Document:

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                                                                    EXHIBIT 10.6

STANDARD INDUSTRIAL LEASE AGREEMENT           Facility Address:
(Net Form)

                                              7110 Katy Road, Suite 200
                                              Houston, Texas 77024

  120,000   Sq. Ft.
------------

                                LEASE AGREEMENT

THIS LEASE AGREEMENT, ("Lease") made and entered into on this 14 day of
April, 2000 by and between CONNECTICUT GENERAL LIFE INSURANCE COMPANY, on
behalf of its Separate Account R hereinafter referred to as "Lessor", and
HOMEGROCER.COM, INC., a Delaware Corporation hereinafter referred to as
"Lessee";

                                  WITNESSETH:
1.   PREMISES AND TERM.

     A.  PREMISES. In consideration of the mutual obligations of Lessor and
         --------
Lessee set forth herein, Lessor leases to Lessee, and Lessee hereby leases from
Lessor the Premises located at 7110 Katy Road, Suite 200, Houston, Harris
County, Texas, more particularly described on EXHIBIT "A" ("Site Plan") and
legally described in Paragraph 26A attached hereto and incorporated herein by
reference, (the "Premises"), together with all rights, privileges, easements,
appurtenances, rights of ingress and egress and amenities belonging to or in any
way pertaining to the Premises, the building where the Premises are located (the
"Building") and the project where the Building is located, to have and to hold,
subject to the terms, covenants and conditions in this Lease.

     In addition to Lessee's rights to use and occupy the Premises as
hereinafter specified, Lessee shall have exclusive rights to use the Lessee's
parking area and any other vehicle parking or use areas designated on Exhibit A
as exclusive to Lessee ("Lessee's Exclusive Parking Areas"), and Lessee shall
have non-exclusive rights to use the other common areas of the Project except
those parking areas and any other vehicle parking areas that are not designated
as exclusive to Lessee and as otherwise provided herein. The Premises, the
Building, the common areas (the "Common Areas"), the land upon which they are
located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "Project."

     B.  TERM.  The term of this Lease shall commence on the Commencement Date
         -----
hereinafter set forth and shall end on the last day of the month that is ONE
HUNDRED TWENTY (120) months after the Commencement Date.  The parties anticipate
and intend that Lessor will deliver the Premises to Lessee on or before April 7,
2000 (the "Anticipated Delivery Date") in order to permit Lessee to commence its
tenant improvement work.  All terms and conditions of the Lease shall be in
effect from the Anticipated Delivery Date.  Unless mutually altered in writing
by Lessee and Lessor, the Commencement Date shall be June 1, 2000.

     C.  EXISTING BUILDING.  Lessor represents and warrants that all electrical,
mechanical, plumbing and other systems serving the Premises, the demising walls
of the Premises and all structural and roof components of the Building will in
good working order and good condition as of the Delivery Date. Lessor shall
complete the construction of the interior center demising and the addition to
Lessee's Exclusive Parking Area within thirty (30) and ninety (90) days,
respectively, from the Anticipated Delivery Date of the Premises. If these items
are not completed within this time, Lessor will make arrangements to provide
comparable parking for Lessee within the Project and beginning on the
Commencement Date one day of rent will be abated for each day the Lessor was
late in completing the interior center demising wall or the addition to Lessee's
Exclusive Parking Area.  Subject to and conditioned upon Lessor's representation
and warranty in the prior sentence, Lessee acknowledges that (i) it has
inspected and accepts the Premises, (ii) the improvements comprising the same
will be suitable for the purpose for which the Premises are leased after
completion of Lessee's tenant improvements, (iii) the Premises are in good and
satisfactory condition pre-existing environmental conditions, latent defects and
structural components of the Building, Project, and the Premises excepted), and
(iv) the Premises shall be leased on an "as is" basis, and no representations as
to the repair of the Premises, nor promises to alter, remodel or improve the
Premises have been made by Lessor except those expressly set forth in this
Section 1, in Section 4 and in Paragraph 25B of this Lease. Upon request by
Lessor, Lessee shall execute and deliver to Lessor a Letter Acknowledging
Delivery of the Premises.

     D. GENERAL CONDITIONS.  Lessee's and Lessor's obligations, privileges,
covenants and agreements contained in this Lease shall be operative and
effective regardless of whether the Premises are ever occupied by Lessee.  If
Lessee fails to occupy the Premises for any reason, except due to Lessor's
negligence or willful

                                  1                     INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

misconduct to include, but not limited to Substances on or about the Project,
after delivery of the Premises to Lessee, this Lease shall be deemed to have
commenced automatically on the Commencement Date.

2. BASE RENT, SECURITY DEPOSIT AND OPERATING EXPENSES.

     A. Lessee agrees to pay to Lessor base rent ("Base Rent") for the Premises,
in advance, without demand, deduction or set off, except at otherwise provided
in paragraph 4E., at the rate of SEE BELOW per month during the term hereof. One
such monthly installment, plus the other monthly charges set forth in Paragraph
2C below shall be due and payable on the date hereof and a like monthly
installment shall be due and payable on or before the first day of each calendar
month succeeding the commencement date; except that all payments due hereunder
for any fractional calendar month shall be prorated.

     B. In addition, Lessee agrees to deposit with Lessor on the date hereof
the sum of ONE HUNDRED FIFTY THOUSAND DOLLARS AND NO/100 Dollars ($150,000.00)
(the "Security Deposit") which shall be held by Lessor, with interest at no less
than three (3%) percent per annum, as security for the performance of Lessee's
obligations under this Lease, it being expressly understood and agreed that the
Security Deposit is not an advance rental deposit or a measure of Lessor's
damages in case of Lessee's default. Upon each occurrence of an event of
default, Lessor may use all or part of the Security Deposit to pay past due rent
or other payments due Lessor under this Lease, and the cost of any other damage,
injury, expense or liability caused by such event of default without prejudice
to any other remedy provided herein or provided by law. On demand, and after
written notice, Lessee shall pay Lessor the amount that will restore the
Security Deposit to its pre-deduction amount. The Security Deposit shall be
deemed the property of Lessor, but any remaining balance of such deposit shall
be returned by Lessor to Lessee when Lessee's obligations under this Lease have
been fulfilled.

     C. Lessee agrees to pay as additional rental its proportionate share (as
defined in Paragraph 23B below) of operating expenses ("Operating Expenses")
which are comprised of (i) Taxes (hereinafter defined) payable by Lessor
pursuant to Paragraph 3A below, (ii) the cost of maintaining insurance covering
the of which the Premises is a part, (iii) the cost of utilities payable
pursuant to Paragraph 8 below, and the cost of any common area charges payable
by Lessor in accordance with Paragraph 4 below and (iv) any other charges which
Lessor is entitled to collect under the terms of this. During each month of the
term of this Lease, on the same day that rent is due hereunder, Lessee shall
escrow with Lessor an amount equal to 1/12 of the estimated annual cost of its
proportionate share of such Operating Expenses (which estimated amount shall not
exceed 105% of the actual Operating Expenses for the prior calendar year, unless
a greater increase can be substantiated by Lessor with reasonable supporting
documentation). Lessee authorizes Lessor to use the funds deposited with Lessor
under this Paragraph 2C to pay such costs. The initial monthly escrow payments
are based upon the estimated amounts and shall be increased or decreased
annually to reflect the then current projected cost of all such Operating
Expenses (which estimated amount shall not exceed 105% of the actual Operating
Expenses for the prior calendar year, unless a greater increase can be
substantiated by Lessor with reasonable supporting documentation). Lessor shall
total all Operating Expenses annually, and reconcile Lessee's actual
proportionate share of such expenses against Lessee's total escrow payments by
May 1st of each year. If the Lessee's total escrow payments are less than
Lessee's actual proportionate share of all such, Operating Expenses, Lessee
shall pay the difference to Lessor within ten (10) days after demand. If the
total escrow payments of Lessee are more than Lessee's actual proportionate
share of all such, Operating Expenses, Lessor shall retain such excess and
credit it against Lessee's future liabilities for Operating Expenses. Lessee
shall be entitled to audit Lessor's Operating Expense accounts and Lessor shall
cooperate with Lessee in regard to any such audit. If the audit reveals that
Lessee has overpaid its proportionate share of Operating Expenses, such
overpayment shall be reimbursed to Lessee promptly upon demand. If the results
of such audit show that Operating Expenses have been overstated by two (2%)
percent or more, the cost of such audit up to a maximum of $1,000.00 shall be
reimbursed to Lessee by Lessor promptly upon demand. The amount of the monthly
Base Rent and the initial monthly Operating Expenses escrow payments are as
follows:

<TABLE>
<CAPTION>
                Months:                                  01 - 60:           61 - 120:
<S>                                                    <C>                 <C>
(1) Base Rent as set forth in Paragraph 2A.             $42,000.00          $48,700.00
(2) Tax Escrow                                          $ 8,000.00          $ 8,000.00
(3) Insurance Escrow                                    $   356.00          $   356.00
(4) Common Area Escrow                                  $ 1,875.00          $ 1,875.00
(5) Management Fee                                      $ 1,567.00          $ 1,567.00
                                                        ----------          ----------

     Total Monthly Rental Payment                       $53,798.00          $60,498.00
</TABLE>

                                 2                      INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

3. TAXES

     A. Lessor agrees to pay all taxes, assessments and governmental charges of
any kind and nature (collectively referred to herein as "Taxes") that accrue
against the Premises, the Building and the Project and Lessee shall be liable
for its proportionate share of the same. If at any time during the term of this
Lease, there shall be levied, assessed or imposed on Lessor a capital levy or
other tax directly on the rents received therefrom and/or a franchise tax,
assessment, levy or charge measured by or based, in whole or in part, upon such
rents from the Premises and/or the land and improvements of which the Premises
are a part, then all such taxes, assessments, levies or charges, or the part
thereof so measured or based, shall be deemed to be included within the term
"Taxes" for the purposes hereof.  The Lessor shall have the right to employ a
tax consulting firm to attempt to assure a fair tax burden on the building and
grounds within the applicable taxing jurisdiction. Lessee agrees to pay its
proportionate share of the cost of such consultant.  Lessee acknowledges and
agrees that, except as provided in Paragraph 3B. below, Lessor shall have no
obligation to protest or appeal the valuation of the Building or to provide
notice to Lessee of any such protest or appeal or any appraisal or reappraisal
of such building.

     B. In any year which Lessor does not protest the real property tax
assessment levied against the real property, Lessee may choose to protest the
assessment in Lessor's name with Lessor's prior written approval which shall not
be unreasonably withheld or delayed. If Lessor grants permission to Lessee to
protest the assessment, Lessor shall fully cooperate with Lessee's efforts
provided Lessee pays all costs and expenses necessary to conduct such protest.
In the event Lessor protests such assessment and a reduction in the taxes for
the Property results, Lessee shall be entitled to its pro rata share of the
benefit of such reassessment, either as a credit against the next payments of
Rent and Additional Rent due under this Lease or as a refund if this Lease has
expired. If Lessee protests the assessment and the taxes for the Property are
reduced as a result of such protest, Lessee shall each be entitled to its pro
rata share of the benefit of such reassessment. Lessee shall also be entitled to
reimbursement of its expenses in conducting such protest, (not to exceed the
reasonable protest fees that Lessor would have paid if Lessee had protested such
assessment) such reimbursement to be in the form of a credit against Rent and
Additional Rent.

     C.  Lessee shall be liable for all taxes levied or assessed against any
personal property or fixtures placed in the Premises.  If any such taxes are
levied or assessed against Lessor or Lessor's property and (i) Lessor pays the
same or (ii) the assessed value of Lessor's property is increased by inclusion
of such personal property and fixtures and Lessor pays the increased taxes,
then, upon demand Lessee shall pay to Lessor such taxes.

4. LESSOR'S REPAIRS AND MAINTENANCE.

     A. Lessor, shall maintain the roof, structural steel, center demising wall,
the foundation and the structural soundness of the exterior walls of the
Building in good repair, reasonable wear and tear accepted, and Lessee shall be
liable for its proportionate share of the cost of routine maintenance or repair
provided, however, Lessee shall promptly upon demand, reimburse Lessor for any
damage to the same caused by Lessee's act, neglect, fault or omission.  The term
"walls" as used herein shall not include windows, glass or plate glass, doors,
special storefronts or office entries.  Lessee shall immediately give Lessor
written notice of defect or need for repairs, after which Lessor shall have
reasonable opportunity to repair the same or cure such defect. Lessor's
obligation to maintain the aforementioned items shall be limited solely to the
cost of such repairs or maintenance or the curing of any defect in the same.

     B. Lessor shall perform the paving maintenance, common area and landscape
replacement and maintenance, exterior painting, common electrical connections,
common water and sewage line plumbing, (for Lessee's use and enjoyment of the
Premises,) and any other common maintenance items and Lessee shall be liable for
its proportionate share of the cost and expense of such repair, replacement, and
maintenance, excepting costs relating to Substances not introduced to the
Premises by Lessee or it's agents. Lessor reserves the right to perform any
obligations that are otherwise Lessee's obligations in Paragraph 5, only after
written notice and appropriate cure period, in which event Lessee shall
reimburse upon receipt of invoice with reasonable detail, Lessor for the
entirety of the reasonable costs of such performance.

     C. Lessor reserves the right to alter or modify the Building and the Common
Areas associated therewith, when such alterations or modifications are required
by governmental laws, codes, ordinances, regulations, or any other applicable
authorities, including, without limitation, the Americans with Disabilities Act
of 1990 (the "ADA"), provided Lessor shall not materially interfere with
Lessee's use and enjoyment of the Premises. In such event, Lessee shall be
liable for its proportionate share of such cost. If such modification is a
capital modification for the general benefit of the, Project, and is required
regardless of Lessee's particular use of the Premises, then the cost shall be an
operating expense allocated over the useful life of the modification. If such
modification is predicated by the use of another lessee in the Project or is
principally for the benefit of another lessee in the Project, the Lessee shall
not be liable for any portion of these costs. Notwithstanding the foregoing, if
such modification is predicated by Lessee's particular use of the Premises or is
principally for the

                                 3                      INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

benefit of Lessee (and not other lessees of the Building) the cost shall be
borne entirely by Lessee and Lessee shall reimburse Lessor for same promptly
upon demand.

     D. Lessee agrees to pay its proportionate share of the cost of (i)
maintenance and/or landscaping of any property that is a part of the Building
and/or the Project, (ii) property management fee (not to exceed market property
management fees), staff salary and benefits allocated to the Building and/or the
Project and (iii) operating and maintaining any property, facilities or
services, including, but not limited to, the cost of the monitoring, repair and
maintenance of water systems or sewer plants, and security systems and service,
if any, provided for the common use or benefit of Lessee and other lessees of
the Project or Building.

     All such expenses of Lessor for maintaining and operating the Building
and/or the Project, including, but not limited to, the items set forth in
Paragraphs 4A, 4B, 4C, and 4D, shall be included as additional rental under the
provisions of Paragraph 2C. Lessor agrees that Operating Costs do not and shall
not include any capital costs for roof, foundation, building structural,
provisioning of utilities or parking lot replacement, restoration or other work
occasioned by fire, windstorm or other casualty to the extent of net insurance
proceeds received by Lessor with respect thereto, income and franchise taxes of
Lessor, expenses incurred in leasing to or procuring of lessees, leasing
commissions, advertising expenses, expenses for the renovating of space for new
lessees, interest or principal payments on any mortgage or other indebtedness of
Lessor, or depreciation allowance or expense. In addition, Operating Expenses
shall not include the following:

     (1)  Attorneys' fees, costs and disbursements and other expenses incurred
          in connection with leasing, renovating or improving space for Lessees
          or prospective Lessees of the Project;

     (2)  Costs (including permit, license and inspection fees) incurred in
          improving or decorating, painting or redecorating space for Lessees or
          vacant space;

     (3)  Lessor's costs of any services sold to Lessees for which Lessor is
          entitled to be reimbursed by such Lessees as an additional charge or
          rental over and above the base rental, utility costs and maintenance
          costs payable under the lease with such Lessee or other occupant;

     (4)  Any amortization on the Project except as expressly permitted herein;

     (5)  Costs incurred due to violation by Lessor of any of the terms and
          conditions of this Lease or any other lease relating to the Project;

     (6)  All items and services for which Lessee pays third persons or which
          Lessor provides selectively to one or more Lessees or occupants of the
          Project (other than Lessee) without reimbursement;

     (7)  Promotional expenditures;

     (8)  Repairs or other work paid for through condemnation proceeds;

     (9)  Repairs resulting from any defect in the original design or
          construction of the Building that are is covered under a warranty or
          which are the result of a breach of contract or which are a breach of
          guaranty;

     (10) Any capital expenditures (except as otherwise provided herein);

     (11) Any ground lease, mortgage or debt service payment.

     E.  In the event that Lessor fails to cure any breach of its obligations to
maintain and repair or fails to cure any breach or any other obligation under
this Lease within thirty (30) days after receipt of Lessee's notice of default,
or if having commenced said cure, Lessor does not diligently pursue it to
completion, then Lessee may elect to cure said breach at Lessee's expense and
may invoice Lessor for the cost of such cure. Lessor after receiving such
invoice and proper supporting documentation shall reimburse Lessee for such
reasonable costs within thirty (30) days. If Lessor has not paid such invoice in
this thirty (30) day period, Lessee shall send a second notice regarding the
payment of this invoice to Lessor. If Lessor has not paid this invoice within
sixty (60) days after receiving said second notice, Lessee shall have the right
to offset the cost of cure from rent until Lessee's reasonable damages caused by
such breach are recovered. If Lessee's reasonable damages exceed the remaining
financial obligations of Lessee under this Lease, Lessor shall reimburse any
remaining balances to Lessee upon the expiration or early termination of this
Lease. Prior to seeking such offset or reimbursement, Lessee shall document the
damages and supply said documentation to Lessor.

                                 4                      INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

5. LESSEE'S REPAIRS AND MAINTENANCE.

     A.  In regard to the Premises, Lessee, at its own cost and expense, shall
(i) maintain all parts of the Premises (except for those items for which Lessor
is responsible under Paragraph 4) in good condition, reasonable wear and tear
excepted (ii) promptly make all necessary repairs and replacements, including,
but not limited to, windows, glass and plate glass, exterior doors, any special
office entry, interior walls and finish work, interior doors and floor covering,
utility connections located within or serving only the Premises, downspouts,
gutters, heating and air conditioning systems serving only the Premises, light
bulbs and ballasts, dock boards, truck doors, dock bumpers, paving, plumbing
work and fixtures, termite and pest extermination, regular removal of trash and
debris, dedicated sewer lines, and any damage due to vandalism or malicious
mischief (iii) keep Lessee's Exclusive Parking Areas in a clean and sanitary
condition, and (iv) repair all wind damage to glass except with respect to
tornado or hurricane damage, notwithstanding the foregoing, if any damage to the
Premises is caused by the act, neglect, fault or omission of other lessee's in
the Project, then Lessee shall promptly notify Lessor of such damage. Lessor
shall then diligently proceed and pursue to completion the repair of such damage
and recover the cost of these repairs from the applicable lessee's.

     B. Lessee and its employees, agents, customers, invitees, and/or licensees
shall have the right to use Lessee's Exclusive Parking Areas, as designated on
Exhibit A, subject to such reasonable rules and regulations as Lessor may from
time to time prescribe after written notice so long as the new rules and
regulations do not unreasonably interfere with Lessee's use or occupancy of the
Premises, and subject to rights of ingress and egress of other lessees. Lessee
shall control for Lessee's exclusive use Lessee's Exclusive Parking Areas
(including the entire truck apron and parking area on the north side of the
Building) for the purpose of car and truck storage and parking. Lessee shall
have the right to secure the car and truck parking area with fencing and/or
security cameras. All of Lessee's truck parking and employee parking shall be
within Lessee's Exclusive Parking Areas and shall be free of charge for the
initial Lease term and all Lease term extensions and renewals. Lessor shall not
be responsible for enforcing Lessee's parking rights against any third parties.
Lessee shall undertake reasonable measures, at its own cost and expense, to keep
its employees, agents, customers, invitees, and/or licensees from parking
outside of Lessee's Exclusive Parking Area on any streets running through or
contiguous to the Building or Project or any other areas as designated by
Lessor. Lessee hereby consents to the removal of any vehicle in violation of the
foregoing designated areas of parking as established by Lessor.

     C. Lessee, at its own cost and expense, shall perform regularly scheduled
preventive maintenance by Lessee's employee or by maintenance contractor
approved by Lessor (which approval will not be unreasonably withheld or delayed)
for servicing all hot water, heating and air conditioning systems and equipment
located within the Premises. The maintenance or service contract must include
all generally acceptable services suggested by the equipment manufacturer in its
operations/maintenance manual and must become effective and a copy thereof
delivered to Lessor within thirty (30) days of the date Lessee takes possession
of the Premises.

     D. Lessee agrees that no washing of any type (other than reasonable
restroom or kitchen washing or food preparation) will take place in the Premises
provided that truck washing may occur in Lessee's Exclusive Parking Areas.
Lessee shall be fully responsible for all repairs, clean up and any other
consequences of cleaning its trucks in the Exclusive Parking Area, including,
but not limited to, storm sewers, truck apron concrete, subgrade, joints, and
stains.

     E.  Lessor hereby grants to Lessee all rights of access, ingress and egress
at the points shown on Exhibit A in, to, from and over any and all streets, ways
or alleys adjoining, abutting or adjacent to the Project and the Building,
together with the right to use, in common with other occupants of the Project,
any and all of the Common Areas pertaining to the Project with the exception of
any parking areas that are not designated for Lessee's exclusive use.

     F.  Lessee's Exclusive Parking Areas shall not be disturbed without
Lessee's consent which consent may be withheld in Lessee's sole discretion. In
the event that unauthorized persons, including tenants or invitees of tenants
occupying the Building, utilize said parking areas for parking or other purposes
to an extent which shall be objectionable to Lessee, Lessor shall, upon written
request from Lessee, immediately take whatever reasonable action as shall be
necessary to prevent said unauthorized utilization. Lessor shall not use or
permit the use of the Common Areas for any purpose other than the parking and
passage of vehicles and the movement of pedestrian traffic, lighting,
landscaping, directional and traffic controls signals, and Lessor will not,
except as shown on Exhibit A, construct, locate or allow construction or
location of any fence, barricade, structure, buildings, or other obstruction
which would interfere with the intended uses thereof, of the free flow of
traffic to, or access from, the Common Areas.

     G.  During the Lease term, Lessor shall provide and maintain paved
driveways to the Premises in order to provide convenient ingress and egress from
the delivery or service entrances to adjacent public streets and highways for
the purpose of receiving and delivering merchandise and otherwise servicing the
Premises, as

                                 5                      INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

shown on Exhibit A.  Said driveways shall be of sufficient width so
as to permit the passage, unloading, and the turning around of trailer trucks
and other commercial vehicles.  Said driveways shall not be removed or changed
without written authorization of Lessee.

     H.  In making any permitted or required replacement, change, restoration,
alteration, improvement, enlargement or repair of or to the Premises, Lessor and
Lessee and their contractors and suppliers may use the portion of the common
area adjacent to Lessee's Premises for the parking of trucks and delivery
vehicles, storage of materials, temporary structures and other matters
incidental to such work, provided that no such use shall unreasonably interfere
with the operation of the business of any Lessee. In making any permitted or
required replacement, change, restoration, alteration, improvement or repair of
or to any portion of the project other than the Premises, Lessor, or any of
Lessor's tenants and their contractors and suppliers may use such portions of
the common areas as will not materially block the access to the Premises, for
the parking of trucks and delivery vehicles, storage of materials and other
matters incidental to such work, provided that no such use shall unreasonably
interfere with the operation of the business of Lessee or any sublessee or
licensee of Lessee.

     I.  Throughout the Lease term, no entrance, exit, approach or means of
entrance, exit or approach to and from the Premises or the Project shall be
unreasonably interfered with or disturbed by Lessor or anyone claiming by,
through or under Lessor. Lessee, its customers, sublessees, licensees, employees
and invitees, shall have vehicular and pedestrian ingress and egress at all
times between each of the entrances and exits of the Project and a public street
or highway, except for reasonable periods during which repairs, maintenance or
other work are being performed by utility companies or municipal authorities or
repairs for maintenance are being performed by Lessor.

     J.  Any and all security of any kind for Lessee, Lessee's agents, employees
or invitees, the Premises, or any personal property thereon (including, without
limitation, any personal property of any sublessee) shall be the sole
responsibility and obligation of Lessee, and shall be provided by Lessee at
Lessee's sole cost and expense. Lessee acknowledges and agrees that Lessor shall
have no obligation or liability whatsoever with respect to the same except due
to Lessor's negligence or willful misconduct. Lessee shall indemnify and hold
Lessor harmless from and against any and all loss, cost, damage or other
liability arising directly or indirectly from security measures or the absence
thereof with respect to the Premises and the building or the project of which
the Premises are a part. Lessee may, at Lessee's sole cost and expense, install
alarm systems in the Premises provided such installation complies with the
provisions of Paragraph 6 hereof. Removal of such alarm systems shall be
Lessee's sole responsibility and, at Lessee's sole cost and expense, shall be
completed prior to lease termination and all affected areas of the Premises
shall be repaired and/or restored in a good and workmanlike manner to the
condition that existed prior to such installation. Notwithstanding the
foregoing, Lessor may elect in Lessor's sole discretion to contract for common
security services, to whatever extent Lessor may deem appropriate, for the
building or the project of which the Premises are a part, provided, however
Lessee acknowledges and agrees that Lessor shall in no event be obligated to
provide any such services and the provision of such services shall not alter or
modify Lessee's indemnification of Lessor or the obligation of Lessee to provide
its own security as set forth herein. The cost of any security services
contracted for by Lessor which are provided for all tenants at the Project,
including Lessee, shall be treated as an operating expense pursuant to Paragraph
2C hereof.

6. ALTERATIONS. Lessee, at any time during the Lease, shall have the option to
make any alterations, additions, partitions or other improvements to the
Premises or installing fixtures on the Premises, as required to operate Lessee's
business at its own cost and expense with no base rent, additional rent, or
supervisory fee due under the Lease for such space or modifications, provided
such improvements are not structural in nature. Such alterations, additions,
partitions, other improvements, and fixtures shall require the prior written
consent of Lessor, which consent will not be unreasonably withheld, conditioned
or delayed, provided that alterations, additions, partitions, or other
improvements that cost less than fifty thousand dollars ($50,000.00) in any
calendar year and do not affect the building's structural integrity or
mechanical systems will not require Lessor's prior written approval. Lessee, at
its own cost and expense, may erect shelves and bins as it desires without
Lessor's consent as well as alterations, additions, partitions, or other
improvements and fixtures which have been specifically consented to in writing
by Lessor (except as otherwise provided above), provided that (a) such items are
consistent with Lessee's permitted use of the Premises, (b) such items do not
overload or cause material damage to the same, (c) such items may be removed
without injury to the Premises, and (d) the construction, erection or
installation thereof complies with all applicable governmental laws, codes,
ordinances, regulations, or any other applicable authorities, including, without
limitation, the Americans with Disabilities Act of 1990 (the "ADA"), and with
Lessor's reasonable details, specifications and other requirements. Any
reasonable architectural, engineering, construction management, permits,
inspections, or other cost or fee required to assure compliance with the
conditions set forth in this Paragraph 6 shall be paid by Lessee promptly upon
demand. All alterations, additions, partitions, or other improvements and
fixtures erected or installed by Lessee shall be and remain the property of
Lessor during the term of this Lease.; provided that Lessor shall have the
option, exercisable in Lessor's sole discretion, to require Lessee either (i)
upon request made prior to the construction of such alterations, additions,
partitions, or other improvements (excluding Lessee's personal

                                 6                      INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

property) remove at the termination of this Lease, at Lessee's sole cost and
expense, all or part of any alterations, additions, partitions, or other
improvements and fixtures, at which time Lessee shall promptly restore the
Premises to its original condition, or (ii) to keep in place the same in which
case such alterations, additions, improvements, fixtures, and partitions shall
remain the property of Lessor. All shelves, bins, and trade fixtures and
personal property installed by Lessee shall be removed on or before the earlier
to occur of the date of termination of this Lease or vacating the Premises, at
which time Lessee shall restore the Premises to their original condition,
reasonable wear and tear excepted. All alterations, installations, removals and
restoration shall be performed in a good and workmanlike manner so as not to
damage or alter the primary structure or structural qualities of the buildings
and other improvements situated on the Premises or of which the Premises are a
part. Lessee, at its sole cost and expense, may, from time to time, install
antennas and/or satellite dishes, refrigeration, heating, ventilation or air
conditioning equipment on the roof of the Premises subject to applicable codes
and Lessor's prior written consent, which will not be unreasonably withheld,
conditioned or delayed. Such installations must not adversely affect the
structural integrity of the building and must comply with Lessor's reasonable
standard construction and engineering specifications. There shall be no
additional rent charged for such use of the roof. Upon removal of such antennas
and/or satellite dishes, refrigeration, heating, ventilation and air
conditioning equipment, Lessee shall restore the roof to its original condition,
subject to normal wear and tear.

     7. SIGNS. Lessee shall have the right to its pro-rata share of exterior
signage on the Premises subject to applicable codes and Lessor's prior written
approval, which shall not be unreasonably withheld, conditioned, or delayed. All
signage installed by Lessee on the Premises shall be done at the sole cost and
expense of Lessee, but may be included as a portion of the anticipated Lessee
Improvements. Lessee shall repair, paint, and/or replace the building facial
surface to which its signs are attached upon vacation of the Premises, or the
removal or alteration of its signage. Lessee shall not (i) make any changes to
the exterior of the Premises, (ii) install any exterior lights, decorations,
balloons, flags, pennants, banners or painting, or (iii) 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 Lessor's
prior written consent not to be unreasonably withheld, conditioned or delayed.
All signs, decorations, advertising media, blinds, draperies and other window
treatment or bars or other security installations visible from outside the
Premises shall conform at Lessee's expense with all applicable governmental
laws, ordinances, regulations, or other requirements.

     8. UTILITIES.  For Lessee's intended use and occupancy, Lessor agrees to
provide water, sewer, electricity, and telephone service connections to the
Premises upon the commencement date hereof, which connections, outside of the
Premises shall be maintained by Lessor and connections inside of the Premises
shall be maintained by Lessee. Lessee shall pay for all water, gas, heat, light,
power, telephone, sewer, sprinkler charges and other utilities and services used
on or at the Premises, and any maintenance or inspection charges for Lessee's
utilities. Lessor shall cause any of said services to be separately metered to
Lessee. Lessee shall pay its pro rata share, as reasonably determined by Lessor,
of all charges for jointly metered utilities. Lessor shall not be liable for any
interruption or failure of utility service on the Premises, provided Lessor's
negligence or willful misconduct do not cause such interruption or failure.

9. INSURANCE.

     A. Lessor shall be obligated to maintain industry standard liability and
casualty insurance covering the buildings situated on the Premises or of which
the Premises are a part, except for those items the repair and maintenance of
which are Lessee's responsibility under Paragraph 5, in an amount not less than
one hundred percent (100%) of the "replacement cost" thereof insuring against
the perils of Fire, Lightning, Extended Coverage, Vandalism, and Malicious
Mischief.

