensions
and locations are approximate, and any physical conditions indicated may not
exist as shown.

                                [Diagram Exhibit]

                                       A-1

<PAGE>

                                    EXHIBIT B
                                    ---------

                              FLOOR PLAN OF SPACE B
                              ---------------------

The floor plan which follows is intended solely to identify the general outline
of Space B, and should not be used for any other purpose. All areas, dimensions
and locations are approximate, and any physical conditions indicated may not
exist as shown.

                                [Diagram Exhibit]

                                       B-1

<PAGE>

                                    EXHIBIT C
                                    ---------

                              FLOOR PLAN OF SPACE C
                              ---------------------

The floor plan which follows is intended solely to identify the general outline
of Space C, and should not be used for any other purpose. All areas, dimensions
and locations are approximate, and any physical conditions indicated may not
exist as shown.

                                [Diagram Exhibit]

                                       C-1

<PAGE>

                                    EXHIBIT D
                                    ---------

                            FORM OF LETTER OF CREDIT

                          [LETTERHEAD OF ISSUING BANK]

                           LETTER OF CREDIT DEPARTMENT

                           Issue Date:  _________ ___, 199_
                           Our Number:  ________________

No.________________________________________
Irrevocable Commercial Letter of Credit

                                 Applicant:

                                 Beneficiary: ____________________________

                                 Amount (U.S.): $______________

                                 Expiry:  ____________ ___, 19__

Gentlemen:

         For the account of Applicant we hereby establish this Irrevocable
Letter of Credit No. _____________________ in your favor for an amount of up to
$_______________ effective immediately, available by your drafts at sight when
accompanied by this Irrevocable Letter of Credit and the following document:

                  Beneficiary's statement purportedly signed by an officer of
                  Beneficiary or Beneficiary's authorized managing agent,
                  reading:

                           "The amount of this drawing under Irrevocable Letter
                  of Credit No. _____________ is being drawn pursuant to Lease
                  dated __________________ ____ 199_, by and between
                  ______________________, as Landlord, and _________________, as
                  Tenant".

         All drafts must be marked "Drawn under ____________________ Bank,
Irrevocable Letter of Credit No. ____________ dated _____________, 19___."

         It is a condition of this Irrevocable Letter of Credit that it shall be
fully transferable by Beneficiary without any fees or charges payable by
Beneficiary in connection therewith.

         It is a condition of this Irrevocable Letter of Credit that it shall be
automatically extended for additional periods of one year from the present or
future expiration date, unless at least 30 days prior to such expiration date we
notify you in writing by certified or registered mail,

                                       D-1

<PAGE>

return receipt requested, at the above address, that we elect not to renew this
Irrevocable Letter of Credit for such additional period. Upon receipt by you of
such notice you may draw drafts on us at sight for an amount not to exceed the
balance remaining in this Irrevocable Letter of Credit within the then
applicable expiry date.

         We hereby agree with you that drafts drawn under and in accordance with
the terms of this Irrevocable Letter of Credit will be duly honored by us on
delivery of this Irrevocable Letter of Credit and the document so specified,
when presented at this office.

         This credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500; provided, however, that in the event the expiration date
occurs during an interruption of our business of the type described in Article
17 of such publication, then the expiration date shall be deemed to be
automatically extended until the date which shall be five (5) days after the
resumption of our business.

                                             ------------------------------
                                             Authorized Signature

                                       D-2

<PAGE>

                                    EXHIBIT E
                                    ---------

                              RULES AND REGULATIONS
                              ---------------------

                  1. The rights of tenants in the entrances, corridors,
elevators of the Building are limited to ingress to and egress from tenants'
premises for tenants and their employees, licenses and invitees, and no tenant
shall use, or permit the use of, the entrances, corridors, or elevators for any
other purpose. No tenant shall invite to such tenant's premises, or permit the
visit of, persons in such numbers or under such conditions as to interfere with
the use and enjoyment of any of the entrances, corridors, elevators and other
facilities of the Building by other tenants. Fire exits and stairways are for
emergency use only, and shall not be used for any other purposes by the tenants,
their employees, licensees or invitees. No tenant shall encumber or obstruct, or
permit the encumbrance or obstruction of, any of the sidewalks, entrances,
corridors, elevators, fire exits or stairways of the Building. Landlord reserves
the right to control and operate the public portions of the Building and the
public facilities, as well as facilities furnished for the common use of
tenants, in such manner as it reasonably deems best for the benefit of tenants
generally.

                  2. Tenant's employees shall not loiter around the hallways,
stairways, elevators, front, roof or any other part of the Building used in
common by the occupants thereof.

                  3. Tenant shall not alter the exterior appearance of the
Building by installing signs, advertisements, notices or other graphics on
exterior walls, or interior surfaces visible from outside, without prior written
permission from Landlord. Similarly, electrical fixtures hung in offices or
other spaces along the perimeter of the Building which affect its exterior
appearance must be fluorescent and a quality, type, design and bulb color,
previously approved in writing by Building management.

                  4. The cost of repairing any damage to the public portions of
the Building or the public facilities or to any facilities used in common with
other tenants, caused by a tenant or the employees, licensees or invitees of the
tenant, shall be paid by such tenant.

                  5. The requirements of tenants will be attended to only upon
application at the Building Management Office. Employees of the Building shall
not perform any work or do anything outside of their regular assigned duties,
unless under special instructions from the Building Management Office.

                  6. Except as specifically provided in the Lease, Tenant shall
have no right of access to the roof of the Building and shall not install,
repair or replace any satellite dish, antennae, fan, air conditioner or other
devices on the roof of the Building without the prior written consent of
Landlord. Any such device installed without such written consent shall be
subject to removal, at Tenant's expense, without notice, at any time.

                  7. Exterior signs on doors and any directory tablet must be
approved by Landlord.

                                      E-1
<PAGE>

                  8. No awnings or other projections over or around the windows
shall be installed by any tenant and only such window blinds as are permitted by
Landlord shall be used in any tenant's premises.

                  9. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building.
The water and service closets and other plumbing fixtures in or serving any
tenant's premises shall not be used for any purpose other than the purpose for
which they were designed or constructed and no sweepings, rubbish, rags, acids
or other foreign substances shall be deposited therein. All damages resulting
from any misuse of the fixtures shall be borne by the tenant who, or whose
servants, employees, agents, visitors or licensees, shall have caused the same.

                  10. Tenant shall not disturb others. This rule prohibits any
noise audible from the hallway, adjoining office suites or outside whether
created by musical instruments, radios, television sets, group activities or any
other source.

                  11. All hand trucks used in the Building shall be equipped
with rubber tires and side guards.

                  12. No tenant shall install wires, conduit, sleeves or similar
installations in Building shaftways without prior written consent of Landlord,
and as Landlord may direct.

                  13. Each tenant shall, at its expense, provide artificial
light in the premises demised to such tenant for Landlord's agents, contractors
and employees while performing janitorial or other cleaning services and making
repairs or alterations therein.

                  14. Tenants shall not permit any cooking or food odors
emanating from their demised premises to be detectable in any other portions of
the Building.

                  15. Tenants shall provide Building management provided with
keys or combinations to all locks, bolts or other mechanical security systems
except those protecting high security areas. Upon vacating the Building, tenants
must return keys to storerooms, offices and toilets or pay replacement costs.

                  16. All entrance doors in each tenant's premises shall be left
locked when the tenant's premises are not in use. Entrance doors shall not be
left open at any time.

                  17. Tenants shall not keep pets, bicycles, or other vehicles
in their premises without prior written approval by Landlord. Exceptions are
made for seeing-eye dogs and conveyances required by handicapped persons.

                  18. Regular suppliers of outside services must be approved by
Building management, which may establish hours or other conditions for entrance
to the Building. Such suppliers include vendors of food, spring water, ice,
towels, barbering, shoe shining and other products and services.

                                      E-2
<PAGE>

                  19. Canvassing, soliciting and peddling of products or
services are prohibited in the Building, and tenants shall cooperate with
Landlord in attempting to prevent such acts in the Building.

                  20. Landlord may refuse admission to the Building outside of
normal hours to any person not having a pass issued by Landlord or not properly
identified, and may require all persons admitted to or leaving the Building
outside of normal business hours to register. Tenant's employees, agents and
visitors shall be permitted to enter and leave the Building whenever appropriate
arrangements have been previously made between Landlord and Tenant. Each tenant
shall be responsible for all persons for whom such person requests such
permission and shall be liable to Landlord for all acts of such persons. Any
person whose presence in the Building at any time shall, in the reasonable
judgment of Landlord, be prejudicial to the safety, character, reputation and
interests of the Building or its tenants may be denied access to the Building or
may be rejected therefrom. In case of invasion, riot, public excitement or other
commotion, Landlord may prevent all access to the Building during the
continuance of the same, by closing the doors or otherwise, for the safety of
the tenants and protection of property in the building. Landlord may require any
person leaving the Building with any package or other object to exhibit a pass
from the tenant from whose premises the package or object is being removed, but
the establishment and enforcement of such requirements shall not impose any
responsibility on Landlord for the protection of any tenant against the removal
of property from the premises of the tenant. Landlord shall in no way be liable
to any tenant for injury or loss arising from the admission, exclusion or
ejection of any person to or from the tenant's premises or the Building under
the provisions of this rule.

                  21. Tenant, at its sole cost and expense, shall cause the
Premises to be exterminated from time to time to the reasonable satisfaction of
the Building Management Office, and shall employ such exterminators therefor as
shall be approved by the Building Management Office.

                  22. Tenants shall not serve or permit the serving of alcoholic
beverages in the its premises unless Tenant shall have procured host liquor
liability insurance, issued by companies and in amounts reasonably satisfactory
to Landlord, naming Landlord and its managing agent as additional insureds.

                  23. The Building loading docks may be used only for loading
and unloading procedures. Tenants may not use the loading dock area for parking.
Tenants may not place any dumpsters at the loading docks or any other portion of
the Building without the prior written approval of Landlord.

                  24. No shutdowns of any Building systems will be permitted
without prior written approval of Landlord and supervision by the Building
engineer.

                  25. Tenant's contractors or vendors may not use any space
within the Building outside the Premises for storage or moving of materials or
equipment or for the location of a field office or facilities for the employees
of such contractors or vendors without obtaining Landlord's prior written
approval for each such use. Landlord shall have the right to terminate such use
and

                                      E-3
<PAGE>

remove all such contractor's or vendor's materials, equipment and other
property from such space, without Landlord being liable to tenant or to such
contractor or vendor, and the cost of such termination and removal shall be paid
by Tenant to Landlord.

                  26. Tenants are required to have a full service maintenance
contract covering their supplemental HVAC, Uninterrupted Power Supply (UPS) and
Automatic Transfer systems, and to provide copies of such contracts to the
Building management office.

                  27. The Building reserves the right to restrict the use of
certain materials (i.e., Omega sprinkler heads and piping manufactured in The
Republic of China) in the building based on notifications that declare the
materials unsafe.

                  28. Trucks using the Tenant Shipping Platforms on the ground
floor of the building, and the upper Floor Truck Lobbies will load and discharge
at the place or places thereat and therein as indicated by the duly authorized
representative of Landlord in charge of such operation.

