Document:

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                                                                    EXHIBIT 10.4

                              BEFREE SERVICE ORDER

THIS AGREEMENT is made and entered into as of 6/14/99 (the "Effective Date") by
and between Be Free, Inc. ("Be Free"), having its principal place of business at
154 Crane Meadow Road, Suite 100, Marlborough, Massachusetts 01752, and 800.com,
Inc. ("Merchant"), having its principal place of business at 1516 NW Thurman,
Portland, Oregon 97209. In consideration of the mutual covenants and conditions
contained in this Service Order and in Be Free's standard Terms of Service in
the form attached hereto (collectively the "Agreement"), and intending to be
legally bound hereby, the parties mutually agree as follows:

1.        BFAST                        DECLINED [ ]                ACCEPTED [X]

a.      Provided that Merchant has initialed or checked "Accepted" above,
        Merchant agrees to the BFAST provisions of the Agreement, including the
        fees outlined below, and Be Free agrees to provide the BFAST Services
        detailed in Exhibit A.

b.      Merchant agrees to pay Be Free a BFAST Implementation Fee of [ * ]
        dollars ($[ * ]) upon execution of this Agreement and [ * ] dollars ($[
        * ]) upon BFAST Program Launch.

c.      Merchant agrees to pay Be Free a BFAST Service Fee each month equal to
        the greater of:

        (i)     [ * ] percent ([ * ]%) of monthly Net Sales generated through
                the Affiliate Sales Channel (for purposes of this Section, Net
                Sales shall be defined as gross sales less shipping charges,
                taxes and returns); or

        (ii)    upon BFAST Program Launch, a minimum Monthly Service Fee of $[ *
                ] dollars.

2.      AFFILIATE SUPPORT (REQUIRES BFAST)  DECLINED  LEVEL I       LEVEL I &
                                               [X]    SUPPORT       LEVEL II
                                                      ACCEPTED [ ]  SUPPORT
                                                                    ACCEPTED [ ]

a.      Provided that Merchant has initialed or checked the applicable
        "Accepted" above, Merchant agrees to the Level I Affiliate Support
        provisions or the Level I and Level II Affiliate Support provisions of
        the Agreement, including the fees outlined below, and Be Free agrees to
        provide the applicable Affiliate Support Services detailed in Exhibit A.

b.      Upon BFAST Program Launch, Merchant agrees to pay Be Free a Level I
        Affiliate Support Fee of [ * ] ($[ * ]) per Affiliate per month for the
        first six (6) months, and [ * ] ($[ * ]) per Affiliate per month for all
        subsequent months.

c.      Upon BFAST Program Launch, Merchant agrees to pay Be Free a Level II
        Affiliate Support Fee of [ * ] dollars ($[ * ]) per month.

3.      AFFILIATE APPLICATION REVIEW (REQUIRES BFAST) DECLINED [X]ACCEPTED [ ]

a.      Provided that Merchant has initialed or checked "Accepted" above,
        Merchant agrees to the Affiliate Application Review provisions of the
        Agreement, including the fees outlined below, and Be Free agrees to
        provide the Affiliate Application Review Services detailed in Exhibit A.

b.      Upon BFAST Program Launch, Merchant agrees to pay Be Free an Affiliate
        Application Review Fee of [ * ] dollars ($[ * ]) per Affiliate
        application.

4.      AFFILIATE CHECK WRITING (REQUIRES BFAST) DECLINED [X] ACCEPTED [ ]

* Portion has been omitted pursuant to a confidential treatment request and
filed separately with the Commission.
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a.      Provided that Merchant has initialed or checked "Accepted" above,
        Merchant agrees to the Affiliate Check Writing provisions of the
        Agreement, and provided that Merchant has transferred to Be Free amounts
        owed to Affiliates by Merchant for BFAST-monitored transactions, Be Free
        agrees to provide the Affiliate Check Writing Services detailed in
        Exhibit A.

b.      Merchant agrees to pay Be Free an Affiliate Check Writing Fee of [ * ]
        ($[ * ]) plus actual postage costs for each check distributed.

5.      OPEN AFFILIATE OUTREACH & FASTAPP DECLINED [ ] ACCEPTED [X]
        (REQUIRES BFAST) Provided that Merchant has initialed or checked
        "Accepted" above, Merchant agrees to the Open Affiliate Outreach and
        FastApp provisions of the Agreement, and provided that Merchant is
        participating in the Be Free FastApp program, Be Free agrees to provide
        the Open Affiliate Outreach and FastApp Services detailed in Exhibit A.

6.      BFIT AD SERVING & AD TRAFFICKING  DECLINED [ ]  AD SERVING   AD SERVING
                                                       ACCEPTED [X]      &
                                                                         AD
                                                                    TRAFFICKING
                                                                    ACCEPTED [ ]

a.      Provided that Merchant has initialed or checked the applicable
        "Accepted" above, Merchant agrees to the BFIT Ad Serving provisions or
        the BFIT Ad Serving and Ad Trafficking provisions of the Agreement,
        including the fees outlined below, and Be Free agrees to provide the
        applicable BFIT Services detailed in Exhibit A.

b.      Merchant agrees to pay Be Free a BFIT Ad Serving Fee of [ * ] ($[ * ])
        per one thousand BFIT Impressions (advertisements) served.

c.      Merchant agrees to pay Be Free a BFIT Ad Trafficking Fee of [ * ]
        ($[ * ]) per one thousand BFIT Impressions (advertisements) served.

AGREED AND ACCEPTED BY BE FREE:             AGREED AND ACCEPTED BY MERCHANT:

By:        Stephen M. Joseph                By:          Jeanette Slepian
   -------------------------------             ---------------------------------
Name:    /s/ Stephen M. Joseph              Name:      /s/ Jeanette Slepian
     -----------------------------               -------------------------------
Title:         CFO                          Title:    VP Business Development
      ----------------------------                ------------------------------
Date:                                       Date:
     -----------------------------               -------------------------------

* Portion has been omitted pursuant to a confidential treatment request and
filed separately with the Commission.
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                             BEFREE TERMS OF SERVICE

1.      DEFINITIONS

1.1     "Affiliate" shall mean the person or entity that displays Merchant's
        products, services and/or promotions on its internet site in exchange
        for receiving remuneration from Merchant for such display.

1.2     "Affiliate Sales Channel" shall mean Merchant's group of Affiliates and
        related Affiliate Sites.

1.3     "Affiliate Site" shall mean the Affiliate's internet site or sites which
        display products, services, and/or promotions provided by Merchant.

1.4     "BFAST Impression" shall mean a form of information display code on an
        Affiliate Site that generates a transactional request to the BFAST
        service bureau each time an End User views a listing or display of
        merchandise or service offered by Merchant on an Affiliate Site
        (typically, this will result in the display of a product graphic or an
        invisible graphic from the BFAST service bureau).

1.5     "BFAST Program Launch" shall mean the first date upon which Merchant
        receives a BFAST Affiliate application.

1.6     "BFIT Impression" shall mean a form of information display code on an ad
        site that generates a transactional request to the BFIT service bureau
        each time an End User views an advertisement offered by Merchant on an
        Affiliate Site (typically, this will result in the display of a graphic
        from the BFIT service bureau).

1.7     "End User" shall mean a person or entity who visits the Affiliate Site.

1.8     "End User Clickthrough" shall mean the event caused by an End User
        clicking or otherwise activating a BFAST or BFIT Impression (typically,
        this will result in the link to and display of a page on the Merchant's
        internet site).

2.      TERM AND TERMINATION

2.1     This Agreement will begin on the Effective Date and end one year from
        (i.) the BFAST Program Launch or; (ii.) if Merchant has not accepted
        BFAST, the first date when a BFIT Impression is served ("Term"). The
        Agreement will automatically renew for additional one year periods
        ("Additional Terms") unless terminated in writing by either party before
        ninety (90) days prior to the end of the Term or Additional Terms.

2.2     Provided that a party is not in default of any payment or other material
        breach, that party may terminate this Agreement upon sixty (60) days
        written notice upon any breach or default of a material provision by the
        other party. For purposes of this Section, a material breach of the
        performance specifications in Section 3 shall be defined as Be Free's
        failure to provide those specifications for a period of seventy-two (72)
        consecutive hours, unless such failure is caused by circumstances beyond
        Be Free's reasonable control as detailed in Section 8.5. Any

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        termination under this Section 2.2. shall become effective at the end of
        the sixty (60) day notice period unless the party in violation cures the
        breach or default, or has commenced reasonable efforts to cure the
        breach or default within such period.