     B. Lessee, at its own expense, shall maintain during the term of this Lease
a policy or policies of worker's compensation and comprehensive general
liability insurance, including personal injury and property damage, with
contractual liability endorsement, in the amount of One Million Dollars
($1,000,000.00) for property damage and One Million Dollars ($1,000,000.00) per
occurrence for personal injuries or deaths of persons occurring in or about the
Premises. Lessee, at its own expense, also shall maintain during the term of
this Lease, fire and extended coverage insurance covering (i) the replacement
cost of all alterations, additions, partitions and improvements installed or
placed on the Premises by Lessee or by Lessor on behalf of Lessee and (ii) the
replacement cost of all of Lessee's personal property contained within the
Premises and (iii) business interruption of Lessee. Said policies shall (i) name
Lessor as an additional insured (except for the worker's compensation policy,
which instead shall include waiver of subrogation endorsement in favor of
Lessor), (ii) be issued by an insurance company which is reasonably acceptable
to Lessor, (iii) provide that said insurance shall not be canceled unless thirty
(30) days prior written notice shall have been given to Lessor, and (iv) provide
primary coverage to Lessor when any policy issued to Lessor provides duplicate
or similar coverage, and in such circumstance Lessor's coverage under Lessor's
policy shall be deemed excess over and above the coverage provided by Lessee's
policy. Said policy or policies or certificates thereof shall be delivered to
Lessor by Lessee upon commencement of the term of the Lease and upon each
renewal of said insurance.

                                 7                      INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

     C. Lessee will not permit the Premises to be used for any purpose or in any
manner that would (i) void the insurance thereon, (ii) increase the insurance
risk or premium (unless Lessee pays the amount of such increase), or (iii) cause
the disallowance of any sprinkler credits. If any increase in the cost of any
insurance on the Premises or the building of which the Premises are a part is
caused by Lessee's use of the Premises, or because Lessee vacates the Premises,
then Lessee shall promptly pay the amount of such increase to Lessor upon
demand.

     D. Anything in this Lease to the contrary notwithstanding, Lessor and
Lessee hereby waive and release each other of and from any and all rights of
recovery, claim, action or cause of action, against each other, their agents,
officers and employees, for any loss or damage that may occur to the Premises,
improvements to the building or buildings of which the Premises are a part, or
personal property (building contents) within the building(s) and/or Premises
covered or required to be covered by the insurance to be provided under this
Lease, EVEN IF SUCH LOSS OR DAMAGE IS CAUSED BY THE FAULT, NEGLIGENCE OR OTHER
TORTIOUS CONDUCT, ACTS OR OMISSIONS OF THE RELEASED PARTY OR THE RELEASED
PARTY'S AGENTS, DIRECTORS, OFFICERS, EMPLOYEES OR INVITEES. Said mutual waivers
shall be in addition to, and not in limitation or derogation of, any other
waiver or release contained in this Lease with respect to any loss or damage to
property of the parties hereto. Without in any way limiting the foregoing
waivers and to the extent permitted by applicable law, the parties hereto each,
on behalf of their respective insurance companies insuring the property of
either Lessor or Lessee against any such loss, waive any right of subrogation
that Lessor or Lessee or their respective insurance companies based upon an
assignment from its insured. Each party to this Lease agrees immediately after
execution of this Lease to give each insurance company which has issued to its
policies of fire and extended coverage insurance, written notice of the terms of
the mutual waivers contained in this subparagraph, and if necessary to prevent
the invalidation of said insurance coverage by reason of said waivers, to have
the insurance policies properly endorsed.

10. FIRE AND CASUALTY DAMAGE.

     A. If the Premises or the Building should be damaged or destroyed by fire
or other peril, Lessee immediately shall give written notice to Lessor. If the
building situated upon the Premises or of which the Premises are a part should
be damaged or destroyed by any peril covered by the insurance to be provided by
Lessor under Paragraph 9A above, and in Lessor's estimation, rebuilding or
repairs cannot be completed within one hundred eighty (180) days after the date
of such damage, Lessee may elect to terminate this Lease and the Base Rent and
additional rental shall be abated during the unexpired portion of this Lease,
effective upon the date of the occurrence of such damage.

     B. If the Building should be damaged by any peril covered by the insurance
to be provided by Lessor under Paragraph 9A above, and in Lessor's estimation,
rebuilding or repairs can be substantially completed within one hundred eighty
(180) days after the date of such damage, this Lease shall not terminate, and
Lessor shall restore the Premises to substantially its previous condition,
except that Lessor shall not be required to rebuild, repair or replace any part
of the partitions, fixtures, additions and other improvements that may have been
constructed, erected or installed in or about the Premises for the benefit of,
or by, or for, Lessee. If such repairs and rebuilding have not been
substantially completed within one hundred eighty (180) days after the date of
such damage, Lessee, as Lessee's exclusive remedy, may terminate this Lease by
delivering written notice of termination to Lessor in which event the rights and
obligations hereunder shall cease and terminate. For purposes of this Paragraph
10B, if Lessee reasonably determines that the Premises are not suitable for
Lessee's intended use in whole or in part following such damage, the Base Rent
and additional rental payable hereunder during the period in which Lessee
reasonably determines that the Premises are not usable shall be reduced (i)
according to the square footage of the unusable area contained in the Premises,
as reasonably determined by Lessee, or (ii) to such extent as may be fair and
reasonable under the circumstances, as reasonably determined by Lessee.

     C. Notwithstanding anything herein to the contrary, in the event the holder
of any indebtedness secured by a mortgage or deed of trust covering the Premises
requires that the insurance proceeds be applied to such indebtedness, then
Lessor shall have the right to terminate this Lease by delivering written notice
of termination to Lessee within fifteen (15) days after such requirement is made
known by any such holder, whereupon all rights and obligations hereunder shall
cease and terminate.

     11. LIABILITY AND INDEMNIFICATION. Except for any claims, rights of
recovery and causes of action that Lessee has released, Lessor shall indemnify
Lessee, hold Lessee harmless and defend Lessee against any and all claims or
liability for any injury or damage to any person in, on or about the Premises,
the Building or the Project or any part thereof when such injury or damage shall
be caused by the act, neglect, fault of, or omission of any duty with respect to
the same by Lessor, its agents, servants, contractors, invitees, tenants, or
employees. Notwithstanding the foregoing or anything to the contrary in this
Lease, Lessee hereby agrees that in no event shall Lessor be liable for any
incidental or consequential damages whatsoever resulting from such

                                 8                      INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

claim or liability, including, without limitation, any damages as a result of
any interruption of Lessee's business or any loss of income therefrom. Except
for any claims, rights of recovery and causes of action that Lessor has
released, Lessee shall indemnify Lessor, hold Lessor harmless from and defend
Lessor against any and all claims or liability for any injury or damage (i) to
any person or property whatsoever occurring in, on or about the Premises or any
part thereof and/or of the building of which the Premises are a part, including
without limitation elevators, stairways, passageways or hallways, the use of
which Lessee may have in accordance with this Lease, when such injury or damage
shall be caused by the act, neglect, fault of, or omission of any duty with
respect to the same by Lessee, its agents, servants, employees, or invitees,
contractors, subtenants, (ii) arising from the conduct of management of any work
done by the Lessee in or about the Premises when such injury or damage shall be
caused by the act, neglect, fault of, or omission of any duty with respect to
the same by Lessee, its agents, servants, employees, or invitees, contractors,
subtenants, (iii) arising from transactions of the Lessee when such injury or
damage shall be caused by the act, neglect, fault of, or omission of any duty
with respect to the same by Lessee, its agents, servants, employees, or
invitees, contractors, subtenants, and (iv) all costs, counsel fees, expenses
and liabilities incurred in connection with any such claim or action or
proceeding brought thereon when such injury or damage shall be caused by the
act, neglect, fault of, or omission of any duty with respect to the same by
Lessee, its agents, servants, employees, or invitees, contractors, subtenants.
The provisions of this Paragraph 11 shall survive the expiration or termination
of this Lease with respect to any claims or liability occurring prior to such
expiration or termination.

     12. USE. The Premises shall be used only for the purpose of general office
use, receiving, storing, servicing, shipping, product preparation, grocery store
services (other than on-site retail) and selling (other than by on-site retail)
products, materials, alcoholic beverages and merchandise made and/or distributed
by Lessee and for such other lawful purposes as may be incidental thereto.
Outside storage, (excluding storage of trucks and other vehicles and the washing
thereof) at any time is prohibited without Lessor's prior written consent.
Lessee shall, at its own cost and expense, obtain any and all licenses and
permits necessary for such use (including, but not limited to, a Certificate of
Occupancy), in regard to Lessee's tenant improvements, if required), shall at
all times maintain the Premises in a clean, healthful and safe condition and
comply with all governmental laws, codes, ordinances, regulations or any other
applicable authorities with regard to the use, condition or occupancy of the
Premises including, without limitation, the ADA. Lessee shall be responsible, at
Lessee's sole cost and expense, for the correction, prevention, and abatement of
nuisances in or upon, or connected with, the Premises to the extent caused by
Lessee. Lessee shall not permit any unreasonably objectionable or unpleasant
odors, smoke, dust, gas, noise, vibrations, or pest infestations to emanate from
the Premises, nor take any other action that would constitute an unreasonable
nuisance or would unreasonably disturb, unreasonably interfere with, or endanger
Lessor or any other lessees of the building or project of which the Premises are
a part, excepting pre-existing conditions and Substances. Lessee's use of the
Premises shall at all times comply with the insurance provisions in Paragraph 9C
hereof. Lessee agrees that the point pressure resulting from Lessee's racking
system, inventory, forklifts and equipment pertaining to Lessee's use of the
Premises shall not exceed allowable design floor loading for floor slabs on
grade (provided Lessor shall inform Lessee in writing of the allowable design
floor loading). Lessee shall hold harmless Lessor from any loss, liability, and
expenses, both real and alleged, arising out of any damage or repair caused by
Lessee's negligence or failure to comply with this paragraph.

     13. INSPECTION. Lessor and Lessor's agents and representatives shall have
the right to enter the Premises at any reasonable time during business hours,
after first giving Lessee 24 hours prior written notice, except in cases of
emergency when no such notice is required, to inspect the Premises and to make
such repairs as may be required or permitted pursuant to this Lease. Lessor
shall not unreasonably interfere with Lessee's use and enjoyment of the Premises
when Lessor exercises its right of entry under this Section 13. During the
period that is six (6) months prior to the end of the term hereof and at any
time Lessee is in monetary default, Lessor and Lessor's representatives may
enter the Premises during business hours for the purpose of showing the
Premises. Lessee shall neither prevent, prohibit, nor in any way impair such
showing of the Premises. In addition, during the last six months of any term,
including exercised extensions, Lessor shall have the right to erect a suitable
sign on or near the Premises stating the Premises are available. Lessee shall
notify Lessor in writing at least thirty (30) days prior to vacating the
Premises and shall arrange to meet with Lessor for a joint inspection of the
Premises prior to vacating.

14. ASSIGNMENT AND SUBLETTING.

     A. Lessee, shall not have the right to assign, sublet, transfer or encumber
this Lease, or any interest therein, without the prior written consent of
Lessor, which consent shall not be unreasonably withheld, conditioned or
delayed. Any attempted assignment, subletting, transfer or encumbrance by Lessee
in violation of the terms and covenants of this Paragraph shall be void.
Notwithstanding the foregoing, Lessee shall have the right to assign this Lease
to any affiliate (as such term is defined in the Securities Act of 1933)
provided that such assignment is in form satisfactory to Lessor and that such
affiliate agrees to and performs all obligations of Lessee under this lease. Any
assignee, sublessee or transferee of Lessee's interest in this Lease (all such
assignees, sublessees and transferees being hereinafter referred to as
"Transferees"), by assuming Lessee's obligations hereunder,

                                 9                      INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

shall assume liability to Lessor for all amounts paid to persons other than
Lessor by such Transferees in contravention of this Paragraph. No assignment,
subletting, or other transfer, whether consented to by Lessor or not, or
permitted hereunder, shall relieve Lessee of its liability hereunder. If an
event of default occurs while the Premises or any part thereof are assigned or
sublet, then Lessor, in addition to any other remedies herein provided, or
provided by law, may collect directly from such Transferee all rents payable to
the Lessee and apply such rent against any sums due Lessor hereunder. No such
collection shall be construed to constitute a novation or a release of Lessee
from the further performance of Lessee's obligations hereunder. Notwithstanding
the foregoing, without Lessor's consent, Lessee may assign its leasehold
interest to: (a) a parent, subsidiary, sibling or affiliate corporation,
controlling, controlled by or under common control with, Lessee; (b) a successor
corporation related to Lessee by merger, consolidation, non-bankruptcy
reorganization or government action; (c) a reincorporation that strictly
involves changing the state in which Lessee is incorporated; or (d) a purchaser
of substantially all of Lessee's assets located in the Property. In addition,
the restrictions on Transfer (as defined above) do not apply to the sale or
other transfer of Lessee's capital stock including: (i) any transfer in
connection with the merger, consolidation or non-bankruptcy reorganization; (ii)
any transaction related to a public sale or private placement; (iii) any
transfer of any sale of stock amongst existing shareholders; or (iv) an activity
in any company stock option programs.

     B. If this Lease is assigned to any person or entity pursuant to the
provision of the Bankruptcy Code, 11 U.S.C. (S) 101 et. seq., (the "Bankruptcy
Code"), any and all monies or other consideration payable or otherwise to be
delivered in connection with such assignment shall be paid or delivered to
Lessor, shall be and remain the exclusive property of Lessor and shall not
constitute property of Lessee or of the estate of Lessee within the meaning of
the Bankruptcy Code. Any and all monies or other considerations constituting
Lessor's property under the preceding sentence not paid or delivered to Lessor
shall be held in trust for the benefit of Lessor and be promptly paid or
delivered to Lessor.

     C. Any person or entity to which this Lease is assigned pursuant to the
provisions of the Bankruptcy Code shall be deemed, without further act or deed,
to have assumed all of the obligations arising under this Lease on and after the
date of such assignment. Any such assignee shall upon demand execute and deliver
to Lessor an instrument confirming such assumption.

     15.  CONDEMNATION. If the Premises, Project, or Exclusive Parking Area, or
any portion thereof 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 and imminent taking, and the taking prevents or
materially interferes with the use of the Premises for the purpose for which
they were leased to Lessee, Lessee shall have the right to terminate this lease
and the Base Rent and additional rental shall be abated during the unexpired
portion of this Lease, effective on the date of such taking. All compensation
awarded in connection with or as a result of any of the foregoing proceedings
shall be the property of Lessor and Lessee hereby assigns any interest in any
such award to Lessor; provided, however, Lessor shall have no interest in any
award made to Lessee for loss of business or goodwill or for Lessee's costs of
relocation, for the taking of Lessee's fixtures and improvements.

     16. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Lessee immediately shall deliver possession to Lessor with all
repairs and maintenance required herein to be performed by Lessee completed. If,
for any reason, Lessee retains possession of the Premises after the expiration
or termination of this Lease, unless the parties hereto otherwise agree in
writing, such possession shall be subject to termination by either Lessor or
Lessee at any time upon not less than twenty (20) days advance written notice,
and all of the other terms and provisions of this Lease shall be applicable
during such period, except that Lessee shall pay Lessor from time to time, upon
demand, as rental for the period of such possession, an amount equal to one
hundred fifty percent (150%) of the Base Rent in effect on the termination date,
computed on a daily basis for each day of such period. No holding over by
Lessee, whether with or without consent of Lessor shall operate to extend this
Lease except as otherwise expressly provided. The preceding provisions of this
Section 16 shall not be construed as consent for Lessee to retain possession of
the Premises in the absence of written consent thereto by Lessor.

     17. QUIET ENJOYMENT. Lessor covenants that on or before the commencement
date it will have good title to the Premises, free and clear of all liens and
encumbrances, excepting only the lien for current taxes not yet due, such
mortgage or mortgages as are permitted by the terms of this Lease, zoning
ordinances and other building and fire ordinances and governmental regulations
relating to the use of such property, and easements, restrictions and other
conditions of record. Lessor represents that it has the authority to enter into
this Lease and that so long as there is not an uncured event of default, Lessee
shall peaceably and quietly have, hold and enjoy the Premises for the term
hereof without hindrance or molestation from Lessor, subject to the terms and
provisions of this Lease.

                                 10                     INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

18. EVENTS OF DEFAULT. The following events (herein individually referred to as
"event of default") each shall be deemed to be events of nonperformance by
Lessee under this Lease:

     A. Lessee shall fail to pay any installment of Base Rent or any additional
rental herein reserved when due, or any other payment or reimbursement to Lessor
required herein when due, and such failure shall continue for a period of five
days after receipt of written notice from Lessor stating that the payment was
not received.

     B. Lessee shall (i) become insolvent; (iii) admit in writing its inability
to pay its debts: (iii) make a general assignment for the benefit of creditors;
(iv) 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 as bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors 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; or (v) take any action to
authorize or in contemplation of any of the actions set forth above in this
Paragraph.

     C. Any case, proceeding or other action against the Lessee shall be
commenced seeking (i) to have an order for relief entered against it as a debtor
or to adjudicate it as bankrupt or insolvent; (ii) reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts under any
law relating to bankruptcy, insolvency, reorganization or relief of debtors
(iii) appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its property, and such case,
proceeding or other action (a) results in the entry of an order for relief
against it which it is not fully stayed within seven (7) business days after the
entry thereof or (b) shall remain undismissed for a period of forty-five (45)
days.

     D. Lessee shall fail to discharge or bond against any lien placed upon the
Premises in violation of Paragraph 21 hereof within thirty (30) days after any
such lien or encumbrance is filed against the Premises.

     E.  Lessee shall fail to comply with any term, provision or covenant of
this Lease (other than those listed in this Paragraph 18), and shall not cure,
or start to cure, such failure within twenty (20) business days after written
notice thereof to Lessee.

19. REMEDIES

     A. Upon each occurrence of an event of default, that Lessee fails to cure
  within cure period, Lessor after written notice, shall have the option to
  pursue any one or more of the following remedies without any notice or demand:

       (1) Terminate this Lease; and/or
       (2) Enter upon and take possession of the Premises with or without
  terminating this Lease; and/or
       (3) Alter all locks and other security devices at the Premises with or
  without terminating this Lease, and pursue, at Lessor's option, one or more
  remedies pursuant to this Lease, and in any such event Lessee immediately
  shall surrender the Premises to Lessor, and if Lessee fails so to do, Lessor,
  without waiving any other remedy it may have, may enter upon and take
  possession of the Premises and expel or remove Lessee and any other person who
  may be occupying such Premises or any part thereof.

     B. If Lessor terminates this Lease, at Lessor's option, Lessee shall be
liable for and shall pay to Lessor, the sum of all rental and other payments
owed to Lessor hereunder accrued to the date of such termination, plus, as
liquidated damages, an amount equal to the present value (using the current
"prime" interest rate of Chase Bank, or should such financial institution no
longer exist, a comparable financial institution) of(1) the total rental and
other payments owed hereunder for the remaining portion of the Lease term,
calculated as if such term expired on the date set forth in Paragraph 1, less
(2) the then fair market rental of the Premises for such period.

     C.  If Lessor repossesses the Premises without terminating the Lease,
Lessee, at Lessor's option, shall be liable for and shall pay Lessor on demand
all rental and other payments owed to Lessor hereunder, accrued to the date of
such repossession, plus all amounts required to be paid by Lessee to Lessor
until the date of expiration of the term as stated in Paragraph 1, diminished by
all amounts received by Lessor through reletting of the Premises during such
remaining term (but only to the extent of the rent herein reserved). Actions to
collect amounts due by Lessee to Lessor under this subparagraph may be brought
from time to time, on one or more occasions, without the necessity of Lessor's
waiting until expiration of the Lease term.

     D.  Upon an event of default, in addition to any sum provided to be paid
herein, Lessee also shall be liable for and shall pay to Lessor (i) brokers'
fees incurred by Lessor in connection with reletting the whole or any part of
the Premises; which fees shall be prorated based on the remaining term of this
Lease as of the date of reletting compared to the term of the replacement lease;
(ii) the costs of removing and storing Lessee's or other occupant's property;
(iii) the costs of repairing, or otherwise putting the Premises into as good
condition as that in which it was originally delivered to Lessee reasonable wear
and tear excepted); and (iv) all reasonable

                                 11                     INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

expenses incurred by Lessor in enforcing or defending Lessor's rights and/or
remedies. If either party hereto institutes any action or proceeding to enforce
any provision hereof by reason of any alleged breach of any provision of this
Lease, the prevailing party shall be entitled to receive from the losing party
all reasonable attorneys' fees and all court costs in connection with such
proceeding.

     E.  In the event Lessee fails to make any payment due hereunder when
payment is due and the period to cure has expired, to help defray the additional
cost to Lessor for collecting and/or processing such late payments, Lessee shall
pay to Lessor on demand a late charge in an amount equal to five percent (5%) of
such installment; and the failure to pay such late charge within ten (10) days
after demand therefore shall be an additional event of default hereunder. The
provision for such late charge shall be in addition to all of Lessor's other
rights and remedies hereunder or at law and shall not be construed as liquidated
damages or as limiting Lessor's remedies in any manner.

     F.  Exercise by Lessor of any one or more remedies hereunder granted or
otherwise available shall not be deemed to be an acceptance of surrender of the
Premises by Lessor, whether by agreement or by operation of law, it being
understood that such surrender can be effected only by the written agreement of
Lessor and Lessee. Lessee and Lessor further agree that forbearance by Lessor to
enforce its rights pursuant to the Lease at law or in equity, shall not be a
waiver of Lessor's right to enforce one or more of its rights in connection with
any subsequent default.

     G.  If Lessor fails to perform any of its obligations hereunder within
thirty (30) days after written notice from Lessee specifying such failure,
Lessee's exclusive remedies shall be the remedies set forth in Paragraph 4E
and/or an action for damages, specific enforcement or injunctive relief. Unless
and until Lessor fails to so cure any default after such notice within the
allowable cure period, Lessee shall not have any remedy or cause of action by
reason thereof. All obligations of Lessor hereunder will be construed as
covenants, not conditions; and all such obligations will be binding upon Lessor
only during the period of its possession of the Premises and not thereafter. The
term "Lessor" 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 covenants and
obligations of the Lessor thereafter accruing, but such covenants and
obligations shall be binding during the Lease term upon each new owner for the
duration of such owner's ownership. Notwithstanding any other provision hereof,
Lessor shall not have any personal liability hereunder. In the event of any
breach or default by Lessor in any term or provision of this Lease, Lessee
agrees to look solely to the equity or interest then owned by Lessor in the
Project and the security deposits, operating income, other assets, and insurance
coverage related to the Project; however, in no event, shall any deficiency
judgment or any money judgment of any kind be sought or obtained against any
Lessor.

     H.  If Lessor repossesses the Premises pursuant to the authority herein
granted, then Lessor shall have the right to (i) keep in place and use or (ii)
remove and store all of the furniture, fixtures and equipment at the Premises,
including that which is owned by or leased to Lessee at all times prior to any
foreclosure thereon by Lessor or repossession thereof by any lessor thereof or
third party having a lien thereon. Lessor also shall have the right to
relinquish possession of all or any portion of such furniture, fixtures,
equipment and other property to any person ("Claimant") who presents to Lessor a
copy of any instrument represented by Claimant to have been executed by Lessee
(or any predecessor of Lessee) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or other
property, without the necessity on the part of Lessor to inquire into the
authenticity or legality of said instrument. The rights of Lessor herein stated
shall be in addition to any and all other rights that Lessor has or may
hereafter have at law or in equity; and Lessee stipulates and agrees that the
rights herein granted Lessor are commercially reasonable.

     I.  Notwithstanding anything in this Lease to the contrary, all amounts
payable by Lessee to or on behalf of Lessor under this Lease, whether or not
expressly denominated as rent, shall constitute rent.

     J.  This is a contract under which applicable law excuses Lessor from
accepting performance from (or rendering performance to) any person or entity
other than Lessee.

     K.  Notwithstanding anything herein to the contrary, Lessor agrees to
undertake commercially reasonable efforts to mitigate its damages resulting from
any default or breach by Lessee.

     20. MORTGAGES. Lessee accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a lien
or charge upon the Premises or the improvements situated thereon or the building
of which the Premises are a part; provided, however, that if the mortgagee,
trustee, or holder of any such mortgage or deed of trust elects to have Lessee's
interest in this Lease superior to any such instrument, then by notice to Lessee
from such mortgagee, trustee or holder, this Lease shall be deemed superior to
such lien, whether this Lease was executed before or after said mortgage or deed
of trust. Lessee, at any time hereafter on demand, shall execute any
instruments, releases or other documents that may be required by any mortgagee
for the purpose of subjecting and subordinating this Lease to the lien of any
such mortgage.

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                                                        Lessor:
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                                                        Lessee:   KHS
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Lessor shall use commercially reasonable efforts to obtain a commercially
reasonable non-disturbance agreement from any future mortgage holder on terms
reasonably acceptable to Lessee. In addition, Lessee shall not be required to
execute any instrument which materially increases Lessee's obligations or
decreases Lessee's rights under this Lease.

     21. MECHANIC'S LIENS. Lessee has no authority, express or implied, to
create or place any lien or encumbrance of any kind or nature whatsoever upon,
or in any manner to bind the interest of Lessor or Lessee in the Premises or to
charge the rentals payable hereunder for any claim in favor of any person
dealing with Lessee, including those who may furnish materials or perform labor
for any construction or repairs. Lessee 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 by or at the direction of Lessee and that it will save and hold Lessor
harmless from any and all loss, cost or expense based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Lessor in the Premises or under the terms of this
Lease arising out of such work. Lessee agrees to give Lessor immediate written
notice of the placing of any lien or encumbrance against the Premises.

22.  HAZARDOUS MATERIALS.

     A.  The term "Substances," as used in this Lease shall mean pollutants,
contaminants, toxic or hazardous wastes, or any other substances, the use,
storage, handling, disposal, transportation or removal of which is regulated,
restricted, prohibited or penalized by any "Environmental Law," which term shall
mean any federal, state or local law, ordinance or other statute of a
governmental or quasi-governmental authority relating to pollution or protection
of health or the environment and shall specifically include, but not be limited
to, any "hazardous substance" as that term is defined under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 and any
amendments or successors in function thereto.

     B. Lessee hereby agrees that (i) no activity will be conducted on the
Premises that will produce any Substance, except for such activities that are
part of the ordinary course for Lessee's business activities (the "Permitted
Activities") provided said Permitted Activities are conducted in accordance with
all Environmental Laws and have been reasonably approved in advance in writing
by Lessor (which approval shall not be unreasonably withheld, conditioned, or
delayed); Lessee shall be responsible for obtaining any required permits and
paying any fees and providing any testing required by any governmental agency;
(ii) the Premises will not be used in any manner for the storage of any
Substances except for the temporary storage of such materials (the "Permitted
Materials") that are used in the ordinary course of Lessee's business (all
products that are typically sold in a retail food or drug store and all related
products used to prepare such products for sale) provided such substances are
properly stored in a manner and location meeting all Environmental Laws and
approved in advance in writing by Lessor (which approval Lessor may grant or
withhold in its sole discretion); Lessee shall be responsible for obtaining any
required permits and paying any fees and providing any testing required by any
governmental agency; (iii) no portion of the Premises will be used as a landfill
or a dump; (iv) Lessee will not install any underground or aboveground tank of
any type; (v) Lessee will not allow any surface or subsurface conditions to
exist or come into existence that constitute, or with the passage of time, may
constitute a public or private nuisance; (vi) Lessee will not permit any
Substances (excepting all products that are typically sold in a retail food or
drug store and all related products used to prepare such products for sale,
("Permitted Materials")) to be brought onto the Premises, except in accordance
with the terms and conditions hereof, and if so brought or found located
thereon, the same shall be immediately removed, and properly disposed, and all
required cleanup procedures shall be diligently undertaken pursuant to all
Environmental Laws; and (vii) Lessee shall in all regards comply with
Environmental Laws including, without limitation, meeting any necessary
financial responsibility requirements. Prior to any Substance being brought upon
or into the Premises by Lessee, excepting (vi) above, whether Lessor's written
permission is required or not, Lessee will provide to Lessor any applicable
material safety data sheets regarding said Substance as well as a written
description of the amount of such Substance to be brought upon or into the
Premises and the common and recognized chemical name of such Substance. Lessee
shall bear responsibility for insuring that all record keeping, reporting and
remediation responsibilities of Lessee under Environmental Laws are met and
Lessee assumes all such responsibility and liability for such legal compliance.
Lessor shall bear responsibility for insuring that all record keeping, reporting
and remediation responsibilities of Lessor under Environmental Laws are met and
Lessor assumes all such responsibility and liability for such legal compliance.

     C.   After giving at lease twenty-four (24) hours prior written notice
(except in the case of an emergency in which case no prior notice is required),
Lessor or Lessor's representative shall have the right, but not the obligation,
to enter the Premises for, among other purposes, the purposes of inspecting the
storage, use and disposal of any Substances and to review Lessee's compliance
with all Environmental Laws. Should it be determined, in Lessor's sole
commercially reasonable opinion, that any Substances are being improperly
stored, used, or disposed of by Lessee, then Lessee shall after receipt of
written notice, immediately take such corrective action as required by
applicable Environmental Laws. Lessee will provide Lessor written notification

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                                                        Lessor:
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                                                        Lessee:   KHS
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of the release or disposal of any Substance by Lessee either within the Premises
or outside of Lessee's Premises and will also provide Lessor written notice of
any pending or threatened litigation concerning the breach or purported breach
of any Environmental Laws by Lessee.

     D.   If at any time during or after the term of the Lease, the Premises is
found to be contaminated by Substances, arising from or as a result of Lessee's
negligence (whether in whole or in part) or any Substances by Lessee or any of
Lessee's agents, employees, assigns or sublessee ("Lessee's Contamination"),
Lessee shall diligently institute proper and thorough cleanup procedures to
remediate Lessee's Contamination in accordance with Environmental Laws at
Lessee's sole cost, and Lessee agrees to indemnify and hold Lessor harmless from
all claims, demands, actions, liabilities, costs, expenses, damages, fines,
reimbursement, restitution, response costs, cleanup costs, and obligations
(including investigative responses and attorney's fees) of any nature to the
extent incurred for the remediation of Lessee's Contamination. The foregoing
indemnification and the responsibilities of Lessee shall apply to Lessee
regardless of whether they arise from any Permitted Activity, Substances or
Permitted Materials (as may be listed below), and shall survive the termination
or expiration of this Lease. Lessor shall be under no obligation to expend any
sums or to seek reimbursement to enforce the indemnification obligations of
Lessee hereunder.

     Permitted materials: All products that are typically sold in a retail food
or drug store and all related products used to prepare such products for sale.

     E.  Lessee acknowledges and agrees that it shall not be unreasonable for
Lessor to withhold its consent to any proposed assignment, subletting, or
transfer of Lessee's interest in this Lease if (i) the anticipated use of the
Premises by the proposed assignee, sublessee, or transferee (collectively, a
"Transferee") involves the generation, storage, use, treatment, or disposal of
Substances excepting Permitted Materials; (ii) the proposed Transferee has been
required by any prior lessor, lender, or governmental authority to make remedial
action in connection with Substances contaminating a property, if the
contamination resulted from such Transferee's actions or use of the property in
question; or (iii) the proposed Transferee is subject to an enforcement order
issued by any governmental authority in connection with the use, disposal, or
storage of a Substance, excepting Permitted Materials.