                  29. Trucks using the Tenant Shipping Platforms on the ground
floor of the building, and the upper floor truck lobbies, will load and
discharge at the place or places thereat and therein as indicated by the duly
authorized representative of Landlord in charge of such operation.

                  30. Elevators for freight handling service will be operated
during Business Hours on Business Days, unless special arrangement is made with
Landlord for operation at other times.

                  31. The use of the private right of way and the truck
elevators will be subject to and under the reasonable direction and control of
the duly authorized representative of Landlord in charge of such operation. When
in the interest of continuity of service or in the interest of the common
service, Tenant's freight departing from or arriving at the building by truck
may at the direction of Landlord be handled over and through the Tenant Shipping
Platforms on the ground floor and the freight elevators. Landlord reserves the
right to direct such handling in lieu of truck elevator service.

                  32. In the interest of preserving the continuity of freight
elevator service, freight will not be floored upon the freight elevator, but
will at all times be handled and moved upon suitable vehicles of the indoor
industrial wheeler type permitting such freight to be economically and
expeditiously wheeled on and off the freight elevators. Freight which cannot be
handled upon such equipment will be handled in such alternative manner as may be
approved by Landlord.

                  33. (a) The Tenant Shipping Platforms located on first or
ground floor of the Building are designed to accomplish the immediate transfer
and movement of freight between the freight elevators and trucks. The use of
such facility by Tenant or any of its agents, servants, employees,
representatives or contractors will be confined to such purpose, under the
reasonable

                                      E-4
<PAGE>

direction and control of the duly authorized representative of Landlord in
charge of such operation.

                  (b) No storage or holding of freight on such Tenant Shipping
Platforms awaiting the arrival of trucks, or awaiting transfer by Tenant from
such Tenant Shipping Platforms to the Premises, will be permitted. No
automobiles of Tenant or any Tenant Party may enter on or be stored in any
portion of the building, except in areas designated by Landlord, and provided
Tenant pays for such parking at rates designated by Landlord, its agents or
parking lessees.

                  (c) Any violation of this rule or disregard of directions
issued by Landlord will give Landlord the right to handle, transfer, remove or
store such freight in or to other premises in the building. When such handling,
transfer, removal or storage is performed by Landlord, and when it shall be
deemed necessary by Landlord to preserve the continuity of common service
provided by this facility, any and all expense will be at Tenant's sole cost and
expense. Landlord will not be responsible for any loss or damage which any such
freight may suffer by such handling, removing or storage.

                  34. Neither Tenant nor any Tenant Party will at any time be
permitted to operate any freight, passenger or truck elevator.

                  35. The Building is equipped with scuppers for carrying off
water which may result from sprinkler operation or other causes. Tenant shall
not, under any circumstances, deposit or permit to be deposited sweepings or any
other rubbish in such scuppers, and Tenant will keep the scuppers within the
Premises at all times free of any and all rubbish, sweepings, and other
obstructions of any nature whatsoever.

                  36. Tenant shall not, under any circumstances, permit the
accumulation of sweepings or any other rubbish in the expansion joints of the
Building, or in any other portions of the Building outside of the Premises, and
all such sweepings or rubbish shall be removed daily by Tenant in such manner as
Landlord shall direct. Tenant will keep the Building's expansion joints free of
any and all rubbish, sweepings and any other obstruction of any nature
whatsoever. Tenant will not place machinery or equipment in a position so that
such machinery or equipment straddles an expansion joint, or erect a partition
which intersects an expansion joint, unless one end of such machinery, equipment
or partition is free to permit the expansion and contraction of such expansion
joint.

                  37. If any electrical or telephone installations made or
operated by Tenant shall emit any electromagnetic interference, Tenant shall
immediately discontinue use of such installations until such electromagnetic
interference is eliminated to Landlord's satisfaction.

                  38. Tenant shall deliver to Landlord evidence that all
systems, equipment and installations used by Tenant in the Building containing
time- and date-related codes and internal programs, whether computerized or
otherwise, shall continue through the Term, including and beyond 11:59 p.m. on
December 31, 1999 (the "Millennium Date Change") without any material failure or
interruption and at substantially the same level of performance as would have
been

                                      E-5
<PAGE>

provided in the absence of the Millennium Date Change. Additionally, all of
Tenant's systems, equipment and installations shall be tested for operational
compatibility with the following dates: 2/29/2000 and 01/01/2001. Tenant shall
submit evidence of such compliance no later than 90 days following the
Commencement Date.

                  39. Landlord reserves the right at any time and from time to
time, to rescind, alter, waive, modify, add to or delete, in whole or in part,
any of these Rules and Regulations in order to protect the comfort, convenience
and safety of all tenants at the Building. Tenant shall not have any rights or
claims against Landlord by reason of non-enforcement of these rules and
regulations against any tenant, and such non-enforcement will not constitute a
waiver as to Tenant.

                  40. If there shall be any inconsistencies between the text of
the main body of the Lease and these Rules and Regulations, the provisions of
the Lease shall prevail.

                                      E-6
<PAGE>

                                    EXHIBIT F
                                    ---------

                              APPROVED CONTRACTORS
                              --------------------

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

                            CONSTRUCTION VENDOR LIST

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

<S>                                                          <C>
Mr. Frank Sciame                                             Mr. Al Hot
President                                                    President
F.J. Sciame Construction Co., Inc.                           Fast Track Construction
80 South Street                                              450 West 33rd Street
New York, N.Y.  10038                                        New York, N.Y.  10001
Tel:  (212) 232-2200                                         Tel:  (212) 279-0110
Fax:  (212) 248-5299                                         Fax:  (212) 279-9239

Mr. Anthony Genovese                                         Christopher H. Gallin
Executive Vice President                                     John Gallin & Sons, Inc.
HRH Construction Interiors, Inc.                             40 Gold Street
One Park Avenue                                              New York, N.Y.  10018
New York, N.Y.  10016                                        Tel:  (212) 267-8624
Tel:  (212) 616-3100                                         Fax:  (212) 962-7201
Fax:  (212) 696-4091

Mr. Irving Koven                                             Mr. Peter Dove
Ambassador Construction Co., Inc.                            Dominant Construction
41 East 42nd Street                                          523 Route 33
New York, N.Y.  10017                                        Orangeburg, N.Y.  10962
Tel:  (212) 922-1020                                         Tel:  (914) 398-3900
Fax:  (212) 949-9762                                         Fax:  (914) 398-3106

Mr. Chris Philips                                            Mr. Stephen S. Thomsen
Vice President                                               Thomsen Construction Co., Inc.
Tishman Construction Corp.                                   180 Varick Street
666 Fifth Avenue                                             12th Floor
New York, N.Y.  10103                                        New York, N.Y.  10014
Tel:  (212) 708-6824                                         Tel:  (212) 647-1412
Fax:  (212) 399-3643                                         Fax:  (212) 647-1249

Lehrer McGovern Bovis                                        Mr. George J. Figliolia
200 Park Avenue                                              New York City Builders Group
New York, N.Y.  10166                                        One Wall Street, 4th Floor
Tel:  (212) 592-6700                                         New York, N.Y.  10005
Fax:  (212) 592-6988                                         Tel:  (212) 635-0760
                                                             Fax:  (212) 635-0767
</TABLE>

                                      F-1
<PAGE>

<TABLE>
<S>                                                          <C>
John Berry
Westside Interiors                                           Alfred J. Tosto
462 Beattie Road                                             Regional Manager
Rock Tavern, N.Y.  12575                                     Gnome Group, Inc.
Tel:  (914) 496-8005                                         111 8th Avenue
Fax:  (914) 496-2912                                         New York, N.Y.  10011
                                                             Tel:  (212) 807-1991
                                                             Fax:  (212) 807-6266

George Paleski
Lehr Construction Corp.
902 Broadway
New York, NY  10010
Tel:  (212) 353-1160
Fax:  (212) 505-8169
</TABLE>

                                                        SUBCONTRACTORS
<TABLE>
<CAPTION>

              WORK CATEGORY                               SUB-CONTRACTOR NAME                        ESTIMATING CONTACT
              -------------                               -------------------                        ------------------

<S>                                              <C>                                            <C>
             ACCESS FLOORING                                 ARI PRODUCTS                               TERRY BARONE
                                                          One Madison Street                           (201) 773-2777
                                                       East Rutherford, NJ 07073                      F (201) 773-9717

                                                    RAISED FLOOR INSTALLATION, INC.                   ERIC LAGERSTROM
                                                           19 Sebago Street                            (201) 778-2444
                                                           Clifton, NJ 07013                          F (201) 778-8052

                                                         COMPUTER FLOORS, INC.
                                                          19 Richmond Street                           (201) 340-3666
                                                           Clifton, NJ 07011                          F (201) 340-1565

        APPLIANCES & ACCESSORIES                             GRINGER SALES                             LESTER RAWITZ
                                                            29 First Avenue                            (212) 475-2013
                                                          New York, NY 10003                          F (212) 982-1935

                                                           JENTEEN PARTNERS                           BARBARA MAUCERI
                                                          21 Woodfern Street                           (908) 755-2127
                                                           Edison, NJ 08820                           F (908) 769-7284

                                                           AHC APPLIANCE CO.                              JAY TAU
                                                           392 Felter Avenue                           (516) 569-1700
                                                           Hewlett, NY 11557                          F (516) 569-1864

                                                            SALES DIRECTION                              KEN MULLER
                                                        441 Sawmill River Road                         (914) 476-1593
                                                           Yonkers, NY 10701                          F (914) 476-5894

       ARCHITECTURAL METAL & GLASS                          LEXINGTON GLASS                           MICHAEL PECHMAN
                                                          50 North 1st Street                          (718) 782-1776
                                                          Brooklyn, NY 11211                          F (718) 387-5163

</TABLE>

                                      F-2
<PAGE>

<TABLE>
<CAPTION>

              WORK CATEGORY                               SUB-CONTRACTOR NAME                        ESTIMATING CONTACT
              -------------                               -------------------                        ------------------

<S>                                              <C>                                            <C>
                                                               METRALITE                              JEFF SILVERSTEIN
                                                          132-70 34th Avenue                           (718) 961-1770
                                                          Flushing, NY 11354                          F (718) 359-6541

                                                      F & F ARCH. GLASS & METALS                        ERIC FRANCK
                                                           79 Orchard Street                           (718) 402-7710
                                                          Demarest, NJ 07627                          F (718) 993-2792

                                                          CHECKER GLASS CORP.                            ANDY SHEER
                                                          5 Commercial Avenue                          (516) 294-8818
                                                         Garden City, NY 11530                        F (516) 742-4583

          CARPETING, VCT & BASE                          RESOURCE LASHER/WHITE                          DAVID WHITE
                                                         165 West 18th Street                          (212) 366-0666
                                                          New York, NY 10011                          F (212) 627-8015

                                                     CONSOLIDATED CARPET WORKSHOP                      AL BELLINGTON
                                                           1181 Grand Street                           (718) 456-8207
                                                          Brooklyn, NY 11211                          F (718) 497-3487

                                                        DUPONT FLOORING SYSTEM                          KEVIN GERBER
                                                           95 Madison Avenue                           (212) 376-5355
                                                          New York, NY 10016                          F (212) 376-5356