2.3     If this Agreement expires under Section 2.1 or terminates under Section
        2.2, neither party shall not have any obligation to the other party to
        compensate them for damages of any kind, including loss of actual or
        expected income, except as expressly set forth in Section 8.4 of this
        Agreement. Both parties, for themselves and their employees, agents, and
        consultants, waive any rights not granted by this Agreement that would
        otherwise be exercisable under the laws or regulations of any
        jurisdiction. Both parties hereby indemnify and hold the other party
        harmless from and against any and all liabilities relating to any claim
        or demand by the other party's employees, agents, and consultants.
        Sections 2.3, 6, 7, 8.4, 8.5 and 8.6 shall survive the termination or
        expiration of this Agreement.

3.      BE FREE PERFORMANCE SPECIFICATIONS

        Be Free's BFAST and/or BFIT services shall respond to impression
        requests at a rate equal to or greater than the expected peak request
        rate with a first-byte latency of less than ninety-five hundredths
        (0.95) of a second. as measured at its router nearest its internet point
        of presence. Due to the complexity of the Internet, the variability of
        user hardware and software capabilities and the provision of services to
        End Users by various providers, Be Free cannot and does not guarantee
        end-to-end response times or transmission rates.

4.      MERCHANT OBLIGATIONS

        Merchant shall (i.) accept and record a transaction identifier for each
        End User Clickthrough passed from the BFAST and/or BFIT Services; (ii.)
        not less than once each business day, provide Be Free with a transaction
        file, in accordance with Be Free specifications and via an approved
        method, that includes sales (or other services offered by Merchant)
        orders, returns or refunds, and the related transaction identifier; and
        (iii.) on a regular basis, provide Be Free with a catalog file, in
        accordance with Be Free's specifications and via an approved method,
        that accurately reflects the merchandise available on the Merchant's
        internet site.

5.      PAYMENTS AND PERFORMANCE DISCOUNTS

5.1     Should Be Free fail to serve BFAST Impressions in accordance with the
        performance specifications in Section 3 for a period of greater than
        sixty (60) minutes during any calendar day, whether consecutive or
        non-consecutive, Be Free shall discount fees specified in Section
        1.c.(i.) of the Be Free Service Order for that calendar day by five
        percent (5%).

5.2     Unless otherwise specified in the Be Free Service Order, all fees are
        due in accordance with the payment terms stated on Be Free's invoice. At
        Be Free's sole discretion, any late amounts may be subject to a 1.5% fee
        each month. Merchant shall be responsible for all taxes with respect to
        the transactions contemplated hereunder (except any income taxes of Be
        Free).

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6.      OWNERSHIP

6.1     Notwithstanding any other provision in this Agreement, Be Free and
        Merchant shall be the sole and exclusive owners of their respective
        intellectual property, including, without limitation, technology,
        trademarks, service marks, trade names, patents, copyrights, trade
        secrets and confidential information. Neither party shall use the
        intellectual property of the other without the prior express written
        permission of the owner.

6.2     Notwithstanding any other provision in this Agreement, Be Free shall be
        the sole and exclusive owner of all affiliate technology, including
        BFAST and BFIT software and their configuration for Merchant.

6.3     Notwithstanding any other provisions of this Agreement, (i.) Merchant
        shall be the sole and exclusive owner of specific names, addresses,
        transactional data and other personal identifying information of End
        Users and (ii.) Be Free shall have the right to use general demographic
        and non-personally-identifying information of End Users provided however
        that any such use does not identify Merchant as the source of any such
        data.

7.      CONFIDENTIALITY

7.1     Each party acknowledges that during the Term or any Additional Terms of
        this Agreement, it may obtain access to trade secrets and confidential
        business information of the other party. A trade secret generally
        consists of valuable, secret information or ideas that a party collects
        or uses in order to keep its competitive edge. Trade secrets include,
        without limitation, system designs, program materials (including source
        and object code and any system documentation which has not been publicly
        distributed or disclosed), operating processes, equipment design,
        product specifications, and any other proprietary technology.
        Confidential business information, which a party also treats as
        proprietary, consists of all other competitively sensitive information
        kept in confidence by a party. Confidential business information
        includes, without limitation, contract terms, selling and pricing
        information and procedures.

7.2     Each party agrees not to use or disclose any trade secrets or
        confidential business information of the other party, except as may be
        necessary to employees of a party who have a specific need to know in
        order to coordinate the operation of Merchant's Affiliate Sales Channel
        and, specifically, shall not disclose any trade secret or confidential
        business information at any time to any third party without the prior
        express written permission of the owner of such trade secret or
        confidential business information. These restrictions do not apply to
        any information that is or becomes generally available to the public or
        any information properly obtained from a completely independent source.

7.3     Merchant, for itself and its employees, agents, and consultants, agrees
        not to attempt in any manner to enter into, decompile or
        reverse-engineer the source code of Be Free's software or to allow any
        other individual(s) or entity(ies) to do or attempt to do so.

8.      MISCELLANEOUS

8.1     During the Term or any Additional Terms of this Agreement, Be Free shall
        be the sole provider of affiliate serving technology to Merchant.
        However, notwithstanding any other provision in

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        this Agreement, Merchant may participate in a network established by a
        third party for the purpose of creating an affiliate sales channel
        linking the third party's group of affiliates with an aggregated group
        of merchants.

8.2     The parties agree to announce this Agreement shortly after the its
        execution. Each party shall have the right to approve the other party's
        announcement before it is made public, which approval shall not
        unreasonably be withheld.

8.3     This Agreement is not assignable by either party, except that either
        party may assign this Agreement in the event of its merger or
        acquisition, and then only to the merged or acquiring company.

8.4     It is expressly agreed that, in the event of any breach or purported
        breach of this Agreement, the remedy shall be limited to an action at
        law for money damages, if any were actually suffered, and exclude
        consequential and incidental damages. All rights shall be deemed to be
        cumulative and the waiver a breach of any provision of this Agreement
        shall not operate or be construed as a waiver of any subsequent breach.

8.5     Neither party shall be liable to the other party for any delay or
        default hereunder to the extent due to any cause beyond its reasonable
        control if such party notifies the other of the cause and the expected
        duration of such delay or default. All such obligations shall return to
        full force and effect upon the termination of such cause. A "cause
        beyond the reasonable control" of a party includes any act of God, act
        of any government authority, industrial dispute, fire, explosion,
        accident, power failure, flood, riot or war (declared or undeclared).

8.6     This Agreement is the entire agreement between the parties regarding its
        subject matter, supersedes any other agreements or understandings
        between them, and may only be amended by a writing signed by both
        parties. A party's waiver of, or failure to enforce, any right hereunder
        on one occasion shall not be deemed a waiver of any other right on the
        same occasion or the same right on any other occasion. If a court having
        competent jurisdiction declares any provision of this Agreement invalid
        or unenforceable, the remainder of this Agreement shall continue in full
        force and effect. This Agreement shall be construed and governed
        according to the laws of Commonwealth of Massachusetts applicable to
        contracts made, and fully performed, in Massachusetts.

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                              BEFREE SERVICE ORDER
                              EXHIBIT A -- SERVICES

1.      BFAST SERVICES

a.      BFAST (Be Free Affiliate Serving Technology(TM)) Services establish,
        operate and report on an Affiliate Sales Channel and include (i.)
        internet access to Be Free's BFAST service bureau; (ii.) a Merchant
        graphical user interface (GUI) license; (iii.) an internet browser based
        Affiliate interface (reporting.net); and (iv.) implementation, training
        and support functions.

b.      The BFAST service bureau includes Affiliate Sales Channel transactional
        services for the (i.) serving of BFAST Impressions; (ii.) directing End
        Users from the Affiliate Site to the Merchant's internet site; and
        (iii.) tracking and reporting of BFAST impressions, End User
        Clickthroughs and sales (or other services offered by Merchant).

c.      The BFAST Merchant GUI includes tools to (i) approve or reject Affiliate
        applications; (ii.) approve, reject or modify Affiliate commission
        voucher data; (iii.) modify links available to Affiliates on
        reporting.net; (iv.) modify Affiliate profiles; (v.) access Affiliate
        Sales Channel reports; and (vi.) download certain Affiliate Sales
        Channel data. The BFAST Merchant GUI license is a non-exclusive,
        non-transferable license to use the BFAST GUI software for use with
        Merchant's Affiliate Sales Channel activities anticipated by the
        Agreement during the Term or any Additional Terms. Such license includes
        all related software and documentation delivered to Merchant.

d.      The internet browser based Affiliate interface (reporting.net) is a
        Merchant-branded site that includes tools to (i.) allow Affiliates to
        generate links to the Merchant's internet site; (ii.) modify certain
        Affiliate account data; and (iii.) access Affiliate activity reports and
        productivity tips and techniques.

e.      BFAST implementation and training includes the installation of the BFAST
        Merchant GUI, and training on and assistance with the initial setup of
        the (i.) Merchant's profile; (ii.) Affiliate application template;
        (iii.) Affiliate commission structure (including commission rate,
        payment frequency and minimum payment levels); (iv.) security (password)
        configuration; (v.) reporting.net site configuration; and (vi.) Merchant
        transaction and catalog output files.

f.      BFAST support is provided to Merchant by an assigned Client Development
        Manager (CDM) and is available Mondays through Fridays from 8:30 am to
        5:30 pm ET. The CDM will provide support services including (i.) project
        coordination for implementation and training; (ii.) ongoing coordination
        of any necessary Be Free resources; (iii.) technical issue resolution
        and trouble-shooting; (iv.) communication and support for product
        enhancements; (v.) Affiliate Sales Channel analyses, and (vi.)
        communication of Affiliate Sales Channel best practices tips and
        techniques.