     F.  Lessor shall advise Lessee of the existence any toxic materials or
hazardous conditions which exist in or about the Premises, Building, Project and
Common Areas or other parts of the Project site and are in violation of local,
state, or federal environmental regulations. It shall be the sole responsibility
of Lessor if required by any local, state, or federal government entities to
remove any such toxic materials and to indemnify and hold Lessee harmless from
any future action, loss, damage or expense (including attorneys fees) which may
occur as a result of the presence of such materials. Lessor and its successors
and assigns shall indemnify, defend, reimburse and hold Lessee, its employees
and lenders, harmless from and against any and all environmental damages,
including the cost of remediation and other expenses (including attorneys fees),
which existed as a result of hazardous substances on the Project site prior to
the Commencement Date or which are caused by the act or negligent omission of
Lessor, its contractors, invitees, agents or employees after the Commencement
Date. Lessor's obligations, as and when required by the applicable environmental
law requirements, shall include, but not be limited to, the cost of
investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this lease. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
hazardous substances on the Premises or the Project site prior to the
Commencement Date. Lessee shall cooperate fully in any such activities at the
request of Lessor, including allowing Lessor and Lessor's agents to have
reasonable access to the premises, upon twenty-four (24) hours prior written
notice, at reasonable times determined by Lessee, in order to carry out Lessor's
investigative and remedial responsibilities.

     Lessee and Lessor acknowledge that the Project is on a site that was
entered into the Voluntary Clean-up Program promulgated by the Texas Natural
Resource and Conservation Commission and has received a Certificate of
Completion for such clean-up (a copy of such Certificate has been provided to
Lessee by Lessor).

23.  MISCELLANEOUS.

     A. 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.

     B.  For the purposes of this Lease, Lessor and Lessee agree the area of the
Premises shall be deemed to be the square footage shown on page 1 of this Lease.
Lessee's "proportionate share", as used in this Lease, shall

                                 14                     INITIALS
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                                                        Lessee:   KHS
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mean a fraction, the numerator of which is the area contained in the Premises as
shown on page 1 of this Lease and the denominator of which is the area contained
in the Building (for Operating Expenses affecting only the building) or
contained in all buildings located within the Project (for Operating Expenses
affecting the Project) (each such area being measured in square feet). Such
areas shall be calculated according to the roof dimensions of the particular
areas.

     C. The terms, provisions and covenants and conditions contained in this
Lease shall apply to, inure to the benefit of, and be binding upon, the parties
hereto and upon their respective heirs, executors, personal representatives,
legal representatives, successors and assigns, except as otherwise herein
expressly provided. Lessor shall have the right to transfer and assign, in whole
or in part, its rights and obligations in the building and property that are the
subject of this Lease. Each party agrees to furnish to the other, promptly upon
demand, a corporate resolution, proof of due authorization by partners, or other
appropriate documentation evidencing the due authorization of' such party to
enter into this Lease.

     D. Lessor and Lessee shall not be held responsible for delays in the
performance of its obligations hereunder when caused by material shortages, acts
of God or labor disputes. Lessee shall not be held responsible for delays in the
performance of its non-monetary obligations hereunder when caused by material
shortages, acts of God or labor disputes.

     E. Lessee agrees, from time to time, within ten (10) days after request of
Lessor, to deliver to Lessor, or Lessor's designee, a Certificate of Confirming
Lessee's Occupancy and an estoppel certificate stating (if true) that this Lease
is in full force and effect, the date to which rent has been paid, the unexpired
term of this Lease and such other factual matters pertaining to this Lease as
may be requested by Lessor. It is understood and agreed that Lessee's obligation
to furnish such estoppel certificates in a timely fashion is a material
inducement for Lessor's execution of this Lease.

     F. This Lease constitutes the entire understanding and agreement of the
Lessor and Lessee with respect to the subject matter of this Lease, and contains
all of the covenants and agreements of Lessor and Lessee with respect thereto.
Lessor and Lessee each acknowledge that no representations, inducements,
promises or agreements, oral or written, have been made by Lessor or Lessee, or
anyone acting on behalf of Lessor or Lessee, which are not contained herein, and
any prior agreements, promises, negotiations, or representations not expressly
set forth in this Lease are of no force or effect. This Lease may not be
altered, changed or amended except by an instrument in writing signed by both
parties hereto.

     G. All obligations of Lessee and Lessor hereunder not fully performed as of
the expiration or earlier termination of the term of this Lease shall survive
the expiration or earlier termination of the term hereof, including without
limitation, all insurance and indemnity obligations, and all of Lessee's payment
obligations with respect to Base Rent and additional rental and all obligations
concerning the condition and repair of the Premises. Upon the expiration or
earlier termination of the term hereof, and prior to Lessee vacating the
Premises, Lessee shall restore the Premises to good condition and repair,
reasonable wear and tear excluded. Prior to Lessee vacating the Premises, Lessee
shall make all repairs as specified in Paragraph 5 hereof, including but not
limited to any repairs necessary so that the heating and air conditioning
systems exclusively serving the Premises are in good working order (reasonable
wear and tear excepted). Upon expiration or earlier termination hereof, the
Premises shall be delivered to Lessor in broom clean condition. If any and all
repairs or restoration required of Lessee hereunder are not completed by the
expiration or earlier termination hereof, Lessor may cause the same to be
completed and the costs shall be paid by Lessee promptly upon demand (including
a five (5%) percent service charge for arranging for and coordinating such
work).

     Lessee shall also, prior to vacating the Premises, pay to Lessor the
amount, as estimated by Lessor, of Lessee's obligation hereunder for all
operating expenses including, without limitation, taxes, insurance premiums and
common area charges for the year in which the Lease expires or terminates,
prorated for that portion of the year during which this Lease was in force. All
such amounts shall be used and held by Lessor for payment of such obligations of
Lessee hereunder, with Lessee being liable for any additional costs therefor
upon demand by Lessor, or with any excess to be returned to Lessee after all
such obligations have been determined and satisfied as the case may be. In lieu
of waiting until the close of the calendar year in order to determine any excess
additional rentals for operating expenses as set forth in Paragraph 2C, Lessor
has the option to charge Lessee for Lessee's proportionate share of the
additional rentals based upon the previous year's operating expenses plus five
percent (5%). Any security deposit held by Lessor may, at Lessor's option, be
credited against the amount payable by Lessee under this Paragraph 24G or
otherwise handled in accordance with Paragraph 2B hereof.

     H. If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and 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

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                                                        Lessee:   KHS
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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.

     I.  All references in this Lease to "the date hereof" or similar references
shall be deemed to refer to the last date, in point of time, on which all
parties hereto have executed this Lease.

     J.  Lessee represents and warrants that it has dealt with no broker, agent
or other person in connection with this transaction or that no broker, agent or
other person brought about this transaction, other than Trammell Crow Houston,
Ltd. (whose fee Lessor shall pay) and Lessee agrees to indemnify and hold Lessor
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 been
retained by Lessee with regard to this leasing transaction.

     K. If and when included within the term "Lessor", as used in this
instrument, there is more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of a notice
specifying some individual at some specific address for the receipt of notices
and payments to Lessor. If and when included within the term "Lessee", as used
in this instrument, there is more than one person, firm or corporation, all
shall jointly arrange among; themselves for their joint execution of a notice
specifying some individual at some specific address within the continental
United States for the receipt of notices and payments to Lessee. All parties
included within the terms "Lessor" and "Lessee", respectively, shall be bound by
notices given in accordance with the provisions of Paragraph 25 hereof to the
same effect as if each had received such notice.

     L. The building of which the Premises are a part was completed in 1999 and
manufacturers' and installers' warranties still exist on certain building
components. Certain of the items installed as part of the Lessee improvement
work for Lessee shall be under a manufacturer's and installer's warranty, which
shall be used for the benefit of Lessee. Additionally, the building of which the
Premises are a part is currently in compliance with all local, state, and
federal environmental regulations including but not limited to all regulations
regarding Substances. Further, there are no deed restrictions on the building
that will conflict with Lessee's intended use. Other than the representations
and warranties described in this paragraph or elsewhere in this Lease. Lessor
and Lessee expressly agree that there are and shall be no implied warranties of
merchantability, habitability, fitness for a particular purpose or any other
kind arising out of this Lease Agreement and that all express or implied
warranties in connection therewith are expressly disclaimed.

     M. This Lease Agreement shall be construed under the laws of the State of
Texas, and Federal laws as applicable.

     N. Time is of the essence; and all due dates, time schedules, and
conditions precedent to exercising a right shall be strictly adhered to without
delay except where otherwise expressly provided.

     O. Because the Premises are on the open market and are presently being
shown, this Lease shall be treated as an offer subject to non-acceptance by
Lessor, and shall not be valid or binding unless and until accepted by Lessor in
writing and a fully executed copy delivered to both parties hereto.
Notwithstanding the foregoing, Lessee agrees to tender to Lessor an initial sum
with executed originals of this Lease Agreement. Lessor shall for a period of
fifteen (15) days after receipt of such executed Lease and tendered sum have the
ability but not the obligation to review and return an executed original of the
Lease Agreement to Lessee. If Lessor shall notify Lessee of its acceptance or
return an executed original Lease Agreement to the Lessee during, or after the
expiration of, such time period, then this Lease Agreement shall be binding upon
both parties. Upon such occasion, Lessor may retain such sums so deposited by
Lessee and apply such sums to amounts due and owing under the terms of the Lease
Agreement. Lessee agrees that its offer to lease the Premises will be
irrevocably left open during the time period necessary for Lessor to consider
the offer.

     24.  NOTICES. Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivering of notice or the making of any payment by
Lessor to Lessee or with reference to the sending, mailing or delivering of any
notice or the making of any payment by Lessee to Lessor shall be deemed to be
complied with when and if the following steps are taken:

     (a) All rent and other payments required to be made by Lessee to Lessor
hereunder shall be payable to Lessor at the address for Lessor set forth below
or at such other address as Lessor may specify from time to time by written
notice delivered in accordance herewith. Lessee's obligation to pay rent and any
other amounts to Lessor under the terms of this Lease shall not be deemed
satisfied until such rent and other amounts have been actually received by
Lessor. In addition to Base Rent due hereunder, all sums of money and all
payments due Lessor hereunder shall be deemed to be additional rental owed to
Lessor.

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     (b) All payments required to be made by Lessor to Lessee hereunder shall be
payable to Lessee at the address set forth below, or at such other address
within the continental United States as Lessee may specify from time to time by
written notice delivered in accordance herewith.

     (c) Any written notice or document required or permitted to be delivered
hereunder shall be deemed to be delivered whether actually received or not when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have therefore specified by written notice
delivered in accordance herewith.

25.  ADDITIONAL PROVISIONS.

A. Legal Description. For the purposes of this Lease, the rentable square
footage of the Premises shall be deemed to be approximately 120,000 square feet
of office and warehouse space located in a building deemed to be approximately
192,000 square feet on 869,964 square feet of land out of the John Reinerman
Survey, A-642, Harris County, Texas, being all of that 15 acre tract of land as
recorded in Volume 1392, Page 507 of the Harris County Deed Records, and being
all of that 4.9976 acre tract of land as recorded under Harris County Clerk's
File No. C-279243 of the Harris County Real Property Records.

B.  Lessee Improvement.  Lessee has inspected and agrees to accept the Premises
on an "As Is" basis except as otherwise provided in this Lease.

1. Lessor shall provide Lessee with a tenant improvement allowance of
   $420,000.00 (the "Allowance") to complete improvements to the Premises.  This
   Allowance is to be used specifically for improvements to the Premises and no
   other purpose.  This Allowance will be used to fund all Lessee improvement
   costs which will include, but are not limited to, labor costs, material
   costs, general contractor's overhead fees, sales taxes, and permitting fees,
   not to include any costs associated with pre-existing environmental
   conditions.  The cost of the center demising wall and the Lessor's
   construction management fees shall not be deducted from the Allowance, but
   shall be the sole responsibility of the Lessor.  All improvements to the
   Premises are required to meet all applicable codes and regulations, as well
   as Lessor's standard construction specifications and details.   Any space
   plans and construction drawings prepared by or for Lessee shall require the
   written approval from Lessor prior to commencement of construction; such
   approval shall not be unreasonably withheld, conditioned or delayed.  Initial
   Lessee improvements are listed on Exhibit and Lessor conceptually consents to
   all such improvements subject to review of plans.  Any improvement costs or
   expenses in excess of $420,000.00 shall be the sole responsibility of Lessee.

2. Within ten (10) days of the execution of this Lease by both Lessee and
   Lessor, Lessor shall provide Lessee with an architectural and engineering
   allowance of $23,000.00 to be used solely for completing the architectural,
   mechanical, engineering, electrical, and plumbing drawings for the Premises.
   All architectural and engineering drawing costs in excess of $23,000.00
   related to the construction of the Improvements shall be the sole
   responsibility of Lessee.

3. The northeast section of the water detention area that runs along the east
   side of the Project shall be converted by Lessor to additional surface
   parking of no less quality than currently exists on the Premises.  This
   additional surface parking will be of sufficient size to provide parking,
   ingress, and egress in accordance with all applicable codes for fifty (50)
   automobiles.  Lessor shall be solely responsible for all costs to convert
   this section of the water detention area to additional surface parking.  This
   work shall be completed within ninety (90) days after the Anticipated
   Delivery Date.  If Lessee desires to convert a portion or all of this
   additional surface parking area provided by Lessor to accommodate trucks and
   delivery vehicles the cost of such conversion shall be the sole
   responsibility of Lessee.

4. Upon occupancy of the Premises by Lessee, Lessor shall provide an additional
   cash allowance to Lessee of $217,680.00 (4.0% of the Base Monthly Rent for
   the first ten (10) years of the lease term) in lieu of Lessor paying any
   commission to any outside broker acting on behalf of Lessee.

All improvements will be done in accordance with Lessor's standard construction
specifications and any additional improvements must be approved by Lessor.

C.  HVAC Maintenance/Service Contract Requirements.  The service contract must
become effective within thirty (30) days of the date of occupancy of the
facility and must be performed on at least a quarterly basis.  Lessee shall
include the following items in its maintenance contract:

  1.  Adjust belt tension;
  2.  Lubricate all moving parts, as necessary;
  3.  Inspect and adjust all temperature and safety controls;
  4.  Check refrigeration system for leaks and operation;

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  5.  Check refrigeration system for moisture;
  6.  Inspect compressor oil level and crank heaters;
  7.  Inspect air filters and replace when necessary;
  8.  Check space conditions;
  9.  Check condensate drains and drain pans and clean, if necessary;
  10. Inspect and adjust all valves;
  11. Check and adjust dampers;
  12. Run machine through complete cycle.

D. Cancellation Option.  So long as Lessee is not in default hereunder and
in consideration of Lessee fulfilling all other terms, conditions, covenants,
and obligations of this Lease, Lessee shall have a one-time right to terminate
this Lease at the end of the sixtieth (60th) month of the lease term ("Early
Termination Date") by paying Lessor a Early Termination Penalty of $650,000.00.
To exercise this early termination option, Lessee must inform Lessor in writing
not less than one hundred and eighty (180) days in advance of the Early
Termination Date and Lessee's payment of the Early Termination penalty must
accompany the notice of early termination. The Early Termination Date shall be
treated as if it were the original termination date on the Lease, and Lessee
shall fully and diligently comply with all provisions and terms of the Lease
governing and applicable to the surrender and the delivery to Lessor by Lessee
of the entire Premises, including without limitation, (i), the repair and
restoration by Lessee of the Premises, (ii) the timely payment of all sums by
Lessee arising or accruing prior to the Early Termination Date, (iii) the
removal by Lessee of any and all liens on the Premises attributable to an act or
omission of Lessee.   In the event Lessee fails to comply with these provisions
or is in default subsequent to the notice of early termination, this option
shall be considered null and void, and the Lease shall remain in full force and
effect for the entire one hundred and twenty (120) month term. If no notice of
early termination is received by Lessor in accordance with the above terms, the
Lease shall remain in full force and effect for the entire one hundred twenty
(120) month term.

E.   Renewal Option.

     1.  While this lease is in full force and effect, provided that Lessee is
not in default of any of the terms, covenants and conditions thereof, at the
time Lessee exercises such option, Lessee shall have the right or option to
extend the original term of this lease for two (2) further terms of sixty (60)
months each.  Such extension of the original term shall be on the same terms,
covenants or conditions as provided for in the original term except that the
base rental during the extended term shall be at the fair market rental (the
"Fair Market Base Rental") then in effect on equivalent properties, of
equivalent size and condition, in equivalent areas with the length of the lease,
the length of the renewal term, the credit standing of the Lessee to be taken
into account, cost savings of Lessor for not having to pay leasing commission to
outside brokers, tenant allowances, the method for payment of taxes and expenses
or increases in tax.  However, in no event shall the base rent for an extended
term be below the base rent in the primary term of the Lease.  Notice of
Lessee's intention to exercise the option must be given to Lessor in writing not
less than twelve (12) months prior to the expiration of the original term of
this Lease or twelve (12) months prior to the expiration of the first extended
term.

     2. Upon written notice of Lessee's intent to exercise an extension term
option, Lessor shall within twenty (20) days provide Lessee, with written
notice, the amount in which Lessor contends to be the Fair Market Base Rental.
Within twenty (20) days after receipt of Lessor's written notice of the Fair
Market Base Rental, Lessee shall give Lessor written notice ("Lessee's
Response"), either (a) irrevocably exercising Lessee's extension option and
accepting the statement of Fair Market Base Rental set forth in Lessor's notice,
or (b) rejecting the Fair Market Base Rental set forth in Lessor's notice and
specifying the amount lessee contends to be the Fair Market Base Rental.  If
Lessee rejects the Fair Market Base Rental specified by Lessor, then Lessor and
Lessee shall endeavor to negotiate a mutually acceptable resolution to their
dispute concerning the Fair Market Base Rental.  If they are unable to agree
within thirty (30) days after receipt by Lessee's Response, of the rejection of
Lessor's Fair Market Base Rental, and a mutually acceptable resolution of the
Fair Market Base Rental is not reached, then Lessee shall either (i) revoke its
intent to exercise the extension period, or (ii) provide Lessor with written
notice to arbitrate the Fair Market Base Rental.  If Lessee elects to arbitrate
the Fair Market Base Rental, the term of the Lease shall be extended for the
extended term, and the final determination of the Fair Market Base Rental shall
be binding on both Lessor and Lessee.  Upon Lessee's written notice, Lessor and
Lessee shall, within ten (10) days, each separately designate a licensed real
estate appraiser who is reasonably active in regard to the valuation of Houston,
Texas, warehouse properties in the area where the Project is located to
participate in determination of the Fair Market Base Rental.  If either Lessor
or Lessee fails timely to designate an appraiser as provided above, then the
determination of Fair Market Base Rental shall be made solely by the appraiser
timely designated by the other party and such determination shall be binding on
Lessor and Lessee.  Within sixty-five (65) days after receipt by Lessor of
Lessee's notice (or at such other time as Lessor and Lessee may mutually agree),
each party shall state in writing the amount the party contends to be the Fair
Market Base Rental, including whatever support for such contention the party
wishes to have considered by the appraisers.  The appraisers shall arrange for
simultaneous exchange of such written contentions and for presentation of such
additional evidence, rebuttals, or other matters as the parties may wish to
present and the

                                 18                     INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

appraisers may elect to hear or otherwise receive. After presentation of such
additional evidence and argument as the appraisers may elect to receive, if any,
each party may submit a modified statement of contended Fair Market Base Rental.
If the appraisers do not agree upon the actual Fair Market Base Rental, and the
two statements of Fair Market Base Rental are within ten percent (10%) of one
another, then the two statements of Fair Market Base Rental shall be averaged
and such amount shall be binding on Lessor and Lessee as the Fair Market Base
Rental. If the determinations of the two appraisers are greater than ten percent
(10%) from one another, then the two appraisers shall be instructed to appoint,
within ten (10) days thereafter, a third appraiser who has significant
experience and is then active appraising warehouse space in the area. If the two
appraisers designated by Lessor and Lessee cannot agree on the appointment of a
third appraiser within the time period provided, either Lessor or Lessee may
seek the appointment of a third appraiser by the presiding judge for the County
Court where the Project is located. The third appraiser shall then determine
which of the two final contended Fair Market Base Rental amounts submitted by
the parties is closest to the actual Fair Market Base Rental, and such
determination shall be binding on Lessor and Lessee as the Fair Market Base
Rental.

     3.  All reasonable fees and expenses of the appraisers shall be paid as
follows: Lessor shall advance the fees and expenses of the appraiser designated
by Lessor; Lessee shall advance the fees and expenses of the appraiser
designated by Lessee; and Lessor and Lessee shall each advance one half of any
fees and expenses of the third appraiser. The attorneys' fees and expenses of
counsel for the respective parties and of witnesses shall be paid and borne by
the party engaging such counsel or calling such witness, as the case may be.

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

F.   Additional Parking.

     Lessor agrees to assist Lessee in procuring the additional parking adjacent
to the west side of the property from Weingarten Realty Management Company
should Lessee deem such parking is necessary for its operations. Any future
lease agreement for this additional parking between Lessee and Weingarten Realty
Management Company would exclude Lessor as a party to the Lease for such
additional parking. This Lease between Lessor and Lessee is in no way contingent
upon the terms, status, extension, or execution of any parking agreement with
Weingarten. Lessee shall have the right to install a curb cut and driveway to
provide access from the Building to this additional parking. This curb cut and
driveway shall be constructed and maintained at the sole cost of Lessee. Lessee
shall be required to replace this curb cut and remove this driveway upon Lease
termination and restore the affected parking areas, driveways, and truck court
to their original condition, subject to normal wear and tear.

G.   Electrical Service.

     Lessee shall have the right to use the standard tenant improvement
allowance to upgrade the Premises with 4000 A @ 480 volt, 3 phase electrical
service. Lessee shall have the right to equip each truck parking space and dock
with a 208V, 3 phase, 60 Hz @ 30 Amp power connection for refrigeration
equipment.

                                 19                     INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

H.   Loading Docks.

     Lessor, at its sole cost and expense, shall provide thirty (30) dock-high
loading doors and three (3) walk up pedestrian doors. Lessee shall have the
right to use the standard tenant improvements allowance or any additional tenant
improvement allowance to modify the height of the overhead doors, install
mechanical levelers, raise the truck apron grade, or any other modifications
required to meet Lessee's operational requirements.

I.   Non-Compete Provision.

     Subject and subordinate to the restrictions of any existing commitments to
other lessees at the Project, Lessor agrees that it shall not lease space at the
Project to any Internet grocery service entity.

EXECUTED BY LESSOR, this 14th day of April, 2000.

Attest/Witness                      Connecticut General Life Insurance Company,
                                    On behalf of its Separate Account R

                                    By:  CIGNA Investments, Inc.

  Donna [ILLEGIBLE SIGNATURE]       By: /s/ JOHN G. EISELO
------------------------------         -------------------------------------

Title: Administrative Assistant     title:  Managing Director
      ------------------------            ----------------------------------

                                    ADDRESS:
                                    1360 Post Oak Boulevard, Suite 1800
                                    -----------------------------------
                                    Houston, Texas 77056
                                    -----------------------------------

                                    -----------------------------------
                                    "Lessor"

EXECUTED BY LESSEE, this        day of          , 2000.

Attest/Witness                      HomeGrocer.com, Inc.
 [ILLEGIBLE SIGNATURE]              By:  /s/ Kristin H. Stred
------------------------------         --------------------------------

Title: [ILLEGIBLE TITLE]            Title:  Senior Vice President and General
                                            Counsel
      ------------------------            -----------------------------
                                    ADDRESS:
                                    Attn:  Vice President, Operations
                                    -----------------------------------
                                    10230 Northeast Points Drive
                                    -----------------------------------
                                    Kirkland, WA 98033
                                    -----------------------------------

                                    And to:
                                    -------

                                    HomeGrocer.com, Inc.
                                    -----------------------------------
                                    Attn: General Counsel
                                    -----------------------------------
                                    10203 N.E. Points Drive
                                    -----------------------------------
                                    Kirkland, WA 98033
                                    -----------------------------------
                                    "Lessee"

                                 20                     INITIALS
                                                        --------
                                                        Lessor:
                                                               ---------
                                                        Lessee:   KHS
                                                               ---------
<PAGE>

                       Lessee's Exclusive Parking Areas

                                 [LAYOUT PLAN]

HOMEGROCER.COM                                               SCHEMATIC SITE PLAN
--------------------------------------------------------------------------------
HOUSTON, TEXAS                                                    MARCH 29, 2000
<PAGE>

                                  EXHIBIT "B"

Site: Katy Road, Houston Texas

                        ANTICIPATED TENANT IMPROVEMENTS
--------------------------------------------------------------------------------

Summary

Tenant shall have the right, but not the obligation, as allowed and provided
under the terms and conditions of this Lease, to install, construct, modify,
relocate or remove, as reasonably necessary, anticipated Tenant Improvement to
include but not limited to the following:

     1.   Tenant shall have the ability to equip and provide each of the
          delivery truck parking spaces with 280 V, 3 phase, 60 Hz @30 Amp power
          connection for refrigeration equipment (to include delivery truck
          loading docks and adjacent parking truck parking spaces).

     2.   Construction of up to approximately 10,000 square feet of office space
          and related improvements, which may include the modification or
          demolition of existing offices (if any). Exact location of office
          space to be determined.

     3.   Removal of non-structural, non-load bearing walls or partitions.

     4.   Cutting and reinforcement of entrances in interior or exterior walls
          or partitions.

     5.   Construction, removal or modification of loading docks which may
          include dock canopies, dock levelers, heaters and dock lighting as
          necessary.

     6.   Modification or changing grade paving within the proximity of Tenant's
          shipping and dock areas.

     7.   Modification of landscaping, as permitted, to accommodate Tenant's
          business needs.

     8.   Modification to the concrete flooring slab and sewer system, which
          may include cutting, for the required installation of under slab
          drains for freezers, coolers, product preparation areas and restrooms.

     9.   Construction, removal or modification of Building and or Premises
          systems to include electrical, lighting, HVAC, sprinkler, security and
          fire-life safety for Tenant's intended business use.

                                  Page 1 of 2
<PAGE>

                                  EXHIBIT "B"

     10.  Construction, installation or modification of freezer slab(s) on,
          below or above existing slab.

     11.  Construction, installation or modification of refrigeration room(s).

     12.  Construction, installation or modification of conveyer system(s).

     13.  Construction, installation or modification of warehouse racking
          system(s).

     14.  Construction, installation or modification of power generator
          system(s).

     15.  Construction, installation or modification of trash area to include
          trash compactor system(s).

     16.  Construction, installation or modification to and on the roof area to
          install (i) antennas and satellite dishes and associated equipment,
          (ii) refrigeration unit(s) and associated equipment, and (iii) heating
          ventilation and air conditioning unit(s) and associated equipment,
          (iv) conveyor, racking and associated equipment.

     17.  Construction, installation or modification of electrical, data,
          telephone, fiber, lighting, HVAC, sprinkler, fire detection, potable
          water and sanitary sewer systems of the Building and or the Premises.

     18.  Re-stripe and reseal Tenant parking areas and construction,
          installation or modification to parking area lighting and security
          system(s).

     19.  Re-surface and sealing of slab or floors.

     20.  Painting or decorating of interior or exterior of the Premises.

     21.  Construction, installation or modification of Tenant's signage.

     22.  Any USDA required construction, installation or modification to the
          Building or Premises as necessary.

     23.  Installation of security measures including site lighting, fencing,
          gates and electronic monitoring systems in and around the truck court.

                                  Page 2 of 2<PAGE>

                                                                    EXHIBIT 10.7

                             OFFICE BUILDING LEASE
                             One Twelfth @ Twelfth
                              Bellevue, Washington
                         Basic Lease Information Sheet

<TABLE>

<S>                        <C>
1.    Date of Lease          April 3, 2000
                             ------------------------------------------------

2.    Tenant:                HomeGrocer.com, Inc.

3.    Tenant's Address       10230 NE Points Drive
      Prior to Occupancy:    Kirkland, WA 98033

4.    Tenant's Address       South Building (Building #3)
      After Occupancy        1100 - 112th Avenue NE
                             Bellevue, WA  98004

5.    Landlord:              Bellevue Hines Development, L.L.C.

6.    Landlord's Address:    c/o Hines Interests Limited Partnership
                             10900 NE 4th St., Suite 920
                             Bellevue, WA  98004

7.    Premises:              Initial Premises:  Floors 4, 5 and 6 of the South Building
                             -----------------
                             Expansion Space:  Floors 1, 2 and 3 of the South Building (See
                             ---------------
                             Section 1.1(b) below)
                             -------------

8.    Net Rentable           Net Rentable Area of the Initial Premises:  Eighty-three Thousand Nine Hundred
      Area/Tenant's          -----------------------------------------
      Proportionate          Fifty-six (83,956) square feet
      Share:
                             Useable Area of the Initial Premises: Seventy-eight Thousand Two Hundred
                             ------------------------------------
                             Fifty-six (78,256) square feet

                             Net Rentable Area of the Building:  One hundred Seventy-two Thousand Eight
                             ---------------------------------
                             Hundred Eighty-five (172,885) square feet

                             Net Rentable Area of the Project:  Four Hundred Eighty Thousand Three Hundred
                             --------------------------------
                             Ninety-two (480,392) square feet

                             Tenant's Proportionate Share of Building:  Fifty-one and 12/100 percent (51.12%)
                             ----------------------------------------

                             Tenant's Proportionate Share of Project:  Eighteen and 40/100 percent (18.40%)
                             ---------------------------------------

                             The foregoing Proportionate Shares are based only on the Initial Premises
                             (exclusive of the Expansion Space). The number of square feet of Net Rentable
                             Area and Useable Area for the Premises, Building and Project shall be subject
                             to verification as provided in Section 1.4(d) below.
                                                            --------------
</TABLE>
<PAGE>

<TABLE>

<S>                         <C>
9.    Scheduled              February 15, 2001
      Commencement Date:

10.   Term:                  Initial Term:  Seven (7) Years and Zero (0) Months
                             ------------

                             Extension Term:  Five (5) Years and Zero (0) Months
                             --------------

11.   Base Rent:             See Page C below
                                 ------

12.   Security Deposit       See Section 3.1 below
      Amount:                    -----------

13.   Parking:               Three and 25/100 (3.25) parking passes per one thousand (1,000) square feet of Useable Area in the
                             Premises, plus any Additional Allocation pursuant to Section 14.22 below. Based on the estimated square
                                                                                  -------------
                             footages set forth in Item 8 above, if only the Initial Premises are leased, then the number of Parking
                                                   ------
                             Passes shall be Two Hundred Fifty-four (254), and the number in the Additional Allocation shall be
                             Fifty-nine (59). If all of the Expansion Space is leased, then the number of Parking Passes shall be
                             Five Hundred Twenty-four (524), and the number in the Additional Allocation shall be One Hundred
                             Twenty-one (121).