                                                         SHERLAND & FARRINGTON                           ED STRAUSS
                                                            155 6th Avenue                             (212) 206-7500
                                                          New York, NY 10013                          F (212) 206-7517

          CERAMIC TILE & STONE                           G. M. CROCETTI, INC.                           DON TENAGLIA
                                                          3960 Merritt Avenue                          (718) 994-0900
                                                            Bronx, NY 10466                           F (718) 994-4505

                                                       F. LANZILOTTA & SON, INC.                      RICH LANZILOTTA
                                                           421 Doughty Blvd.                           (516) 239-7893
                                                           Inwood, NY 11696                           F (516) 239-8422

                                                          NAVILLUS TILE INC.                          KEVIN O'SULLIVAN
                                                         30-30 Northern Blvd.                          (718) 784-0500
                                                      Long Island City, NY 11101                      F (718) 392-1754

                                                               WILKSTONE                               DAVE WILKINSON
                                                            128 19th Avenue                            (973) 684-5100
                                                          Patterson, NJ 07513                         F (973) 684-4907

       CONCRETE, MASONRY & PLASTER                         EUROTECH MASONRY                              FAY DEVLIN
                                                         532 West 30th Street                          (212) 594-7474
                                                          New York, NY 10001                          F (212) 594-1849

                                                       CIROCCO-OZZIMO CONT. INC.                        GREG OZZIMO
                                                            99 Rome Street                             (516) 847-0185
                                                         Farmingdale, NY 11735                        F (516) 847-0054

                                                          NAVILLUS TILE INC.                          KEVIN O'SULLIVAN
                                                         30-30 Northern Blvd.                          (718) 784-0500
                                                      Long Island City, NY 11101                      F (718) 392-1754

               DEMOLITION                              PATRIOT CONTRACTING CORP.                        MIKE REVELLO
                                                          19-21 Brook Street                           (201) 413-9800
                                                         Jersey City, NJ 07302                        F (201) 309-0550
</TABLE>

                                      F-3
<PAGE>

<TABLE>
<CAPTION>

              WORK CATEGORY                               SUB-CONTRACTOR NAME                        ESTIMATING CONTACT
              -------------                               -------------------                        ------------------

<S>                                              <C>                                            <C>

                                                          LIBERTY CONTRACTING                            FRANK CALI
                                                        71 South Newman Street                         (201) 488-9300
                                                         Hackensack, NJ 07601                         F (201) 488-7166

                                                    RITEWAY INTERNAL REMOVAL, INC.                     LEROY BARROCA
                                                           64-05 34th Avenue                           (718) 458-8900
                                                          Woodside, NY 11377                          F (718) 899-0515

                                                          FORTUNE DEMOLITION                             JAY PATEL
                                                            185 Dey Street                             (201) 795-9200
                                                         Jersey City, NJ 07306                        F (201) 653-2066

           DRYWALL & CARPENTRY                             CURTIS PARTITIONS                          SUDARSHAN NARULA
                                                            505 8th Avenue                             (212) 695-5575
                                                          New York, NY 10018                          F (212) 967-1120

                                                           GLENN PARTITIONS                            BILL SCHNEIDER
                                                           78 Morton Street                            (212) 243-2800
                                                          New York, NY 10014                          F (212) 645-7539

                                                          NASTASI ASSOCIATES                            BOB POLIZZO
                                                           147 Herricks Road                           (516) 746-1800
                                                      Garden City Park, NY 11040                      F (516) 746-6796

                                                     NEW AMSTERDAM INTERIORS, INC.                    KEVIN McNICHOLAS
                                                           292 Fifth Avenue                            (212) 714-3543
                                                          New York, NY 10001                          F (212) 714-3510

         ELECTRICAL & FIRE ALARM                          FOREST ELEC. CORP.                            PHIL ALTHEIM
                                                             2 Penn Plaza                              (212) 318-1500
                                                          New York, NY 10121                          F (212) 318-1791

                                                          R.B. SAMUELS, INC.                            DAVE SAMUELS
                                                         352 Park Avenue South                         (212) 686-6700
                                                          New York, NY 10010                          F (212) 213-4089

                                                             NEAD ELECTRIC                            ANTHONY DELELLO
                                                          186 Griffith Street                          (212) 925-9590
                                                         Jersey City, NJ 07307                        F (201) 656-4954

                                                            UNITY ELECTRIC                           RICHARD SCARPELLI
                                                        65-45 Fresh Meadow Lane                        (718) 539-4300
                                                          Flushing, NY 11365                          F (718) 353-4866

              FABRIC PANELS                                  WALLCOUSTICS                               KEVIN BROWN
                                                           106 Ramapo Plaza                            (800) 851-0084
                                                           Pomona, NY 10970                           F (914) 362-3586

                                                        LENCORE ACOUSTICS CORP.                        KENNETH DREWES
                                                          2220 Hewlett Avenue                          (516) 223-4747
                                                           Merrick, NY 11566                          F (516) 223-4785

                                                    NOVAWALL-REGIONAL WALL SYSTEMS                      HARVEY COOK
                                                          3900 Webster Avenue                          (718) 324-6767
                                                            Bronx, NY 10470                           F (718) 324-2140
</TABLE>

                                      F-4
<PAGE>

<TABLE>
<CAPTION>

              WORK CATEGORY                               SUB-CONTRACTOR NAME                        ESTIMATING CONTACT
              -------------                               -------------------                        ------------------

<S>                                              <C>                                            <C>

                                                                  DFB                                   ELLIOT FEIN
                                                          21-07 Borden Avenue                          (718) 729-8310
                                                      Long Island City, NY 11101                      F (718) 706-0526

            FOLDING PARTITION                              FLEX-WALL SYSTEMS                            GARY GIBALDI
                                                        115 South Corona Avenue                        (516) 561-3900
                                                        Valley Stream, NY 11580                       F (516) 561-3983

                                                        MODERNFOLD/STYLES, INC.                          BILL TARR
                                                      168 South Van Brunt Street                       (201) 871-0150
                                                          Englewood, NJ 07631                         F (201) 871-9848

                                                         NATIONAL FOLDING WALL                          EDMUND GRECO
                                                             P.O. Box 174                              (908) 727-0200
                                                      Bordentown Ave./Cheesequake                     F (908) 727-0201
                                                          Oldbridge, NJ 08857

                  HVAC                                  REACT INDUSTRIES, INC.                         JEFF PLATINSKY
                                                          3402 Review Avenue                           (718) 392-4000
                                                      Long Island City, NY 11101                      F (718) 392-1522

                                                                BP AIR                                  BOB BARBERA
                                                         116 Greenpoint Avenue                         (718) 383-2100
                                                         Greenpoint, NY 11222                         F (718) 389-8539

                                                            WYANT A/C CORP.                           ROCCO PALAZZOLO
                                                           5-35 51st Avenue                            (718) 392-6000
                                                       Log Island City, NY 11101                      F (718) 392-6616

                                                          KABACK ENTERPRISES                           IRVING GERBER
                                                            41 West Street                             (212) 645-5100
                                                          New York, NY 10010                          F (212) 645-8962

                                                            B&G MECHANICAL                              GERRY SCELZO
                                                            Bronx, NY 10451                            (718) 665-4700

                HARDWARE                                SECURE DOOR & HARDWARE                          ALEX KACHKA
                                                            265 46th Street                            (718) 492-1222
                                                          Brooklyn, NY 11220                          F (718) 492-1222

                                                         WEINSTEIN & HOLTZMAN                           IRA HYMOWITZ
                                                              29 Park Row                              (212) 233-4651
                                                          New York, NY 10038                          F (212) 571-5301

                                                             AAA LOCKSMITH                                 PETER
                                                          44 West 46th Street                          (212) 840-3939
                                                          New York, NY 10036                          F (212) 921-5086

              HOLLOW METAL                               ACME STEEL DOOR CORP.                           JOE LICARI
                                                           513 Porter Avenue                           (718) 384-7800
                                                          Brooklyn, NY 11222                          F (718) 599-0582

                                                        SECURE DOOR & HARDWARE                          ALEX KACHKA
                                                            265 46th Street                            (718) 492-1222
                                                          Brooklyn, NY 11220                          F (718) 492-1222
</TABLE>

                                      F-5
<PAGE>

 <TABLE>
<CAPTION>

              WORK CATEGORY                               SUB-CONTRACTOR NAME                        ESTIMATING CONTACT
              -------------                               -------------------                        ------------------

<S>                                              <C>                                            <C>
                                                        WEINSTEIN & HOLTZMAN                           IRA HYMOWITZ
                                                              29 Park Row                              (212) 233-4651
                                                          New York, NY 10038                          F (212) 571-5301

                                                         POST ROAD IRON WORKS                           IRENE WALKER
                                                        345 West Putnam Avenue                         (203) 869-6322
                                                          Greenwich, CT 06830                         F (203) 869-0288

            LATH & ACOUSTICS                              NASTASI ASSOCIATES                            BOB POLIZZO
                                                          129-09 26th Avenue                           (718) 886-7100
                                                           Kearny, NJ 07032                           F (718) 321-2099

                                                       SUPERIOR ACOUSTICS, INC.                         KEN MCGUIGAN
                                                         270 Indian Head Road                          (718) 894-2417
                                                          Kingspark, NY 11754                         F (516) 269-4478

                                                          NATIONAL ACOUSTICS                            JIM MCQUADE
                                                          515 W. 36th Street                           (212) 695-1252
                                                          New York, NY 10018                          F (212) 695-4539

                                                           CURTIS PARTITION                           SUDARSHAN NARULA
                                                            505 8th Avenue                             (212) 695-5575
                                                          New York, NY 10018                          F (212) 967-1120

             LIGHT FIXTURES                                  JDC LIGHTING                              JAMES ROSELLE
                                                          15 West 36th Street                          (212) 594-8869
                                                          New York, NY 10018                          F (212) 967-1242

                                                           SHELTON LIGHTING                            KEVIN WELTMAN
                                                        134-40 West 26th Street                        (212) 255-8555
                                                          New York, NY 10001                          F (212) 645-2543

                                                  HALLMARK ELECTRICAL SUPPLIES CORP.                   GARY A. SIEGEL
                                                          542 Wortman Avenue                           (718) 272-7400
                                                          Brooklyn, NY 11208                          F (718) 257-9244

                                                           PROJECT LIGHTING                           BARRY KESTENBERG
                                                          3358 Lorelei Drive                           (212) 420-7200
                                                       Yorktown, Hts., NY 10598                       F (914) 243-9208

                MILLWORK                                  JARRETT WOODWORKING                          JOHN PAGNOTTA
                                                         1314 Blondell Avenue                          (718) 931-8333
                                                            Bronx, NY 10461                           F (718) 518-1145

                                                          MIELACH / WOODWORK                           PETER MIELACH
                                                            9 Kilmer Court                             (732) 287-1100
                                                           Edison, NJ 08817                           F (732) 287-9383

                                                         ISLAND ARCH. MILLWORK                         EDWARD RUFRANO
                                                           3133 Howard Place                           (516) 737-0020
                                                         Ronkonkoma, NY 11779                         F (516) 737-7518