2.      LEVEL I AFFILIATE SUPPORT AND LEVEL II AFFILIATE SUPPORT SERVICES

a.      Level I Affiliate Support includes the following technical and marketing
        support services including (i.) assisting potential Affiliates with
        application completion; (ii.) assisting Affiliates

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        with link generation; (iii.) assisting Affiliates with the resolution of
        broken links; (iv.) logging all emails and tracking known Affiliate
        issues; (v.) responding to Affiliate e-mails within one (1) business
        day; (vi.) developing a set of Affiliate frequently asked questions
        (FAQs) and an answer data base; (vii.) escalating Affiliate issues to
        the appropriate contacts in Merchant's organization; (viii.) notifying
        Affiliates of product enhancements; (ix.) corresponding with inactive
        Affiliates to remind them of how to set up links; (x.) providing
        Merchant with monthly summaries of outstanding and resolved issues and
        statistics including type and frequency; (xi.) assisting with the
        interpretation of Affiliate reports; and (xii.) responding to Affiliate
        requests to assist with improving sales (or other services offered by
        Merchant).

b.      Level II Affiliate Support is a marketing enhancement service that
        includes corresponding with the top two percent (2%) or two hundred and
        fifty (250) sites, whichever is less, to (i.) notify them of Merchant
        developed promotions such as seasonal offerings, new Affiliate offerings
        and new product offerings; (ii.) recommend sales enhancement techniques
        and best selling methods; and (iii.) ensure that they understand and use
        Affiliate generated reports to maximize their traffic and sales (or
        other services offered by Merchant).

3.      AFFILIATE APPLICATION REVIEW SERVICES

Affiliate Application Review Services include (i.) reviewing Affiliate
applications for completeness and communicating any omitted information; (ii)
reviewing Affiliate Site (at the time of the Affiliate application) for
appropriateness based on written Merchant guidelines; (iii.) approving or
rejecting application based on written Merchant guidelines; (iv.) corresponding
with Affiliate applicants to inform them of acceptance or rejection; (v.)
providing Merchant with monthly summaries of number of applications reviewed,
approved and rejected and the most common reasons for rejection.

4.      AFFILIATE CHECK WRITING SERVICES

Affiliate Check Writing Services include the processing of Affiliate commission
payments. Commission vouchers are generated by the BFAST service bureau based on
guidelines and time periods established by Merchant in the BFAST Merchant GUI
and are approved by Merchant in the GUI. After receipt of funds from Merchant,
Be Free will print, stuff and mail commission checks to Affiliates. A
transaction log will be provided to Merchant for
        [REMAINDER OF TEXT CUT OFF ON COPY]

5.      OPEN AFFILIATE OUTREACH AND FASTAPP SERVICES

Open Affiliate Outreach Services include initiatives by Be Free to expand the
Affiliate Sales Channel through various Affiliate recruitment programs.
Affiliates recruited by Be Free on behalf of Merchant may be provided the option
of joining other Be Free customers' affiliate sales channels through FastApp, a
consolidated Be Free-branded on-line Affiliate application form and, if
requested by the Affiliate, through direct solicitation by Be Free.

6.      BFIT AD SERVING AND AD TRAFFICKING SERVICES

a.      BFIT (Be Free Intelligent Targeting) Ad Serving Services serve BFIT
        Impressions to one or more internet sites and include (i.) internet
        access to Be Free's BFIT service bureau; (ii.) a

<PAGE>   9

        Merchant graphical user interface (GUI) license; (iii.) an internet
        browser based interface for ad sites (reporting.net); and (iv.)
        implementation, training and support functions.

b.      The BFIT service bureau includes advertisement services for the (i.)
        serving of BFIT Impressions based on Merchant identified criteria (such
        as internet site, End User browser or operating system, and date and
        time of day); (ii.) directing End Users from the ad site to the
        Merchant's internet site; and (iii.) tracking and reporting of BFIT
        Impressions, End User Clickthroughs and, provided Merchant has accepted
        the BFAST provisions of the Agreement, sales (or other services offered
        by Merchant).

c.      The BFIT Merchant GUI includes tools to (i.) manage ad campaigns and ad
        series; (ii.) access advertising management and revenue reports; and
        (iii.) download certain advertising data. The BFIT Merchant GUI license
        is a non-exclusive, non-transferable license to use the BFIT GUI
        interface software for use with Merchant's ad serving activities
        anticipated by the Agreement during the Term or any Additional Terms.
        Such license includes all related software and documentation delivered
        to Merchant.

d.      The internet browser based interface for the ad sites (reporting.net) is
        a Merchant-branded site that includes tools to allow ad sites to access
        advertising reports.

e.      BFIT implementation and training includes the installation of the BFIT
        Merchant GUI, and training on and assistance with the initial setup of
        (i.) the Merchant's profile; (ii.) the ad campaign and ad series
        template; (iii.) the security (password) configuration; and (iv.) the
        reporting.net site.

f.      BFIT support is provided by an Advertising Coordinator or, if Merchant
        has accepted the BFAST provisions of the Agreement, an assigned Client
        Development Manager (CDM). BFIT support is available Mondays through
        Fridays from 8:30 am to 5:30 pm ET. The Advertising Coordinator or CDM
        will provide support services including (i.) project coordination for
        implementation and training; (ii.) ongoing coordination of any necessary
        Be Free resources; (iii.) technical issue resolution and
        trouble-shooting; (iv.) communication and support for product
        enhancements; and (v.) advertising analyses.

g.      BFIT Ad Trafficking Services include the (i.) coordination of Merchant's
        ad campaign information, media plans and insertion orders; (ii.)
        creation and distribution of BFIT Impression links to ad sites; (iii.)
        scheduling and monitoring of ad site activity and ad performance; and
        (iv.) distribution of activity reports for BFIT Impressions, End User
        Clickthroughs and, provided Merchant has accepted the BFAST provisions
        of the Agreement, sales (or other services offered by Merchant).<PAGE>   1
                                                                    EXHIBIT 10.5

                                 LEASE AGREEMENT

DATED:            As of the 1st day of March, 1999

BETWEEN:          Bridgetown Development Company, II, L.L.C., an Oregon
                  limited liability company                             "Lessor"

AND:              800.COM, Inc., an Oregon corporation, doing business as
                  800.COM                                               "Lessee"

1.      PREMISES.

        Lessor, being the lawful owner of the following described property,
hereby leases to Lessee, and Lessee hereby leases from Lessor, for the term and
on the terms and conditions hereinafter set forth, that portion of a building
(the "Building"), more particularly described on Exhibit "A" attached hereto and
made a part hereof, together with all improvements now or hereinafter located
thereon, if any (hereinafter collectively referred to as the "Premises").

2.      OCCUPANCY.

        2.1 Original Term. The term of this lease shall be for a term of five
(5) years, beginning March 1, 1999 (the Lease Commencement Date").

        2.2 Option Term. Lessee is granted the option to extend the term of this
Lease for two additional five (5) year terms on the same terms and conditions as
the initial term of this Lease, except as to annual Minimum Rent, which shall be
equal to the Fair Market Rent for the Premises. Each of Lessee's options shall
be exercised by written notice provided by Lessee to Lessor not less than one
hundred twenty (120) days prior to the commencement of each Option Term. "Fair
Market Rent" shall mean the rent being charged for comparable space in Multnomah
County, Oregon, with similar amenities and fixtures. Fair Market Rent as of the
date of each Option Term shall be determined by Lessor with written notice (the
"Notice") given to Lessee not later than thirty (30) days after receipt of the
Lessee's exercise notice, subject to Lessee's right to arbitration as
hereinafter provided. If Lessee disputes the amount claimed by Lessor as Fair
Market Rent, Lessee may require that Lessor submit the dispute to final and
binding arbitration in Portland, Oregon, as described below. Failure on the part
of Lessee to demand arbitration within thirty (30) days after receipt of the
Notice from Lessor shall bind Lessee to the Fair Market Rent determined by
Lessor. In determining the Fair Market Rent by arbitration, Lessor and Lessee
shall

                                      -1-
<PAGE>   2

each request a real estate professional, licensed in Oregon, to calculate the
Fair Market Rent. Lessor and Lessee shall use these two calculations as a basis
for agreeing to the Fair Market Rent. If Lessor and Lessee cannot agree upon the
Fair Market Rent within ten (10) days after receipt of both calculations, then
the two real estate professionals shall jointly choose a third real estate
professional and the decision of the majority of the real estate professionals
as to the Fair Market Rent shall be binding on the parties.