14.   Tenant's Plan          See Exhibit C, Paragraph 20
      Delivery Date:

15.   Cash Allowance:        Twenty-seven Dollars ($27.00) per square foot of Useable Area in the Premises, to be allocated as
                             provided in Exhibit C
                                         ---------

16.   Brokers:               Tenant's Broker:  Geoff Boguch of Colliers International
                             ---------------

                             Landlord's Brokers:  John Black, Paul Sweeney and Jason Furr of Broderick Group, Inc.
                             ------------------
</TABLE>
<PAGE>

Base Rent Schedule:

<TABLE>
<CAPTION>

                                          Annual Base Rent Per Square Foot of Net Rentable Area
---------------------------------------------------------------------------------------------------------
                                                         Expansion, ROPR and Offer
                            Initial Premises                       Space                  Entire Building
       Lease Year            (Floors 4,5,6)                   (Floors 1,2,3)              (Floors 1-6)**
----------------------------------------------------------------------------------------------------------
<S>                         <C>                         <C>                           <C>
            1                       $24.00                        $24.00                       $23.00
----------------------------------------------------------------------------------------------------------
            2                       $24.50                        $24.50                       $23.50
----------------------------------------------------------------------------------------------------------
            3                       $25.00                        $25.00                       $24.00
----------------------------------------------------------------------------------------------------------
            4                       $25.50                        $25.50                       $24.50
----------------------------------------------------------------------------------------------------------
            5                       $26.00                        $26.00                       $25.00
----------------------------------------------------------------------------------------------------------
            6                       $26.50                        $26.50                       $25.50
----------------------------------------------------------------------------------------------------------
            7                       $27.00                        $27.00                       $26.00
----------------------------------------------------------------------------------------------------------
     Extension Term         Fair Market Rent determined pursuant to Section 2.6(b) below
                                                                    --------------
==========================================================================================================
</TABLE>
**   This Base Rent schedule will be applicable only if Tenant exercises its
     Expansion Option for all of the Expansion Space and commits to lease the
     entire Building prior to the Notification Date pursuant to Section 1.1(b)
                                                                --------------
     below.

<TABLE>
<CAPTION>

                                 Square Footage and Year 1 Annual and Monthly Rent for Premises*
=================================================================================================================================
                   Useable                                                                                          Monthly
 Full Floor      Square Feet                                                                  Annual Rent/       Rent/Floor if
 of South          (single        Net Rentable                                              Floor if Entire     Entire Building
 Building          tenant)        Square Feet      Annual Rent/Floor   Monthly Rent/Floor   Building Taken**        Taken**
---------------------------------------------------------------------------------------------------------------------------------
<S>             <C>             <C>                <C>                 <C>                  <C>                <C>
      6             21,612           23,343          $  560,232             $ 46,686           $  536,889          $ 44,741
---------------------------------------------------------------------------------------------------------------------------------
      5             27,632           29,590          $  710,160             $ 59,180           $  680,570          $ 56,714
---------------------------------------------------------------------------------------------------------------------------------
      4             29,012           31,023          $  744,552             $ 62,046           $  713,529          $ 59,461
---------------------------------------------------------------------------------------------------------------------------------
  Subtotal          78,256           83,956          $2,014,944             $167,912           $1,930,988          $160,916
-------------       -------          -------          ----------             --------          ----------          --------
---------------------------------------------------------------------------------------------------------------------------------
      3             29,012           31,023          $  744,552             $ 62,046           $  713,529          $ 59,461
---------------------------------------------------------------------------------------------------------------------------------
      2             28,949           30,979          $  743,496             $ 61,958           $  712,517          $ 59,376
---------------------------------------------------------------------------------------------------------------------------------
      1             25,140           26,927          $  646,248             $ 53,854           $  619,321          $ 51,610
---------------------------------------------------------------------------------------------------------------------------------
  Subtotal          83,101           88,929          $2,134,296             $177,858           $2,045,367          $170,447
-------------      -------          -------          ----------             --------           ----------          --------
---------------------------------------------------------------------------------------------------------------------------------
    Total          161,357          172,885          $4,149,240             $345,770           $3,976,355          $331,363
=============      =======          =======          ==========             ========           ==========          ========
=================================================================================================================================
</TABLE>

*    The foregoing chart is for information purposes only and the actual amount
     of the annual Base Rent and each monthly installment thereof shall be
     calculated in accordance with the terms of Section 2.6 of the Lease.
                                                -----------

/s/ TD           /March 22, 2000              /s/ TOM            / 4/3/00
------------------------------------          ----------------------------------
Tenant's Initials/Date                        Landlord's Initials/Date
<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                         Page
                                                                        -----
<C>     <S>                                                          <C>
Basic Lease Information Sheet

ARTICLE 1. Premises.........................................................1
  1.1   Lease...............................................................1
  1.2   Landlord's Reserved Rights..........................................3
  1.3   Common Areas........................................................4
  1.4   Calculation of Net Rentable Area; Useable Area......................5
ARTICLE 2. Term, Use of Premises and Base Rent..............................6
  2.1   Term................................................................6
  2.2   Delay in Delivery...................................................7
  2.3   Confirmation........................................................7
  2.4   Use.................................................................8
  2.5   Payments by Tenant..................................................8
  2.6   Payment of Base Rent................................................9
  2.7   Partial Months......................................................11
ARTICLE 3. Security Deposit.................................................12
  3.1   Security Deposit Amount.............................................12
  3.2   Letter of Credit....................................................12
  3.3   Use of Security Deposit.............................................13
ARTICLE 4. Payment of Operating Costs.......................................13
  4.1   Net Lease...........................................................13
  4.2   Estimated Payments..................................................14
  4.3   Tenant's Proportionate Share........................................14
  4.4   Operating Costs.....................................................14
  4.5   Adjustment for Occupancy............................................17
  4.6   Computation of Operating Costs Adjustment...........................17
  4.7   Adjustment for Variation Between Estimated and Actual...............17
  4.8   Books and Records...................................................18
ARTICLE 5. Landlord's Covenants.............................................19
  5.1   Basic Services......................................................19
  5.2   Hours of Operation..................................................21
  5.3   Interruption........................................................21
  5.4   Extra Services......................................................22
  5.5   Window Coverings....................................................22
  5.6   Graphics and Signage................................................23
  5.7   Tenant Extra Improvements...........................................23
  5.8   Peaceful Enjoyment..................................................23
ARTICLE 6. Tenant's Covenants...............................................24
  6.1   Compliance With Exhibit C...........................................24
                        ---------
  6.2   Construction of Tenant Improvements.................................24
  6.3   Telecommunications..................................................24
  6.4   Taxes on Personal Property and Tenant Extra Improvements............25
  6.5   Repairs by Tenant...................................................25
  6.6   Waste...............................................................25
  6.7   Alterations, Additions, Improvements................................25
</TABLE>

                                       i
<PAGE>

<TABLE>
<CAPTION>

<S>    <C>                                                             <C>
  6.8   Liens..............................................................26
  6.9   Compliance With Laws and Insurance Standards.......................26
  6.10  Entry for Repairs, Inspection, Posting Notices, Etc................27
  6.11  No Nuisance........................................................27
  6.12  Rules and Regulations..............................................27
  6.13  Surrender of Premises On Termination...............................27
  6.14  Corporate Authority................................................28
  6.15  Utilities..........................................................28
ARTICLE 7. Hazardous Materials.............................................29
  7.1   Prohibition and Indemnity With Respect to Hazardous Materials......29
  7.2   Definitions........................................................29
ARTICLE 8. Assignment or Sublease..........................................30
  8.1   Consent Required...................................................30
  8.2   Landlord's Options.................................................31
  8.3   Minimum Rental; Division of Excess Rent............................32
  8.4   Tenant Not Released................................................32
  8.5   Written Agreement..................................................32
  8.6   No Transfer Period.................................................32
  8.7   Conditions.........................................................32
  8.8   Expenses...........................................................33
  8.9   No Restriction on Landlord.........................................33
  8.10  No Leasehold Financing.............................................33
ARTICLE 9. Condition and Operation of the Project..........................33
  9.1   No Warranty........................................................33
  9.2   Project Alterations................................................33
ARTICLE 10. Lender Rights..................................................34
  10.1  Subordination......................................................34
  10.2  Attornment.........................................................34
  10.3  REAs...............................................................34
  10.4  Estoppel Certificate...............................................34
  10.5  Nondisturbance.....................................................35
ARTICLE 11. Insurance......................................................35
  11.1  Landlord's Casualty Insurance......................................35
  11.2  Liability Insurance................................................35
  11.3  Tenant's Additional Insurance......................................36
  11.4  Indemnity and Exoneration..........................................36
  11.5  Indemnity for Liens................................................37
  11.6  Waiver of Subrogation Rights.......................................37
  11.7  Concurrent Negligence..............................................37
ARTICLE 12. Casualty and Eminent Domain....................................37
  12.1  Damage and Destruction.............................................37
  12.2  Condemnation.......................................................39
ARTICLE 13. Default........................................................40
  13.1  Events of Default..................................................40
  13.2  Remedies Upon Default..............................................41
  13.3  Damages Upon Termination...........................................41
  13.4  Computation of Rent for Purposes of Default........................42
</TABLE>

                                       ii

<PAGE>

<TABLE>
<CAPTION>

<S>    <C>                                                              <C>
  13.5  Late Charge........................................................42
  13.6  Remedies Cumulative................................................42
  13.7  Tenant's Remedies..................................................42
  13.8  Obligation to Mitigate Damages.....................................43
  13.9  Dispute Resolution Procedures......................................43
ARTICLE 14. Miscellaneous..................................................43
  14.1  No Waiver..........................................................43
  14.2  Holding Over.......................................................43
  14.3  Attorneys' Fees....................................................44
  14.4  Amendments.........................................................44
  14.5  Transfers by Landlord..............................................44
  14.6  Severability.......................................................44
  14.7  Notices............................................................44
  14.8  Intentionally Omitted..............................................45
  14.9  No Option..........................................................45
  14.10 Integration and Interpretation.....................................45
  14.11 Quitclaim..........................................................45
  14.12 No Easement for Light, Air and View................................46
  14.13 No Merger..........................................................46
  14.14 Memorandum of Lease................................................46
  14.15 Survival...........................................................46
  14.16 Financial Statements...............................................46
  14.17 No Joint Venture...................................................46
  14.18 Successors and Assigns.............................................46
  14.19 Applicable Law.....................................................47
  14.20 Time of the Essence................................................47
  14.21 Interpretation.....................................................47
  14.22 Parking............................................................47
  14.23 Antennae...........................................................48
  14.24 Generator..........................................................49
  14.25 Brokers............................................................50
  14.26 INTENTIONALLY DELETED..............................................50
  14.27 Phased Development.................................................50
</TABLE>

Attachments:
-----------
Exhibit A-1   Site Plan of the Initial Premises
Exhibit A-2   Site Plan of the Project
Exhibit A-3   Site Plan of Expansion Space
Exhibit B     Legal Description of the Project
Exhibit C     Initial Improvement of the Premises
Schedule C-1  Base Building Improvements
Schedule C-2  Definition of Building Standard Improvements
Schedule C-3  List of Base Building Plans
Schedule C-4  Description of Prime Contract
Exhibit D     Rules and Regulations
Exhibit E     Lease Commencement Certificate
Exhibit F     Form of Tenant Estoppel
Exhibit G     Form of Subordination Agreement
Exhibit H     Form of Letter of Credit
Exhibit I     Janitorial Specifications

                                      iii
<PAGE>

                           SCHEDULE OF DEFINED TERMS
<TABLE>
<CAPTION>
                                         Section No.                      Page No.
                                         -----------                      --------
<S>                                 <C>                                   <C>
Additional Allocation................... Section 14.22(a).......................47
Additional Security Deposit............. Section 3.1............................12
Adjustment Date......................... Section 2.6(b)(iii)....................10
Alterations............................. Section 6.7............................25
Antennae................................ Section 14.23..........................48
Approval Notice......................... Exhibit C, Paragraph 15(a).............11
Availability Notice..................... Section 1.1(d)..........................3
Base Building Improvements.............. Exhibit C, Paragraph 1..................1
Base Building Plans..................... Exhibit C, Paragraph 1..................1
Basic Services.......................... Section 5.1............................19
Building Components..................... Section 1.2.............................4
Building................................ Section 1.1(a)..........................1
Buildings............................... Section 1.1(a)..........................1
Business Days........................... Section 5.2............................21
CAD..................................... Exhibit C, Paragraph 5..................4
Cash Allowance.......................... Exhibit C, Paragraph 14................10
Chronically Late........................ Section 13.1(i)........................41
Claims.................................. Section 7.1............................29
Common Areas............................ Section 1.3.............................4
Conceptual Plans........................ Exhibit C, Paragraph 4..................3
Construction Payment.................... Exhibit C, Paragraph 9(b)...............8
Cost Proposal........................... Exhibit C, Paragraph 1(a)(ii)...........2
Design Manual........................... Section 5.1(a).........................19
Estimated Operating Costs............... Section 4.2............................14
Estimated Payment....................... Exhibit C, Paragraph 1(a)(iii)..........2
Event of Default........................ Section 13.1...........................40
Expanded Uses........................... Section 2.4.............................8
Expansion Option........................ Section 1.1(b)..........................1
Expansion Space......................... Section 1.1(b)..........................1
Expiration Date......................... Section 2.1(a)..........................6
Extension Option........................ Section 2.1(b)..........................6
Extension Term Adjustment Date.......... Section 2.6(b)(ii)......................9
Extension Term.......................... Section 2.1(b)..........................6
Extra Services.......................... Section 5.4............................22
Fair Market Rent........................ Section 2.6(b)(iii).....................9
Garage.................................. Section 14.22(c).......................48
General Contractor...................... Exhibit C, Paragraph 1..................1
Generator............................... Section 14.24..........................50
Guarantor............................... Section 13.1(d)........................40
Hazardous Material...................... Section 7.2(a).........................29
Hazardous Materials Claims.............. Section 7.2(b).........................30
Hazardous Materials Laws................ Section 7.2(c).........................30
Initial Lease........................... Section 1.1(d)..........................3
Initial Premises........................ Section 1.1(a)..........................1
Initial Term............................ Section 2.1(a)..........................6
Landlord................................ Introduction............................1
Landlord Parties........................ Section 6.5............................25
Landlord's Architect.................... Exhibit C, Paragraph 1..................1
</TABLE>

                                       iv
<PAGE>

<TABLE>
<CAPTION>

<S>                                     <C>                                  <C>
Landlord's Work......................... Exhibit C, Paragraph 10(a)..............8
Late Delivery Payment................... Section 2.2.............................7
Laws.................................... Section 6.9(a).........................26
Lease................................... Introduction............................1
Lease Year.............................. Section 2.1(a)..........................6
Letter of Credit........................ Section 3..............................13
Major Vertical Penetrations............. Section 1.2.............................4
Market Area............................. Section 2.6(b)(iii)....................10
Net Rentable Area....................... Section 1.4.............................5
Normal Office Hours..................... Section 5.2............................21
Notification Date....................... Section 1.1(b)..........................1
Offer Space Adjustment Date............. Section 2.6(b)(i).......................9
Offer Space............................. Section 1.1(d)..........................2
Operating Costs Adjustment.............. Section 4.6............................17
Operating Costs......................... Section 4.4............................14
Parking Passes.......................... Section 14.22(a).......................47
Permitted Hazardous Materials........... Section 7.2(d).........................30
Permitted Transferee.................... Section 8.1(b).........................31
Permitted Use........................... Section 2.4.............................8
Premises................................ Section 1.1(a)..........................1
Prime Contract.......................... Exhibit C, Paragraph 9(a)(i)(B).........6
Project................................. Section 1.1(a)..........................1
Provider................................ Section 6.3............................24
Qualified Auditor....................... Section 4.8............................18
Real Property........................... Section 1.1(a)..........................1
Real Property Taxes..................... Section 4.4(j).........................15
REAs.................................... Section 10.3...........................34
Rent Commencement Date.................. Section 2.6(a)..........................9
Rent.................................... Section 2.5.............................8
ROM Estimate............................ Exhibit C, Paragraph 1(a)...............1
ROPR Space.............................. Section 1.1(c)..........................2
Security Deposit Amount................. Section 3.1............................12
Security Deposit........................ Section 3.1............................12
Senior Instruments...................... Section 10.1...........................34
Senior Parties.......................... Section 10.1...........................34
Substantial Completion.................. Exhibit C, Paragraph 17................12
Substantially Complete.................. Exhibit C, Paragraph 17................12
Successor............................... Section 10.2...........................34
Tenant Delay............................ Exhibit C, Paragraph 18................13
Tenant Extra Improvements............... Section 5.7............................23
Tenant Improvements..................... Exhibit C, Paragraph 2..................3
Tenant.................................. Introduction............................1
Tenant Parties.......................... Section 6.5............................25
Tenant Sign............................. Section 5.6(b).........................23
Tenant's Personal Property.............. Section 11.1...........................35
Tenant's Proportionate Share............ Section 4.3............................14
Tenant's Work........................... Exhibit C, Paragraph 10(b)..............8
Term Commencement Date.................. Section 2.1(a)..........................6
Term.................................... Section 2.1(a)..........................6
TI Architect............................ Exhibit C, Paragraph 3..................3
TI Bids................................. Exhibit C, Paragraph 9(a)(ii)...........7
</TABLE>

                                       v
<PAGE>

<TABLE>
<CAPTION>

<S>                                     <C>                                    <C>
TI Construction Contract................ Exhibit C, Paragraph 2..................3
TI Contractor........................... Exhibit C, Paragraph 9(a)(ii)...........7
TI Working Drawings..................... Exhibit C, Paragraph 5..................4
Transfer................................ Section 8.1(a).........................30
Transferee.............................. Section 8.1(a).........................30
Upgrade Payment......................... Exhibit C, Paragraph 1(a)(ii)...........2
Upgrade Plans........................... Exhibit C, Paragraph 1(a)(i)............1
Upgrades................................ Exhibit C, Paragraph 1(a)...............1
Useable Area............................ Section 1.4(c)..........................5
</TABLE>

                                       vi
<PAGE>

                             OFFICE BUILDING LEASE

     This Office Building Lease (the "Lease") is made and entered into as of the
date specified in Item 1 of the Basic Lease Information Sheet attached hereto
                  ------
and incorporated herein by this reference, by and between BELLEVUE HINES
DEVELOPMENT, L.L.C., a Delaware limited liability company ("Landlord"), and
HOMEGROCER.COM, INC., a Delaware corporation ("Tenant").

     Now, therefore, in consideration of the mutual covenants and agreements
contained in this Lease, the parties agree as follows:

                                  ARTICLE 1.
                                   PREMISES
                                   --------

 1.1 Lease.

     (a) Initial Premises.  Subject to the terms, covenants and conditions
set forth herein, Landlord leases to Tenant and Tenant leases from Landlord
those certain premises identified in the Basic Lease Information Sheet as Item
                                                                          ----
7, which are schematically depicted on the floor plans attached hereto as
-
Exhibit A-1 (the "Initial Premises").  The term "Premises" as used herein shall
-----------
mean the Initial Premises and any Expansion Space, ROPR Space or Offer Space
added to the Premises pursuant to Sections 1.1(b), 1.1(c), and 1.1(d) below. The
                                  ---------------  ------      ------
Initial Premises are deemed to contain the Net Rentable Area and Useable Area
set forth in Item 8 of the Basic Lease Information Sheet. The number of square
             ------
feet of Net Rentable Area and Useable Area in the Premises, the Building and the
Project are subject to verification as set forth in Section 1.4(d) below. The
                                                    --------------
Premises are located in the South building of the Project located on the real
property situated in the City of Bellevue, County of King, State of Washington,
legally described on Exhibit B (as such real property may be added to or reduced
                     ---------
by Landlord from time to time, the "Real Property"); provided, however, that
                                                     --------  -------
such additions or reductions shall not materially, adversely affect Tenant's use
and quite enjoyment of the Premises; shall be consistent with the
characteristics of a Class A office project; shall not reduce the parking
specifically allotted to Tenant under Section 14.22 of this Lease; and shall not
                                      -------------
materially and permanently increase Tenant's out-of-pocket cost of operating in
the Premises. The term "Building" shall mean the building within which the
Premises are located and the term "Buildings" shall mean all buildings located
on the Real Property. The term "Project" shall mean the Real Property and all
improvements located thereon or used in connection therewith from time to time,
including without limitation, the Buildings, the Common Areas (as defined in
Section 1.3 below) and any other present or future improvements included within
-----------
the office development now known as One Twelfth @ Twelfth in Bellevue,
Washington, the general outlines of which are shown on the Project site plan
attached hereto as Exhibit A-2.
                   -----------

     (b) Expansion Option.  Tenant shall have the option to expand (the
"Expansion Option") the square footage of the Premises to include the first,
second and/or third floors in the Building which are schematically depicted on
the floor plans attached hereto as Exhibit A-3 (the "Expansion Space") provided
                                   -----------
that the Expansion Space actually leased, if any, shall be in whole floor
increments and must be contiguous to the Initial Premises.  Tenant's Expansion
Option shall be personal to Tenant and may not be exercised by any Transferee
without Landlord's prior written consent. If Tenant wishes to exercise the
Expansion Option, Tenant shall notify Landlord in writing by April 30, 2000 (the
"Notification Date").  Tenant's notice shall not be revocable and must specify
how many floors of the Expansion Space will be included in the Premises.  If
Tenant timely exercises the Expansion Option the Expansion Space described in
Tenant's notice shall be added to and become part of the Initial Premises for
all purposes under this Lease, and all of the terms and conditions hereof shall
apply to such Expansion Space, except that Base Rent applicable to the Expansion
Space shall be as set forth in the Basic Lease Information Sheet.  If Tenant
exercises the Expansion Option on all of the Expansion Space prior to the
Notification Date then the Base Rent for the entire Premises shall be adjusted
as set forth in the Basic Lease Information Sheet.  Notwithstanding anything to
the contrary in this Section 1.1(b), Tenant's right to lease the Expansion Space
                     --------------
hereunder shall not be exercisable by Tenant at any time during which
<PAGE>

Tenant is in default under this Lease. If Tenant does not deliver a notice to
Landlord exercising the Expansion Option on or before the Notification Date,
Tenant's Expansion Option shall terminate and shall be of no further force and
effect. If Tenant exercises its Expansion Option then Tenant shall include the
Expansion Space in all of its plans pursuant to Exhibit C and Tenant's failure
                                                ---------
to do so shall constitute a Tenant Delay thereunder and Landlord shall be
relieved of its obligation to deliver the Expansion Space to Tenant with the
balance of the Initial Premises.

     (c) Right of Prior Refusal.  After the Notification Date and continuing
through September 15, 2000, Tenant shall have a primary and continuing right of
prior refusal to include within the Premises any space in the Building (the
"ROPR Space") on the terms and conditions of this Section 1.1(c).  Tenant may
                                                  --------------
not exercise its right to lease any ROPR Space during any period when Tenant is
in default under this Lease.  If Landlord submits an initial proposal to lease
any of the ROPR Space to a third party, Landlord shall notify Tenant and Tenant
shall have five (5) Business Days after receipt of Landlord's notice within
which to deliver an irrevocable written notice to Landlord exercising its right
to lease space in the Building equal in size to the ROPR Space identified in
Landlord's notice. If the space identified in the Landlord's notice is not
contiguous to the Premises, then should Tenant exercise its rights under this
Section 1.1(c), Landlord may select and substitute a comparably sized portion of
--------------
the Building (no more than 10% larger or smaller than the ROPR Space) that is
contiguous to the Premises.  The ROPR Space identified in Landlord's notice (or
the comparably sized substitute space) shall be added to and become part of the
Premises on all of the terms and conditions of this Lease (including Exhibit C),
                                                                     ---------
except that (i) the Base Rent rate applicable to the ROPR Space shall be as
described in Item 11 of the Basic Lease Information Sheet, (ii) Base Rent and
             -------
Operating Expenses on the ROPR Space shall commence upon delivery of the ROPR
Space to Tenant in the condition required hereunder, and (iii) Landlord shall
not be required to deliver possession of the ROPR Space to Tenant until the date
that is six (6) months after Landlord's approval of Tenant's final working
drawings for the Tenant Improvements to be constructed in the ROPR Space, which
drawings shall be delivered by Tenant within three (3) months following Tenant's
notice accepting the ROPR Space.  If Tenant does not deliver a notice to
Landlord within such five (5) Business Day period exercising its right to lease
the ROPR Space identified in Landlord's notice, Landlord may lease all or any
portion of such space to any other person to whom Landlord makes a written
proposal within fifteen (15) Business Days after the expiration of Tenant's
response period, on such terms and conditions as Landlord deems acceptable in
its sole discretion.

     (d) Right of First Offer.  After September 15, 2000, subject to the terms
and conditions of this Section 1.1(d), Tenant shall have a continuing right of
                       --------------
first offer to include within the Premises any space which becomes available in
the Building (the "Offer Space").  Within thirty (30) days after the
commencement of each calendar year, Tenant shall notify Landlord in writing if
Tenant is interested in increasing the size of the Premises and stating the
amount of space that Tenant seeks.  If Tenant does not deliver such notice to
Landlord within such thirty (30) day period, then Tenant shall have no rights to
lease any Offer Space during that calendar year and Landlord shall not be
required to deliver any Availability Notices (as defined below) to Tenant during
that calendar year.  Tenant may not exercise its right to lease any Offer Space
during any period when an Event of Default is outstanding under this Lease
(provided, however, that the cure period for any Event of Default shall be
shortened to coincide with the period during which Tenant must respond to an
Availability Notice under the following paragraph) or if Tenant ceases to occupy
the entire Initial Premises. If less than three (3) years remain on the Initial
Term, Tenant must exercise its Extension Option under Section 2.1(b) in order to
                                                      --------------
lease any Offer Space and if no Extension Option remains to be exercised,
Tenant's rights under this Section 1.1(d) shall terminate.  For purposes of this
                           --------------
Section 1.1(d), the phrase "any space which becomes available" shall mean any
--------------
space in the Building which is vacant at the time of the Availability Notice,
or, if the Offer Space is less than a full floor, is scheduled to be vacated
within six (6) months of the Availability Notice, or, if the Offer Space is a
full floor or more, is scheduled to be vacated within twelve (12) months of the

                                       2
<PAGE>

Availability Notice, but no space shall be considered Offer Space unless it has
been initially leased to another tenant under a written lease agreement (an
"Initial Lease").

     Landlord shall not offer to lease nor lease any Offer Space to a party
other than Tenant without first providing Tenant with written notice
("Availability Notice") that the Offer Space is available to lease or will be
available to lease within the next six (6) months after the Availability Notice
for Offer Space that is less than one (1) full floor, or within the next twelve
(12) months after the Availability Notice for Offer Space that is one (1) full
floor or more. Tenant shall have five (5) days after receipt of an Availability
Notice within which to notify Landlord in writing of Tenant's intent to lease
all or a portion (subject to the qualifications set forth in the following
sentence) of the Offer Space identified in such notice. Tenant may elect to
include in the Premises all of the Offer Space identified in such Availability
Notice or may elect to exclude any whole floor increment of the Offer Space
identified in such Availability Notice and to include the balance of the Offer
Space in the Premises; provided, however that if similar size Offer Space is
                       --------  -------
available on two floors, Tenant may not elect to take only the non-contiguous
portion of the Offer Space.  For example, if an Availability Notice indicates
that half of the second floor and half of the third floor are available to
lease, then Tenant may elect to take all of the third floor Offer Space or all
of the second and third floor Offer Space but may not elect to take only the
second floor Offer Space.  If Tenant does not exercise its option with respect
to the Offer Space described in an Availability Notice then Landlord may lease
all or any portion of the space identified therein to a third party on any terms
that Landlord may deem acceptable.

     Any Offer Space leased by Tenant under this Section 1.1(d) shall be leased
                                                 --------------
under all of the terms and conditions of this Lease except that (i) Base Rent
for the Offer Space shall be equal to the Fair Market Rent determined pursuant
to Section 2.6(b) below, (ii) Landlord shall deliver the space to Tenant as
   --------------
previously improved but Landlord shall have no obligation to install any Tenant
Improvements in the space or to contribute any money towards any alteration or
improvement thereof, and (iii) Rent shall commence on the Offer Space on the
first day on which both (A) the Tenant is permitted by the Landlord to occupy
such Offer Space, and (B) at least thirty (30) days have passed since Landlord
provided Tenant with the Availability Notice with respect to such space.  Any
Offer Space leased by Tenant under this Section 1.1(d) shall become part of the
                                        --------------
Premises and be governed by the terms of this Lease and shall have the same
expiration date, renewal options, and services.  Tenant's right to lease the
Offer Space is subject to any renewal or expansion options or similar rights
granted to any other tenant under an Initial Lease.  Tenant shall forfeit any
rights under this Section 1.1(d) immediately upon being deemed Chronically Late,
                  --------------
which forfeiture may not be cured even if Tenant complies with the terms of
Section 3.1 and pays the Additional Security Deposit.
-----------

     (e) Adjustment of Proportionate Share.  If Tenant exercises any option to
include Expansion Space, ROPR Space or Offer Space in the Premises, Tenant's
Proportionate Share shall be adjusted and upon Landlord's request, Tenant shall
execute an amendment to this Lease or other written confirmation documenting the
new Net Rentable Area and Useable Area in the Premises, Tenant's Proportionate
Share of the Building and the Project and the applicable Base Rent for such
space.

  1.2  Landlord's Reserved Rights.  In addition to all other rights reserved by
Landlord under this Lease, Landlord reserves from the leasehold estate
hereunder, and the Premises shall not include, (a) the exterior surfaces of the
walls and windows bounding the Premises, and (b) all space located within the
Premises for Major Vertical Penetrations (as defined below), conduits, electric
and all other utilities, heating ventilation and air-conditioning and fire
protection and life safety systems, sinks or other Building or Project
facilities that do not constitute Tenant Improvements (collectively, "Building
Components"). Landlord shall have the use of the Building Components and access
through the Premises for operation, maintenance, repair or replacement thereof.
Landlord shall have the right from time to time, to install, remove or relocate
any of the Building Components within the Premises to locations that do not
permanently and materially reduce the square footage of the Premises. As used
herein, the term "Major Vertical Penetrations" shall mean the area or areas
within Building stairs (excluding the landing at each

                                       3
<PAGE>

floor), elevator shafts, and vertical ducts that service more than one floor of
the Building. The area of Major Vertical Penetrations shall be bounded and
defined by the dominant interior surface of the perimeter walls thereof (or the
extended plane of such walls over areas that are not enclosed). Major Vertical
Penetrations shall exclude, however, areas for the specific use of Tenant or
installed at the request of Tenant, such as special stairs or elevators.