                                                              HIRD/BLAKER                               CLIFF BLAKER
                                                         620 East 132nd Street                         (718) 665-3434
                                                            Bronx, NY 10474                           F (718) 665-0524
</TABLE>

                                      F-6
<PAGE>

<TABLE>
<CAPTION>

              WORK CATEGORY                               SUB-CONTRACTOR NAME                        ESTIMATING CONTACT
              -------------                               -------------------                        ------------------

<S>                                           <C>                                               <C>
                PLUMBING                                  ABBA PLUMBING CORP.                          JOHN HARSTICK
                                                           12-11 43rd Avenue                           (718) 389-1200
                                                      Long Island City, NJ 11101                      F (718) 389-7781

                                                             LAB PLUMBING                              RICHARD BISSO
                                                         530 West 50th Street                          (212) 246-9690
                                                          New York, NY 10019                          F (212) 581-4929

                                                             PAR PLUMBING                               MARTY LEVINE
                                                       60 North Prospect Avenue                        (516) 887-4000
                                                          Lynbrook, NY 11563                          F (516) 592-9089

                                                              L.S. MILLER                               LARRY MILLER
                                                             1 Haig Drive                              (516) 242-3196
                                                          Dix Hills, NY 11746                         F (516) 243-4985

         PAINTING & WALLCOVERING                             BOND PAINTING                             KEN SPRECHTER
                                                          42 West 38th Street                          (212) 944-0070
                                                          New York, NY 10018                          F (212) 944-8499

                                               711 N.Y. PAINTING & DECORATING CO., INC.                 BILL DICHTER
                                                           47-36 11th Street                           (718) 784-7775
                                                      Long Island City, NY 11101                      F (718) 784-1222

                                                     HUDSON SHATZ PAINTING COMPANY                     RICH GOETINGER
                                                         429 East 53rd Street                          (212) 757-6363
                                                          New York, NY 10019                          F (212) 265-2178

           PROJECTION SCREENS                              JENTEEN PARTNERS                              ART DOVER
                                                          21 Woodfern Street                           (908) 755-2127
                                                           Edison, NJ 08820                           F (908) 769-7284

                                                             GRINGER SALES                             LESTER RAWITZ
                                                            29 First Avenue                            (212) 475-2013
                                                          New York, NY 10003                          F (212) 982-1935

                                                          RAVEN SCREEN CORP.                             MARTY SOSS
                                                           112 Spring Street                           (914) 782-1844
                                                           Monroe, NY 10950                           F (914) 782-1840

                SPRINKLER                                   RAEL SPRINKLER                              DAVID ISRAEL
                                                           601 Merrick Road                            (516) 593-2000
                                                          Lynbrook, NY 115643                         F (516) 593-9635

                                                     SIRINA FIRE PROTECTION CORP.                       JACK GILLEN
                                                         128 Charlotte Avenue                          (516) 942-0400
                                                         Hicksville, NY 11801                         F (516) 942-0415

                                                          ABBA PLUMBING CORP.                           JEAN SPIVAK
                                                           12-11 43rd Avenue                           (718) 389-1200
                                                      Long Island City, NJ 11101                      F (718) 389-7781

                                                         PREFERRED MECHANICAL                           SEAN MACKIN
                                                             895 BROADWAY                                 460-9670
                                                         New York, N.Y. 10003                            F 387-9298
</TABLE>

                                      F-7
<PAGE>

<TABLE>
<CAPTION>

              WORK CATEGORY                               SUB-CONTRACTOR NAME                        ESTIMATING CONTACT
              -------------                               -------------------                        ------------------

<S>                                              <C>                                            <C>
            STRUCTURAL STEEL                               KOENIG IRONWORKS                            NORM ROSENBAUM
                                                       223-225 West 19th Street                        (212) 924-4334
                                                          New York, NY 10011                          F (212) 633-0149

                                                             BURGESS STEEL                             EUGENE GUERIN
                                                        200 West Forest Avenue                         (201) 871-3500
                                                          Englewood, NJ 07631                         F (201) 871-8750

                                                         POST ROAD IRON WORKS                           IRENE WALKER
                                                        345 West Putnam Avenue                         (203) 869-6322
                                                          Greenwich, CT 06830                         F (203) 869-0288

                                                          TARRANT STEEL INC.                             PAUL RALPH
                                                            617 Elm Street                             (201) 955-1680
                                                           Kearny, NJ 07032

            TOILET PARTITION                                 GRINGER SALES                             LESTER RAWITZ
                                                            29 First Avenue                            (212) 475-2013
                                                          New York, NY 10003                          F (212) 982-1935

                                                           JENTEEN PARTNERS                           PRISCILLA SIEGEL
                                                          21 Woodfern Street                           (908) 755-2127
                                                           Edison, NJ 08820                           F (908) 769-7284

                                                             KNICKERBOCKER                           MARIO MARTINOLICH
                                                              PO Box 3035                              (516) 546-0550
                                                          Freeport, NY 11520                          F (516) 546-0549

                                                        LEJAC METAL SPECIALTIES                             TODD
                                                          135 Aspinall Street                          (516) 334-0855
                                                          Westbury, NY 11590

            TEL/DATA CABLING                         US INFORMATION SYSTEMS (USIS)                        PAM SOSS
                                                          15 North Mill Road                           (914) 358-7755
                  (CWA)                                     Nyack, NY 10960                           F (914) 358-7882

              (IF REQUIRED)                               LINEAR TECHNOLOGIES                           PETER PULEO
                                                    27 West 24th Street - 2nd floor                    (212) 645-9000
                                                          New York, NY 10010                          F (212) 645-9005

                                                     INTELLIGENT BUILDING SYSTEMS                      JERRY FORREST
                                                         230 West 41st Street                          (212) 376-5322
                                                          New York, NY 10036                          F (212) 376-5325

                                                        WINDMILL COMMUNICATIONS                           KEN KATZ
                                                   15 West 37th Street - 11th floor                    (212) 730-5959
                                                          New York, NY 10018                          F (212) 730-6661

              WOOD FLOORING                                HOBOKEN WOODWORK                            BRIAN SAKOSITS
                                                            979 3rd Avenue                             (212) 759-5917
                                                          New York, NY 10022                          F (212) 593-0268

                                                            METRO FLOORING                             ZANDRA KAUFMAN
                                                       241-15 N. Conduit Avenue                        (212) 686-8111
                                                          Rosedale, NY 11422                          F (212) 686-7127
</TABLE>

                                      F-8
<PAGE>

<TABLE>
<CAPTION>

              WORK CATEGORY                               SUB-CONTRACTOR NAME                        ESTIMATING CONTACT
              -------------                               -------------------                        ------------------

<S>                                              <C>                                            <C>
                                                             HAYWOOD BERK                                 BARBARA
                                                           180 Varick Street                           (212) 242-0047
                                                          New York, NY 10014                          F (212) 242-0995

                                                           DESIGNED FLOORING                             JOE MATURA
                                                           142 Bristol Drive                           (516) 921-3147
                                                          Woodbury, NY 11797                          F (516) 946-7516

            WINDOW TREATMENT                                DFB (TRAK TEX)                              ELLIOT FEIN
                                                          21-07 Borden Avenue                          (718) 729-8310
                                                      Long Island City, NY 11101                      F (718) 729-0526

                                                         INTERNATIONAL BLINDS                          DAVID J. KLEIN
                                                   200 Park Avenue South, Suite 1707                   (212) 473-2000
                                                          New York, NY 10003                          F (212) 353-3400

                                                              LVC BLINDS                               JOHN VanCALCAR
                                                           176 Kansas Street                           (201) 525-0222
                                                         Hackensack, NJ 07601                         F (201) 525-0345

                                                           CITY VIEW BLINDS                              MOSHE GOLD
                                                           167 Clymer Street                           (718) 486-5511
                                                          Brooklyn, NY 11211                          F (718) 387-3026

</TABLE>

                                      F-9

<PAGE>

                                    EXHIBIT G
                                    ---------

                            CERTIFICATE OF OCCUPANCY
                            ------------------------

                                [Exhibit on file]

                                      G-1
<PAGE>

                                    EXHIBIT H
                                    ---------

                        FORM OF NON-DISTURBANCE AGREEMENT
                        ---------------------------------

RECORDING REQUESTED BY AND
WHEN RECORDED PLEASE RETURN TO:

STROOCK & STROOCK & LAVAN LLP
180 MAIDEN LANE
NEW YORK, NEW YORK  10038-4982
ATTN:  BRIAN DIAMOND, ESQ.

-------------------------------------------------------------------------------
                   (SPACE ABOVE THIS LINE FOR RECORDER'S USE)

             SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT

                  THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
(this "Agreement"), is entered into as of the ___ day of October, 1999, by and
among BARNESANDNOBLE.COM LLC, a Delaware limited liability company ("Tenant"),
111 CHELSEA LLC, a Delaware limited liability company ("Landlord"), and 111 8TH
FUNDING COMPANY, a Delaware corporation ("Lender").

                                   WITNESSETH:

                  WHEREAS, this Agreement affects the Property described in
Exhibit A attached hereto;

                  WHEREAS, the terms "Tenant", "Landlord", "Lender", "Premises",
"Leases", "Property", "Loan", "Assignment of Leases and Rents", "Note", and
"Mortgage" are defined in the Schedule of Definitions attached hereto as Exhibit
B;

                  WHEREAS, Landlord and Tenant have entered into the Leases
covering the Premises in the Property;

                  WHEREAS, Lender is the holder of the Note evidencing the Loan,
and secured by, inter alia, the Mortgage covering the Property;

                                      H-1
<PAGE>

                  WHEREAS, the parties hereto desire to expressly confirm the
subordination of the Leases to the Mortgage and the Assignment of Leases and
Rents; and

                  WHEREAS, Tenant has requested that Lender agree not to disturb
Tenant's possessory rights in the Premises in the event Lender should foreclose
the Mortgage or the Assignment of Leases and Rents or Lender should otherwise
come into possession of the Premises and, provided that Tenant is not then in
default under the Leases beyond applicable grace and notice periods and provided
further that Tenant attorns to Lender or the purchaser at any foreclosure sale
of the Property or purchaser in lieu of foreclosure, Lender is willing to agree
to such request, upon and subject to the terms and conditions hereinafter set
forth.

                  NOW, THEREFORE, in consideration of the mutual covenants
contained herein and of other good and valuable consideration, the parties agree
as follows:

                  1.       Subordination; Consent.

                  Subject to the provisions of this Agreement, anything to the
contrary in the Leases notwithstanding, the Leases and the leasehold estates
created thereby, and all of Tenant's rights thereunder, are and shall be and
shall at all times remain subject, subordinate and inferior to the Mortgage and
the Assignment of Leases and Rents and all rights of Lender thereunder and to
any and all renewals, revisions, modifications, consolidations, replacements and
extensions thereof. Lender's execution of this Agreement shall be deemed to
satisfy any requirement in the Mortgage that Lender consent to the execution of
the Ninth Floor Lease and the Assignment.