3.      RENT.

        3.1 Minimum Rent. Lessee shall pay minimum rent (the "Minimum Rent)
pursuant to the following schedule: (a) From May 15, 1999, as defined below,
through August 1, 1999 Lessee shall pay Minimum Rent in the amount of $18,666
per month; (b) Beginning September 1, 1999 and continuing through April 1, 2000
Lessee shall pay $14.50 per square foot per year for "Space 1" as outlined on
Exhibit "A" and $8.00 per square foot per year for "Space 2" as outlined on
Exhibit "A"; (c) For Lease Year 2 (from May 1, 2000 through April 1, 2001):
$14.94 per square foot per year for "Space 1" and $8.24 per square foot per year
for "Space 2"; (d) For Lease Year 3: $15.39 per square foot per year for "Space
1" and $8.49 per square foot per year for "Space 2"; (e) For Lease Year 4:
$15.85 per square foot per year for "Space 1" and $8.74 per square foot per year
for "Space 2"; and (f) For Lease Year 5: $16.33 per square foot per year for
"Space 1" and $9.00 per square foot per year for "Space 2". Square footage shall
be determined by Lessor's architect by the Rent Commencement Date by measuring
the floor area of the leased premises to the interior surface of exterior walls.
In the event Lessee determines and notifies Lessor within thirty (30) days after
the Lease Commencement Date that the floor area of the leased premises is at
variance with the square footage determination of Lessor's architect, the
parties shall attempt to agree on the appropriate square footage determination.
If the parties are unable to agree upon the square foot area of the leased
premises, Lessor's and Lessee's architects shall appoint a third architect
within thirty (30) days after Lessor or Lessee so direct and such third
architect shall measure the leased premises and its determination shall be
binding upon the parties. Adjustments shall be made utilizing the third
architect's determination. Each of the parties shall pay the fees of its own
architect and one-half (1/2) of the third architect's fees. Minimum Rent shall
be payable in advance in equal monthly installments on the first day of each
month during the term of this Lease or the Option Term, provided, that if the
Rent Commencement Date is a day other than the first day of a month, Lessee
shall, on the Rent Commencement Date, pay rent for the balance of said month,
prorated at said monthly rate, based on the actual number of days remaining in
such month. Minimum Rent shall commence May 15, 1999 (the "Rent Commencement
Date").

                                      -2-
<PAGE>   3

        3.2 Additional Rent. All tax, utility and CAM charges, which Lessee is
required to pay by this lease, and any other sum which Lessee is required to pay
to Lessor or third parties shall be additional rent. All additional rent charges
shall be paid monthly by Lessee, beginning March 1, 1999.

4.      TAXES AND ASSESSMENTS.

        4.1 Lessee's Personal Property Taxes. Lessee shall pay, when due and
payable, any and all taxes, assessments, license fees and public charges levied,
assessed or imposed at any time and which become payable during the term of this
Lease upon Lessee's trade fixtures, equipment, furniture, inventories of
merchandise, and any other personal property installed or located on the
Premises, whether or not such assessment is made against Lessee or against
Lessor, either separately or as part of the assessment of the building that
includes the Premises.

        4.2 Property Taxes. During the entire term hereof, Lessee shall pay to
Lessor all Property Taxes for the Building and the Adjoining Property, as
described on Exhibit "A". Lessee shall be required to pay only of such Property
Taxes as are applicable to the term of the Lease from the Lease Commencement
Date to the Lease Termination Date.

        4.3 Tax statements shall be immediately sent by Lessor to Lessee for
payment of Property Taxes as they become due. Lessor agrees to pay Property
Taxes prior to delinquency.

        4.4 The term "Property Taxes" shall include all real and personal
property taxes, assessments, and other governmental charges, general and
special, ordinary, and extraordinary, of any kind and nature whatsoever levied
by any governmental authority against the land and improvements on the Building
and Adjoining Property and any personal property used in its operation,
maintenance and repair, and all reasonable costs and expenses incurred by Lessor
in attempts to obtain reductions in such taxes or assessments. Property Taxes
includes, without limitation, assessments for public improvements or benefits
which are levied, assessed or imposed during the term of this Lease, and which
become a lien on the Building or only part thereof, together with any taxes upon
rentals payable by Lessee hereunder if such taxes are substituted in whole or in
part for presently existing ad valorem real property taxes but only to the
extent to which such taxes upon rentals are substituted for said real property
taxes. However, "Property Taxes" shall not include any franchise, excise, gift,
estate, inheritance, succession, capital levy or transfer tax of Lessor in
connection with this Lease or Lessor's rights in the Premises, or any income,
excess profits or revenue tax, charge or levy against Lessor upon the business,
sales or operations of Lessor. Property Taxes shall only include special
assessments provided that (i) any such assessment is paid

                                      -3-
<PAGE>   4

over the longest period of time permitted by law, or, if not, the amount payable
by Lessee in any tax year for such assessment shall be no greater than the
amount that would have been payable by Lessee had the assessment been payable
over the longest period of time permitted; and (ii) any such special assessments
shall relate to improvements which directly benefit the occupants and Lessees of
the Building which 'includes the Premises.

5.      USE OF THE PREMISES.

        5.1 Permitted Use. The Premises shall be used for the conduct of
Lessee's online retail electronics business, other retail uses, office use,
warehousing, shipping, receiving, and other ancillary functions and for a food
service operation that provides online access and for no other purpose.

        5.2 Restrictions on Use. In connection with use of the Premises Lessee
shall:

                A. Conform to all applicable laws and regulations of any public
        authority affecting the Premises and use thereof and correct at Lessee's
        own expense any failure of compliance created through Lessee's fault or
        by reason of Lessee's use, but Lessee shall not be required to make any
        structural changes to effect such compliance unless such changes are
        required because of Lessee's specific use. If federal, state or local
        authorities do not permit Lessee's use, this Lease shall be null and
        void.

               B. Refrain from any activity which would make it impossible to
        insure the Premises against casualty.

               C. Refrain from any use other than presently conducted which
        would be reasonably offensive to other Lessees or owners or users of
        neighboring premises or which would tend to create a nuisance or damage
        the reputation of the Premises.

               D. Refrain from loading the floors beyond the point considered
        safe by a competent engineer or architect selected by Lessor.

               E. Refrain from making any marks on or attaching any sign,
        insignia, antenna, aerial, or other device to the exterior or interior
        walls, windows, or roof of the Premises without the written consent of
        Lessor, except that Lessee shall be entitled to erect signs on the
        Premises, subject to Lessor's advance prior written approval, which
        approval shall not be unreasonably withheld, conditioned or delayed.

                                      -4-
<PAGE>   5

        5.3 Inspection of the Premises. Lessor or its agents may 'inspect the
Premises at any reasonable time upon not less than 24 hours' notice and shall be
entitled in the case of emergency to enter the Premises at any time for the
purpose of preserving the Premises from damage.

        5.4 Parking. During the term of this Lease (except to the extent
affected by timely completion of the parking lot and by Lessor's reasonable
requirement for short term parking on the Adjoining Property), Lessor agrees to
provide and maintain, at no charge to Lessee, fifty (50) spaces in the Adjoining
Property. Lessor's reasonable short term parking needs shall not require, under
any circumstances, a relocation of more than twenty-five (25) parking spaces
from the Adjoining Property, In the event of such relocation, replacement
parking shall be provided within a two and one-half (2-1/2) block radius of the
Premises for Lessee's use at no charge to Lessee. The parking is shown on
attached Exhibit "A."

        5.5 Use. Lessor warrants that the Premises shall comply with the
building code and the Americans with Disabilities Act as of the Lease
Commencement Date. The parties agree to use their best efforts to cause the
completion of the work described in the contract attached hereto as Exhibit "B"
on or before April 15, 1999.