  1.3  Common Areas.  Tenant shall have the nonexclusive right (in common with
other tenants or occupants of the Project, Landlord and all others to whom
Landlord has granted or may hereafter grant such rights) to use the Common
Areas, subject to such reasonable rules and regulations as Landlord may from
time to time impose. Landlord may at any time close temporarily any Common Areas
to make repairs or changes therein or to effect construction, repairs, or
changes within the Project, or to prevent the acquisition of public rights in
such areas, or to discourage parking by parties other than tenants of the
Project, and may do such other acts in and to the Common Areas as in its
judgment may be desirable; provided that any such acts shall not prevent Tenant
from reasonable access to, quiet enjoyment and use of the Premises at all times
other than emergencies. Landlord may from time to time permit portions of the
Common Areas to be used exclusively by specified tenants. Landlord may also,
from time to time, place or permit customer service and information booths,
kiosks, stalls, push carts and other merchandising facilities in the Common
Areas, provided, however, that if Landlord receives rent that is calculated
       --------  -------
on the basis of the square feet occupied by such installation, such area shall
be excluded from the Common Areas during the period for which such rent is
received. "Common Areas" shall mean (a) with respect to any Building, any of the
following or similar items to the extent they are included in such Building: the
total square footage of areas of the Building devoted to non-exclusive uses such
as ground floor lobbies and elevator foyers; fire vestibules; mechanical areas;
restrooms and corridors on all floors; elevator foyers and lobbies on multi-
tenant floors; electrical and janitorial closets; telephone and equipment rooms;
and other similar facilities maintained for the benefit of Building tenants and
invitees, but shall not mean Major Vertical Penetrations; and (b) all parking
garage vestibules, restrooms (including locker rooms and shower facilities
located in the garage), loading docks, exercise and conference facilities
available for use by Project tenants (if any), walkways, roadways, sidewalks,
surface parking areas, parkways, driveways, trash areas, mechanical areas,
landscaped areas, courtyards or other similar facilities maintained for the
benefit of Project tenants and invitees.

     Notwithstanding anything in this Section 1.3 to the contrary, if Tenant
                                      -----------
leases and occupies the entire Building, Landlord shall not place or permit
customer service and information booths, kiosks, stalls, push carts or other
merchandising facilities in the Common Areas inside the Building, nor shall
Landlord permit portions of the Common Areas inside the Building to be
exclusively occupied by other tenants of the Project, without Tenant's prior
written consent.  Furthermore, if Tenant leases and occupies the entire
Building, Tenant with consent of Landlord, which shall not be unreasonably
withheld, conditioned or delayed, may use portions of the Common Areas inside
the Building for information booths, kiosks, stalls, push carts, and other
merchandising facilities for use solely by Tenant's employees provided such
items are not visible from outside the Building.  Tenant shall not have the
right to install any merchandising facilities for use by any persons other than
its employees without the Landlord's prior written consent which may be given,
withheld or conditioned in Landlord's sole discretion.

  1.4  Calculation of Net Rentable Area; Useable Area.  Tenant acknowledges that
the term "Net Rentable Area" as used in this Lease shall mean the area or areas
of space within the Project determined by Landlord in accordance with a modified
BOMA standard as described below.

     (a) Net Rentable Area on a single tenancy floor shall be determined by
measuring from the inside surface of the outer pane of glass and extensions of
the plane thereof in non-glass areas to the inside surface of the opposite outer
pane of glass and extensions of the plane thereof in non-glass areas and shall
include all areas within the envelope created by extending the dominant plane of
the outside walls of the Building, excluding Major Vertical Penetrations, plus
Tenant's pro rata share of Common Areas. The calculation of Net Rentable Area
set forth in the Basic Lease Information Sheet

                                       4
<PAGE>

includes Tenant's pro rata share of Common Areas. In the event of any changes to
the Project, Landlord shall determine Tenant's pro rata share of Common Areas
using any commercially reasonable allocation formula selected by Landlord. No
deductions from Net Rentable Area shall be made for columns or projections
necessary to the Building except for Major Vertical Penetrations.

     (b) Net Rentable Area for a multi-tenant floor shall include all space
within the demising walls (measured from the mid-point of the demising walls
and, in the case of exterior walls, measured as defined in (a) above), plus
Tenant's pro rata share of Common Areas. The calculation of Net Rentable Area
set forth in the Basic Lease Information Sheet includes Tenant's pro rata share
of Common Areas.  In the event of any changes to the Project, Landlord shall
determine Tenant's pro rata share of Common Areas using any commercially
reasonable allocation formula selected by Landlord. No deductions from Net
Rentable Area shall be made for columns or projections necessary to the Building
except for Major Vertical Penetrations.

     (c) Tenant acknowledges that the term "Useable Area" means the Net Rentable
Area less the Common Areas included in the calculation thereof.

     (d) The Net Rentable Area in the Premises and the Project has been
calculated on the basis of the foregoing methodology based on the Base Building
Plans (as defined in Exhibit C) and is stipulated for purposes hereof to be the
amount stated in the Basic Lease Information Sheet as Item 8, subject to
                                                      ------
verification pursuant to this Section 1.4(d) and to adjustment to reflect
                              --------------
changes in Net Rentable Area or Useable Area over time and as permitted by this
Lease.  Tenant shall have a one-time option to request verification of the Net
Rentable Area in the Initial Premises, the Building or the Project, at Tenant's
sole cost and expense, within thirty (30) days of taking possession of the first
floor of the Initial Premises.  Such verification shall be for the sole purpose
of confirming that the space as constructed conforms to the Building Plans.  If
any additional space is included within the Premises after the Term Commencement
Date in accordance with Sections 1.1(b), (c), or (d) then Tenant shall have the
                        ---------------  ---     ---
option to request verification of the Net Rentable Area included in such space
for the sole purpose of confirming that the space as constructed  conforms to
the Building Plans, within thirty (30) days of Landlord delivering possession
thereof to Tenant.   Such verification shall be performed by Landlord's
architect in strict accordance with the modified BOMA standards set forth in
this Section 1.4.  Landlord's architect's determination shall be conclusive.  If
     -----------
such verification reveals a variance of one percent (1%) or more from the
figures set forth in the Basic Lease Information Sheet as Item 8 or Landlord's
                                                          ------
later measurement thereof, such figures shall be adjusted accordingly.  Tenant's
failure to request verification within the time allowed under this Section
                                                                   -------
1.4(d) shall be deemed a waiver of such rights, and the figures set forth in the
------
Basic Lease Information Sheet as Item 8 or Landlord's later measurement thereof
                                 ------
shall be conclusively deemed to be correct, provided, however, that such figures
                                            --------  -------
are subject to adjustment to reflect changes in Net Rentable Area or Useable
Area over time and as permitted by this Lease.

                                  ARTICLE 2.
                      TERM, USE OF PREMISES AND BASE RENT
                      -----------------------------------

  2.1  Term.

     (a) Except as provided in Exhibit C, Paragraph 18, the term "Term
                               ---------  ------------
Commencement Date" shall mean the later of (i) the date of Substantial
Completion (as defined in Exhibit C to this Lease) of the entire Initial
                          ---------
Premises, and (ii) the Scheduled Commencement Date, as stated in the Basic Lease
Information Sheet as Item 9.  The "Initial Term" of this Lease shall mean the
                     ------
number of years and/or months set forth in the Basic Lease Information Sheet as
Item 10, commencing on the first day of the calendar month following the Term
-------
Commencement Date (or on the Term Commencement Date if it is the first day of a
calendar month) through and including the Expiration Date. "Expiration Date"
shall mean the last day of the Initial Term or any Extension Term under Section
                                                                        -------
2.1(b) below, or such earlier date upon which this Lease is terminated pursuant
------
to the terms hereof.  The "Term" of this Lease shall mean the Initial Term and
the Extension Term (as defined in Section 2.1(b)), if any.  For all purposes
                                  --------------

                                       5
<PAGE>

hereunder, the term "Lease Year" shall mean a twelve (12) month period starting
on the Term Commencement Date or any anniversary thereof, the first Lease Year
shall begin on the Term Commencement Date and the final Lease Year may include
more than twelve (12) months.  The Scheduled Commencement Date represents merely
the parties' estimate of the Term Commencement Date and is the date before which
Tenant is not obligated to accept possession of the Initial Premises. If the
Initial Premises are Substantially Complete prior to the Scheduled Commencement
Date, Tenant shall have the option to take occupancy of the Initial Premises and
the Term Commencement Date shall be the date of such occupancy.  Landlord shall
provide Tenant as much notice as circumstances reasonably allow of the date when
Landlord expects to achieve Substantial Completion, based upon the progress of
the work.  The covenants and conditions of this Lease shall be effective as of
the mutual execution of this Lease notwithstanding the Term Commencement Date
set forth herein.

     (b) Extension Term.  Provided that no Event of Default is outstanding at
the time of exercise or at any time thereafter prior to the initially scheduled
Expiration Date, Tenant shall have one (1) option to extend the Initial Term of
this Lease (the "Extension Option") for the number of years and/or months set
forth in the Basic Lease Information Sheet as "Extension Term" in Item 10,
                                                                  -------
commencing on the day after the expiration of the Initial Term and continuing
through the Expiration Date, subject to all of the terms and conditions of this
Lease, except that Base Rent shall be adjusted as provided below.  Tenant shall
provide Landlord with irrevocable written notice of Tenant's intent to exercise
its Extension Option no later than twelve (12) months prior to the expiration of
the Initial Term.  Tenant's Extension Option shall be personal to Tenant and may
not be exercised by any Transferee, other than a Permitted Transferee, without
Landlord's prior written consent.  Base Rent for the Extension Term shall be
determined as provided in Section 2.6(b). Tenant shall forfeit any rights under
                          --------------
this Section 2.1(b) immediately upon being deemed Chronically Late, which
     --------------
forfeiture may not be cured even if Tenant complies with the terms of Section
                                                                      -------
3.1 and pays the Additional Security Deposit.
---

     (c) Early Access.  Landlord shall provide Tenant with access and entry to
each floor of the Initial Premises as provided in Exhibit C, during the thirty
                                                  ---------
(30) days prior to Substantial Completion of such floor for performance of
Tenant's Work (as defined in Exhibit C), at times consistent with the schedule
                             ---------
for completion of Landlord's Work, subject to all the terms and conditions of
the Lease including all of the terms of Exhibit C hereto.  Any early access
                                        ---------
allowed under this Section 2.1(c) shall be for the sole purpose of completing
                   --------------
Tenant's Work as described herein.  Landlord shall have no duty or obligation to
accelerate or modify the schedule for completion of Landlord's Work to
accommodate Tenant's rights under this Section.  If Tenant's access in
accordance with this Section 2.1(c) delays Substantial Completion, such delay
                     --------------
will be deemed to be a Tenant Delay (as defined in Exhibit C hereto).  Tenant
                                                   ---------
shall be solely responsible for any increased costs incurred by Landlord as a
result of or in connection with Tenant's access to the Premises under this
Section.

  2.2  Delay in Delivery.  If Landlord, for any reason whatsoever, cannot
deliver possession of the Initial Premises in the condition required under this
Lease to Tenant on the Scheduled Commencement Date (as such date may be extended
by any period of Tenant Delay (as defined in Exhibit C) and by any delay
                                             ---------
attributable to Force Majeure (as defined in Section 14.20 below)), this Lease
                                             -------------
shall not be void or voidable, nor shall Landlord be liable to Tenant for any
loss or damage resulting therefrom, except as stated in this Section 2.2. Tenant
                                                             ------------
understands and agrees that the Term Commencement Day may be delayed beyond the
Scheduled Commencement Date. The provisions of this Section 2.2 shall not apply
                                                    -----------
to the ROPR Space or Offer Space.

     (a) Late Delivery Payment.  Notwithstanding the foregoing, if Landlord does
not deliver possession of (i) one (1) full floor of the Initial Premises to
Tenant within ninety (90) days after the Scheduled Commencement Date (as such
date may be extended by any period of Tenant Delay and by any delay attributable
to Force Majeure), and (ii) the entire Initial Premises to Tenant within one
hundred twenty (120) days after the Scheduled Commencement Date (as such date
may be extended by any period of Tenant Delay and by any delay attributable to
Force Majeure), then Landlord shall pay to Tenant the

                                       6
<PAGE>

sum of Thirty Thousand Dollars ($30,000) per month until Landlord delivers
possession of the entire Initial Premises in the condition required under this
Lease, up to a maximum payment of One Hundred Eighty Thousand Dollars ($180,000)
(the "Late Delivery Payment") as liquidated damages but not as a penalty. The
Late Delivery Payment shall be prorated for any partial month (based on the
actual days in that month) and applied as a credit against the first
installments of Rent falling due hereunder or shall be paid on any termination
of this Lease pursuant to Section 2.2(b) below.  Tenant acknowledges that
                          --------------
actual damages may be difficult to ascertain and that this provision does not
constitute a penalty. The parties acknowledge that the Late Delivery Payment has
been specifically negotiated between Landlord and Tenant and that the amount of
such payment represents a reasonable estimation of the damages that Tenant would
suffer in the event Landlord fails to deliver possession of the Premises in a
timely manner. Except as provided in Section 2.2(c) below, Tenant waives any
                                     --------------
other rights or remedies available to it at law or equity for such late
delivery.

     (b) Termination for Delayed Delivery.  If Landlord does not deliver
possession of the Initial Premises to Tenant (i) within one hundred eighty (180)
days (plus any additional period of delay attributable to Force Majeure or
Tenant Delay) after the Scheduled Commencement Date, or (ii) within two hundred
seventy (270) days (plus any additional period of delay attributable to casualty
or condemnation proceedings, Force Majeure or Tenant Delay, provided, however
                                                            --------  -------
that such period may be extended for Force Majeure for a maximum of one hundred
eighty (180) days) after the Scheduled Commencement Date, then in either such
event, Landlord or Tenant may terminate this Lease by delivery of written notice
to the other party but in no event shall Landlord be liable to Tenant for any
loss or damage resulting from such delay except for the Late Delivery Payment.
Tenant must provide an irrevocable written termination notice to Landlord within
thirty (30) days after the expiration of either such period or shall be deemed
to have waived its right to terminate this Lease.  If Tenant notifies Landlord
that it wishes to terminate the Lease pursuant to this provision and Landlord
delivers possession of the Initial Premises to Tenant within thirty (30) days
after receipt of such notice from Tenant, then the notice of termination shall
be void and this Lease shall remain in full force and effect.  If the Lease is
terminated pursuant to this provision then the Lease shall terminate as of the
effective date of such notice and thereafter neither party shall be liable to
the other for any loss or damage resulting from such delay, except for
Landlord's obligation to pay the Late Delivery Payment.

  2.3  Confirmation.  When the actual Term Commencement Date and the Rent
Commencement Dates are determined, Tenant shall, within ten (10) days after
receipt thereof, execute and return to Landlord a Lease Commencement Certificate
in the form of Exhibit E attached hereto, or any similar form requested by
               ---------
Landlord, confirming the information thereon. Failure within such time to
execute and return or to object in writing to the Lease Commencement Certificate
shall be conclusively deemed to be an acknowledgement that Tenant agrees to the
terms shown thereon and Tenant shall be deemed to have confirmed that the
certificate is correct as presented.

  2.4  Use.  Subject to the restrictions set forth in Section 7.1, Tenant
                                                      -----------
shall use the Premises solely for executive, professional, corporate or
administrative offices (the "Permitted Use"). So long as HomeGrocer.com, Inc. or
a Permitted Transferee is the tenant hereunder, Tenant may use the Premises for
the following ancillary uses if such uses are allowed by law and provided such
ancillary uses are related to Tenant's internal operations or are offered only
to Tenant's employees: a call center, data center (including without limitation
computer server and data warehousing rooms and with custom HVAC and construction
requirements to be provided by Tenant at its sole cost and expense), employee
lunch room with accommodations for catering and food kiosks operated by or
contracted for by Tenant, day care facility (for children of Tenant's employees
only) operated by or contracted for by Tenant, exercise and shower facilities
for Tenant's employees only, electrical and telecommunications closets on each
floor with risers between floors for cabling, telecommunications and back-up
power supply facilities, a company store and/or concierge service for Tenant's
employees (the "Expanded Uses") and for no other use or purpose without
Landlord's prior written consent, which may be withheld or conditioned in

                                       7
<PAGE>

Landlord's sole discretion. Notwithstanding the foregoing, Tenant may enter into
Transfers (as defined in Section 8.1 below) that permit the Transferees to
                         -----------
use the Premises for Expanded Uses, provided that (a) no individual Transferee
may use more than twenty-five percent (25%) of its transferred space for
Expanded Uses, and (b) all Transferees collectively may not use more than
twenty-five percent (25%) of the total transferred space for Expanded Uses.
Landlord makes no representation or warranty that the Premises may be used or
are suitable for any of the Expanded Uses and Tenant shall have no right to seek
any land use variance to allow any Expanded Use without Landlord's prior
approval.  Landlord shall not be required to construct the Building or the
Project to accommodate any Expanded Use, and any modification or alteration of
the Building or the Premises to accommodate such uses shall be subject to
Landlord's prior written consent and shall be performed at Tenant's sole cost
and expense.  Notwithstanding the foregoing, for the purpose of limiting the
type of use permitted by Tenant, or any party claiming through Tenant, but
without limiting Landlord's right to lease any portion of the Project to a
tenant of Landlord's choice, the Permitted Use shall not include:  (a) offices
of any agency or bureau of the United States or any state or political
subdivision thereof; (b) offices or agencies of any foreign government or
political subdivision thereof; (c) offices of any health care professionals or
service organization, except for administrative offices where no diagnostic,
treatment or laboratory services are performed; (d) schools or other training
facilities that are not ancillary to executive, professional or corporate
administrative office use; (e) retail or restaurant uses except as provided
above; (f) broadcast studios or other broadcast production facilities, such as
radio and/or television stations, except for internal corporate communications;
(g) product display or demonstration facilities except interior displays
directed at Tenant's employees and guests and not visible from outside the
Building; (h) offices at which deposits or bills are regularly paid in person by
customers; or (i) personnel agencies, except offices of executive search firms.

  2.5  Payments by Tenant.  As used herein, the term "Rent" shall include Base
Rent, Operating Costs (as defined in Article 4 below) and all other sums payable
                                     ---------
by Tenant to Landlord. Tenant shall pay Rent at the times and in the manner
herein provided. All obligations of Tenant hereunder to make payments to
Landlord shall constitute Rent and failure to pay the same when due shall give
rise to the rights and remedies provided in Section 13.2.
                                            ------------

  2.6  Payment of Base Rent.

     (a) General.  Tenant's obligation to pay Rent and its other obligations
under this Lease with respect to occupancy shall commence upon the Rent
Commencement Date for each floor of the Initial Premises and for the ROPR Space
and Offer Space as set forth above (except as expressly otherwise provided
herein with respect to obligations arising earlier).  The "Rent Commencement
Date" shall mean with respect to each full floor of the Initial Premises, the
earlier of: (i) the date of Substantial Completion of the Tenant Improvements
and the Base Building Improvements on such floor, or (ii) the date on which
Tenant takes possession of such floor; provided, however that Tenant's access
                                       --------  -------
pursuant to Section 2.1(c) above shall not trigger the Rent Commencement Date.
            --------------
Tenant shall pay the Base Rent in the amounts set forth in the Basic Lease
Information Sheet as Item 11 (as the same may be adjusted from time to time
                     -------
hereunder) in advance on or before the Rent Commencement Date for each floor and
thereafter the first day of each calendar month during the Term and any
extensions or renewals thereof; provided, however, that after the Rent
                                -------- --------
Commencement Date for each floor, Base Rent and Tenant's Proportionate Share of
Operating Costs for such floor for each month prior to the Term Commencement
Date shall be paid in advance on the first day of each month even though the
Term has not commenced.  All payments of Rent due under this Lease shall be
payable in advance, without demand (except as specifically provided herein) and
without reduction, abatement (except as such right is specifically granted to
Tenant under this Lease), counterclaim or setoff, at the address specified in
the Basic Lease Information Sheet as Item 6, or at such other address as may be
                                     ------
designated by notice to Tenant from Landlord.

                                       8
<PAGE>

     (b)  Adjustment of Base Rent.  In the event that Tenant exercises its right
to lease any Offer Space under Section 1.1(d) and/or exercises its Extension
                               --------------
Option under Section 2.1(b), the Base Rent for such space or such period shall
             --------------
be determined as follows:

          (i)   Offer Space Base Rent.  Base Rent for the Offer Space shall be
equal to the greater of (A) the Fair Market Rent, as defined in Section
                                                                -------
2.6(b)(iii), as of the date the Offer Space is included in the Premises (the
-----------
"Offer Space Adjustment Date"), or (B) the Base Rent rate set forth for the
Offer Space in the Basic Lease Information Sheet.

          (ii)  Extension Term Base Rent. Base Rent for the Extension Term shall
be the greater of (A) the Fair Market Rent (as defined in Section 2.6(b)(iii)
                                                          -------------------
below) based on a five (5) year term to begin on the first day of the Extension
Term (the "Extension Term Adjustment Date"), or (B) the Base Rent in effect on
the last day of the Initial Term.

          (iii) "Fair Market Rent" as of any date shall mean the per-square-
foot rental rate obtained by Landlord under at least two (2) direct leases,
including fair market expansions and renewals, for comparable space in the
Project executed in the previous six (6) month period.  Space in the Project
shall be deemed comparable space if it is of comparable quality construction
(considering existing tenant improvements or tenant improvement allowances to
construct new improvements), has been leased for a comparable term, and is of
comparable size.  If no comparable space has been leased in the Project during
the prior six (6) months, then the Fair Market Rent shall mean the per-square-
foot rental rate for a direct lease, including expansions or renewals, for
comparable space, leased for a comparable term, with comparable quality
construction (considering existing tenant improvements or tenant improvement
allowances to construct new improvements), in comparable Class A office projects
in the Market Area, taking into consideration:  location in the Building or
other building, extent of service provided or to be provided, the ownership of
the comparable space, the time the particular rate under consideration became or
is to become effective and any other relevant terms or conditions.  "Market
Area" shall mean projects and buildings located in the highway corridor
beginning at the Plaza at Yarrow Bay, continuing along the State Highway 520 to
Interstate Highway 405 and terminating at the Newport Corporate Center located
at the southeast quadrant of the intersections of I-405 and Interstate Highway
90, but excluding projects located east of 100th Avenue NE, west of 112th Avenue
NE, north of NE 2nd Street and south of NE 10th Street, all in the City of
Bellevue.

     The term "Adjustment Date" shall mean each of the Offer Space Adjustment
Date and the Extension Term Adjustment Date, as applicable to the calculation of
Fair Market Rate then under consideration.  Fair Market Rent as of any
Adjustment Date shall be determined by Landlord with written notice given to
Tenant not later than ninety (90) days prior to such Adjustment Date, subject to
Tenant's right of arbitration pursuant to the provisions of Section 2.6(b)(iv)
                                                            ------------------
following the failure to resolve any disagreement in accordance with Section
                                                                     -------
13.9.  Failure on the part of Landlord to give such notice in a timely manner
----
shall not vitiate the right to require adjustment of Base Rent, but such delay
shall result in deferral of the Adjustment Date to the date ninety (90) days
after the date of such notice.  After the process provided in Section 13.9 has
                                                              ------------
been undertaken, Tenant may by written notice demand arbitration within thirty
(30) days after receipt of notice from Landlord of Landlord's determination of
Fair Market Rent, and if no such notice is delivered, Tenant shall be deemed to
have accepted the Fair Market Rent as determined by Landlord.  Should Tenant
elect to arbitrate and should the arbitration not be concluded prior to the
Adjustment Date, Tenant shall pay Rent to Landlord after the Adjustment Date,
including Base Rent adjusted to reflect Fair Market Rent as Landlord has so
determined.  If the amount of Fair Market Rent as determined by arbitration is
greater than or less than Landlord's determination, then any adjustment required
to correct the amount previously paid shall be made by payment by the
appropriate party within ten (10) days after such determination of Fair Market
Rent by arbitration.

          (iv)  Arbitration of Fair Market Rent.  If Tenant disputes the amount
claimed by Landlord as Fair Market Rent, the parties shall attempt to agree on
Fair Market Rent within

                                       9
<PAGE>

thirty (30) days thereafter, and in accordance with Section 13.9. If such
                                                    ------------
dispute cannot be resolved by mutual agreement, the dispute may be submitted to
arbitration. The award rendered in any such arbitration may be entered in any
court having jurisdiction and shall be final and binding between the parties.
The arbitration shall be conducted and determined in the City of Bellevue,
Washington, in accord with the then-prevailing commercial arbitration rules of
the American Arbitration Association or its successor for arbitration of
commercial disputes except that the procedures mandated by said rules shall be
modified as follows:

                (A) Tenant shall make demand for arbitration in writing within
thirty (30) days after receipt of Landlord's determination of Fair Market Rent.
Tenant's arbitration demand shall specify (a) the name and address of the person
to act as the arbitrator on its behalf, and (b) Tenant's determination of Fair
Market Rent. The arbitrator shall be qualified as a real estate appraiser with
at least five (5) years experience appraising first-class commercial office
space in the Market Area who would qualify as an expert witness over objection
to give testimony addressed to the issue in a court of competent jurisdiction.
Failure on the part of Tenant to make a timely and proper demand for arbitration
shall constitute a waiver of the right to arbitration. Within ten (10) Business
Days after receipt of Tenant's demand for arbitration, Landlord shall have the
right to give notice in writing to Tenant of Landlord's adjusted determination
of Fair Market Rent. Within ten (10) Business Days following Tenant's receipt of
such notice, if Tenant and Landlord have not agreed upon Fair Market Rent,
Tenant shall notify Landlord in writing that Tenant desires to renew its demand
for arbitration. Failure on the part of Tenant to give such notice shall
constitute a waiver of the right to arbitration, and Tenant shall be deemed to
have accepted Landlord's determination of Fair Market Rent. Within ten (10)
Business Days after the receipt of a notice renewing the demand for arbitration,
Landlord shall give notice to Tenant, specifying the name and address of the
person designated by Landlord to act as arbitrator on its behalf who shall be
similarly qualified. If Landlord fails to notify Tenant of the appointment of
its arbitrator, within or by the time above specified, then the arbitrator
appointed by Tenant shall be the arbitrator to determine the issue.

                (B) If two (2) arbitrators are chosen pursuant to the preceding
Section, the arbitrators so chosen shall meet within ten (10) Business Days
after the second arbitrator is appointed and, if within ten (10) Business Days
after such first meeting the two arbitrators have not agreed upon a
determination of Fair Market Rent, they shall appoint a third arbitrator, who
shall be a competent and impartial person with qualifications similar to those
required of the first two arbitrators.  If they are unable to agree upon such
appointment within five (5) Business Days after expiration of said ten (10) day
period, the third arbitrator shall be selected by the parties themselves if they
can agree thereon, within a further period of ten (10) Business Days.  If the
parties do not so agree, then either party, on behalf of both, may request
appointment of such a qualified person by a court of the State of Washington
sitting in King County pursuant to RCW 7.04.050.  Request for appointment shall
be made in writing with a copy given to the other party.  Each party agrees that
said court shall have the power to make the appointment, provided, however, if
                                                         --------  -------
the court does not make a determination within ten (10) days of request by
either party for the appointment of a third arbitrator, appointment of such
third arbitrator shall be made in accordance with the selection procedure of the
commercial arbitration rules of the American Arbitration Association or its
successor for arbitration of commercial disputes.  The three (3) arbitrators
shall decide the dispute, if it has not previously been resolved, by following
the procedure set forth below.

                (C) The arbitrator selected by each of the parties shall state
in writing his determination of the Fair Market Rent, supported by the reasons
therefor, and shall deliver a copy to each party. The arbitrators shall arrange
for a simultaneous exchange of such proposed resolutions. The role of the third
arbitrator shall be to select which of the two (2) proposed resolutions most
closely approximates his determination of Fair Market Rent. The third arbitrator
shall have no right to propose a middle ground or any modification of either of
the proposed resolutions. The resolution he

                                       10
<PAGE>

chooses as most closely approximating his determination of Fair Market Rent
shall constitute the decision of the arbitrators and shall be final and binding
upon the parties.

                (D) If any arbitrator fails, refuses or is unable to act, his
successor shall be appointed by him, but in the case of the third arbitrator,
his successor shall be appointed in the same manner as provided for appointment
of the third arbitrator.  The arbitrators shall attempt to decide the issue
within ten (10) Business Days after the appointment of the third arbitrator.
Any decision in which the arbitrator appointed by Landlord and the arbitrator
appointed by Tenant concur shall be binding and conclusive upon the parties.
Each party shall pay the fees and costs of its own counsel.  The losing party
shall pay the fees and costs of the arbitrators and of the expert witnesses (if
any) of the prevailing party as well as those of its expert witnesses.  For
purposes hereof, the losing party shall be that party whose selected
arbitrator's statement of Fair Market Rent was not selected by the third
arbitrator.

                (E) The arbitrators shall have the right to consult experts and
competent authorities with factual information or evidence pertaining to a
determination of Fair Market Rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine.
The arbitrators shall render their decision and award in writing and shall
deliver copies to each party.  The arbitrators shall have no power to modify the
provisions of this Lease.

  2.7  Partial Months.  If a Rent Commencement Date occurs on other than the
first day of a calendar month, then Base Rent and Operating Costs for such
partial calendar month shall be prorated using the actual number of days the
applicable portion of the Premises is leased and the prorated installment shall
be paid on such Rent Commencement Date together with any other amounts payable
on that day. If the Expiration Date occurs on other than the last day of a
calendar month, then Base Rent and Operating Costs for such partial calendar
month shall be prorated using the actual number of days the Premises are leased
and the prorated installment shall be paid on the first day of the calendar
month in which the Expiration Date occurs.

                                  ARTICLE 3.
                               SECURITY DEPOSIT
                               ----------------

  3.1  Security Deposit Amount.  Concurrently with execution hereof, Tenant
shall deliver to Landlord a security deposit in an amount equal the number of
square feet of Net Rentable Area in the Initial Premises multiplied by Twenty-
nine and 88/100 Dollars ($29.88) (the "Security Deposit Amount") as security for
the full and faithful performance of Tenant's obligations under this Lease (the
"Security Deposit"). If Tenant exercises the Expansion Option in a timely manner
and leases the entire Building pursuant to its Expansion Option, the Security
Deposit Amount shall be equal to the number of square feet of Net Rentable Area
in the Premises multiplied by Twenty-nine and 57/100 Dollars ($29.57). If Tenant
leases any Offer Space, the Security Deposit Amount shall be increased by
Sixteen and 50/100 Dollars ($16.50) per square foot of Net Rentable Area added
to the Premises. If Tenant leases any ROPR Space, the Security Deposit Amount
shall be increased by Twenty-nine and 88/100 Dollars ($29.88) per square foot of
Net Rentable Area added to the Premises. Tenant shall deliver such increased
amount to Landlord within five (5) days after exercising any such options and if
Tenant does not deposit such additional amount then Tenant's exercise of such
rights shall be void and of no further force and effect.

     Each time Tenant receives notice from Landlord that Tenant is Chronically
Late, Tenant shall pay an additional Security Deposit equal to three (3) months
Base Rent (at the Base Rent rate then in effect) (the "Additional Security
Deposit").  Tenant shall pay the Additional Security Deposit to Landlord within
ten (10) days following receipt of written notice from Landlord that Tenant is
Chronically Late and if such sum is received in a timely manner, Tenant shall no
longer be deemed to be Chronically Late; provided, however, that Landlord may,
                                         --------  -------
at its option, elect within ten (10)  days thereafter to reject the Additional
Security Deposit and to exercise its remedies under Section 13 with respect to
                                                    ----------
the Event of Default.  If Landlord accepts payment of the Additional Security
Deposit, the Additional Security Deposit

                                       11
<PAGE>

may be applied in any manner permitted for the Security Deposit and, upon
expiration of the Lease shall be applied to Base Rent for the final months of
the Term.