                  2.       Acknowledgment and Agreement by Tenant.

                  Tenant acknowledges and agrees that:

                  (a) Tenant has been advised of the existence of the Mortgage
and the agreements evidencing and securing the Loan; and

                  (b) From and after the date hereof, in the event of any act or
omission by Landlord which would give Tenant the right, either immediately or
after the lapse of time, to terminate either Lease, to claim a partial or total
eviction, to withhold any rent, and/or to otherwise refuse to meet any of
Tenant's obligations to perform under either Lease, Tenant will not exercise any
such right:

                           (i) until it has given written notice of such act or
         omission to Lender; and

                           (ii) until the same period of time, if any, as is
         given to Landlord under such Lease to cure such act or omission and an
         additional period of time of thirty (30) days shall have elapsed
         following Lender's receipt of such notice; provided, however, that with
         respect to any default, other than a monetary default, so long as
         Lender shall be acting reasonably to remedy such default, such thirty
         (30) day period shall be extended by the number of days reasonably
         required for Lender to obtain possession of the Property and to cure
         such default.

                                      H-2
<PAGE>

                  (c) Tenant has notice that the Leases and the rents and all
other sums due thereunder have been assigned or are to be assigned to Lender as
security for the Loan secured by the Mortgage and the Assignment of Leases and
Rents. In the event Lender notifies Tenant of the occurrence of a default under
the Mortgage and demands that Tenant pay its rents and all other sums due or to
become due under the Leases directly to Lender, Tenant shall honor such demand
and pay its rent and all other sums due under the Leases directly to Lender or
as otherwise authorized in writing by Lender. Landlord hereby irrevocably
authorizes Tenant to make the foregoing payments to Lender upon such notice and
demand.

                  (d) Tenant shall send a copy of any notices regarding monetary
issues, any notices regarding material non-monetary issues, and all notices of
termination and default given to Landlord under either Lease to Lender at the
same time and in the same manner such notice is sent to Landlord.

                  (e) Within ten (10) days after Lender's request, Tenant shall
deliver to Lender and/or to any person designated by Lender, estoppel
certificates executed by Tenant, in recordable form, certifying (if such be the
case) that each Lease is in full force and effect, the date and amount of
Tenant's most recent payment of rent under each Lease, that there are no
defenses or offsets outstanding under either Lease (or stating those claimed by
Tenant, as the case may be) and such other information about Tenant or the
Leases as Lender may reasonably request.

                  (f) This Agreement satisfies any condition or requirement in
the Leases relating to the granting of a nondisturbance agreement.

                  (g) Anything in the Leases to the contrary notwithstanding, in
the event that Lender shall acquire title to, or shall take possession of, the
Premises or the Property, Lender shall have no obligation, nor incur any
liability, beyond Lender's then interest, if any, in the Property and Tenant
shall look exclusively to such interest of Lender, if any, in the Premises or
the Property for the payment and discharge of any obligations imposed upon
Lender hereunder or under the Lease and Lender is hereby released and relieved
of any other obligations hereunder and under the Lease. Tenant agrees that with
respect to any money judgment which may be obtained or secured by Tenant against
Lender, Tenant shall look solely to the estate or interest owned by Lender in
the Premises or the Property and the rental income therefrom paid by Tenant to
Lender, and Tenant shall not collect or attempt to collect any such judgment out
of any other assets of Lender or Lender's shareholders, principals, officers,
directors, agents or employees.

                  3.       Nondisturbance, Attornment and New Lease.

                           (a) In the event Lender shall come into possession of
or acquire title to either or both Premises as a result of the enforcement or
foreclosure of the Mortgage, the Note or the Assignment of Leases and Rents, or
by means of the delivery to Lender of a deed-in-lieu of foreclosure, or as a
result of any other means:

                           (i) Lender agrees that Tenant's rights and
         obligations under the Leases (subject to the terms hereof) shall not be
         affected nor shall Tenant be disturbed in its

                                      H-3
<PAGE>

         possession of the Premises for any reason other than one which would
         entitle Landlord to terminate the Leases or either of them, under their
         terms or at law or in equity, or would cause, without any further
         action by Landlord, the termination of the Leases or either of them, or
         would entitle Landlord to dispossess the Tenant from the Premises;
         provided, however, that at the time Lender comes into possession of, or
         acquires title to, the Premises, Tenant is not in default under either
         Lease beyond applicable grace and notice periods, which default would
         cause, without any further action of Landlord, the termination of such
         Lease, or would entitle Landlord to dispossess Tenant from the
         Premises; and

                           (ii) Tenant shall be bound to Lender under all of the
         terms, covenants and conditions of the Leases for the balance of the
         term thereof remaining and any extensions or renewals thereof which may
         be effected in accordance with any option therefor in the Leases, with
         the same force and effect as if Lender were the landlord under the
         Leases, and Tenant does hereby attorn to Lender as its landlord, said
         attornment to be effective and self-operative without the execution of
         any further instruments on the part of any of the parties hereto
         immediately upon Lender coming into possession of, or acquiring title
         to, the Premises. Tenant agrees, however, upon the election of and
         written demand by Lender, within sixty (60) days after Lender receives
         title to or acquires possession of the Premises, as the case may be, to
         execute an instrument in confirmation of the foregoing provisions,
         reasonably satisfactory to Lender, in which Tenant shall acknowledge
         such attornment and shall set forth the terms and conditions of its
         tenancy.

                  (b) In the event any person or entity other than Lender shall
come into possession of or acquire title to the Premises as a result of the
enforcement or foreclosure of the Mortgage, the Note or the Assignment of Leases
and Rents, or in the event that Landlord conveys its estate in the Premises to
any person or entity other than Lender, or in the event that Landlord's estate
in the Premises passes to a person or entity other than Lender by operation of
law or any other means (such person or entity being referred to hereinafter as a
"Successor Owner"), then in any of said events:

                           (i) Tenant's rights and obligations under the Leases
         (subject to the terms hereof) shall not be affected nor shall Tenant be
         disturbed in its possession of the Premises by Successor Owner for any
         reason other than one which would entitle Landlord to terminate the
         Leases or either of them, under their terms or at law or in equity, or
         would cause, without any further action by Landlord, the termination of
         the Leases or either of them, or would entitle Landlord to dispossess
         Tenant from the Premises; provided, however, that at the time Successor
         Owner comes into possession of, or acquires title to, the Premises,
         Tenant is not in default under either Lease beyond applicable grace and
         notice periods, which default would cause, without any further action
         of Landlord, the termination of such Lease, or would entitle Landlord
         to dispossess Tenant from the Premises; and

                           (ii) Tenant shall be bound to Successor Owner under
         all of the terms, covenants and conditions of the Leases for the
         balance of the term thereof remaining and any extensions or renewals
         thereof which may be effected in accordance with any option

                                      H-4
<PAGE>

         therefor in the Leases, with the same force and effect as if Successor
         Owner were the Landlord under the Leases, and Tenant does hereby attorn
         to Successor Owner as its Landlord, said attornment to be effective and
         self-operative without the execution of any further instruments on the
         part of any of the parties hereto immediately upon Successor Owner
         coming into possession of, or acquiring title to, the Premises. Tenant
         agrees, however, upon the election of Successor Owner, within sixty
         (60) days after Successor Owner receives title to the Premises, to
         execute an instrument in confirmation of the foregoing provisions,
         reasonably satisfactory to Successor Owner, in which Tenant shall
         acknowledge such attornment and shall set forth the terms and
         conditions of its tenancy.

                  (c) In the event Lender or any Successor Owner shall come into
possession of or acquire title to the Premises, as aforesaid, neither Lender nor
Successor Owner shall be:

                           (i) liable for any act, omission or default of any
         prior landlord under the applicable Lease (including, without
         limitation, Landlord); provided, however, that nothing contained herein
         shall be deemed to relieve Lender or Successor Owner of any liability
         arising by reason of Lender's or Successor Owner's acts or omissions
         from or after the date that Lender or Successor Owner shall become
         landlord under such Lease, and Lender or Successor Owner, as landlord
         under such Lease, shall be obligated to properly maintain, operate and
         repair the Premises in accordance with the provisions of such Lease,
         notwithstanding the fact that any condition requiring such maintenance
         or repair may have arisen prior to the date of any such foreclosure, or
         assignment in lieu of foreclosure, of the Mortgage; or

                           (ii) subject to any offsets or defenses which Tenant
         might have against any prior landlord under such Lease (including,
         without limitation, Landlord); or

                           (iii) bound by any rent or additional rent which
         Tenant might have paid for more than the then current month to any
         prior landlord under such Lease (including Landlord) or by any security
         deposit, cleaning deposit or other prepaid charge which Tenant might
         have paid in advance to any prior landlord under such Lease (including,
         without limitation, Landlord), except to the extent any such security
         deposit or other sum shall actually have been received by Successor
         Owner; or

                           (iv) bound by any amendment or modification of such
         Lease made without Lender's written consent, in accordance with the
         terms of the Mortgage; or

                           (v) bound by any agreement of any landlord under such
         Lease (including, without limitation, Landlord) with respect to the
         completion of any improvements at the Property or the Premises or for
         the payment or reimbursement to Tenant of any contribution to the cost
         of the completion of any such improvements; provided, however, that:

                                    (A) with respect to the Ninth Floor Lease,
         if Successor Owner fails to commence and thereafter pursue the
         completion of any such improvements, or fails to make any such payment
         or reimbursement when due, in either case relating to

                                      H-5
<PAGE>

         Space B or Space C (as defined in the Lease), after notice to do so
         from Tenant specifying the date when the commencement of such
         completion, payment or reimbursement is due and accompanied by
         appropriate backup information, then, as Tenant's sole and exclusive
         remedy, Tenant shall have the right to terminate the Ninth Floor Lease
         solely with respect to such Space, by notice to Successor Owner given
         no later than thirty (30) days after the date when the commencement of
         such completion, payment or reimbursement is due, such termination to
         be effective thirty (30) days after the date such notice is given, upon
         which date the Ninth Floor Lease shall be deemed automatically amended
         by the deletion of such Space from the Premises, Fixed Rent and
         Additional Rent shall be reduced in the proportion which the area of
         such Space bears to the total area of the Premises immediately prior
         thereto, and Tenant shall promptly vacate and surrender such Space to
         Successor Owner. Notwithstanding anything to the contrary contained
         herein, if Successor Owner shall commence such completion, payment or
         reimbursement at any time within thirty (30) days following Successor
         Owner's receipt of such notice by Tenant, such termination shall be
         void and of no force and effect, and Tenant shall have no further right
         to terminate the Ninth Floor Lease with respect to such Space pursuant
         to this Section 3(c)(v); and

                                    (B) As of the date hereof, B&N Inc. (as
         defined in Exhibit B hereto) has not received payment of a construction
         allowance in the amount of $1,275,720 pursuant to a letter agreement
         dated June 30, 1997 modifying the Eleventh Floor Lease (the
         "Construction Claim"), and B&N Inc. has demanded payment therefor from
         Landlord. Notwithstanding anything contained in this Agreement to the
         contrary, by entering into this Agreement, Tenant or B&N Inc., as the
         case may be, does not herein waive or release any claims, rights,
         causes of action or defenses, including without limitation Tenant's or
         B&N Inc., as the case may be, right to commence any action or
         proceeding to recover the Construction Claim which may be available to
         Tenant or B&N Inc., as the case may be, against any person.