6.      COMMON AREA MAINTENANCE ("CAM")

        6.1 Lessee shall pay CAM expenses to Lessor as provided herein. CAM
expenses shall include all of Lessor's cost for operations, insuring with all
risk casualty insurance at full replacement cost (which Lessor agrees to
maintain during the term of this Lease), managing, administering, maintaining,
cleaning, repairing, and replacing the Building and Adjoining Property,
including, but not limited to, water and sewer charges the cost of natural gas
and electricity provided to the Building, janitorial and cleaning supplies and
services; administration costs and management fees that do not exceed fifteen
percent (15%) of annual CAM expenses; superintendent fees; security services, if
any; insurance premiums, licenses, permits for the operation and maintenance of
the Building and all of its component elements and mechanical systems except for
elevator costs or repairs; the annual amortized capital improvement cost
(amortized over such a period as Lessor may select but not shorter than the
period allowed under the Internal Revenue Code and at a current market interest
rate) for any capital improvements to the Building required by any governmental
authority or those which have a reasonable probability of improving the
operating efficiency of the Building. Lessor agrees to maintain the common area
in good repair, to keep such area clean, to remove snow and ice therefrom, to
keep such area lighted during hours of darkness when the Premises are open for
business and to keep the parking area properly striped to assist in the orderly
parking of cars.

                                      -5-
<PAGE>   6

        In the event Lessor shall fail to commence required maintenance and/or
repairs to the common area within thirty (30) days after receipt of Lessee's
written notice of the need for such repairs and diligently pursue such repairs
to completion, Lessee may commence to perform said maintenance and/or repairs.
In the event Lessor fails to pay any contractor within thirty (30) days after
receipt of an invoice for any such repairs, Lessee may pay such contractor and
deduct said amount from rent.

        CAM expenses for the calendar year in which the Lease Termination Date
occurs shall be prorated for that calendar year on a 365 day basis.

        6.2 Commencing on the first day of each calendar month throughout the
term of this Lease beginning March 1, 1999, Lessee shall pay to Lessor along
with rent Lessee's percentage share of the CAM expenses as reasonably estimated
by Lessor.

        6.3 Within sixty (60) days following the end of any calendar year,
Lessor shall furnish Lessee a statement covering the year just expired,
certified as correct by an authorized representative of Lessor, setting forth
the total CAM expenses in reasonable detail. If Lessor's payments of such CAM
expenses exceed Lessee's payments so made, Lessee shall pay to Lessor the
deficiency within thirty (30) days after receipt of said statement. If the
Lessee's payments exceed Lessor's CAM expenses, Lessor shall pay Lessee the
excess amount within thirty (30) days after receipt of such statement.

        6.4 Disputes. If Lessee disputes any computation of CAM charges under
this Lease, it shall give written notice to Lessor within sixty (60) days after
the computation is sent to Lessee. If Lessee fails to give such written notice,
the computation by Lessor shall be binding and conclusive between the parties
for the period in question. If Lessee gives a timely notice, the dispute shall
be resolved pursuant to Section 21 below. Each party shall pay one-half (1/2) of
the fee for making such determination except that if the adjustment in favor of
Lessee exceeds eight percent (8%) of the escalation amounts for the year in
question, Lessor shall pay (i) the entire cost of any such third-party
determination; and (ii) Lessee's out-of-pocket costs and reasonable expenses for
personnel time in responding to the audit. Nothing herein shall reduce Lessee's
obligations to make all payments as required by this Lease.

        6.5 Limitation on Adjoining Property Expenses. Notwithstanding any of
the foregoing, Lessee's pro rata share of CAM expenses and Property Taxes for
the Adjoining Property shall not exceed One Thousand Dollars ($1,000.00) in any
calendar year.

                                      -6-
<PAGE>   7

7.      REPAIR AND MAINTENANCE.

        7.1 Obligation. Lessee shall at all times during the term of this Lease
keep and maintain, at its own cost and expense, in good order, condition and
repair the entire nonstructural portions of the Premises (including, without
limitation, all improvements, fixtures and equipment thereon) making all repairs
and replacements, interior and exterior, above or below ground and ordinary or
extraordinary. Lessor shall keep in good order, condition and repair the
foundations, exterior walls (excluding the interior of all walls and the
exterior and interior of all exterior doors, plate glass, display and other
windows), roof (excluding interior ceiling), all historical aspects of the
Building, including the vestibule doors to the Premises, and all exterior and
interior lines and pipes of the Building, except for any damage thereto caused
by any act, negligence or omission of Lessee or Lessee's employees, agents,
contractors or customers, and any structural alterations or improvements
required by any governmental agency by reason of Lessee's use or occupancy of
the Premises. Lessee shall pay to Lessor as part of CAM expenses the costs which
Lessor incurs in performing its foregoing repair and maintenance obligations
with respect to all portions of the Building that Lessor is obligated to repair
and maintain, Lessor's actual cost to administer such repairs and maintenance,
less any contributions toward such costs made by or on behalf of other Lessees
of the Building. Reimbursements by Lessee to Lessor for its share of such costs
shall be included in Lessee's CAM charges. It is an express condition precedent
to all obligations of Lessor to repair that Lessee shall have notified Lessor in
writing of the need for such repair. If Lessor shall fail to commence the making
of repairs, as it is obligated to do by the terms hereof, within thirty (30)
days after such notice and the failure to repair has materially interfered with
Lessee's use of the Premises, Lessee's sole right and remedy for such failure on
the part of Lessor shall be to cause such repairs to be made and to charge
Lessor the reasonable cost therefor. No deductions will be made from rent or
other payment due to the Lessor.

        7.2 Scope. Except for repairs necessitated solely as a result of
Lessor's negligence or that of Lessor's agents, employees and contractors,
Lessee's obligation to keep and maintain the Premises in good order, condition
and repair, ordinary wear and tear excepted, shall include, without limiting the
generality of Lessee's obligation, maintaining, but not repairing or replacing,
all interior plumbing and sewage facilities and pipes in the Premises, floors
(including floor coverings), doors, locks and closing devices, window casements
and frames, glass and plate glass, grilles, all interior electrical lines and
equipment, and equipment and all other appliances, within or attached to the
Premises. In addition, Lessee shall, at its sole cost and expense, install or
construct any improvements, equipment or fixtures required by any governmental
authority or agency as a consequence of Lessee's particular use and occupancy of
the

                                      -7-
<PAGE>   8

Premises. Lessee shall replace any damaged plate glass on the Premises within
ten (10) working days of the occurrence of such damage.

        7.3 Assignment. Lessor shall assign to Lessee, and Lessee shall have the
benefit of, any guarantee or warranty to which Lessor is entitled under any
purchase, construction or installation contract relating to a component of the
Premises which Lessee is obligated to repair and maintain. Lessee shall have the
right to call upon the contractor to make such adjustments, replacements or
repairs which are required to be made by the contractor under such contract.
Lessor further warrants that all mechanical and electrical systems are in good
working order at the Lease Commencement Date and warrants the same against
latent defects. Lessee shall have the benefit in Lessee's own name or in the
name of Lessor of all warranties relating to materials and construction of
improvements and Lessor shall, if necessary, assign any such warranties and
guaranties to Lessee upon request. Nothing herein shall limit the right of
Lessee to proceed against the manufacturer or supplier of any product under any
warranties which may be applicable.

        7.4 Maintenance Contracts. Lessor shall at all times during the term
hereof employ and pay a firm satisfactory to Lessor, engaged in the business of
maintaining air conditioning systems, to perform periodic inspections of the
heating or air-conditioning systems serving the Premises and to perform any
necessary work or maintenance or repair thereon. All charges and expenses
therefor shall be included in Lessee's CAM charges for the Building.

        7.5 Surrender. Upon the expiration or termination of this Lease, Lessee
shall surrender the Premises to Lessor in good order, condition and state of
repair, ordinary wear and tear and casualty excepted. Except as provided in
Sections 6.1, 7.1 and 16.5 herein, Lessee hereby waives the right to make
repairs at Lessor's expense under the provisions of any laws permitting repairs
by a Lessee at the expense of a Lessor to the extent allowed by law. Lessor and
Lessee have, by this Lease, made specific provision for such repairs and have
expressly defined their respective obligations.

8.      ALTERATIONS.

        8.1 Alterations Prohibited. Lessee shall make no improvements or
alterations of any kind which materially and adversely affect the leased
Premises without first obtaining Lessor's written consent, which consent shall
not be unreasonably withheld, conditioned or delayed.

                8.1.1 Notwithstanding the foregoing and subject to Lessor's
        prior written consent and approval, which shall not be unreasonably
        withheld, conditioned or delayed, Lessor will allow Lessee or Lessee'
        contractor to install all cabling,

                                      -8-
<PAGE>   9

        wiring and conduit necessary or desirable for Lessee's intended use of
        the Premises (the "Wiring Installation"). Lessor approves of EC
        Electrical Construction Company or a substitute contractor of reasonably
        equivalent qualifications as the contractor for the Wiring Installation.
        The Wiring Installation shall be at Lessee's sole cost and expense,
        shall comply with all applicable building codes and other governmental
        regulations and shall be first-class material and workmanship. Any
        contractor providing Wiring Installation shall provide a certificate of
        insurance to Lessor, showing Lessor as an additional insured under all
        commercially reasonable and necessary policies of insurance.