     On the fifth (5th) anniversary of the Term Commencement Date, the Security
Deposit Amount shall be reduced by fifty percent (50%) for the balance of the
Term (including the Extension Term).  Tenant shall forfeit its rights under the
prior sentence immediately upon being deemed Chronically Late, which forfeiture
may not be cured even if Tenant complies with the terms of the prior paragraph
and pays the Additional Security Deposit.  If Tenant's Standard & Poor's
corporate credit rating reaches a level of BBB or better, then Tenant shall not
be required to furnish a Security Deposit for the initial Security Deposit
Amount and the initial Security Deposit Amount (or the balance thereof then in
Landlord's possession), shall be returned to Tenant within ten (10) days
following Landlord's receipt of written notice from Tenant that it has achieved
such credit rating together with proof of such rating reasonably satisfactory to
Landlord; provided, however, that if Tenant's Standard & Poor's corporate credit
          --------  -------
rating subsequently falls below a level of BBB, Tenant shall be required to
provide a Security Deposit in the Security Deposit Amount within thirty (30)
days thereafter.  Upon request, Tenant shall provide evidence to Landlord of its
Standard & Poor's corporate credit rating.  The foregoing provision shall not
apply to the Additional Security Deposit which shall be held by Landlord and
applied as set forth in the preceding paragraph.

  3.2  Letter of Credit.  In lieu of depositing cash to satisfy its obligation
with respect to the Security Deposit, Tenant may provide an irrevocable, fully
assignable, and unconditional standby letter of credit, issued by a financial
institution acceptable to Landlord and with a term of at least one (1) year,
drawable by Landlord upon presentation, and substantially in the form attached
hereto as Exhibit H (the "Letter of Credit"). Landlord may draw upon the Letter
          ---------
of Credit under the same terms and conditions as Landlord may apply a cash
security deposit. In addition, Landlord may draw upon the Letter of Credit if
Tenant fails to deliver to Landlord a renewal or extension of the Letter of
Credit for a term of not less than one (1) year at least thirty (30) days prior
to the expiration date of the existing Letter of Credit.

  3.3  Use of Security Deposit.  Landlord may (but shall not be required to) use
the Security Deposit or any portion thereof to cure any defaults on the part of
Tenant or to compensate Landlord for any damage or costs Landlord incurs as a
result of Tenant's failure to perform any of its covenants or obligations
hereunder. In such event, and upon written notice from Landlord to Tenant
specifying the amount of the Security Deposit so utilized by Landlord and the
purpose for which such amount was applied, Tenant shall immediately deposit with
Landlord an amount sufficient to return the Security Deposit to the full
Security Deposit Amount. Tenant acknowledges that any use of the Security
Deposit shall not constitute a bar or defense to any of Landlord's remedies
under this Lease, at law or in equity. Within sixty (60) days after expiration
of the Term or earlier termination of this Lease for any reason other than an
Event of Default by Tenant, the Security Deposit shall be returned to Tenant,
reduced by those amounts that may be required by Landlord to remedy defaults on
the part of Tenant in the payment of Rent or otherwise, to repair damages to the
Premises caused by Tenant and to restore the Premises to the condition required
by this Lease. Landlord shall have no obligation to segregate the Security
Deposit from its general funds or to pay interest thereon. If Landlord conveys
or transfers its interest in the Premises, and as a part of such conveyance or
transfer, assigns its interest in this Lease, then Landlord shall be released
and discharged from any further liability to Tenant with respect to the Security
Deposit provided Landlord has delivered the Security Deposit to the transferee
or assignee or the transferee or assignee has assumed Landlord's obligations
under this Lease. Any assignment of the Lease by Landlord, whether voluntary or
through involuntary assignment or transfer such as bankruptcy or foreclosure,
will automatically and without further action by either party cause an
assignment of the Security Deposit (whether cash or a letter of credit) to the
assignee and the parties will execute such documents as necessary to reflect
such assignment and in such circumstances Tenant agrees to look solely to such
transferee or assignee for the return of the Security Deposit provided Landlord
has delivered the Security Deposit to the transferee or assignee or the
transferee or assignee has assumed Landlord's obligations

                                       12
<PAGE>

under this Lease. Landlord and its successors and assigns will not be bound by
any actual or attempted assignment or encumbrance of the Security Deposit by
Tenant and if Tenant's interest in the Lease has been assigned, Landlord may
return the Security Deposit to such assignee in accordance with the terms and
conditions hereof. If Landlord returns the Security Deposit to Tenant's assignee
as aforesaid, Landlord will have no further obligation to any party with respect
thereto.

                                  ARTICLE 4.
                          PAYMENT OF OPERATING COSTS
                          --------------------------

  4.1  Net Lease.  This is a net lease. Base Rent shall be paid to Landlord
absolutely net of all costs and expenses as more fully provided herein. The
provisions of this Article 4 for payment of Operating Costs by means of periodic
                   ---------
payment of Tenant's Proportionate Share (as defined in Section 4.3) of Estimated
                                                       -----------
Operating Costs (as defined in Section 4.2) and the Operating Costs Adjustment
                               -----------
(as defined in Section 4.6) are intended to pass on to Tenant and reimburse
               -----------
Landlord for Tenant's Proportionate Share of Operating Costs.

  4.2  Estimated Payments.  Tenant shall pay Tenant's Proportionate Share of
Estimated Operating Costs in advance on or before the first day of each calendar
month during the Term and any extensions or renewals thereof commencing on each
Rent Commencement Date. "Estimated Operating Costs" for any calendar month shall
mean Landlord's estimate of Operating Costs for the calendar year within which
such month falls, divided into twelve (12) equal monthly installments. Landlord
shall provide Tenant with a statement setting forth the Estimated Operating
Costs and Tenant's Proportionate Share thereof within ninety (90) days after the
Term Commencement Date and the commencement of each calendar year thereafter,
Landlord may adjust such estimate from time to time by written notice. Until a
new statement of Estimated Operating Costs is received Tenant shall continue to
make the monthly payment of Estimated Operating Costs based on the last
applicable statement thereof.

  4.3  Tenant's Proportionate Share.  "Tenant's Proportionate Share"' shall be
calculated by Landlord for each calendar year of the Term and shall mean (1)
with respect to Tenant's Proportionate Share of the Building, a percentage equal
to the Net Rentable Area of the Premises divided by the greater of (a) ninety-
five percent (95%) of the Total Rentable Area in the Building leased or held for
lease, or (b) the Net Rentable Area of the Building actually leased to tenants;
and (2) with respect to Tenant's Proportionate Share of the Project, a
percentage equal to the Net Rentable Area of the Premises divided by the greater
of (x) ninety-five percent (95%) of the total Net Rentable Area of the Project
leased or held for lease, or (y) the Net Rentable Area in the Project actually
leased to tenants. As of the date hereof, Tenant's Proportionate Share is the
percentage set forth in the Basic Lease Information Sheet as Item 8, subject to
                                                             ------
verification as provided in Section 1.4(d).
                            --------------

  4.4  Operating Costs.  "Operating Costs" shall mean all expenses and costs
(but not specific costs that are separately billed to and paid by specific
tenants) of every kind and nature that Landlord shall pay or incur or become
obligated to pay or incur (including, without limitation, costs incurred by
managers and agents that are reimbursed by Landlord) because of or in connection
with the management, repair, maintenance, replacement, preservation, ownership
and operation of the Project and any supporting facilities directly serving the
Project (as allocated to the Project in accordance with standard accounting
practices, consistently applied). Tenant acknowledges that Operating Costs may
include expenses and costs associated with the management, preservation,
ownership and operation of the Project that are, from time to time, allocated by
Landlord, in its sole but reasonable discretion, between the Building and other
Buildings, presently or hereafter existing at the Project, and Tenant agrees to
pay as additional Rent, Tenant's share, as reasonably determined by Landlord, of
such Operating Costs as so allocated by Landlord. Operating Costs shall include,
but not be limited to the following types of expenses:

                                       13
<PAGE>

     (a) Wages, salaries, reimbursable expenses and benefits of all on-site and
off-site personnel directly engaged in the operation, repair, maintenance and
security of the Project and the direct costs of training such employees.

     (b) Costs (including allocated rental at no more than Landlord's good faith
estimate of the fair market rent determined once during each calendar year) for
the property management office (provided that the allocated rental shall be on
no more than two thousand five hundred (2,500) square feet of Useable Area) and
office operation; costs of operating exercise facilities in the Project, if any,
available for use by tenants, including the cost of acquiring or leasing
equipment therein; and costs of operating any conference facilities in the
Project, if any, available for use by tenants, including the cost of acquiring
or leasing equipment therein (less revenues received in connection with the use
thereof).

     (c) All supplies, materials and rental equipment used in the operation and
maintenance of the Project, including, without limitation, the cost of erecting,
maintaining and dismantling art work and similar decorative displays
commensurate with operation of a Class A office project.

     (d) Utilities, including, without limitation, water, power, sewer, waste
disposal, communication and cable television facilities, heating, cooling,
lighting and ventilation of the Project not paid for directly by tenants of the
Project.

     (e) All maintenance, extended warranties (amortized over the period of such
warranty), janitorial and service agreements for the Project and the equipment
therein, including, but not limited to, alarm service, window cleaning, elevator
maintenance, and maintenance and repair of the Project and all Building
Components.

     (f) A management fee equal to the lesser of (A) three percent (3%) of all
revenue (excluding such management fee) derived from the Project, including
without limitation, all Rent hereunder, all rent and other payments derived from
other tenants in the Project, parking revenues and other revenues derived from
licenses of any other part of or right in the Project; or (B) provided that
Tenant is not in default under this Lease and leases and occupies at least three
(3) full floors of space in the Project, the lowest management fee permitted to
be included in Operating Costs under any other lease between Landlord and any
tenant leasing at least two (2) full floors of space in the Project.

     (g) Legal and accounting services for the Project, including, but not
limited to, the costs of audits by certified public accountants of Operating
Costs records; provided, however, that Operating Costs shall not include legal
               --------  -------
fees related to (i) negotiating lease terms for prospective tenants, (ii)
negotiating termination or extension of leases with existing tenants, (iii)
proceedings against tenants relating solely to the collection of rent or other
sums due to Landlord from such tenants, or (iv) the initial development and/or
initial construction of the Project.

     (h) All insurance premiums and costs, including but not limited to, the
premiums and cost of fire, casualty, liability, rental abatement or interruption
and earthquake insurance applicable to the Project and Landlord's personal
property used at the Project in connection therewith (and all amounts paid as a
result of loss sustained that would be covered by such policies but for
"deductible" provisions).

     (i) Repairs, replacements and general maintenance of the Project (except
for repairs and replacements (x) paid for from the proceeds of insurance, or (y)
paid for directly by Tenant, other tenants or any third party).

     (j) All real and personal property taxes, assessments, local improvement or
special benefit district charges and other governmental charges, special and
general, known and unknown, foreseen and unforeseen, of every kind and nature
whatsoever payable during or attributable to periods after the Term Commencement
Date (i) attributable to the Real Property or the Project or levied, assessed or
imposed on, the Real Property or the Project, or any portion thereof, or
interest therein; (ii) attributable

                                       14
<PAGE>

to or levied upon Landlord's personal property located in, or used in connection
with the Project; (iii) surcharges and all local improvement or special benefit
and other assessments levied with respect to the Project, the Real Property, and
all other property of Landlord used directly in connection with the operation of
the Project; (iv) any taxes levied or assessed in lieu of, in whole or in part,
or in addition to such real or personal property taxes; (including, but not
limited to, leasehold taxes, business and occupation taxes and taxes or license
fees upon or measured by the leasing of the Project or the rents or other income
collected therefrom (v) any and all costs, expenses and attorneys' fees paid or
incurred by Landlord in connection with any proceeding or action to contest in
whole or in part, formally or informally, the imposition, collection or validity
of any of the foregoing taxes, assessments, charges or fee (collectively, "Real
Property Taxes"). If by law any Real Property Taxes may be paid in installments
at the option of the taxpayer, then Landlord shall include within Real Property
Taxes for any year only those installments (including interest, if any) which
would become due by exercise of such option. Real Property Taxes shall not
include (x) inheritance or estate taxes imposed upon or assessed against the
Project, or any part thereof or interest therein, or (y) income taxes computed
upon the basis of the Landlord's net income, or (z) any real estate excise tax
payable in connection with a transfer or conveyance of the Project or any part
thereof.

     (k) Amortization (together with reasonable financing charges) of capital
improvements made to the Project (i) to comply with the requirements of law,
ordinance rule or regulation, (ii) to replace items which Landlord would be
obligated to maintain under this Lease; or (iii) to improve the operating
efficiency or reduce Operating Costs of the Project.  As used in this Section,
"amortization" shall mean allocation of the cost equally to each year of useful
life of the items being amortized.  Notwithstanding the foregoing, however,
Landlord may treat as expenses (chargeable in the year incurred), and not as
capital costs, items that are less than two percent (2%) of Estimated Operating
Costs for the year in question.

     (l) All charges of any kind and nature imposed, levied, assessed, charged
or collected by any governmental authority or other entity either directly or
indirectly payable during or attributable to periods after the first Rent
Commencement Date (i) for or in connection with public improvements, user,
maintenance or development fees, transit, parking, housing, employment, police,
fire, open space, streets, sidewalks, utilities, job training, child care or
other governmental services or benefits, (ii) for environmental matters or as a
result of the imposition of mitigation measures, including compliance with any
transportation management plan, or fees, charges or assessments as a result of
the treatment of the Project, or any portion thereof or interest therein, as a
source of pollution or storm water runoff.

     Notwithstanding the foregoing, Operating Costs shall not include:

     (m) Any sums collected from other Building tenants for special services
provided to such tenant, in excess of the services provided to Tenant hereunder,
any sums collected from other Building tenants for Operating Costs separately
billed to and paid by tenants, or costs incurred in connection with services
made available to one or more tenants but not to tenants of the Project
generally;

     (n) Amounts received from insurance claims and costs of repair and
reconstruction related thereto to the extent of such insurance proceeds (other
than deductible amounts under applicable insurance policies);

     (o)    Ground rent (if any);

     (p) Interest or loan fees incurred in connection with any loan secured by
the Building or the Real Property or any other costs (including attorneys fees)
directly related to any such financing or refinancing;

                                       15
<PAGE>

     (q) Costs of work to the Project that are necessary to comply with
applicable laws, regulations, ordinances or codes relating to the initial
construction of the Project in effect as of the date of this Lease;

     (r) Leasing commissions and costs of marketing or advertising materials
designed to specifically market space in the Project for lease;

     (s) Except as permitted under Section 4.4.1(k) above, depreciation or
                                   ----------------
amortization of the Building or Building Components or expenses that should be
capitalized in accordance with standard accounting practices, consistently
applied;

     (t) If Tenant is paying separately for parking privileges in the Garage,
costs incurred for day-to-day operations or maintenance of the Garage (except
for Real Property Taxes);

     (u) Any penalties due to violation of law or fines imposed for late payment
of any Operating Costs by Landlord or interest thereon, unless such penalties,
interest or fines were caused directly or indirectly by Tenant;

     (v) Damages incurred by Landlord for any default, breach, claim, judgment
or settlement arising out of this Lease or any other lease of space in the
Project;

     (w) Expenses for the repair or replacement of any item to the extent such
repair or replacement is reimbursed, or is received at no cost, through
applicable warranty or insurance proceeds;

     (x) Costs incurred to test, survey, cleanup, contain, abate, remove, or
otherwise remedy Hazardous Materials from the Project to the extent such
Hazardous Materials were installed by Landlord and were considered hazardous
under applicable Hazardous Materials Laws as and when installed;

     (y) Costs of initial construction of the Project in accordance with the
plans approved for building permits by the City of Bellevue, including all costs
of correcting defects in the initial construction for which Landlord is
otherwise responsible under the Lease;

     (z) Costs incurred for repairs and replacements resulting from an uninsured
casualty to the extent such costs exceed ten percent (10%) of the Base Rent per
square foot per calendar year;

     (aa) Attorneys and outside accountants fees incurred in connection with
leasing space in the Project or any sale or attempted sale of the Project; and

     (bb) Costs incurred relating to any additional real property added to the
Project until such additional real property is developed.

  4.5  Adjustment for Occupancy.  Notwithstanding any other provision herein to
the contrary, if during any year of the Term the Project is not fully occupied
or all premises within the Project do not receive Basic Services (as defined in
Section 5.1 below), then an adjustment shall be made in computing Operating
-----------
Costs for such year so that Operating Costs shall be computed as though the
Project had been fully occupied and provided with Basic Services during such
year; provided, however, that in no event shall Landlord collect in total, from
      -------- --------
Tenant and all other tenants of the Project, an amount greater than one hundred
percent (100%) of Operating Costs during any year of the Term.

  4.6  Computation of Operating Costs Adjustment.  The term "Operating Costs
Adjustment" for any calendar year shall mean the difference, if any, between
Estimated Operating Costs and actual Operating Costs for that calendar year.
Landlord shall, within a reasonable period of time after the end of any calendar
year for which Estimated Operating Costs differs from actual Operating Costs,
give written notice thereof to Tenant. The notice shall include a statement of
the total Operating Costs applicable to such calendar year and the computation
of the Operating Costs Adjustment. Landlord's failure to give such notice and
statement within a reasonable period of time after the end of any calendar

                                       16
<PAGE>

year for which a Operating Costs Adjustment is due shall not release either
party from the obligation to make the adjustment provided for in Section 4.7.
                                                                 -----------

  4.7  Adjustment for Variation Between Estimated and Actual.  If Tenant's
Proportionate Share of Operating Costs for any calendar year exceeds the
payments received by Landlord towards Tenant's Proportionate Share of Estimated
Operating Costs for such year, Tenant shall pay to Landlord Tenant's
Proportionate Share of the Operating Costs Adjustment within thirty (30) days
after the date of the Landlord's statement of the Operating Costs Adjustment. If
the Tenant's Proportionate Share of Operating Costs for any calendar year is
less than the payments received by Landlord towards Tenant's Proportionate Share
of Estimated Operating Costs for such year, then Landlord, at Landlord's option,
shall either (a) pay Tenant's Proportionate Share of the Operating Costs
Adjustment to Tenant in cash, or (b) credit said amount against future
installments of Estimated Operating Costs payable by Tenant hereunder. If the
Term commences or terminates at any time other than the first day of a calendar
year, Tenant's Proportionate Share of the Operating Costs Adjustment shall be
calculated based upon the exact number of calendar days during such calendar
year that fall within the Term, and any payment by Tenant required hereunder
shall be paid even if the Term has expired when such determination is made.

  4.8  Books and Records.  Provided that Tenant delivers written notice of its
intent to audit within ninety (90) days after receipt by Tenant of Landlord's
annual statement of total Operating Costs as provided in Section 4.6, and
                                                         -----------
completes such audit within one hundred and twenty (120) days thereafter, Tenant
shall have the right to conduct a reasonably and specifically defined audit of
Landlord's books and records relating to Operating Costs during the immediately
preceding calendar year in accordance with the following terms and provisions:

       (a) No Event of Default with respect to payment of Base Rent and Tenant's
Proportionate Share of Operating Costs is outstanding at the time of Tenant's
notice or at the time of the audit.

       (b) Tenant shall have the right to have an employee of Tenant or a
Qualified Auditor (as defined below) inspect Landlord's accounting records at
Landlord's office no more than once per calendar year.

       (c) Neither the employee of Tenant nor the Qualified Auditor shall be
employed or engaged on a contingency basis, in whole or in part.

       (d) Prior to commencing the audit, Tenant and the auditor shall:  (i)
provide Landlord with evidence that the auditor is from a nationally recognized
accounting firm or one of the top five (5) accounting firms in the Seattle
metropolitan area and that the individual performing the audit is a certified
public accountant (a "Qualified Auditor"); (ii) each sign a confidentiality
letter to be provided by Landlord, consistent with the provisions of this
Section 4.8; (iii) provide a signed representation certified by the auditor's
-----------
chief financial officer, chief executive officer or managing partner (or
equivalent) that such auditing firm is acting as an independent accountant in
the conduct of the audit; and (iv) provide Landlord with a full copy of all
correspondence, instructions and engagement letters between the auditor and
Tenant.

       (e) The audit shall be limited solely to:  (i) confirming that the
Operating Costs reported in the Landlord's annual statement are consistent with
Landlord's books and records; (ii) confirming that Landlord has reasonable
support for the expenses and items of expenses as reported by Landlord; (iii)
confirming that Landlord has not accidentally or fraudulently charged the same
item of expenses on a duplicate basis to the Building; (iv) confirming that
Landlord has not charged any item specifically excluded from Operating Costs in
this Lease; (v) reviewing the procedure for gross-up to confirm that it is
consistent with the terms of this Lease relative to such procedures; and (vi)
confirming that Tenant has been properly allocated Tenant's Proportionate Share
of Operating Costs.  The auditor

                                       17
<PAGE>

shall not make any judgments as to the reasonableness of any item of expense
and/or the total Operating Costs of the Building, nor shall such reasonableness
be subject to audit.

       (f) If Tenant's auditor finds errors or over or under charges in
Landlord's annual statement of Operating Costs, said findings must be
immediately and simultaneously reported to both Landlord and Tenant, with full
written support for such findings and specific reference to the relevant Lease
provisions disqualifying such expenses, if applicable. If Landlord agrees with
said findings, appropriate rebates or charges shall be made to Tenant in
accordance therewith. If Landlord does not agree, Landlord shall engage its own
auditor to review the findings of Tenant's auditor and Landlord's books and
records. The two auditors shall then meet to resolve any difference between the
audits. If agreement cannot be reached within two (2) weeks after the auditors'
initial meeting, then the auditors shall together select a third auditor (who
shall be a Qualified Auditor) to which they shall each promptly submit their
findings in a final report, with copies submitted simultaneously to the first
two auditors, Tenant and Landlord. The third auditor shall leave submitted
findings unopened for a period of two (2) weeks, during which time Landlord and
Tenant may attempt to reach a negotiated settlement. If no settlement is
reached, then within fifteen (15) days following the completion of such two-week
period, the third auditor shall determine which of the two reports best meets
the terms of this Lease, which report shall become the "Final Finding". The
third auditor shall not have the option of selecting a compromise between the
first two auditors' findings, nor to make any other finding.

       (g) If the Final Finding determines that Landlord has overcharged Tenant,
Landlord shall credit Tenant toward the payment of the Base Rent next due and
payable under this Lease the amount of such overcharge.  If the Final Finding
determines that Tenant was undercharged, then within thirty (30) days after the
Final Finding, Tenant shall reimburse Landlord the amount of such undercharge.

       (h) If the Final Finding results in a credit to Tenant in excess of three
percent (3%) of Tenant's Proportionate Share of the total Operating Costs for
the calendar year subject to the audit, Landlord shall pay its own audit costs
and reimburse Tenant for its costs associated with said audits. If the Final
Finding results in a credit to Tenant of less than one percent (1%) of Tenant's
Proportionate Share of the total Operating Costs for the calendar year subject
to the audit, Tenant shall pay its own costs and shall reimburse Landlord for
Landlord's costs associated with said audits.  In all other events, each party
shall pay its own audit costs, including one half (1/2) of the cost of the third
auditor.

       (i) The results of any audit of Operating Costs hereunder shall be
treated by Tenant, all auditors, and their respective employees and agents as
confidential, and shall not be discussed with nor disclosed to any third party.

                                  ARTICLE 5.
                             LANDLORD'S COVENANTS
                             --------------------

  5.1  Basic Services.  So long as no Event of Default is outstanding during
Tenant's occupancy of the Premises Landlord shall operate the Building as a
Class A office building and shall provide the following ("Basic Services"):

       (a) Administration of construction of the Tenant Improvements (as defined
in Section 5.7) in the Premises in accordance with Exhibit C and the Tenant
   -----------                                     ---------
Design Manual which is incorporated herein by this reference (the "Design
Manual").

       (b) Hot and cold water at those points of supply provided for general use
of other tenants in the Project as provided for in the TI Working Drawings
(excluding supply points included to accommodate Expanded Uses).

       (c) Central heat and air conditioning in season, and ventilation at such
temperatures and in such amounts as are standard for Class A office buildings in
the Market Area or as may be permitted or controlled by applicable laws,
ordinances, rules and regulations, during Normal Office

                                       18
<PAGE>

Hours.  Landlord shall use commercially reasonable efforts to ensure that indoor
air quality complies with all applicable laws, ordinances, rules and regulations
but shall not be responsible for correcting any air quality problems caused by
tenants of the Project.

       (d) Routine maintenance, repairs, structural and exterior maintenance
(including exterior glass and glazing), painting and electric lighting service
for all public areas and special service areas of the Project in the manner and
to the extent deemed by Landlord to be necessary or desirable.  Landlord's
obligation with respect to repair as part of Basic Services under this Section
                                                                       -------
5.1 shall be limited to (i) the structural portions of the Building, (ii) the
---
exterior walls of the Buildings, including glass and glazing, gutters and
downspouts, (iii) the roof, (iv) mechanical, electrical, plumbing and life
safety systems that are considered Base Building Improvements (as defined
Exhibit C attached hereto), (v) heating, ventilating and air-conditioning
---------
equipment, ducts and appurtenances serving the Premises and Building to the
extent such equipment is considered Building Standard Improvements, and provided
that Landlord shall have no responsibility to maintain such equipment, ducts and
appurtenances that were installed by Tenant as Tenant Extra Improvements; (vi)
sewer, water, gas, telephone, and power lines and meters to the extent owned by
Landlord and serving the Premises and the Building but only to the extent such
lines and meters are located outside the Premises and were installed as part of
Base Building Improvements; and (vii) Common Areas.

       (e) Janitorial service on a five (5) day per week basis, excluding
holidays recognized by Landlord, not to exceed twelve (12) holidays in any
calendar year, plus any additional federal or state holidays established after
the date of this Lease. Janitorial service shall be of comparable scope and
quality to that provided in other Class A office buildings in the Market Area,
and shall initially be provided according to the specifications described on
Exhibit I attached hereto and incorporated herein by this reference.  Any
---------
janitorial service contracted with by Landlord shall be bonded. Landlord shall
have no liability for losses resulting from janitorial service or caused by
janitorial service employees. Landlord shall take reasonable steps, after
written notice from Tenant, to correct problems arising from the quality of
janitorial service provided, and to respond to security concerns believed to be
caused by such janitorial service provider.

       (f) An electrical system to convey power delivered by public utility or
by another provider of comparable quality and service selected by Landlord, in
amounts sufficient for normal office operations during Normal Office Hours as
provided in similar office buildings in the greater Bellevue area, but not to
exceed a total allowance of four (4) watts per square foot of Net Rentable Area
(which includes an allowance for lighting of the Premises), provided that no
single item of electrical equipment consumes more than one-half (0.5) kilowatt
at rated capacity or requires a voltage other than 120 volts, single phase. If
Tenant's electrical requirements, as estimated by Landlord based upon rated
capacity (or based upon metered consumption), exceed such amounts, Tenant shall
pay the full amount of such excess together with any additional cost necessary
to provide such excess capacity. If the installation and operation of Tenant's
electrical equipment requires additional air conditioning capacity above that
provided by the Building Standard Improvements (as defined in Exhibit C), then
                                                              ---------
the cost of installing additional air conditioning and operation thereof
(including utilities) shall be paid by Tenant and shall be considered an Extra
Service, subject to the provisions of Section 5.4 below.  Landlord may require
                                      -----------
Tenant to pay for the installation and operation of utility metering devices to
measure actual utility consumption in the Premises.  Notwithstanding the
foregoing, after Landlord has approved Tenant's TI Working Drawings pursuant to
Exhibit C, Landlord shall make good faith efforts to identify Upgrades (as
---------
defined in Exhibit C to the electrical facilities that will be required to
           ---------
accommodate the approved TI Working Drawings.  Landlord's approval of Upgrades
shall be governed by Exhibit C.  Tenant will have use of the approved Upgrades
                     ---------
to the electrical system  throughout the Term unless Tenant indicates that it no
longer needs such additional electrical facilities; provided, that the cost of
providing the Upgrades shall be at Tenant's sole cost and expense.

                                       19
<PAGE>

       (g) Installation, maintenance and replacement of building standard lamps,
bulbs and ballasts used in the Premises.

       (h) Security service for the Project, including electronic card key
access to the Building and Garage, a staffed security station, call boxes,
motion sensors, electromagnetic locks and surveillance cameras, or such other
comparable systems as Landlord deems appropriate; provided, however, that the
                                                  -------- --------
security service shall be provided by unarmed personnel and shall not include
alarm systems for special surveillance of the Premises; and provided, further,
                                                            --------  -------
that Landlord shall not be liable to Tenant or any third party for any breach of
security or any losses due to theft, burglary, battery or for damage done or
injury inflicted by persons in or on the Project.

       (i) Public elevator service to the Garage and the floors on which the
Premises are situated during Normal Office Hours; provided, however, that Tenant
                                                  --------  -------
shall have access to the Premises and the Garage twenty-four (24) hours per day,
seven (7) days per week, 365 days per year.

       (j) Correction of latent defects in the initial construction of the
Project to the extent Landlord reasonably deems necessary.

       (k) Except to the extent that Tenant or another tenant of the Project is
otherwise required to do so under the terms of any applicable lease, from and
after the Term Commencement Date Landlord shall comply with all Laws (as defined
in Section 6.9(a)), as amended from time to time, related to the condition of
   --------------
the Building and Project, including without limitation, all applicable Hazardous
Materials Laws (as defined in Section 7.2(a)), and the Americans with
                              --------------
Disabilities Act of 1990, as amended; provided, however, that Landlord shall
                                      --------  -------
have the right to contest the applicability or validity of such Laws as applied
to the Project.

       (l) Operation of the Garage during Normal Office Hours; provided,
                                                               --------
however, that Tenant shall have access to the Garage twenty-four (24) hours per
-------
day, seven (7) days per week, 365 days per year.

  5.2  Hours of Operation.  The term "Business Days" shall mean Monday through
Friday, excluding State and Federal holidays and all days that maintenance
employees of the Project are entitled to take off or to receive extra
compensation for, from time to time under their union contract or other
agreement, provided that all such holidays shall not exceed twelve (12) in any
calendar year, plus any additional state or federal holidays enacted after the
date of this Lease. The term "Normal Office Hours" shall mean Business Days from
7:00 a.m. to 6:00 p.m., and Saturdays from 8:00 a.m. to 1:00 p.m.

  5.3  Interruption.  Landlord shall not be liable for damages to either person
or property, nor shall Landlord be deemed to have evicted Tenant, nor shall
there be any abatement of Rent, nor shall Tenant be relieved from performance of
any covenant on its part to be performed hereunder by reason of (a) interruption
of, or variation or deficiency in, or failure of, the provision of Basic
Services; (b) breakdown or malfunction of lines, cables, wires, pipes, equipment
or machinery utilized in supplying or permitting Basic Services or
telecommunications; or (c) curtailment or cessation of Basic Services due to
causes or circumstances beyond the reasonable control of Landlord, including but
not limited to (i) strikes, lockouts or other labor disturbance or labor dispute
of any character, (ii) governmental regulation, moratorium or other governmental
action, (iii) inability, despite the exercise of reasonable diligence, to obtain
electricity, water or fuel from the providers thereof, and (iv) acts of God.
Landlord shall use reasonable diligence to make such repairs as may be required
to lines, cables, wires, pipes, equipment or machinery within the Project to
provide restoration of Basic Services and, where the cessation or interruption
of Basic Services has occurred due to circumstances or conditions beyond Project
boundaries or outside the Landlord's control, to cause the same to be restored,
by application or request to the provider thereof.