                  (d) New Lease. Tenant agrees, upon demand of Lender or any
Successor Owner which shall have come into possession or acquired title to the
Premises, as aforesaid, to execute a lease of either Premises (as tenant) with
Lender or Successor Owner (as landlord) upon the same terms and conditions as
the applicable Lease between Tenant and Landlord, which lease shall cover any
unexpired term of such Lease existing at the time of such conveyance of title.

                  4.       Acknowledgment and Agreement by Landlord.

                  Landlord, as landlord under the Leases and mortgagor under the
Mortgage, acknowledges and agrees for itself and its heirs, successors and
assigns, that:

                  (a) This Agreement does not: (i) constitute a waiver by Lender
of any of its rights under the Mortgage and the Assignment of Leases and Rents
and/or (ii) in any way release Landlord from its obligations to comply with the
terms, provisions, conditions, covenants, agreements and clauses of the Mortgage
and the Assignment of Leases and Rents.

                                      H-6
<PAGE>

                  (b) The provisions of the Mortgage and the Assignment of
Leases and Rents remain in full force and effect and must be complied with by
Landlord.

                  (c) In the event Lender notifies Tenant of the occurrence of
any default under the Mortgage and demands that Tenant pay its rent and all
other sums due under the Leases or either of them directly to Lender, Landlord
acknowledges and agrees that Tenant shall have the right and obligation to pay
all such rent and other sums due under the Leases directly to Lender or as
otherwise authorized in writing by Lender. Lender agrees to send Landlord copies
of all such notices given to Tenant pursuant to this Section 4(c).

                  (d) Landlord shall not agree to any amendment or modification
of the Leases without Lender's prior written consent, in accordance with the
terms of the Mortgage, which consent may be given or withheld in Lender's sole
and absolute discretion.

                  5.       Miscellaneous.

                  (a) Any notice, demand, consent, approval, direction,
agreement or other communication (a "Notice") required or permitted hereunder or
under any other documents in connection herewith shall be in writing and shall
be addressed to the parties hereto at their addresses shown on Exhibit B hereto.
All Notices shall be (i) personally delivered (including delivery by Federal
Express or other comparable nation-wide overnight courier service) to the
aforementioned addresses, in which case they shall be deemed delivered on the
date of delivery or the first business day thereafter if delivered other than on
a business day or after 5:00 p.m. New York City time) to said addresses; (ii)
sent by certified mail, return receipt requested, in which case they shall be
deemed delivered on the delivery date shown on the receipt unless delivery is
refused or delayed by the addressee in which event they shall be deemed
delivered on the date of deposit in the U.S. Mail; or (iii) sent by means of a
facsimile transmittal machine, in which case they shall be deemed delivered on
the date of receipt with receipt thereof confirmed by telephonic acknowledgment
or first business day thereafter if delivered other than on a business day or
after 5:00 p.m. New York City time.

                  (b) This Agreement shall bind and inure to the benefit of all
of the parties hereto, their successors and assigns; provided, however, that in
the event of the assignment or transfer of the interest of Lender hereunder, all
obligations and liabilities of Lender under this Agreement shall terminate, and
thereupon all such obligations and liabilities shall be the responsibility of
the party to whom Lender's interest is assigned or transferred; and provided
further that the interest of Tenant under this Agreement may not be assigned or
transferred.

                  (c) This Agreement shall be governed by and construed in
accordance with the law of the State of New York.

      [Remainder of Page Intentionally Left Blank; Signature Page Follows]

                                      H-7
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.

                               111 8TH FUNDING COMPANY, Lender
                               a Delaware corporation

                               By:___________________________
                                    Name:
                                    Title:

                               BARNESANDNOBLE.COM LLC, Tenant
                               a Delaware limited liability company

                               By:___________________________
                                    Name:
                                    Title:

                               111 CHELSEA LLC, Landlord
                               a Delaware limited liability company

                               By:  Taconic Chelsea Holdings LLC,
                                    a Delaware limited liability company,
                                    its managing member

                                     By:  Taconic SL Principals LLC,
                                          a Delaware limited liability company,
                                          its managing member

                                          By:___________________________
                                               Name:      Paul E. Pariser
                                               Title:     Member

                                      H-8
<PAGE>

                                 ACKNOWLEDGMENTS
                                 ---------------

COUNTY OF __________________ )
                             ss.:
STATE OF____________________ )

                  On this ___ day of October in the year 1999 before me, the
undersigned, a notary public in and for said State, personally appeared
___________ __________________________, personally known to me or proved to me
on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity, and that by his/her signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.

                                            -------------------------
                                            Notary Public

COUNTY OF __________________ )
                             ss.:
STATE OF____________________ )

                  On this ___ day of October in the year 1999 before me, the
undersigned, a notary public in and for said State, personally appeared
___________ __________________________, personally known to me or proved to me
on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity, and that by his/her signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.

                                            -------------------------
                                            Notary Public

                                      H-9
<PAGE>

COUNTY OF __________________ )
                             ss.:
STATE OF____________________ )

                  On this ___ day of October in the year 1999 before me, the
undersigned, a notary public in and for said State, personally appeared
___________ __________________________, personally known to me or proved to me
on the basis of satisfactory evidence to be the individual whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her capacity, and that by his/her signature on the instrument,
the individual, or the person upon behalf of which the individual acted,
executed the instrument.

                                            -------------------------
                                            Notary Public

                                      H-10
<PAGE>

                                    EXHIBIT A
                                    ---------

                          LEGAL DESCRIPTION OF PROPERTY

ALL that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:

BEGINNING at the corner formed by the intersection of the northerly side of West
15th Street and the westerly side of Eighth Avenue;

RUNNING THENCE westerly along the northerly side of West 15th Street, 800 feet
to the easterly side of Ninth Avenue;

THENCE northerly along the easterly side of Ninth Avenue, 206 feet 6 inches to
the southerly side of West 16th Street;

THENCE easterly along the southerly side of West 16th Street, 800 feet to the
westerly side of Eighth Avenue; and

THENCE southerly along the westerly side of Eighth Avenue, 206 feet 6 inches to
the northerly side of West 15th Street, the point of place of BEGINNING.

                                      A-1
<PAGE>

                                    EXHIBIT B
                                    ---------

                             SCHEDULE OF DEFINITIONS

                  "Lender" means 111 8th Funding Company, a Delaware
corporation. All notices to Lender shall be sent to:

                           J.P. Morgan Investment Management Inc.
                           522 Fifth Avenue
                           New York, New York  10036
                           Attention:  Mr. __________
                           Facsimile:  (212) 837-____

                  and a copy to:

                           Stroock & Stroock & Lavan LLP
                           180 Maiden Lane
                           New York, New York 10038
                           Attention:  Brian Diamond, Esq.
                           Facsimile:  (212) 806-6006

                  "Assignment of Leases and Rents" means an Assignment of Leases
and Rents, dated as of July 9, 1999, encumbering the Property, executed by
Landlord, as assignor, to Lender, as assignee, as the same may be amended,
modified or otherwise altered, securing repayment of the Loan evidenced by the
Note and securing certain other obligations, recorded or to be recorded in the
Office of the City Register for New York County (the "Register's Office").

                  "Mortgage" means a Mortgage and Security Agreement and
Assignment of Leases and Rents, dated as of July 9, 1999, encumbering the
Property, executed by Landlord, as Mortgagor, to Lender, as Mortgagee, as the
same may be amended, modified, extended, consolidated, split or restated,
securing repayment of the Loan evidenced by the Note and securing certain other
obligations, recorded or to be recorded in the Register's Office.

                  "Landlord" means 111 Chelsea LLC, a Delaware limited liability
company. All notices to Landlord shall be sent in accordance with the terms of
the Lease.

                  "Leases" means, collectively, (i) that certain lease (the
"Ninth Floor Lease"), dated as of October 1, 1999, between Landlord and Tenant,
covering the Premises, and (ii) that certain Agreement of Lease, dated as of
June 30, 1997, between Landlord's predecessor-in-interest, P.A. Building Company
("PA") as landlord, and Tenant's predecessor-in-interest, Barnes & Noble, Inc.
("B&N Inc."), as tenant, as amended by (i) letter agreement of even date
therewith, between PA and B&N Inc., (ii) letter agreement, dated July 1, 1997,
between PA and B&N Inc. (iii) Modification of Lease Agreement dated as of
January 1998, between Landlord and B&N Inc. and (iv) Amendment of Lease dated as
of September 1, 1998, between Landlord and B&N Inc., and as further amended by
Assignment, Assumption and Consent Agreement and Amendment to Lease, dated as of
October 1, 1999, among Landlord, B&N Inc. and Tenant (the "Assignment"),

                                      B-1
<PAGE>

pursuant to which the tenant's interest in the Eleventh Floor Lease was assigned
to Tenant (as so amended and assigned, the "Eleventh Floor Lease").

                  "Loan" means a first mortgage loan from Lender to Landlord in
the original principal amount of $225,000,000.00, which Loan is evidenced by the
Note and secured by the Mortgage and by the Assignment of Leases and Rents.

                  "Note" means that certain Note executed by Landlord in favor
of Lender dated as of July 9, 1999 in the original principal amount of
$225,000,000.00, as the same may be amended, modified, extended, consolidated,
split or restated.

                  "Premises" means, collectively, (i) certain space (the "Ninth
Floor Space") consisting of up to approximately 90,140 square feet on the ninth
(9th)) floor of the improvements which are located upon the Property, as more
fully described in the Ninth Floor Lease, and (ii) certain space (the "Eleventh
Floor Space") consisting of approximately 76,654 Rentable Square Feet on the
eleventh (11th) floor of the improvements which are located upon the Property,
as more fully described in the Eleventh Floor Lease.

                  "Property" means the real property commonly known as 111
Eighth Avenue, New York, New York 10011, and more particularly described in
Exhibit A to the Agreement to which this Schedule is attached, together with the
improvements thereon.

                  "Tenant" means barnesandnoble.com llc, a Delaware limited
liability company. All notices to Tenant shall be sent in accordance with the
terms of the Leases.

                                      B-2
<PAGE>

                                    EXHIBIT I
                                    ---------

                                   ROOF SPACE
                                   ----------

The roof plan which follows is intended solely to identify the general outlines
  of the Roof Space and should not be used for any other purpose. All areas,
  dimensions and locations are approximate, and any physical conditions
  indicated may not exist as shown.

                                [Diagram Exhibit]

                                      I-1

<PAGE>

                                    EXHIBIT J
                                    ---------

                                ARTICLE 29 SPACE
                                ----------------

The floor plan which follows is intended solely to identify the general outlines
of the Article 29 Space and locations are approximate, and any physical
conditions indicated may not exist as shown.