               8.1.2 In performing the Wiring Installation, Lessee shall keep
        the real property where the Wiring Installation is to be performed free
        from any liens arising out of any work performed, materials furnished or
        obligations incurred by Lessee. Lessee shall pay, when due, all sums of
        money that may become due or purportedly due for any labor, services,
        materials, supplies, or equipment alleged to have been furnished or to
        be furnished to or for Lessee in performing the Wiring Installation and
        which may be secured by any mechanic's, material-men's, or other lien,
        and Lessee shall cause each such lien to be fully discharged and
        released at the time performance of the obligation secured matures or
        becomes due. Lessee shall defend, indemnify and hold Lessor harmless
        from all loss, damage and expense, including reasonable attorneys' fees
        which may arise from such lien.

        8.2 Ownership of Alterations. All permanent improvements and alterations
performed on the leased Premises by either Lessor or Lessee shall be the
property of Lessor when this Lease terminates, except for Lessee's trade
fixtures.

        8.3 Lessee Improvements. Lessor agrees to pay a portion of the cost of
Tenant Improvements to the Premises, such improvements to be substantially as
set forth in Exhibit "B." The parties agree that Lessor shall not pay more than
Seven Hundred Twenty Three Thousand and No/100 Dollars ($723,000.00) toward the
cost of such Tenant Improvements (the "Allowance") and that as of the date of
execution of this Lease, Lessor has paid Ninety Seven Thousand Five Hundred
Sixty and No/100 Dollars ($97,560.00) of the Allowance, as detailed on Exhibit
"C", attached hereto. Any costs and expenses in excess of the Allowance that may
be necessary to complete the Tenant Improvements by April 15, 1999 shall be at
Lessee's sole cost and expense. The parties agree that on the date of execution
of this Lease, Lessee has paid Lessor Twenty Five Thousand and No/100 Dollars
($25,000.00) which shall be applied by Lessor to pay for the cost and related
expenses of all Tenant Improvements to the Premises in excess of and after the
Allowance has been paid by Lessor.

                                      -9-
<PAGE>   10

        8.4 Signs. Subject to Lessor's prior written consent and approval, which
shall not be unreasonably withheld, conditioned or delayed, Lessor will allow
Lessee to install signs identifying Lessee's business, on the outside wall of
the building at the main entry to the building and next to the ground floor
elevator. Such installation shall be at Lessee's sole cost and expense.

9.      UTILITIES.

        Lessee shall pay all initial utility deposits, submetering costs and
fees, and all monthly service charges for water, electricity, sewer, gas,
telephone and any other utility services furnished to the Premises and the
improvements thereon during the entire term of this Lease. In the event any such
services are not submetered or separately metered or otherwise billed directly
to Lessee, but rather are billed to and paid by Lessor, Lessee shall pay to
Lessor the cost of such services provided to Lessee. Except to the extent of an
interruption of Lessee's utility services caused by Lessor or one of Lessor's
contractors, Lessor shall not be liable for any reason for any loss or damage
resulting from an interruption of any of the above services.

10.     DAMAGE AND DESTRUCTION.

        10.1 Unless Lessee elects to extend the term of this Lease as provided
herein, if during the last three years of the lease term or any extended term
the Building is substantially destroyed by fire, storm, lightning, earthquake or
other casualty, either party shall have the right to terminate this Lease on
thirty (30) days written notice to the other party, and this Lease shall
terminate as of the date of such destruction. If Lessor so notifies Lessee,
Lessee may elect to extend the term, in which event this Lease shall not be
terminated and Lessor shall restore the Premises as set forth in paragraph 10.2
below. In the event of such termination, Lessor shall account to Lessee for that
portion of the monthly installment of rent which is attributable to the days
remaining in the month after the date of termination due to total destruction of
the Building. In the event of such termination, all proceeds of insurance shall
be the sole and absolute property of Lessor. Notice of termination or of
Lessee's election to extend this Lease shall be given within thirty (30) days of
the date of destruction.

        10.2 If during other than the last three years of the lease term, the
Building is substantially damaged or damaged, but not wholly destroyed, by fire,
storm, lightning, earthquake or other casualty, Lessor shall restore the
Building to substantially the same condition as existed before the damage
(ordinary wear and tear excepted) as speedily as reasonably practicable;
provided, however, that if the damage shall be so extensive that the same cannot
be reasonably repaired and restored within six (6) months from the date of
casualty, or if the estimated cost of restoration exceeds the insurance proceeds
received as a result of such damage, Lessor shall have the right, exercisable by
written

                                      -10-
<PAGE>   11

notice to Lessee within sixty (60) days after the occurrence, to terminate this
Lease. In the event of such termination, Lessor shall account to Lessee for that
portion of the monthly installment of rent which is attributable to the days
remaining in the month after the date of termination due to such destruction and
all proceeds of insurance shall be the sole and absolute property of Lessor. If
Lessor has no such right to terminate, or if Lessor has the right but fails to
exercise the same within the aforesaid sixty (60) day period, then Lessor shall
proceed as stated above to restore the Building.

11.     EMINENT DOMAIN.

        11.1 Partial Taking. If a portion of the Premises is condemned and
paragraph 11.1 does not apply, the lease shall continue on the following terms:

        A. Lessor shall be entitled to all of the proceeds of condemnation, and
Lessee shall have no claim against Lessor as a result of the condemnation.
Nothing in this paragraph 11 shall be construed to affect Lessee's entitlement
to any condemnation award applicable to Lessee's trade fixtures, removal of
personal property and moving expenses or Lessee's right to assert its own
condemnation claim.

        B. Lessor shall proceed as soon as reasonably possible to make such
repairs and alterations to the Premises as are necessary to restore the
remaining Premises to a condition as comparable as reasonably practicable to
that existing at the time of the condemnation.

        C. After the date on which title vests in the condemning authority or an
earlier date on which alterations or repairs are commenced by Lessor to restore
the balance of the property in anticipation of taking, the rent shall be reduced
in proportion to the reduction in value of the Premises as an economic unit on
account of the partial taking.

        11.2 Total Taking. If a condemning authority takes all of the Premises
or a portion sufficient to render the remaining Premises reasonably unsuitable
for the use which Lessee was then making of the Premises, the lease shall
terminate as of the date the title vests in the condemning authorities. Such
termination shall have the same effect as a termination under paragraph 11.1(a)
above. Lessor shall be entitled to all of the proceeds of condemnation, and
Lessee shall have no claim against Lessor as a result of the condemnation.

        11.3 Sale in Lieu of Condemnation. Sale of all or part of the Premises
to a purchaser with the power of eminent domain in the face of a threat or
probability of the exercise of the power shall be treated for the purpose of
this Section 11 as a taking by condemnation.

                                      -11-
<PAGE>   12

12.     LIABILITY AND INDEMNITY.

        12.1 Liens

        A. Except with respect to activities for which Lessor or Fila is
responsible, Lessee shall pay as due all claims for work done on and for
services rendered or material furnished to the Premises and shall keep the
Premises free from any liens. If Lessee fails to pay any such claims or to
discharge any lien, Lessor may do so and collect the cost as additional rent.
Any amount so added shall bear interest at the rate of ten percent (10%) per
annum from the date expended by Lessor and shall be payable on demand. Such
action by Lessor shall not constitute a waiver of any right or remedy which
Lessor may have on account of Lessee's default.

        B. Lessee may withhold payment of any claim in connection with a
good-faith dispute over the obligation to pay, so long as Lessor's property
interests are not jeopardized. If a lien is filed as a result of nonpayment,
Lessee shall, within ten (10) days after knowledge of the filing, secure the
discharge of the lien or deposit with Lessor cash or sufficient corporate surety
bond or other surety satisfactory to Lessor in an amount sufficient to discharge
the lien plus any costs, attorney fees, and other charges that could accrue as a
result of a foreclosure or sale under the lien.

        12.3 Indemnification. Except as otherwise provided herein and except for
Lessor's acts of negligent, intentional or willful misconduct, Lessor shall not
be liable to Lessee, and Lessee hereby waives all claims against Lessor, for any
injury to or death of any person or damage to or destruction of property in or
about the Premises by or from any cause whatsoever, including, without
limitation, gas, fire, oil, electricity or leakage of any character from the
roof, walls, basement or other portion of the Premises of such building. Lessor
shall not be liable to Lessee for the acts of any third party. Except for
damages caused by Lessor's negligent, intentional or willful misconduct, Lessee
shall indemnify, defend and hold harmless Lessor, its principals, successors,
agents and assigns from any and all claims arising from Lessee's use of the
Premises or from the conduct of its business or from any activity, work, or
other things done, permitted, or suffered by Lessee in or about the Premises,
and shall further indemnify, defend and hold harmless Lessor against and from
any and all claims arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any act or negligence of Lessee or any
        officer, agent, employee, guest, or invitee of Lessee and from all
costs, expenses, attorneys' fees, and liabilities incurred in or about the
defense of any such claim or any action or proceeding brought thereon, and in
case any action or proceeding brought against Lessor by reason of such claim,
Lessee, upon notice from Lessor, shall defend

                                      -12-
<PAGE>   13

the same at Lessee's expense by counsel reasonably satisfactory to Lessor. The
provisions of this paragraph 12.3 shall survive the termination of the Lease.