     Notwithstanding the foregoing, if an interruption or curtailment of any
Basic Service occurs by reason of Landlord's negligence, omission or breach of
its obligations hereunder, and (i) the interruption

                                       20
<PAGE>

causes the Premises or a portion thereof to be untenantable, (ii) Tenant ceases
to use the Premises or the untenantable portion thereof, and (iii) Tenant has
given Landlord (and all Senior Parties to the extent required by Section 14.7
                                                                 ------------
below) notice of such interruption, then, on the tenth (10th) consecutive
Business Day following the date on which all of the foregoing conditions are
satisfied, Base Rent shall abate (in whole or in part based on the number of
square feet that are untenantable) until the Premises are rendered tenantable;
provided, however, that in no event shall Tenant be entitled to an abatement
--------  -------
of Base Rent if the interruption was caused in whole or in part by any action or
inaction by Tenant or its employees, agents, contractors or invitees or by
events outside the direct control of Landlord. If Tenant is entitled to a rent
abatement under the prior provision and ten (10) Business Days after the date of
Tenant's notice under clause (iii) above Landlord has not commenced or is not
diligently pursuing a cure of the interruption, then Tenant may provide a second
notice to Landlord (and all Senior Parties to the extent required by Section
                                                                     -------
14.7 below) stating that if such interruption is not cured within ten (10)
----
Business Days thereafter, Tenant intends to commence cure and specifying the
steps that Tenant will take to cure the interruption. If Landlord has not
commenced or is not diligently pursuing a cure of the interruption within ten
(10) days after receipt of such second notice, Tenant may take steps to cure the
interruption as outlined in its notice to Landlord. Notwithstanding the
foregoing, Tenant shall not be permitted access to any equipment or facilities
that serve other tenants' premises in the Project. Tenant shall be solely
responsible for any loss or damage arising from its efforts to cure the
interruption.

  5.4  Extra Services.  Landlord shall provide to Tenant, subject to capacity
limitations and the needs of other tenants, and at Tenant's cost and expense
(and subject to the other limitations hereinafter set forth) the additional
services described below ("Extra Services"). Tenant shall pay Landlord for the
cost (including capital costs, out-of-pocket expenses and the allocated cost of
Landlord's employees) of providing any Extra Services, together with an
administrative fee equal to fifteen percent (15%) of such cost, within ten (10)
days following presentation of an invoice therefor by Landlord to Tenant.
Landlord shall credit the administrative fee collected from Tenant on a line-
item basis against Operating Costs if such fee is charged in connection with an
item that would otherwise be included within Operating Costs. The cost
chargeable to Tenant for Extra Services shall constitute additional Rent.

       (a) Any extra cleaning and janitorial services in excess of that required
for Building Standard Improvements.  Landlord shall, upon reasonable advance
notice, arrange for weekend janitorial service on terms acceptable to the
service provider, Tenant and Landlord.

       (b) Additional air conditioning and ventilating capacity (24 hours a day,
seven days a week, 365 days a year) required by reason of any electrical, data
processing or other equipment or facilities or services required to support the
same, in excess of that which would be required for Building Standard
Improvements.

       (c) Heating, ventilation, air conditioning or extra electrical equipment
or service during hours other than Normal Office Hours up to 24 hours a day,
seven days a week, 365 days a year. Landlord shall provide said heating,
ventilation and air conditioning or extra service solely upon the prior request
of Tenant given in compliance with the notice requirements and procedures that
Landlord may establish from time to time.

       (d) Repair and maintenance for which Tenant is responsible hereunder.

       (e) Any Basic Service in amounts reasonably determined by Landlord to
exceed the amounts required to be provided under Section 5.1, but only if
                                                 -----------
Landlord elects to provide such additional or excess service.

       (f) Any other item described in this Lease as an Extra Service or which
Landlord is not required to provide as part of Basic Services.

  5.5  Window Coverings.  All window coverings shall be provided by Landlord as
Building Standard Improvements. Tenant shall not remove, replace or install any
window coverings, blinds or

                                       21
<PAGE>

drapes on any exterior window without Landlord's prior written approval. Tenant
acknowledges that breach of this covenant shall directly and adversely affect
the exterior appearance of the Project and the operation of the heating,
ventilation and air conditioning systems.

  5.6  Graphics and Signage.

       (a) Building Standard.  Landlord shall provide the initial identification
of Tenant's name on the directory board in the main lobby of the Building and,
if the Premises is on a multi-tenant floor, in the elevator lobby, and the cost
thereof may be paid from the Cash Allowance.  All signs, notices and graphics of
every kind or character, visible in or from public corridors, the Common Areas
or the exterior of the Premises shall comply with the Design Manual and any
deviation shall be subject to Landlord's prior written approval.

       (b) Limited Right to Exterior Signage.  Provided that Tenant is leasing
and occupying a minimum of two and one half (2.5) floors in the Building and no
Event of Default is outstanding under this Lease, Tenant shall have the
exclusive right, at Tenant's sole cost and expense, to install and maintain a
sign identifying HomeGrocer.com, Inc. (the "Tenant Sign") on the upper portion
of the south side of the Building above the uppermost windows. Unless Tenant is
leasing the entire Building, Landlord shall have the right to install signage on
the Building below the glass line on the third (3rd) floor of the Building. The
design (including the design of any replacement sign) and method of installation
of the Tenant Sign shall be subject to Landlord's reasonable approval and all
City of Bellevue and other applicable governmental requirements. Tenant must
submit detailed plans for the Tenant Sign to Landlord for review and approval
before Tenant installs the Tenant Sign on the exterior of the Building. At the
end of the Lease Term or if Tenant no longer leases and occupies two and one
half (2.5) floors in the Building, Tenant shall remove the Tenant Sign and shall
restore the Building to its condition prior to installation of the signage, at
Tenant's sole cost and expense. The right to install and maintain the Tenant
Sign is personal to HomeGrocer.com, Inc. and shall not be assignable to any
other party without the consent of Landlord, which may be withheld or
conditioned in Landlord's sole discretion.

  5.7  Tenant Extra Improvements.  Landlord shall administer construction and
installation of all Tenant Extra Improvements in the Premises, at Tenant's
expense, such installation to be made and paid for pursuant to the provisions of
Exhibit C in the same manner as the Building Standard Improvements.  Landlord
---------
shall not seek the benefits of depreciation deductions or income tax credit
allowances for federal income tax reporting purposes with respect to any Tenant
Extra Improvements for which Tenant has fully reimbursed Landlord under this
Section 5.7. "Tenant Extra Improvements" shall mean the extent to which
-----------
the Tenant Improvements in the Premises differ materially from the Building
Standard Improvements as determined in Landlord's discretion. In instances where
this Lease refers to Tenant Extra Improvements as a standard for the provision
of services, maintenance, repair or replacement by Tenant or Landlord, such
reference shall be to the difference in required services, maintenance, repairs
or replacements between the Tenant Improvements as constructed in the Premises
and the Building Standard Improvements, had the Building Standard Improvements
been constructed in the Premises. Tenant Improvements (as defined in Exhibit C)
                                                                     ---------
shall be installed on behalf of Tenant and approved by Landlord pursuant to
Exhibit C. The Cash Allowance (as defined in Exhibit C) shall not be applied
---------
to the cost of any Tenant Extra Improvements.

  5.8  Peaceful Enjoyment.  Tenant shall peacefully have, hold and enjoy the
Premises, subject to the other terms hereof, provided that Tenant pays the Rent
and performs all of Tenant's covenants and agreements herein contained. This
covenant and the other covenants of Landlord contained in this Lease shall be
binding upon Landlord and its successors only with respect to breaches occurring
during its and their respective ownerships of Landlord's interest hereunder.

                                       22
<PAGE>

                                  ARTICLE 6.
                              TENANT'S COVENANTS
                              ------------------

  6.1  Compliance With Exhibit C.  Tenant shall comply with the terms and
                       ---------
conditions and deadlines set forth in Exhibit C and the Design Manual with
                                      ---------
respect to the construction of the Tenant Improvements in the Premises.

  6.2  Construction of Tenant Improvements.  Tenant shall reimburse Landlord for
all costs incurred by Landlord to construct or install Tenant Extra Improvements
on Tenant's behalf pursuant to Exhibit C and the Design Manual. All additions to
                               ---------
or improvements of the Premises, whether of Building Standard Improvements or
Tenant Extra Improvements, shall be and become the property of Landlord upon
installation and shall be surrendered to Landlord upon termination of this Lease
by lapse of time or otherwise, except as otherwise stated herein or as stated in
any subsequent approval of such additions or improvements. Although Tenant Extra
Improvements become the property of Landlord upon installation, they are
intended to be for the convenience of Tenant and are not intended to be a
substitute for Rent or any part thereof.

  6.3  Telecommunications.  Tenant shall install and maintain all required
intrabuilding network cable and other communications wires and cables necessary
to serve the Premises from the point of presence in the Building. Tenant shall
obtain any telecommunications services within the Building from vendors selected
by Landlord or approved by Landlord in its sole discretion (a "Provider"). In
the event that Tenant desires to obtain telecommunications services from a
Provider not selected by Landlord, Tenant shall submit to Landlord a list of
such proposed vendor(s) together with such other information regarding the
vendors as Landlord may request, including financial information, references
from at least two (2) owners of comparable projects in which the vendor has
experience and a description of the vendor's business activities in downtown
Bellevue. Landlord shall notify Tenant within thirty (30) Business Days of
receipt of the list if Landlord approves any of Tenant's proposed vendors.
Failure to notify Tenant shall be deemed disapproval. If Landlord approves any
telecommunications Provider selected by Tenant, the Provider must agree in
writing to abide by all of Landlord's policies and procedures for
telecommunications vendors and to pay for the use of any space outside the
Premises needed to install the vendor's equipment at the rate established by
Landlord from time to time. If Tenant desires to utilize the services of a
Provider not selected by Landlord, such Provider must obtain the written consent
of Landlord to the plans and specifications for its lines or equipment within
the Building prior to installation in the Building and must install such lines
and equipment in locations designated by Landlord. Tenant shall obtain any
necessary governmental permits relating to the installation, use or operation of
Provider's lines and equipment. Landlord shall provide Tenant and its Provider
and contractors with reasonable access to portions of the Building outside the
Premises to the extent necessary to install, maintain or replace any
telecommunications equipment serving the Premises. Landlord's consent to a
Provider shall not be deemed to constitute a representation or warranty as to
the suitability, capability or financial strength of any Provider. To the extent
the service by a Provider is interrupted, curtailed or discontinued for any
reason whatsoever, Landlord shall have no obligation or liability in connection
therewith. The provisions of this Section are solely for the benefit of Tenant
and Landlord, are not for the benefit of any third party, and no telephone or
telecommunications provider shall be deemed a third party beneficiary hereof.
Tenant acknowledges and agrees that Landlord has not represented or warranted
that Tenant will have unlimited access to riser space or other space outside the
Premises for the purpose of the installing telecommunications equipment and
Landlord shall have no obligation to construct or designate additional riser
space or equipment space to accommodate the Tenant's or its Provider's
telecommunications equipment. Tenant acknowledges that roof and riser space are
a finite commodity and that Landlord may in its discretion limit Tenant's total
use of such space to accommodate and take into account use of the Project
systems and the needs of other Project tenants. Notwithstanding the foregoing,
after Landlord has approved Tenant's TI Working Drawings pursuant to Exhibit C,
                                                                     ---------
Landlord

                                       23
<PAGE>

shall make the riser space or other space outside the Premises as shown in the
approved TI Working Drawings available to Tenant throughout the Term at Tenant's
expense.

  6.4  Taxes on Personal Property and Tenant Extra Improvements.  In addition
to, and wholly apart from its obligation to pay Tenant's Proportionate Share of
Operating Costs, Tenant shall be responsible for, and shall pay prior to
delinquency, all taxes or governmental service fees, possessory interest taxes,
fees or charges in lieu of any such taxes, capital levies, or other charges
imposed upon, levied with respect to or assessed against Tenant's Personal
Property (as defined in Section 11.1), on the value of its Tenant Extra
                        ------------
Improvements, on its interest pursuant to this Lease or on any use made of the
Premises or the Common Areas by Tenant in accordance with this Lease. To the
extent that any such taxes are not separately assessed or billed to Tenant,
Tenant shall pay the amount thereof as invoiced to Tenant by Landlord within ten
(10) days following receipt of such invoice.

  6.5  Repairs by Tenant.  Except to the extent that Landlord is responsible for
such repair or maintenance under Section 5.1 above, Tenant shall maintain and
                                 -----------
repair the Premises and keep the same in good condition, ordinary wear and tear
and damage by casualty and condemnation which is not required to be restored
pursuant to Section 12 and damage due solely to acts of Landlord (except to the
            ----------
extent such damage is covered by Tenant's insurance) excepted. Tenant's
obligation shall include, without limitation, the obligation to maintain and
repair all walls, floors, ceilings and fixtures and to repair all damage caused
by Tenant or Tenant's employees, agents, contractors, officers, directors,
partners, members, licensees, invitees and guests ("Tenant Parties") to the
Premises or the Project, whatever the scope of the work of maintenance or repair
required. Tenant shall repair all damage caused by removal of Tenant's movable
equipment or furniture or the removal of any Tenant Extra Improvements or
Alterations (as defined in Section 6.7) permitted or required by Landlord, all
                           -----------
as provided in Section 6.13. Any repair or maintenance that Tenant is required
               ------------
to perform under this Lease shall be performed at Tenant's expense by Landlord's
employees as an "Extra Service" subject to Section 5.4, or by contractors
                                           -----------
selected by Landlord. If Tenant fails or refuses to perform such work in a
timely and efficient manner, then Landlord may perform such work for the account
of Tenant as an Extra Service. Any work of repair and maintenance performed by
or for the account of Tenant by persons other than Landlord shall be performed
at Tenant's risk using contractors approved by Landlord prior to commencement of
the work and in accordance with procedures Landlord shall from time to time
establish. All such work shall be performed in compliance with all applicable
laws, ordinances, rules and regulations and Tenant shall provide to Landlord
copies of all permits and records of inspection issued or obtained by Tenant in
connection therewith to establish such compliance. Tenant shall not be required
to perform any maintenance or repair required solely by reason of the negligence
or wrongful acts of Landlord or its employees, agents, contractors, officers,
directors, partners, licensees, invitees and guests, Landlord's affiliates or
Landlord's members ("Landlord Parties"). Tenant shall promptly notify Landlord
of any needed repairs in the Premises or to the Building Components.

  6.6  Waste.  Tenant shall not commit or allow Tenant Parties to commit any
waste or damage in any portion of the Premises or the Project.

  6.7  Alterations, Additions, Improvements.  Tenant shall not make or allow to
be made any alterations, additions or improvements in or to the Premises
(collectively, "Alterations") without obtaining the prior written consent of
Landlord which shall not be unreasonably withheld or delayed if the proposed
Alterations satisfy the requirements of (a) through (f) below. Landlord's
consent shall not be required for Alterations provided that Tenant, prior to
commencing any Alteration, provides evidence satisfactory to Landlord that the
Alterations (a) comply with all applicable laws, ordinances, rules and
regulations; (b) are compatible with the Design Manual and the Building, its
architecture and its mechanical, electrical, HVAC and life safety systems; (c)
do not interfere with the use and occupancy of any other portion of the Building
by any other tenant or their invitees; (d) do not affect the structural portions
of the Building; (e) do not and shall not, whether alone or taken together with
other improvements, require the construction of any other improvements or
alterations within the Building;

                                       24
<PAGE>

(f) do not reduce the value of the Premises or increase the cost to Landlord of
reletting the Premises; and (g) are reasonably expected to cost less than Ten
Thousand Dollars ($10,000). Where Landlord's consent is required, in determining
whether to consent to the proposed Alterations, Landlord shall have the right to
review plans and specifications for proposed Alterations, construction means and
methods, the identity of any contractor or subcontractor to be employed on the
work for Alterations, and the time for performance of such work. Tenant shall
supply to Landlord any documents and information requested by Landlord in
connection with any Alterations to the Premises. Landlord may hire outside
consultants to review such documents and information and Tenant shall reimburse
Landlord for the cost thereof as well as Landlord's internal costs as an Extra
Service subject to Section 5.4. All Alterations permitted hereunder shall
                   -----------
be made and performed by Tenant or, at Landlord's election, may be performed by
Landlord or by contractors selected by Landlord, without cost or expense to
Landlord and as an Extra Service. Landlord may supervise and administer the
installation of Alterations as an Extra Service. Upon completion of any
Alterations, Tenant shall provide Landlord, at Tenant's expense, with a complete
set of "as built" plans on mylar and specifications reflecting the actual
conditions of the Alterations as constructed in the Premises, together with a
copy of such plans on diskette in the AutoCAD format or such other format as may
then be in common use for computer assisted design purposes. The obligations of
the parties with respect to removal of Alterations shall be controlled by
Section 6.13.
------------

  6.8  Liens.  Tenant shall keep the Premises and the Project free from any
liens arising out of any (a) work performed or material furnished to or for the
Premises, and (b) obligations incurred by or for Tenant or any person claiming
through or under Tenant. Tenant shall, within twenty (20) days following the
imposition of any such lien, cause such lien to be released of record by payment
or posting of a bond fully satisfactory to Landlord in form and substance and in
compliance with RCW 60.04. Landlord shall have the right at all times to post
and keep posted on the Premises any notices permitted or required by law, or
that Landlord shall deem proper for the protection of Landlord, the Premises,
the Project and any other party having an interest therein, from mechanics',
materialmen's and other liens. After the expiration of the foregoing twenty (20)
day period, if the lien has not been released or a bond posted, then Landlord
may cause such liens to be released by any means it deems proper, including,
without limitation, payment of any such lien, at Tenant's sole cost and expense.
All costs and expenses incurred by Landlord in causing such liens to be released
shall be repaid by Tenant to Landlord immediately upon demand, together with an
administrative fee equal to twenty percent (20%) of such costs and expenses. In
addition to all other requirements contained in this Lease, Tenant shall give
Landlord at least ten (10) Business Days prior written notice before
commencement of any construction on the Premises.

  6.9  Compliance With Laws and Insurance Standards.

       (a) Tenant shall comply with all federal, state and local laws,
ordinances, orders, rules, regulations and policies (collectively, "Laws"), now
or hereafter in force, as amended from time to time, in any way related to the
use, condition or occupancy of the Premises, regardless of when such Laws become
effective, including, without limitation, all applicable Hazardous Materials
Laws (as defined in Section 7.2(a)), the Americans with Disabilities Act of
                    --------------
1990, as amended and any laws prohibiting discrimination against, or segregation
of, any person or group of persons on account of race, color creed, religion,
sex, marital status, national origin or ancestry. Tenant shall also comply with
the terms of any transportation management program or similar programs affecting
the Building and required by any governmental authority. Tenant shall
immediately deliver to Landlord a copy of any notices received from any
governmental agency in connection with the Premises. It is the intention of
Tenant and Landlord that the obligations of Tenant under this Section 6.9 shall
                                                              -----------
apply irrespective of the scope of work required to achieve such compliance.
Tenant shall not use or occupy the Premises in any manner that creates, requires
or causes imposition of any requirement by any governmental authority for
structural or other upgrading of or improvement to the Building or the Project.

       (b) Tenant shall not occupy or use, or permit any portion of the Premises
to be occupied or used, for any business or purpose that is disreputable or
constitutes a fire hazard.  Tenant

                                       25
<PAGE>

shall not permit anything to be done that would increase the rate of fire or
other insurance coverage on the Project and/or its contents. If Tenant does or
permits anything to be done that increases the cost of any insurance policy
carried by Landlord, then Tenant, at Landlord's option, shall not be in default
under this Lease, but shall reimburse Landlord, upon demand, for any such
additional premiums as an Extra Service.

  6.10 Entry for Repairs, Inspection, Posting Notices, Etc.  After reasonable
notice (except in emergencies where no such notice shall be required), Landlord
or Landlord Parties shall have the right to enter the Premises to inspect the
same, to clean, to perform such work as may be permitted or required hereunder,
to make repairs to or alterations of the Project or other tenant spaces therein,
to deal with emergencies, to post such notices as may be permitted or required
by law to prevent the perfection of liens against Landlord's interest in the
Project or to exhibit the Premises to prospective tenants (during the last
twelve (12) months of the Term), purchasers, encumbrancers or others, or for any
other purpose as Landlord may deem necessary or desirable; provided, however,
                                                           --------  -------
that Landlord shall make reasonable efforts not to unreasonably interfere with
Tenant's business operations, and further provided that upon request by Tenant
and if Tenant makes a representative available upon demand, Landlord shall enter
the Premises only when accompanied by a representative of Tenant. In no event
shall Tenant be entitled to any abatement of Rent by reason of the exercise of
any such right of entry. Upon request by Tenant, Landlord shall request that any
direct competitor of Tenant entering the Premises with Landlord under this
Section 6.10 execute a commercially reasonable non-disclosure agreement on
------------
a form to be provided by Tenant before entering the Premises.

  6.11 No Nuisance.  Tenant shall not create any nuisance, or interfere with,
annoy, endanger or disturb any other tenant or Landlord in its operation of the
Project. Tenant shall not place any loads upon the floor, walls or ceiling of
the Premises that endanger the structure nor place any harmful liquids or
Hazardous Material (as defined in Section 7.2) in the drainage system of the
                                  -----------
Building. Tenant shall not permit any vibration, noise or odor to escape from
the Premises and shall not do or permit anything to be done within the Premises
which would adversely affect the quality of the air in the Building.

  6.12 Rules and Regulations.  Tenant shall comply with the rules and
regulations for the Project attached as Exhibit D and such amendments or
                                        ---------
supplements thereto as Landlord may adopt from time to time with prior notice to
Tenant, provided such rules and regulations are applicable to all tenants of the
Project, do not discriminate against Tenant and do not materially and
permanently increase Tenant's costs of operating in the Premises. Landlord shall
not be liable to Tenant for or in connection with the failure of any other
tenant of the Project to comply with any rules and regulations applicable to
such other tenant under its lease. In the event of any conflict between the
rules and regulations and the express terms of this Lease, the terms of this
Lease shall control.

  6.13 Surrender of Premises On Termination.  On or before the ninetieth (90th)
day preceding the Expiration Date, Tenant shall notify Landlord in writing of
the precise date upon which Tenant plans to surrender the Premises to Landlord.
On expiration of the Term, Tenant shall quit and surrender the Premises to
Landlord, broom clean, in good order, condition and repair as required by this
Lease, with all of Tenant's movable equipment, furniture, trade fixtures and
other personal property removed therefrom (ordinary wear and tear and damage to
an extent consistent with the Premises remaining in good condition and repair by
casualty and condemnation which is not required to be restored pursuant to
Section 12 excepted). In addition, Tenant shall remove all telecommunications
----------
and computer networking wiring and cabling serving the Premises from the
Building, unless Landlord requires such materials to be surrendered to Landlord.
All Alterations and Tenant Improvements shall be surrendered with the Premises
in good condition and repair, reasonable wear and tear (but only to an extent
consistent with the Premises remaining in good condition and repair) and
casualty damage which is not required to be restored pursuant to Section 12
                                                                 ----------
excepted, unless (a) Tenant has obtained Landlord's agreement in writing that it
can remove an Alteration or item of Tenant Improvements, or (b) Landlord has
notified Tenant that Tenant must remove an Alteration or item of Tenant
Improvements pursuant to the following paragraph. Any property of Tenant not
removed from the Premises shall be deemed, at Landlord's

                                       26
<PAGE>

option, to be abandoned by Tenant and Landlord may store such property in
Tenant's name at Tenant's expense, and/or dispose of the same in any manner
permitted by law. If Landlord desires to have the Premises, or any part or parts
thereof, restored to a condition that existed prior to installation of any
Tenant Extra Improvements or to the condition prior to making any Alterations,
Landlord may so notify Tenant in writing at any time prior to the regularly
scheduled Expiration Date (or if this Lease is sooner terminated, within ten
(10) days after the date of such termination); and upon receipt of such notice,
Tenant shall, at Tenant's sole cost and expense, so restore the Premises, or
such part or parts thereof, reasonable wear and tear (but only to an extent
consistent with the Premises remaining in good condition and repair) and
casualty damage excepted, before the regularly scheduled Expiration Date (or if
this Lease is sooner terminated, within ten (10) days after receipt of notice).
Tenant shall repair at its sole cost and expense, all damage caused to the
Premises or the Project by removal of Tenant's movable equipment or furniture
and such Tenant Improvements and Alterations as Tenant shall be allowed or
required to remove from the Premises by Landlord. If the Premises are not
surrendered as of the end of the Term in the manner and condition herein
specified, Tenant shall indemnify, defend, protect and hold Landlord and
Landlord Parties harmless from and against any and all damages resulting from or
caused by Tenant's delay or failure in so surrendering the Premises, including,
without limitation, any claims made by any succeeding tenant due to such delay
or failure. Tenant acknowledges that Landlord shall be attempting to lease the
Premises with any such lease to be effective upon expiration of the Term, and
failure to surrender the Premises could cause Landlord to incur liability to
such successor tenant for which Tenant shall be responsible.

     At the time Landlord gives its approval to any Alterations or Tenant Extra
Improvements, if requested by Tenant, Landlord shall inform Tenant as to which
elements or components of such Alterations or Tenant Extra Improvements Landlord
may require Tenant to remove from the Premises (and to have the Premises
restored as provided above) at the end of the Term.  Landlord shall notify
Tenant no later than sixty (60) days prior to the end of the Term (or within
thirty (30) days after an earlier termination of this Lease) which of the
components so identified must be removed by Tenant and, if no such notice is
provided, Landlord shall be deemed to have elected to have all such elements and
components removed by Tenant and to have the Premises restored as provided
above.

  6.14 Corporate Authority.  If Tenant is a corporation or limited liability
company or partnership or if Tenant is a partnership on whose behalf a partner
which is a corporation or limited liability company executes this Lease, then in
any such case, each individual executing this Lease on behalf of such
corporation, limited liability company, or partnership represents and warrants
that he or she is duly authorized to execute and deliver this Lease on behalf of
said corporation, limited liability company and/or partnership, as the case may
be.

  6.15 Utilities.  Tenant shall not obtain any electrical or other utility
services (other than telecommunications services) from vendors other than those
selected by Landlord or approved by Landlord in writing.

                                  ARTICLE 7.
                              HAZARDOUS MATERIALS
                              -------------------

  7.1  Prohibition and Indemnity With Respect to Hazardous Materials.  Except as
stated below, Tenant shall not cause or permit any Hazardous Material to be
brought upon, kept or used in or about the Premises by Tenant or Tenant Parties
without the prior written consent of Landlord. Tenant may, at Tenant's risk,
bring, store and use reasonable quantities of Permitted Hazardous Materials in
the Premises for their intended use. If Tenant violates this provision, or if
contamination of the Premises or the Real Property by Hazardous Material occurs
for which Tenant or any Tenant Party is responsible, or if Tenant's activities
or those of Tenant Parties result in or cause a Hazardous Materials Claim, then
Tenant shall indemnify, defend, protect and hold Landlord and Landlord Parties
harmless from and against any and all claims, judgments, damages, penalties,
fines, costs, expenses, liabilities or losses (including,

                                       27
<PAGE>

without limitation, diminution in value of the Premises or the Project, damages
for the loss or restriction on use of rentable or usable space or of any amenity
of the Premises or the Project, damages arising from any adverse impact on
marketing of space, and sums paid in settlement of claims, attorneys' fees,
consultants' fees and experts' fees) (collectively, "Claims") which arise during
or after the Term as a result of such contamination. This indemnification of
Landlord by Tenant includes, without limitation, costs incurred in connection
with any investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state or local government agency or
political subdivision because of any Hazardous Material present in the soil or
ground water on or under the Premises. The foregoing indemnity shall survive the
expiration or earlier termination of this Lease.

     Landlord may, at Landlord's risk, bring, store, and use reasonable
quantities of Permitted Hazardous Materials in the Building or Project for their
intended use.  With respect to any Hazardous Materials kept on or about the
Project or Building by Landlord, Landlord shall comply with all governmental
rules, regulations and requirements regarding the proper and lawful use, sale,
transportation, generation, treatment and disposal of Hazardous Materials.

  7.2  Definitions.  The following terms shall have the meanings given below for
purposes of this Lease.

       (a) "Hazardous Material" shall mean any (a) oil, diesel fuel, flammable
substances, explosives, radioactive materials, hazardous wastes or substances,
toxic wastes or substances or any other wastes, materials or pollutants which
(i) pose a hazard to the Project or to persons on or about the Project or (ii)
cause the Project to be in violation of any Hazardous Materials Laws; (b)
asbestos in any form, urea formaldehyde foam insulation, transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls, or radon gas; (c) chemical, material or substance defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "moderate risk waste," or "toxic substances" or words of similar import
under any applicable local, state or federal law or under the regulations
adopted or publications promulgated pursuant thereto, including, but not limited
to, the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. (S) 9601, et seq.; the Hazardous Materials
                                      -------
Transportation Act, as amended, 49 U.S.C. (S) 1801, et seq.; the Federal Water
                                                    -------
Pollution Control Act, as amended, 33 U.S.C. (S) 1251, et seq.; and the Model
                                                       -------
Toxics Control Act, as amended, RCW 70.105D; (d) chemicals, materials or
substances, exposure to which is prohibited, limited or regulated by any
governmental authority or may or could pose a hazard to the health and safety of
the occupants of the Project or the owners and/or occupants of property adjacent
to or surrounding the Project, or any other person coming upon the Project or
adjacent property; and (e) other chemicals, materials or substances which may or
could pose a hazard to the environment.

       (b) "Hazardous Materials Claims" shall mean any enforcement, cleanup,
removal, remedial or other governmental or regulatory actions, agreements or
orders instituted pursuant to any Hazardous Materials Laws; and any claims made
by any third party against Landlord, Tenant or the Project relating to damage,
contribution, cost recovery compensation, loss or injury resulting from the
presence, release or discharge of any Hazardous Materials.  Tenant shall
promptly cure and satisfy all Hazardous Materials Claims arising out of or by
reason of the activities or business of Tenant, Tenant Parties or any party
claiming by or through Tenant and its employees, agents, contractors, officers,
directors, partners, licensees, invitees and guests.

       (c) "Hazardous Materials Laws" shall mean any federal, state or local
laws, ordinances, orders, rules, regulations or policies, now or hereafter in
force, as amended from time to time, in any way relating to the environment,
health and safety, and Hazardous Materials (including, without limitation, the
use, handling, transportation, production, disposal, discharge or storage
thereof) or to industrial hygiene or the environmental conditions on, under or
about the Project, including, without limitation, soil, groundwater and indoor
and ambient air conditioning.

                                       28
<PAGE>

       (d) "Permitted Hazardous Materials" shall mean diesel fuel in amounts
that can be stored in the Generator and related fuel tank, batteries (including
those used in equipment providing uninterrupted power supply), as well as
Hazardous Materials which are contained in ordinary office supplies of a type
and in quantities typically used in the ordinary course of business within
executive offices of similar size and location, but only if and to the extent
that such fuel and supplies are transported, stored and used in full compliance
with all Hazardous Materials Laws and their packaging instructions and otherwise
in a safe and prudent manner. Hazardous Materials which are contained in
ordinary office supplies or diesel fuel which are transported, stored and used
in a manner which is not in full compliance with all Hazardous Material Laws and
their packaging instructions or which is not in any respect safe and prudent
shall not be deemed to be "Permitted Hazardous Materials" for the purposes of
this Lease.