                                [Diagram Exhibit]

                                      J-1

<PAGE>

                                    EXHIBIT K
                                    ---------

                             SECTION 2.3 OCCUPANCIES
                             -----------------------

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
SPACE AS          AREA (SEE
INDICATED         ATTACHED                              TERMINATION DATES  COMMENTS
IN LEASE          PLAN)          TENANT
---------------------------------------------------------------------------------------------------------------------
<S>               <C>            <C>                    <C>
SPACE A           M              CBS                    9/30/99             An executed Termination Agreement gives
                  K                                                         Landlord a right to terminate the lease
                                                                            upon 30 days written notice to Tenant.
                                                                            Landlord delivered notice to the tenant on
                                                                            August 23, 1999, designating September 30,
                                                                            1999 as the termination date.
                 ----------------------------------------------------------------------------------------------------
                  L              Cowan & Tout           9/28/99            Landlord has the right to terminate the
                                                                           sublease on 60 days written notice.
                                                                           Landlord delivered notice to the tenant
                                                                           on July 30, 1999, designating September
                                                                           28, 1999 as the termination date.
---------------------------------------------------------------------------------------------------------------------
SPACE B           B              Frontier Global        12/31/99           Landlord has certain relocation rights
                                 Center                                    upon 60 days prior written notice to the
                                                                           tenant. Pursuant to a Termination
                                                                           Agreement, the tenant must surrender the
                                                                           space as of December 31, 1999 and relocate
                                                                           to the 2nd Floor.
                  ---------------------------------------------------------------------------------------------------
                  C              Vacant                 NA                 Currently vacant
                  ---------------------------------------------------------------------------------------------------
                  D              The Effects House      11/30/99           Lease expiration date
                  ---------------------------------------------------------------------------------------------------
                  E              Vacant                 NA                 Currently vacant
---------------------------------------------------------------------------------------------------------------------
SPACE C           J              CBS (Office Space)     5/31/00            Lease expiration date
---------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       K-1

<PAGE>

                                    EXHIBIT L
                                    ---------

                            SECTION 30.2 OCCUPANCIES
                            ------------------------

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
AREA (SEE                                         APPROXIMATE
ATTACHED PLAN)                                    RENTABLE SQUARE
                  TENANT                          FEET                  LEASE EXPIRATIONS
-------------------------------------------------------------------------------------------------------
<S>               <C>                            <C>                    <C>
       A          Cowan & Tout                          35,000          12/31/04
-------------------------------------------------------------------------------------------------------
       F          BT North America                      18,000          12/31/00
-------------------------------------------------------------------------------------------------------
       G          Knight Maintenance                     6,500          09/30/07
-------------------------------------------------------------------------------------------------------
       H          Urban Office Products                  4,500          12/31/00
-------------------------------------------------------------------------------------------------------
       I          Abel Bainson & Butz                    1,600          11/30/00
-------------------------------------------------------------------------------------------------------
</TABLE>

                                      L-1

<PAGE>

                                    EXHIBIT M
                                    ---------

                             [Intentionally Deleted]
                             -----------------------

                                     M-3-1

<PAGE>

                                    EXHIBIT N
                                    ---------

                          EXISTING EMERGENCY STAIRWELL
                          ----------------------------

                                [Diagram Exhibit]

                                       N-1
<PAGE>

                                    EXHIBIT O
                                    ---------

                         FORM OF AGREEMENT AND GUARANTY
                         ------------------------------

                  AGREEMENT AND GUARANTY (this "Guaranty") made as of October
___, 1999, by BARNESANDNOBLE.COM inc., a Delaware corporation with its principal
office at 122 Fifth Avenue, New York, New York 10011 ("Guarantor") to 111 EIGHTH
AVENUE LLC ("Landlord"), a Delaware limited liability company with an office c/o
Taconic Investment Partners LLC, 1500 Broadway, New York, New York 10036.

                              W I T N E S S E T H:

         WHEREAS:

                  A. Landlord has been requested by barnesandnoble.com llc, a
Delaware limited liability company with its principal office at 111 Eighth
Avenue, New York, New York 10011 ("Tenant"), to enter into an Agreement of
Lease, dated as of the date hereof (the "Lease"), whereby Landlord would lease
to Tenant, and Tenant would hire and rent from Landlord, a portion of the ninth
(9th) floor, as more particularly described in the Lease (the "Premises"), in
the building known as 111 Eighth Avenue, New York, New York.

                  B. Guarantor owns, directly or indirectly, certain equity
interests in Tenant, and will derive substantial benefit from the execution and
delivery of the Lease.

                  C. Guarantor acknowledges that Landlord would not enter into
the Lease unless this Guaranty accompanied the execution and delivery of the
Lease.

                  NOW, THEREFORE, in consideration of the execution and delivery
of the Lease and of other good and valuable consideration, the receipt and
sufficiency whereof are hereby acknowledged by Guarantor:

                  1. DEFINITIONS. Defined terms used in this Guaranty and not
otherwise defined have the meanings assigned to them in the Lease.

                  2.       COVENANTS OF GUARANTOR.

                  (a) Guarantor absolutely, unconditionally and irrevocably
guarantees, as a primary obligor and not merely as a surety: (i) the full and
prompt payment of all Fixed Rent, Additional Rent and all other sums and charges
payable by Tenant under the Lease, and (ii) the full and timely performance of
all covenants, terms, conditions, obligations and agreements to be performed by
Tenant under the Lease (all of the obligations described in clauses (i) and
(ii), collectively, the "Obligations"). If an Event of Default shall occur under
the Lease, Guarantor will, without notice or demand, promptly pay and perform
all of the Obligations, and pay to Landlord when due all Fixed Rent and
Additional Rent payable by Tenant under the Lease, together with all damages,
costs and expenses to which Landlord is entitled pursuant to the Lease or under
applicable Legal Requirements.

                                      O-1
<PAGE>

                  (b) Guarantor agrees with Landlord that (i) any action, suit
or proceeding of any kind or nature whatsoever (an "Action") commenced by
Landlord against Guarantor to collect Fixed Rent, Additional Rent and any other
sums and charges due under the Lease for any month or months shall not prejudice
in any way Landlord's rights to collect any such amounts due for any subsequent
month or months throughout the Term in any subsequent Action, (ii) Landlord may,
at its option, without prior notice or demand, join Guarantor in any Action
against Tenant in connection with or based upon the Lease or any of the
Obligations, (iii) Landlord may seek and obtain recovery against Guarantor in an
Action against Tenant or in any independent Action against Guarantor without
Landlord first asserting, prosecuting, or exhausting any remedy or claim against
Tenant or against any security of Tenant held by Landlord under the Lease, and
(iv) Guarantor will be conclusively bound in any jurisdiction by a judgment in
any Action by Landlord against Tenant, as if Guarantor were a party to such
Action, even though Guarantor is not joined as a party in such Action.

                  3.       GUARANTOR'S OBLIGATIONS UNCONDITIONAL.

                  (a) This Guaranty is an absolute and unconditional guaranty of
payment and of performance, and not of collection, and shall be enforceable
against Guarantor without the necessity of the commencement by Landlord of any
Action against Tenant, and without the necessity of any notice of nonpayment,
nonperformance or nonobservance, or any notice of acceptance of this Guaranty,
or of any other notice or demand to which Guarantor might otherwise be entitled,
all of which Guarantor hereby expressly waives in advance.

                  (b) If the Lease is renewed, or the Term extended, for any
period beyond the Expiration Date, either pursuant to any option granted under
the Lease or otherwise, or if Tenant holds over beyond the Expiration Date, the
obligations of Guarantor hereunder shall extend and apply to the full and
faithful performance and observance of all of the Obligations under the Lease
during any renewal, extension or holdover period.

                  (c) This Guaranty is a continuing guarantee and will remain in
full force and effect notwithstanding, and the liability of Guarantor hereunder
shall be absolute and unconditional irrespective of: (i) any modifications or
amendments of the Lease, (ii) any releases or discharges of Tenant other than
the full release and complete discharge of all of the Obligations, (iii) any
extension of time that may be granted by Landlord to Tenant, (iv) any assignment
or transfer of all of any part of Tenant's interest under the Lease, (v) any
subletting of the Premises, (vi) any changed or different use of the Premises,
(vii) any other dealings or matters occurring between Landlord and Tenant,
(viii) the taking by Landlord of any additional guarantees from other persons or
entities, (ix) the releasing by Landlord of any other guarantor, (x) Landlord's
release of any security provided under the Lease, or (xi) Landlord's failure to
perfect any landlord's lien or other security interest available under
applicable Legal Requirements. Guarantor hereby consents, prospectively, to
Landlord's taking or entering into any or all of the foregoing actions.

                                      O-2
<PAGE>

                  4.       WAIVERS OF GUARANTOR.

                  (a) Guarantor waives (i) notice of acceptance of this
Guaranty, (ii) notice of any actions taken by Landlord or Tenant under the Lease
or any other agreement or instrument relating thereto, (iii) notice of any and
all defaults by Tenant in the payment of Fixed Rent, Additional Rent or other
charges, or of any other defaults by Tenant under the Lease, (iv) all other
notices, demands and protests, and all other formalities of every kind in
connection with the enforcement of the Obligations, omission of or delay in
which, but for the provisions of this Section 4, might constitute grounds for
relieving Guarantor of its obligations hereunder, and (v) any requirement that
Landlord protect, secure, perfect or insure any security interest or lien, or
any property subject thereto, or exhaust any right or take any action against
Tenant or any other Person or any collateral.

                  (b) Guarantor waives trial by jury of any and all issues
arising in any Action upon, under or in connection with this Guaranty, the
Lease, the Obligations, and any and all negotiations or agreements in connection
therewith.

                  5. SUBROGATION. Guarantor waives and disclaims any claim or
right against Tenant by way of subrogation or otherwise in respect of any
payment that Guarantor may be required to make hereunder, to the extent that
such claim or right would cause Guarantor to be a "creditor" of Tenant for
purposes of the United States Bankruptcy Code (11 U.S.C. ss.101 et seq., as
amended), or any other Federal, state or other bankruptcy, insolvency,
receivership or similar Legal Requirement. If any amount shall be paid to
Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid and performed in full, Guarantor shall hold
such amount in trust for Landlord and shall pay such amount to Landlord
immediately following receipt by Guarantor, to be applied against the
Obligations, whether matured or unmatured, in such order as Landlord may
determine. Guarantor hereby subordinates any liability or indebtedness of Tenant
now or hereafter held by Guarantor to the obligations of Tenant to Landlord
under the Lease.

                  6. REPRESENTATIONS AND WARRANTIES OF GUARANTOR. Guarantor
represents and warrants that:

                  (a) Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, is duly
qualified to do business in each jurisdiction where the conduct of its business
requires such qualification and has full requisite corporate power and authority
to enter into and perform its obligations under this Guaranty.

                  (b) The execution, delivery and performance by Guarantor of
this Guaranty does not and will not (i) contravene applicable Legal Requirements
or any contractual restriction binding on or affecting Guarantor or any of its
properties, or (ii) result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect to any of its
properties.

                                      O-3
<PAGE>

                  (c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other regulatory body is
required for the due execution, delivery and performance by Guarantor of this
Guaranty.

                  (d) This Guaranty is a legal, valid and binding obligation of
Guarantor, enforceable against Guarantor in accordance with its terms.

                  (e) There is no action, suit or proceeding pending or
threatened against or otherwise affecting Guarantor before any court or other
Governmental Authority or any arbitrator which may adversely affect Guarantor's
ability to perform its obligations under this Guaranty.

                  (f) Guarantor owns, directly or indirectly, approximately
17.86% of the issued and outstanding equity interests of Tenant.