        12.4 Liability Insurance. Before going into possession of the Premises,
Lessee shall procure and thereafter during the term of the lease shall continue
to carry the following insurance at Lessee's cost: public liability and property
damage insurance carried by a responsible company with limits of (i) not less
than Five Million Dollars ($5,000,000.00) for injury to one (1) person and (ii)
Two Million Dollars ($2,000,000.00) for damage to property or such higher limits
as may be required by applicable regulatory agencies. Such insurance shall cover
all normally insured risks arising directly or indirectly out of Lessee's
activities on or any condition of the Premises whether or not related to an
occurrence caused or contributed to by Lessor's negligence, shall protect Lessee
against the claims of Lessor on account of the obligations assumed by Lessee
under paragraph 11.2, and shall protect Lessor and Lessee against claims of
third persons. Certificates evidencing such insurance and bearing endorsements
requiring ten (10) days' written notice to Lessor prior to any change or
cancellation shall be furnished to Lessor prior to Lessee's occupancy of the
property.

13.     QUIET ENJOYMENT.

        13.1 Lessor's Warranty. Lessor warrants that it is the owner of the
Premises and has the right to lease them free of all encumbrances. Lessor will
defend Lessee's right to quiet enjoyment of the Premises from the lawful or
unlawful claims of all persons during the lease term.

        13.2 Estoppel Certificate. Either party will within twenty (20) days
after notice from the other execute and deliver to the other party a certificate
stating whether or not this lease has been modified and is in full force and
effect and specifying any modifications or alleged breaches by the other party.
The certificate shall also state the amount of monthly base rent, the dates to
which rent has been paid in advance, and the amount of any security deposit or
prepaid rent. Failure to deliver the certificate within the specified time shall
be conclusive upon the party of whom the certificate was requested that the
lease is in full force and effect and has not been modified except as may be
represented by the party requesting the certificate.

        13.3 Nondisturbance Agreement. Lessor shall obtain a standard
nondisturbance agreement from its Lender in a form that is reasonably
satisfactory to Lessee. This Lease shall not be binding on Lessee unless and
until the nondisturbance agreement is obtained.

                                      -13-
<PAGE>   14

14.     ASSIGNMENT AND SUBLEASE.

        No part of the leased property may be assigned, mortgaged, or subleased
by Lessee, nor may a right of use of any portion of the Premises be conferred on
any third person by any other means, without the prior written consent of
Lessor, which consent shall not be unreasonably withheld, conditioned or
delayed. This provision shall apply to all transfers by operation of law. No
consent in one instance shall prevent the provision from applying to a
subsequent instance. In determining whether to consent to assignment, Lessor may
consider the financial ability of assignee and the business experience of
assignee. Transfers to a parent or wholly owned subsidiary corporation, which
shall be bound by this Lease, shall not constitute a transfer for purposes of
this section. Lessor understands that Lessee intends to sublet a portion of the
Premises for retail use. Lessor agrees to reasonably approve such retail uses.

15.     DEFAULT.

        The following shall be events of default:

        15.1 Default in Rent. Failure of Lessee (a) to pay any rent within ten
(10) days after it is due and after Lessor shall have first given Lessee ten
(10) days' written notice of nonpayment, provided that such written notice shall
not be given more than once in any calendar year or (b) failure to pay any
charge other than rent which is Lessee's responsibility within thirty (30) days
after written notice of said charge has been given by Lessor to Lessee.

        15.2 Default in Other Covenants. Failure of Lessee to comply with any
term or condition or fulfill any obligation of the lease (other than the payment
of rent or other charges) within thirty (30) days after written notice by Lessor
specifying the nature of the default with reasonable particularity. If the
default is of such a nature that it cannot be completely remedied within the
30-day period, this provision shall be complied with if Lessee begins correction
of the default within the thirty (30) day period and thereafter proceeds with
reasonable diligence and in good faith to effect the remedy as soon as
practicable.

        15.3 Insolvency. Insolvency of Lessee; an assignment by Lessee for the
benefit of creditors; the filing by Lessee of a voluntary petition in
bankruptcy; an adjudication that Lessee is bankrupt or the appointment of a
receiver of the properties of Lessee; the filing of any involuntary petition of
bankruptcy and failure of the Lessee to secure a dismissal of the petition
within forty-five (45) days after filing; attachment of or the levying of
execution on the leasehold interest and failure of Lessee to secure discharge of
the attachment or release of the levy of execution within forty-five (45) days.

                                      -14-
<PAGE>   15

        15.4 Default by Lessor. Failure by Lessor to comply with any term or
condition or fulfill any obligation of the lease which relate to Lessor within
thirty (30) days after written notice by Lessee specifying the nature of the
default with reasonable particularity. If the default is of such a nature that
it cannot be completely remedied within the thirty (30) day period, this
provision shall be compiled with if Lessor begins correction of the default
within the thirty (30) day period and thereafter proceeds with reasonable
diligence and in good faith to effect the remedy as soon as practicable.

16.     REMEDIES ON DEFAULT.

        16.1 Termination. In the event of a default the Lease may be terminated
at the option of Lessor by notice in writing to Lessee. If the lease is not
terminated by election of Lessor or otherwise, Lessor shall be entitled to
recover damages from Lessee for the default if the lease is terminated, Lessee's
liability to Lessor for damages shall survive such termination, and Lessor may
re-enter, take possession of the Premises, and remove any persons or property by
legal action or by self-help with the use of reasonable force and without
liability for damages.

        16.2 Reletting. Following re-entry or abandonment, Lessor may relet the
Premises, but Lessor shall not be required to relet for any use or purpose which
Lessor may reasonably consider injurious to the Premises or to any Lessee which
Lessor may reasonably consider objectionable. Lessor may relet all or part of
the Premises, alone or in conjunction with other properties for a term longer or
shorter than the term of this Lease, upon any reasonable terms and conditions,
including the granting of some rent-free occupancy or other rent concession.

        16.3 Right to Sue More Than Once. Lessor may sue periodically to recover
damages during the period corresponding to the remainder of the lease term, and
no action for damages shall bar a later action for damages subsequently
accruing.

        16.4 Remedies Cumulative. The foregoing remedies shall be in addition to
and shall not exclude any other remedy available to Lessor under applicable law.

        16.5 Default by Lessor. In the event of a default by Lessor herein which
has not been cured as provided therein, Lessee may cure said default and may
offset the costs of said cure against the rent payments payable herein by
Lessee. This shall be in addition to all other remedies available to Lessee.

17.     SURRENDER AT EXPIRATION.

        17.1 Condition of Premises. Upon expiration of the lease term or earlier
termination on account of default, Lessee shall deliver all keys to Lessor and
surrender

                                      -15-
<PAGE>   16

the Premises in the same condition as when said property was delivered to
Lessee, reasonable wear and tear and damage due to fire and unavoidable casualty
excepted. Alterations constructed by Lessee with permission from Lessor shall
not be removed or restored to the original condition unless the terms of
permission for the alteration so require. Depreciation and wear from ordinary
use for which the Premises were leased are excepted. Restoration for which
Lessee is responsible shall be completed to the latest practical date prior to
such surrender. Lessee's obligations under this paragraph shall be subordinate
to the provisions of Section 10 herein related to destruction.

        17.2   Fixtures.

        A. All fixtures placed upon the Premises during the term, other than
Lessee's trade fixtures, shall, at Lessor's option, become the property of
Lessor when this Lease terminates or expires.

        B. Prior to or within fifteen (15) days after expiration or termination
of the lease term, Lessee shall remove all furnishings, furniture, and trade
fixtures which remain its property. If Lessee fails to do so, this shall be an
abandonment of the property, and Lessor may retain the property and all rights
of the Lessee with respect to it shall cease.

        17.3   Holdover.

        A. If Lessee does not vacate the Premises at the time required, Lessor
shall have the option to treat Lessee as a Lessee from month to month, subject
to all of the provisions of this Lease except the provisions for term and
renewal and at a rate equal to 125% of the rent last paid by Lessee during the
original term. Failure of Lessee to remove fixtures, furniture, furnishings, or
trade fixtures which Lessee is required to remove under this lease shall
constitute a failure to vacate to which this paragraph shall apply if the
property not removed will substantially interfere with occupancy of the Premises
by another Lessee or with occupancy by Lessor for any purpose including
preparation for a new Lessee.