                  (g) Guarantor has reviewed and acknowledges having notice of
all the provisions of the Lease and each of the documents, agreements and
instruments executed and delivered in connection with the Lease.

                  (h) The financial statements and accompanying letters and
documents of Guarantor, if any, made available to Landlord in connection with
the Lease (collectively, the "Financial Statements") are true, complete and
correct in all respects, and fairly present the net worth of Guarantor as of the
date thereof, and, since the date of such Financial Statements, there has been
no material adverse change in Guarantor's net worth.

                  7. NOTICES. All consents, notices, demands, requests,
approvals or other communications given under this Guaranty shall be given as
provided the Lease, as follows:

                  (a) if to Guarantor at Guarantor's address set forth on the
         first page of this Guaranty, Attention: Marie J. Toulantis; and

                  (b) if to Landlord, as follows: 111 Eighth Avenue LLC, c/o
         Taconic Investment Partners LLC, 1500 Broadway, New York, New York
         10036, Attention: Mr. Paul Pariser, with a copy to: Schulte Roth &
         Zabel LLP, 900 Third Avenue, New York, New York 10022, Attention:
         Robert S. Nash, Esq.; or

to such other addresses as either Landlord or Guarantor may designate by notice
given to the other in accordance with the provisions of this Section 7.

                  8.       CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES.

                  (a) Guarantor hereby irrevocably (i) submits to the
jurisdiction of any New York State or Federal court sitting in New York City in
any Action arising out of or relating to this Guaranty, and (ii) agrees that all
claims in respect of such Action may be heard and determined in such New York
State or Federal court. Such service may be made by mailing or delivering a copy
of such process to Guarantor in care of the Process Agent at the Process Agent's
address, and Guarantor hereby irrevocably authorizes and directs the Process
Agent to accept such service on its behalf. As an alternative method of service,
Guarantor also irrevocably

                                      O-4
<PAGE>

consents to the service of any and all process in any such Action by the mailing
of copies of such process to Guarantor at its address specified in Section 7
hereof. Guarantor agrees that a final judgment in any such Action shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner permitted under Legal Requirements.

                  (b) Guarantor irrevocably waives, to the fullest extent
permitted by Legal Requirements, and agrees not to assert, by way of motion, as
a defense or otherwise (i) any objection which it may have or may hereafter have
to the laying of the venue of any such Action brought any of the courts
described in Section 8(a), (ii) any claim that any such Action brought in any
such court has been brought in an inconvenient forum, or (iii) any claim that
Guarantor is not personally subject to the jurisdiction of any such courts.
Guarantor agrees that final judgment in any such Action brought in any such
court shall be conclusive and binding upon Guarantor and may be enforced by
Landlord in the courts of any state, in any federal court, and in any other
courts having jurisdiction over Guarantor or any of its property, and Guarantor
agrees not to assert any defense, counterclaim or right of set-off in any Action
brought by Landlord to enforce such judgment.

                  (c) Nothing in this Section 8 shall limit or affect Landlord's
right to (i) serve legal process in any other manner permitted by Legal
Requirements, or (ii) bring any Action against Guarantor or its property in the
courts of any other jurisdictions.

                  (d) Guarantor hereby irrevocably waives, with respect to
itself and its property, any diplomatic or sovereign immunity of any kind or
nature, and any immunity from the jurisdiction of any court or from any legal
process, to which Guarantor may be entitled, and agrees not to assert any claims
of any such immunities in any Action brought by Landlord under or in connection
with this Guaranty. Guarantor acknowledges that the making of such waivers, and
Landlord's reliance on the enforceability thereof, is a material inducement to
Landlord to enter into the Lease.

                  (e) Guarantor agrees to execute, deliver and file all such
further instruments as may be necessary under the laws of the State of New York,
in order to make effective (i) the appointment of the Process Agent, (ii) the
consent by Guarantor to jurisdiction of the state courts of New York and the
federal courts sitting in New York, and (iii) all of the other provisions of
this Section 8.

                  9.       MISCELLANEOUS.

                  (a) The provisions, covenants and guaranties of this Guaranty
shall be binding upon Guarantor and its successors and assigns, and shall inure
to the benefit of Landlord and its successors and assigns, and shall not be
deemed waived or modified unless such waiver or modification is specifically set
forth in writing, executed by Landlord or its successors and assigns, and
delivered to Guarantor.

                  (b) Whenever the words "include", "includes", or "including"
are used in this Guaranty, they shall be deemed to be followed by the words
"without limitation", and, whenever the circumstances or the context requires,
the singular shall be construed as the plural, the

                                      O-5
<PAGE>

masculine shall be construed as the feminine and/or the neuter and vice versa.
This Guaranty shall be interpreted and enforced without the aid of any canon,
custom or rule of law requiring or suggesting construction against the party
drafting or causing the drafting of the provision in question.

                  (c) The provisions of this Guaranty shall be governed by and
interpreted solely in accordance with the internal laws of the State of New
York, without giving effect to the principles of conflicts of law.

                  IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of October ___, 1999.

                           GUARANTOR:

                           BARNESANDNOBLE.COM INC.

                           By:__________________________________
                               Name:
                               Title:

                                      O-6
<PAGE>

STATE OF NEW YORK  )
                   ) ss.:
COUNTY OF NEW YORK )

                  On the ___ day of October, 199__, before me, the undersigned,
personally appeared _______________________, personally known to me or proved to
me on the basis of satisfactory evidence to be the individual(s) whose name(s)
is (are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s) or the person
upon behalf of which the individual(s) acted, executed the instrument.

                                    ------------------------------------
                                    Notary Public

(Affix Notarial Stamp)

                                      O-7
<PAGE>

                                    EXHIBIT P
                                    ---------

                       Floor Plan of the Remaining B Space
                       -----------------------------------

The floor plan which follows is intended solely to identify the general outline
of the Remaining B Space, and should not be used for any other purpose. All
areas, dimensions and locations are approximate, and any physical conditions
indicated may not exist as shown.

                                [Diagram Exhibit]

                                      P-1
<PAGE>

                                   EXHIBIT P-1
                                   -----------

                 Lease Modifications regarding Remaining B Space
                 -----------------------------------------------

         If, as and when Tenant shall terminate the Lease with respect to Space
B and Space C pursuant to the provisions of Section 2.3(c), this Lease shall be
deemed amended as set forth in Section 2.3(c) and as follows:

                  The Definitions of "Premises" and "Premises Area" shall be
deemed deleted and replaced with the following:

                 Premises:        Space A

                 Premises Area:   48,560 Rentable Square Feet, as such Premises
                                  Area may be increased or decreased from time
                                  to time pursuant to this Lease.

                  Section 1.1(a) shall be deemed deleted and replaced with the
following:

                  (a) For the portion of the Term commencing on the Space A
Delivery Date and ending on the Expiration Date, Tenant shall pay Fixed Rent for
Space A as follows:

                           (i) One Million Four Hundred Fifty Six Thousand Eight
         Hundred and 00/100 Dollars ($1,456,800.00) per annum ($121,400.00 per
         month) for the period commencing on the Space A Delivery Date and
         ending one day prior to the fifth (5th) anniversary of the Space A
         Delivery Date;

                           (ii) One Million Six Hundred Two Thousand Four
         Hundred Eighty and 00/100 Dollars ($1,602,480.00) per annum
         ($133,540.00 per month) for the period commencing on the fifth (5th)
         anniversary of the Space A Delivery Date and ending one day prior to
         the tenth (10th) anniversary of the Space A Delivery Date; and

                           (iii) One Million Seven Hundred Forty Eight Thousand
         One Hundred Sixty and 00/100 Dollars ($1,748,160.00) per annum
         ($145,680.00 per month) for the period commencing on the tenth (10th)
         anniversary of the Space A Delivery Date and ending on the Expiration
         Date.

                  Section 1.1(b) and Section 1.1(c) shall be deemed deleted and
of no further force and effect.

                  Section 6.1(b) shall be deemed deleted and replaced with the
following:

                  (b)      "Tenant's Share" means Two and 111/1000ths percent
          (2.111%).

                                      P-1
<PAGE>

                  Section 6.4(a) shall be deemed deleted and replaced with the
following:

                  Section 6.4 (a) If the Labor Rates in effect for any
Comparison Year (any part or all of which falls within the Term) shall be
greater than the Base Labor Rates, then Tenant shall pay, as Additional Rent for
such Comparison Year and continuing thereafter until a new Landlord's Statement
is rendered to Tenant, an amount ("Tenant's Labor Rate Payment") equal to (i)
the number of cents (inclusive of any fractions of a cent) by which the Labor
Rates in effect for such Comparison Year exceed the Base Labor Rates, multiplied
by (ii) (X) 46,053 (from and after the Space A Delivery Date, less the Remaining
B Space), plus (Y) 2,507 (from and after the date of delivery of the Remaining B
Space).

                  Section 9.2(a) shall be amended as follows: "1400 amperes"
shall be deemed deleted and replaced with "732 amperes".

                  Section 31.1(a) shall be deemed deleted and replaced with the
following:

                  Section 31.1 (a) Landlord shall contribute toward the actual
cost of the Initial Alterations (including carpeting, wall covering, telephone
and computer installations and wiring, and "soft costs" incurred in connection
with such alterations, including architectural, consulting, engineering and
legal fees, provided that such "soft costs" shall not exceed ten percent (10%)
of Landlord's Contribution) an amount ("Landlord's Contribution") equal to the
lesser of (a) Nine Hundred Seventy One Thousand Two Hundred and 00/100 Dollars
($971,200.00), or (b) the aggregate amount of all costs and expenses actually
incurred by Tenant in connection with the Initial Alterations; provided,
however, that this Lease shall be in full force and effect and no Event of
Default shall have occurred and be continuing hereunder, and provided, further,
that Landlord's Contribution shall be payable in stages commencing on the
Delivery Date with respect to each Space, in the following maximum amounts:

                           (i) with respect to Space A, less the Remaining B
         Space, Nine Hundred Twenty One Thousand Sixty and 00/100 Dollars
         ($921,060); and

                           (ii) with respect to the Remaining B Space, Fifty
         Thousand One Hundred Forty and 00/100 Dollars ($50,140.00).

                  Section 31.1(c) shall be amended as follows:  "$1,817,800"
shall be deemed deleted and replaced with "$971,200".

                                      P-2
<PAGE>

                                    EXHIBIT Q
                                    ---------

                                Louver Locations
                                ----------------

The floor plan which follows is intended solely to identify the locations in
which Tenant may install certain louvers as part of Tenant's Initial
Alterations, and should not be used for any other purpose. All areas, dimensions
and locations are approximate, and any physical conditions indicated may not
exist as shown.

                                [Diagram Exhibit]

                                      Q-1

<PAGE>

                                    EXHIBIT R
                                    ---------

                              Center Shaft Location
                              ---------------------

The floor plan which follows is intended solely to identify the location of the
"Center Shaft" for purposes of Sections 9.7(a) and 9.8, and should not be used
for any other purpose. All areas, dimensions and locations are approximate, and
any physical conditions indicated may not exist as shown.

                                [Diagram Exhibit]

                                      R-1

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