        B. If a month-to-month tenancy results from a holdover by Lessee under
this paragraph 17.3, the tenancy shall be terminable at the end of any monthly
rental period on written notice from Lessor given not less than ten (10) days
prior to the termination date which shall be specified in the notice. Lessee
waives any notice which would otherwise be provided by law with respect to a
month-to-month tenancy.

                                      -16-
<PAGE>   17

18.     MISCELLANEOUS.

        18.1 Nonwaiver. Waiver by either party of strict performance of any
provision of this lease shall not be a waiver of or prejudice the party's right
to require strict performance of the same provision in the future or of any
other provision.

        18.2 Attorney Fees. If suit or action is instituted in connection with
any controversy arising out of this lease, the prevailing party shall be
entitled to recover in addition to costs such sum as the court may adjudge
reasonable as attorney fees.

        18.3 Succession. Subject to the above-stated limitations on transfer of
Lessee's interest, this lease shall be binding upon and inure to the benefit of
the parties, their respective successors and assigns.

        18.4 Lessor's Right to Cure Defaults. If Lessee fails to perform any
obligation under this lease, Lessor shall have the option to do so after thirty
(30) days' written notice to Lessee. All of Lessor's reasonable and necessary
expenditures to correct the default shall be reimbursed by Lessee on demand with
interest at the rate of ten percent (10%) per annum from the date of expenditure
by Lessor.

        18.5 Recordation. This lease shall not be recorded without the consent
in writing of Lessor. Lessor shall execute and acknowledge a memorandum of this
lease in a form suitable for recording, and Lessee may record the memorandum.

        18.6 Entry for Inspection. Except for emergencies, Lessor shall have the
right to enter upon the Premises at any time upon 24 hours' notice to determine
Lessee's compliance with this lease, or to show the Premises to any prospective
Lessee or purchaser, and in addition shall have the right, at any time during
the last two months of the term of this lease, to place and maintain upon the
Premises notices for leasing or selling of the Premises.

        18.7 Interest on Rent and Other Charges. Any rent or other payment
required of Lessee by this lease shall, if not paid within ten (10) days after
it is due, bear interest at ten percent (10%) from the due date until paid.

        18.8 Proration of Rent. In the event of commencement or termination of
this Lease at a time other than the beginning or end of one of the specified
rental periods, then the rent shall be prorated as of the date of commencement
or termination and in the event of termination for reasons other than default,
all prepaid rent shall be refunded to Lessee or paid on its account.

                                      -17-
<PAGE>   18

        18.9 Utilities. Lessee shall pay all charges for heat, light, power,
water, sewage and other services used by Lessee on the Premises. However, all
such charges shall be prorated between the parties to the first and last days of
the lease.

        18.10 Notice. Any notice required or permitted under this lease, shall
be effective when actually delivered or, if mailed five (5) days after the
notice is deposited as registered, express or certified mail, directed to the
address set forth below or to such other address as either party may specify
from time to time by notice to the other party. Subject to the foregoing, the
respective addresses of the parties for sending notices are as follows:

        If to Lessor:            Bridgetown Development Company, II, L.L.C.
                                 7330 NE 14th
                                 Vancouver, Washington 98664
                                 ATTN: Timothy L. Small

        With a copy to:          Sean Donahue
                                 1620 Benj. Franklin Plaza
                                 One SW Columbia Street
                                 Portland, Oregon 97258-2098

        If to Lessee:            800.COM, Inc.
                                 1631 N.W. Thurman Street
                                 Portland, Oregon 97209
                                 ATTN: Spencer Brown

        With a copy to:          Christopher T. Matthews
                                 Perkins Coie LLP
                                 1211 SW Fifth Avenue, Suite 1500
                                 Portland, Oregon 97204-3715

        18.11  Environmental Matters.

        A. Lessee shall obtain, at its sole cost and expense, all environmental
and regulatory permits that are required for Lessee's operations on the Premises
as of the Lease Commencement Date, including, but not limited to air, water and
solid and hazardous waste disposal permits. Lessee shall be solely liable for
compliance therewith and shall indemnify and hold Lessor harmless from and
against any and all claims or losses arising therefrom. Lessee shall obtain all
permits subsequently required during the term of this lease.

                                      -18-
<PAGE>   19

        B. Lessee agrees to and expressly assumes full responsibility and
liability for compliance with applicable laws concerning Lessee's use of the
Premises and regulations relating to and governing environmental matters
including but not limited to the requirements of the Resource Conservation and
Recovery Act, as amended, and the regulations promulgated thereunder.

        C. In the event Lessee believes any reportable spill, leak, emission,
discharge, escape, leach or disposal (collectively "release") of regulated
substances or product which becomes a hazardous waste upon release, has occurred
on the Premises or Adjoining Property, then Lessee shall immediately notify
Lessor and any appropriate governmental agency of the release.

        D. In the event Lessee receives notification from any agency or
department of government (1) asserting the Lessee is not in compliance with any
statutes, ordinances, regulations, licensing requirements, or orders threatening
to revoke any license, franchise, permit or governmental authorization, or (ii)
announcing the promulgation of a new requirement relating to the Lessee's
operations, which could or might adversely affect the Lessee's operations, then
Lessee shall immediately give the Lessor notice thereof.

        E. Lessee agrees to indemnify and hold Lessor harmless from any and all
environmental liability caused by Lessee's operations including but not limited
to liability imposed on Lessor as a potentially responsible party under the
Resource Conservation and Recovery Act, as amended, and regulations promulgated
thereunder with respect to the Premises.

        18.12 Lessor and Lessee are parties to a Lease Agreement dated November
23, 1998 (the "November Lease Agreement"). Upon execution of this Lease, Lessor
shall release Lessee from all of its obligations under the November Lease
Agreement, including any and all fees for architectural services incurred in
connection with the November Lease Agreement. The parties agree that upon
execution of this Lease, the November Lease Agreement shall be null and void and
of no further force and effect.

19.     NET LEASE.

        It is the purpose and intent of Lessor and Lessee that this is intended
to be a net lease, meaning that Lessee shall pay or reimburse Lessor for all
expenses of any type relating to the Premises after the Lease Commencement Date
and all rent shall be paid without setoff, offset, abatement or deduction of any
kind, unless otherwise expressly stated in this Lease.

                                      -19-
<PAGE>   20

20.     LEASE CONSIDERATION AND PREPAID RENT.

        Upon execution of this Lease, Lessee shall deposit with Lessor the sum
of Thirty Nine Thousand Eight Hundred Seventy Five and No/100 Dollars
($39,875.00) (the "deposit"), less the Eighteen Thousand Nine Hundred Thirty
Three and 33/100 Dollars ($18,933.33) that Lessee has previously paid Lessor.
The deposit shall be held by Lessor as security for the faithful performance by
Lessee of all the provisions of this Lease to be performed or observed by
Lessee. If Lessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may use, apply or
retain all or any portion of the deposit for the payment of any rent or other
charge in default or for the payment of any other sum to which Lessor may be
obligated by reason of Lessee's default, or to compensate Lessor for any loss or
damage which Lessor may suffer thereby. If Lessor so uses or applies all or any
portion of the deposit, Lessee shall within ten (10) days after demand therefor
deposit cash with Lessor in an amount sufficient to restore the deposit to the
full amount thereof. Lessee's failure to do so shall be a material breach of
this Lease. Lessor shall not be required to keep the deposit separate from its
general accounts. If Lessee performs all of Lessee's obligations hereunder, the
deposit, or so much thereof as has not therefore been applied by Lessor, shall
be returned, without payment of interest or other increment for its use to
Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's
interest hereunder) at the expiration of the term hereof, and after Lessee has
vacated the Premises. No trust relationship is created herein between Lessor and
Lessee with respect to the deposit.

21.     ARBITRATION.

        Any and all disputes arising out of or in connection with this contract,
including any question regarding its existence, validity, interpretation,
performance or termination, shall be referred to and finally resolved by
arbitration or mediation under the Commercial Arbitration Rules of the American
Arbitration Association, which rules are deemed to be incorporated herein by
reference. The law governing this contract shall be the substantive law of the
State of Oregon. The place of arbitration shall be Portland, Oregon.

22.     COUNTERPARTS.

        This lease may be executed in one or more counterparts, all of which
shall be considered one and the same document, and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties.

                                      -20-
<PAGE>   21

        DATED as of the date and year first above written.

LESSOR:                                     LESSEE:
Bridgetown Development Company, II,         800.COM, Inc., an Oregon corporation
LLC                                         doing business as 800.COM
  an Oregon limited liability company

By: /s/                                     By: /s/ Gregory L. Drew
   ----------------------------------          ---------------------------------
   Signature                                   Signature

                                               President, CEO
-------------------------------------       ------------------------------------
   Name and Title                              Name and Title

                                      -21-

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