                                  ARTICLE 8.
                            ASSIGNMENT OR SUBLEASE
                            ----------------------

  8.1  Consent Required.

       (a)    Prohibited Transactions.  Tenant shall not assign this Lease in
whole or in part, sublease all or any part of the Premises or otherwise sell,
transfer or hypothecate this Lease or grant any right to use or occupy the
Premises to another party (all of such events shall be referred to herein as a
"Transfer" and any such assignee, purchaser, subtenant or other transferee shall
be a "Transferee" for purposes of this Article) without Landlord's prior written
consent, which shall not be unreasonably withheld (after due consideration is
given to the factors listed in Section 8.2 below), conditioned or delayed.
                               -----------
Landlord shall not be required to consent to any Transfer in violation of the
terms of this Section 8. If Tenant intends to enter into a Transfer, Tenant
              ---------
shall give Landlord at least thirty (30) days written notice of such intent.
Tenant's notice shall set forth the effective date of such Transfer and, except
in the case of a Permitted Transferee, shall be accompanied by an exact copy of
the proposed agreements between Tenant and the proposed Transferee and complete
financial information regarding the proposed Transferee. Other than in the case
of a Permitted Transferee, if requested by Landlord, Tenant shall provide
Landlord with (a) any additional information or documents reasonably requested
by Landlord relating to the proposed Transfer or the Transferee, and (b) an
opportunity to meet and interview the proposed Transferee. This Lease may not be
transferred by operation of law. All of the following shall constitute Transfers
subject to this Article 8: (x) if Tenant is a corporation that is not publicly
                ---------
traded on a national exchange, then any transfer of this Lease by merger,
consolidation or liquidation, or any direct, indirect or cumulative change in
the ownership of, or power to vote the majority of Tenant's outstanding voting
stock, shall constitute a Transfer; (y) if Tenant is a partnership, then a
change in general partners in, or voting or decision-making control of, the
partnership shall constitute a Transfer; and (z) if Tenant is a limited
liability company, then a change in members in, or voting or decision-making
control of, the limited liability company shall constitute a Transfer. Any
change in ownership of Tenant's parent of the type described in (x), (y) or (z)
above shall also constitute a Transfer subject to this Article 8. These
                                                       ---------
provisions shall apply to any single transaction or any series of related or
unrelated transactions having the effect described.

       (b)    Permitted Transactions.  The Landlord now consents to the
reincorporation of Tenant in Washington and to the public stock offering now
being contemplated by Tenant and agrees that such transactions will not
constitute a Transfer subject to this Article 8.  In addition, Tenant may
                                      ---------
transfer the Lease in connection with any corporate restructuring within the
family of parent and subsidiary corporations or entities owned or controlled by
Tenant for tax and other legitimate business purposes without the Landlord's
consent but after notice as set forth below, provided that after such
restructuring (i) Tenant must be and must remain part of a consolidated group
that contains the same assets and management as prior to the restructuring, (ii)
Tenant shall have a creditworthiness which is equal to or greater than that of
Tenant at the time of the proposed Transfer, as determined by Landlord in its
reasonable discretion and (iii) the "tenant" after such transfer must be and
remain the entity at the highest

                                       29
<PAGE>

level within the corporate structure. So long as the requirements of (i) through
(iii) are satisfied, each of the foregoing entities shall be considered a
"Permitted Transferee". In the event Tenant desires to effect any Transfer to
Permitted Transferee, Tenant must provide Landlord with at least thirty (30)
days prior written notice of such proposed Transfer, together with such evidence
as Landlord may request to establish that the proposed Transferee is a Permitted
Transferee.

     8.2  Landlord's Options.  If Tenant proposes a Transfer, other than to a
Permitted Transferee, then Landlord may elect to (a) terminate this Lease as to
the space so affected as of the date so specified by Tenant in its notice under
Section 8.1, in which event Tenant shall be relieved of all further obligations
-----------
hereunder as to such space unless within ten (10) days following notice from
Landlord that it has elected this option, Tenant withdraws its Transfer
proposal; (b) permit Tenant to complete the Transfer on the terms set forth in
such notice, subject, however, to such reasonable conditions as Landlord may
require and to the balance of this Article 8, or (c) deny the request to
                                   ---------
Transfer the Lease. Landlord shall have a period of twenty (20) days following
any interview and receipt of such additional information as Landlord requests
(or thirty (30) days from the date of Tenant's original notice if Landlord does
not request additional information or an interview) within which to respond to
Tenant's request. If Landlord fails to notify Tenant in writing of such election
within said period, Landlord shall be deemed to have waived options (a) and (b)
above and to have elected option (c) and denied consent to the proposed
Transfer. In deciding whether to consent to a proposed Transfer, Landlord may
consider any factors that Landlord deems relevant, including but not limited to
the following: (i) whether the use of the Premises by the proposed Transferee
would be a Permitted Use; (ii) whether the proposed Transferee is of sound
financial condition and has sufficient financial resources and business
expertise, as determined by Landlord, to perform under this Lease; (iii) whether
the proposed Transferee's use involves the storage, use, treatment or disposal
of any Hazardous Materials; (iv) whether the proposed use or the proposed
Transferee could cause the violation of any covenant or agreement of Landlord to
any third party or sublessee or permit any other tenant to terminate its lease;
(v) whether the proposed Transferee leases or occupies any other space in the
Building; (vi) whether the terms of the Proposed Transfer are reasonable; and
(vii) whether there is other comparable space available for lease in the
Project. Failure by Landlord to approve a proposed Transfer shall not cause a
termination of this Lease, and the sole remedy of Tenant shall be an action for
injunctive or declaratory relief.

     Notwithstanding the foregoing, Landlord shall not have the right to
recapture under Section 8.2(a) above if Tenant proposes a Transfer, which (i)
                --------------
when added to the space subject to any previous Transfers by Tenant shall result
in total space transferred equal to less than one-third (1/3) of the Net
Rentable Area in the Premises; and (ii) is for a period of less than fifty
percent (50%) of the remaining Term under this Lease, measured from the
commencement date of the proposed Transfer; provided, however, that Landlord
                                            --------  -------
shall have right to recapture under Section 8.2(a) for any Transfer proposed
                                    --------------
during the final two (2) years of the Term, including any Extension Term
although Tenant shall have the right to exercise its Extension Option (if any)
in order to avoid such recapture.

     8.3  Minimum Rental; Division of Excess Rent.  In any Transfer of this
Lease, Tenant shall seek to obtain from the Transferee consideration reflecting
the then-current Fair Market Rent (as defined in Section 2.6(b)(iii) above but
                                                 -------------------
such determination shall not be subject to arbitration) for the space subject to
such Transfer. Any rent or other consideration realized by Tenant in connection
with or as a result of any Transfer in excess of the Base Rent payable
hereunder, after first deducting all reasonable and customary costs actually
incurred by Tenant to effect such Transfer (such as tenant improvements,
brokerage fees, advertising costs and the like) shall be divided equally between
Landlord and Tenant and Landlord's share shall be paid promptly to Landlord as
Rent hereunder; provided, however, that Landlord shall be entitled to receive
                --------  -------
the total rent and other consideration if an Event of Default is then
outstanding under this Lease.

     8.4  Tenant Not Released. No Transfer by Tenant shall relieve Tenant of any
obligation under this Lease. Any Transfer that conflicts with the provisions
hereof shall be void. No consent by

                                       30
<PAGE>

Landlord to any Transfer shall constitute a consent to any other Transfer nor
shall it constitute a waiver of any of the provisions of this Article 8 as they
                                                              ---------
apply to any such future Transfers. Following any Transfer, the obligations for
which the Tenant or subsequent transferor remains liable under this Lease shall
include, without limitation, any obligations arising in connection with any
amendments to this Lease executed by Landlord and the Transferee, whether or not
such amendments are made with knowledge or consent of the transferor.

     8.5  Written Agreement. Any Transfer must be in writing and the Transferee
shall assume in writing, for the express benefit of Landlord, all of the
obligations of Tenant under this Lease with respect to the space transferred,
provided that no such assumption shall be deemed a novation or other release of
the transferor. Tenant shall provide to Landlord true and correct copies of the
executed Transfer documents and any amendment thereto during the Term.

     8.6  No Transfer Period. Tenant shall not enter into any Transfer of this
Lease, other than a Permitted Transfer, until the earlier of (a) two (2) years
after the Term Commencement Date, or (b) the date on which the Project is
eighty-five percent (85%) leased and occupied, provided, however, that during
such period, Tenant may enter into a Transfer for a term of eighteen (18) months
or less, subject to all other terms and conditions of this Article 8.
                                                           ---------

     8.7  Conditions. Landlord may condition its consent to any proposed
Transfer on such conditions as Landlord may require including, construction of
any improvements deemed necessary or appropriate by Landlord by reason of the
Transfer. Any improvements, additions, or alterations to the Building or the
Project that are required by any law, ordinance, rule or regulation, or are
deemed necessary or appropriate by Landlord as a result of any Transfer
hereunder, shall be installed and provided by Tenant in accordance with Section
                                                                        -------
6.7, without cost or expense to Landlord.
---

     8.8  Expenses. Landlord may hire outside consultants to review the Transfer
documents and information. Tenant shall reimburse Landlord for all costs and
expenses incurred by Landlord in connection with any request for consent under
this Article 8 (even if consent is denied or the request is withdrawn) and such
     ---------
reimbursement shall include the allocated cost of Landlord's or its management
company's staff plus all out-of-pocket expenses, including reasonable attorneys'
fees, on demand.

     8.9  No Restriction on Landlord. Without liability to Tenant, Landlord
shall have the right to offer and to lease space in the Project, or in any other
property, to any party, including without limitation parties with whom Tenant is
negotiating, or with whom Tenant desires to negotiate, a Transfer.

     8.10 No Leasehold Financing. Tenant shall not encumber, pledge or mortgage
the whole or any part of the Premises or this Lease, nor shall this Lease or any
interest thereunder be assignable or transferable by operation of law or by any
process or proceeding of any court or otherwise without the prior written
consent of Landlord, which consent may be given or withheld in Landlord's sole
discretion.

                                  ARTICLE 9.
                    CONDITION AND OPERATION OF THE PROJECT
                    --------------------------------------

     9.1  No Warranty. Landlord's entire obligation with respect to the
condition of the Premises, its suitability for Tenant's uses and the
improvements to be installed therein shall be as stated in Exhibit C. Landlord
                                                           ----------
shall have no other obligation of any kind or character, express or implied,
with respect to the condition of the Premises, Building or Project or the
suitability thereof for Tenant's purposes, and Tenant acknowledges that it has
neither received nor relied upon any representation or warranty made by or on
behalf of Landlord with respect to such matters.

     9.2  Project Alterations. Landlord may, in its sole discretion, at any time
and from time to time: (a) make alterations, structural modifications, seismic
modifications or additions to the Building (including building additional
stories) or the Project; (b) change, add to, eliminate or reduce the extent,
size, shape or configuration of any aspect of or improvement (including the
Buildings) within the Project

                                       31
<PAGE>

or its operations; (c) change the arrangement, character, use or location of
corridors, stairs, toilets, mechanical, plumbing, electrical or other operating
systems or any other parts of the Building; (d) change the name, number or
designation by which the Building or the Project is commonly known; or (e) alter
or relocate any portion of the Common Areas or any other common facility. None
of the foregoing acts shall be deemed an actual or constructive eviction of
Tenant, entitle Tenant to any reduction of Rent or result in any liability of
Landlord to Tenant. Except as otherwise provided in this Lease, Landlord shall
have the exclusive rights to the airspace above and around, and the subsurface
below, the Premises and the Project, including, without limitation, the
exclusive right to use all exterior walls, roofs and other portions of the
Building for signs, notices and other promotional purposes. Except as otherwise
provided in this Lease, Landlord shall have the sole and exclusive right to
possession and control of the Common Areas and all other areas of the Project
outside the Premises. Notwithstanding the foregoing, Landlord's exercise of its
rights under this Section 9.2: (i) shall not materially, adversely interfere
                  -----------
with Tenant's use and quiet enjoyment of the Premises, (ii) shall be consistent
with the characteristics of a Class A office project, (iii) shall not reduce the
parking specifically allotted to Tenant under this Lease, and (iv) shall not
materially and permanently increase Tenant's out-of-pocket cost of operating in
the Premises.

                                  ARTICLE 10.
                                 LENDER RIGHTS
                                 -------------

     10.1 Subordination. This Lease is subject and subordinate to each ground or
land lease which may now or hereafter cover all or any portion of the Project
and to each mortgage, deed of trust or other financing or security agreement
which may now or hereafter encumber all or any portion of the Project and to all
renewals, modifications, consolidations, replacements and extensions thereof
(collectively, the "Senior Instruments"). This Section 10.1 shall be self-
                                               ------------
operative and no further instrument of subordination need be required by any
lessor or any holder or beneficiary of any Senior Instrument (collectively, the
"Senior Parties").  Tenant, however, upon Landlord's or any Senior Party's
request, shall execute promptly any certificate or instrument in the form
required by any Senior Party to confirm such subordination, including but not
limited to an agreement in substantially the form attached hereto as Exhibit G,
                                                                     ---------
and shall deliver the same to such party within ten (10) days following receipt
thereof.  Tenant's failure to execute any such certificate or instrument and
deliver the same as required hereunder shall be a material default under this
Lease.

     10.2 Attornment. In the event of the enforcement by any Senior Party under
any Senior Instrument provided for by law or by such Senior Instrument, Tenant
shall attorn to any person or party succeeding to the interest of Landlord as a
result of such enforcement including any purchaser of all or any portion of the
Project at a public or private foreclosure sale or exercise of a power of sale
under such mortgage or deed of trust (collectively, "Successor") and shall
recognize such Successor as the Landlord under this Lease without change in the
terms or other provisions of this Lease; provided, however, that such Successor
                                         --------  -------
shall not be (a) subject to any credits, offsets, defenses or claims which
Tenant may have against any prior landlord; (b) bound by any payment of Rent for
more than one (1) month in advance; (c) bound by any amendment or modification
of this Lease made after the applicable Senior Instrument is placed against the
Project (and Tenant has been given notice thereof) without the written consent
of such Senior Party; (d) liable for any act, omission, neglect or default of
any prior landlord; or (e) required to make any capital improvements to the
Project or the Premises which Landlord may have agreed to make but had not
completed. Notwithstanding the foregoing, a Senior Party may elect at any time
to cause its interest in the Project to be subordinate and junior to Tenant's
interest under this Lease by filing an instrument in the real property records
of King County, Washington effecting such election and providing Tenant with
notice of such election. In no event shall any Senior Party or any Successor
have any liability or obligation whatsoever to Tenant or Tenant's successors or
assigns for the return of all or any part of the Security Deposit unless, and
then only to the extent that, such Senior Party or Successor actually receives
all or any part of the Security Deposit. Tenant, upon Landlord's or any
Successor's request, shall execute promptly a written agreement to confirm such
attornment and if Tenant fails or

                                       32
<PAGE>

refuses to do so within ten (10) days after written request therefor, such
failure or refusal shall constitute a material default by Tenant under this
Lease.

     10.3 REAs. Tenant agrees that this Lease and the rights of Tenant hereunder
are subject and subordinate to any reciprocal access or easement agreements
whether now or in the future affecting the Project (the "REAs"); provided,
                                                                 --------
however, any future REAs shall not materially adversely affect any specific
--------
rights granted to Tenant hereunder with respect to parking or access.

     10.4 Estoppel Certificate. Within ten (10) days of a written request from
Landlord, Tenant shall execute and deliver to Landlord any estoppel certificate
addressed to Landlord and/or to any Senior Party or prospective Senior Party or,
any purchaser or prospective purchaser of all or any portion of, or interest in,
the Project, on the form attached hereto as Exhibit F or such other form
                                            ---------
supplied by Landlord or such other addressee, certifying as to such facts (if
true) and agreeing to such reasonable notice and cure provisions and other
matters as the addressee may reasonably require. In the event that Tenant fails
or refuses to deliver an estoppel certificate to Landlord within ten (10) days
of a written request, then Tenant shall conclusively be deemed, without
exception, to have acknowledged the correctness of the statements set forth in
the form of certificate provided and Tenant shall be estopped from denying the
correctness of each such statement, and the addressee thereof may rely on the
correctness of the statements in such form of certificate, as if made and
certified by Tenant. Tenant hereby constitutes and appoints Landlord as Tenant's
attorney-in-fact to execute any such certificate for and on behalf of Tenant in
the event Tenant fails to execute such certificate or instrument and deliver the
same within ten (10) days following Landlord's request.

     10.5 Nondisturbance. Landlord shall use reasonable efforts to obtain a Non-
Disturbance and Attornment Agreement in the form attached as Exhibit G from its
                                                             ---------
current construction lender on the Project as soon as possible following
execution of this Lease. Any subordination and attornment agreement required of
Tenant under this Lease shall include a non-disturbance provision similar to
that provided in Exhibit G.
                 ---------

                                  ARTICLE 11.
                                   INSURANCE
                                   ---------

     11.1 Landlord's Casualty Insurance. Landlord shall maintain, or cause to be
maintained, a policy or policies of insurance with the premiums thereon fully
paid in advance, issued by and binding upon an insurance company of good
financial standing, insuring the Project against loss or damage by fire or other
insurable hazards (including earthquake loss if Landlord elects to maintain such
coverage) and contingencies for the full insurable value thereof or, in the
alternative, insuring for one hundred percent (100%) of the replacement cost
thereof (or such minimum amount as shall be required to eliminate operation of
coinsurance provisions), exclusive of excavations and foundations(as determined
by Landlord and its insurer from time to time). Landlord shall not be obligated
to insure any of Tenant's furniture, equipment, machinery, trade-fixtures,
personal property, goods or supplies ("Tenant's Personal Property"), or any
Tenant Extra Improvements or Alterations that Tenant may make upon the Premises.
If the annual premiums paid by Landlord for such casualty insurance exceed the
standard premium rates because the nature of Tenant's operations result in
extra-hazardous or higher than normal risk exposure, then Tenant shall, within
ten (10) days of receipt of appropriate premium invoices, reimburse Landlord for
such increases in premium. All insurance proceeds payable under Landlord's
insurance carried hereunder shall be payable solely to Landlord and Tenant shall
have no interest therein.

     11.2 Liability Insurance. Landlord (with respect to the Project) and Tenant
(with respect to the Premises and Project) shall each maintain or cause to be
maintained a policy or policies of commercial general liability insurance with
the premiums thereon fully paid in advance, issued by and binding upon an
insurance company of good financial standing, such insurance to afford minimum
protection of not less than Five Million Dollars ($5,000,000.00), per
occurrence, combined single limit, for bodily injury (including death and
property damage). The coverages required to be carried shall be

                                       33
<PAGE>

extended to include, but not to be limited to, blanket contractual liability,
personal injury liability (libel, slander, false arrest and wrongful eviction),
and broad form property damage liability. Tenant's contractual liability
insurance shall apply to Tenant's indemnity obligations under this Lease. The
certificate evidencing Tenant's insurance coverage required hereunder shall
state that the insurance includes the liability assumed by Tenant under this
Lease. Tenant's insurance required hereunder shall be written to be primary with
any other insurance available to Landlord being excess. Upon request of Tenant,
Landlord shall provide Tenant reasonable evidence that the insurance required to
be maintained hereunder by Landlord is in full force and effect.

     11.3 Tenant's Additional Insurance.

          (a) All Risk Coverage. Tenant shall provide insurance coverage during
the Term against loss or damage by fire and such other risks as are from time to
time included in an "all risk" policy (including without limitation sprinkler
leakage and water damage), insuring the full replacement cost of any Tenant
Extra Improvements, any Alterations and Tenant's Personal Property.

          (b) Workers' Compensation Insurance. Throughout the Lease Term,
Tenant, at its own expense, shall keep and maintain in full force and effect
workers' compensation insurance in an amount equal to at least the minimum
statutory amount then currently required in the State of Washington.

          (c) Other. Such other form or forms of insurance as are generally
required or obtained for similar projects, as Landlord or any mortgagee of
Landlord may reasonably require from time to time, against the same or other
insurable hazards which at the time are commonly insured against in the case of
premises similarly situated, due regard being given to the height and type of
buildings thereon and their construction, use and occupancy.

          (d) Form of Policy. All policies required to be carried by Tenant,
under this Article 11 shall be written with financially responsible companies
           ----------
with a Best & Company rating of "B+IX" or better, and shall name Landlord,
Landlord's property manager and any Senior Party as an additional insured, and
each insurer shall agree not to cancel or alter the policy without at least
thirty (30) days prior written notice to Landlord and all named and additional
insureds. Any deductible or self-insurance provisions under any insurance
policies maintained by Tenant shall be subject to Landlord's prior written
approval, which shall not be unreasonably withheld, conditioned, or delayed.

          (e) Certificates. Prior to commencement of the Term, and thereafter
during the Term, within twenty (20) days prior to the expiration date of any
such coverage, Tenant shall deliver to Landlord a certificate or certificates of
the insurance required hereunder. If Tenant fails to provide such proof of
insurance, Landlord shall be authorized (but not required) to procure such
coverage in the amounts stated with all costs thereof to be charged to Tenant
and paid within ten (10) days of written invoice therefor as an Extra Service.

     11.4 Indemnity and Exoneration.

          (a) Landlord shall not be liable to Tenant for any loss, damage or
injury to person or property caused by (i) theft, fire, vandalism, assault,
battery, act of God, acts of the public enemy, acts of terrorists or criminals,
riot, strike, insurrection, war, court order, requisition or order of
governmental body or authority, whether or not the negligence of Landlord was a
partial cause of such loss, damage or injury, or (ii) the active negligence or
willful misconduct of Tenant or Tenant Parties, or (iii) repair or alteration of
any part of the Project or failure to make any such repair except as expressly
otherwise provided in this Lease.

          /s/ TD
          -----------------
          Tenant's Initials

          (b) Tenant shall indemnify, defend, protect and hold Landlord and
Landlord Parties harmless from and against any and all Claims arising out of or
related to claims of injury to or death of

                                       34
<PAGE>

persons, damage to property occurring or resulting directly or indirectly from
the use or occupancy of the Premises or activities of Tenant or Tenant Parties
in or about the Premises or Project; provided, however, that the foregoing
                                     -------- --------
indemnity shall not be applicable to claims arising solely by reason of the
active negligence or willful misconduct of Landlord, unless such claims are or
should be covered by insurance required to be carried by Tenant under the terms
of this Lease, in which case such claims shall be subject to the terms of this
indemnity.

          (c) Landlord shall indemnify, defend, protect and hold Tenant and
Tenant Parties harmless from and against any and all claims, judgments, damages,
penalties, fines, costs, expenses, liabilities or losses arising solely out the
active negligence or willful misconduct of Landlord, unless such claims are or
should be covered by insurance required to be carried by Tenant under the terms
of this Lease, in which case such claims shall not be subject to the terms of
this indemnity; provided, however, that the foregoing indemnity shall not
                -------- --------
include claims arising, in whole or in part, by reason of the negligence or
willful misconduct of Tenant or Tenant Parties.

          (d) To the extent, but only to the extent, necessary to fully
indemnify the parties from claims made by the indemnifying party or its
employees, the indemnities herein constitute a waiver of the indemnifying
party's immunity under the Washington Industrial Insurance Act, RCW Title 51, as
between Landlord and Tenant only.

     11.5 Indemnity for Liens. Tenant shall indemnify, defend and protect
Landlord and hold and save Landlord harmless of and from any and all loss,
claims, proceedings, cost, damage, injury, causes of action, liabilities or
expense arising out of or in any way related to work or labor performed,
materials or supplies furnished to or at the request of Tenant or in connection
with performance of any work done for the account of Tenant in the Premises or
the Project.

     11.6 Waiver of Subrogation Rights. Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each waive all rights of recovery, claim,
action or cause of action, against the other, Tenant Parties or Landlord
Parties, as applicable, for any loss or damage that may occur to the Premises,
or any improvements thereto, or the Project or any personal property of such
party therein, by reason of fire, the elements, or any other cause that could be
insured against under the term of an "all risk" insurance policy or other
casualty insurance coverages which are required to be obtained pursuant to this
Lease, regardless of cause or origin, including negligence of the other party,
Landlord Parties or Tenant Parties, as applicable, and each party covenants that
no insurer shall hold any right of subrogation against such other party. Tenant
shall advise its insurers of the foregoing and such waiver shall be a part of
each policy maintained by Tenant that applies to the Premises, any part of the
Project or Tenant's use and occupancy of any part thereof.

     11.7 Concurrent Negligence.  Notwithstanding Section 11.4 above, in the
                                                  ------------
event of concurrent negligence of Tenant or Tenant Parties, on the one hand, and
Landlord, on the other hand, which concurrent negligence results in injury to
damage to persons or property occurring in, on or about the Premises, Building
or Project, either party's obligation to indemnify the other party as set forth
in Section 11.4 shall be limited to the extent of the negligence of the
   ------------
indemnifying party or such other parties for whom the indemnifying party is
responsible, including the indemnifying party's proportional share of reasonable
attorneys' fees and costs incurred in connection with any claim, action or
proceeding brought with respect to such injury or damage.

                                  ARTICLE 12.
                          CASUALTY AND EMINENT DOMAIN
                          ---------------------------

     12.1 Damage and Destruction. If a fire or other casualty in the Premises or
the Project occurs, Tenant shall immediately give notice thereof to Landlord.
The following provision shall apply to any fire or other casualty:

                                       35
<PAGE>

     (a) If the damage is limited solely to the Premises and the Premises can,
in the reasonable opinion of Landlord, be made tenantable with all damage
repaired within six (6) months from the date of damage or destruction, then
Landlord shall diligently rebuild the same; provided, however, that Landlord
                                            --------  -------
shall not be obligated to expend for such repair an amount in excess of the
insurance proceeds recovered or recoverable as a result of such damage.

     (b) If portions of the Project outside the boundaries of the Premises are
damaged or destroyed (whether or not the Premises are also damaged or destroyed)
and (i) the Premises and the Project can both, in the reasonable opinion of
Landlord, be made tenantable with all damage repaired within six (6) months from
the date of damage or destruction, and (ii) Landlord determines that such
reconstruction is economically feasible, then Landlord shall diligently rebuild
the same; provided, however, that Landlord shall not be obligated to expend for
          --------  -------
such repair an amount in excess of the insurance proceeds recovered or
recoverable as a result of such damage and Landlord shall have no obligation to
repair or restore Tenant Extra Improvements or Alterations.

     (c) If (i) the Premises should be damaged by any occurrence not covered by
Landlord's insurance, or (ii) the Premises or the Building should be damaged to
the extent that the damage cannot, in Landlord's reasonable opinion be restored
within six (6) months from the date of damage, or (iii) the Building should be
damaged to the extent of more than fifty percent (50%) of the cost of
replacement thereof, notwithstanding that the Premises may be undamaged, or (iv)
if the damage occurs during the last two (2) years of the Term (including any
Extension Term), Landlord may elect either to repair or rebuild the Premises or
the Building or to terminate this Lease upon giving notice in writing of such
election to Tenant within sixty (60) days after the happening of the event
causing the damage.

     (d) During any period when the Premises are rendered untenantable because
of any casualty and Tenant does not occupy the Premises, Base Rent shall abate
proportionately until such time as the Premises are made tenantable as
reasonably determined by Landlord, and no portion of the Rent so abated shall be
subject to subsequent recapture; provided, however, that there shall be no such
                                 -------- --------
abatement if the damage is caused by Tenant or any Tenant Party.

     (e) The proceeds from any insurance paid by reason of damage to or
destruction of the Project or the Building or any part thereof, the Building
Standard Improvements or any other element, component or property insured by
Landlord shall belong to and be paid to Landlord subject to the rights of any
mortgagee of Landlord's interest in the Project or the beneficiary of any deed
of trust that constitutes an encumbrance thereon.  If this Lease is terminated
by either party as a consequence of a casualty in accordance with any of the
provisions of this Section 12.1, all proceeds of insurance required to be
                   ------------
maintained either by Landlord or Tenant shall be paid to Landlord subject to the
rights of any mortgagee of Landlord's interest in the Project or the beneficiary
of any deed of trust that constitutes an encumbrance thereon; provided, however,
                                                              -------- --------
that Tenant shall be paid all proceeds of insurance payable in connection with
Tenant's trade fixtures, furnishings, equipment and all other items of personal
property of Tenant.

     (f) If the Premises, or any part thereof, or any portion of the Building
necessary for Tenant's use of the Premises, are damaged or destroyed during the
last twelve (12) months of the Term, or any extension thereof, Landlord or
Tenant may terminate this Lease by giving written notice thereof to the other
party within thirty (30) days after the date of the casualty, in which case this
Lease shall terminate as of the later of the date of the casualty or the date of
Tenant's vacation of the Premises.

     (g) Except to the extent expressly provided in this Lease, nothing
contained in this Lease shall relieve Tenant of any liability to Landlord or to
Landlord's insurance carriers that Tenant may have under law or under the
provisions of this Lease in connection with any damage to the Premises or the
Building by fire or other casualty.

                                       36
<PAGE>

          (h) If Landlord rebuilds the Premises under any provision of this
Article 12, Tenant shall repair and restore Building Standard Improvements at
----------
Tenant's expense so that the Premises are restored to a tenantable condition, in
compliance with all Laws, and suitable for general office use consistent with a
Class A office project, or, at Landlord's election, Landlord may repair and
rebuild the Building Standard Improvements so that the Premises are in such
condition, at Tenant's sole cost and expense in accordance with Section 6.7 of
                                                                -----------
this Lease.  So long as it does not delay completion of the restoration, Tenant
may elect, at its expense, to update or redecorate the Premises in connection
with the restoration but any changes shall be considered Alterations subject to
the provisions of Section 6.7 above.
                  -----------

          (i) Notwithstanding any other provision of this Section 12.1, within
                                                          ------------
ninety (90) days after the occurrence of any casualty, Landlord shall notify
Tenant as to the expected period of time needed to complete any repair or
restoration. If (i) Landlord estimates that it will take more than three hundred
(300) days to complete the repair or restoration after receipt of insurance
proceeds, and (ii) the damage or destruction renders a material portion of the
Premises untenantable and Tenant ceases to occupy such portion of the Premises,
then Tenant may elect to terminate this Lease by giving Landlord written notice
of termination within twenty (20) days after receipt of Landlord's notice. If
Tenant does not provide written notice within such time period, Tenant shall
have permanently waived its right to terminate the Lease pursuant to this
provision. In addition, if Landlord has not completed any restoration within
three hundred sixty-five (365) days after receipt of sufficient insurance
proceeds (as such period may be extended by any period of Force Majeure) and is
not diligently pursuing completion of restoration then Tenant may notify
Landlord in writing that Tenant wishes to terminate the Lease. If Landlord has
not completed restoration and delivered possession of the restored Premises to
Tenant within thirty (30) days after the date of such notice then this Lease
shall terminate and be of no further force and effect. If Landlord completes
restoration and delivers possession of the restored Premises to Tenant within
thirty (30) days after the date of such notice then this Lease shall continue in
full force and effect.

     12.2 Condemnation.

          (a) If such portion of the Premises or any portion of the Project
shall be taken or condemned for any public purpose and the remainder of the
Premises are rendered untenantable, as reasonably determined by Landlord, this
Lease shall, at the option of either party, terminate as of the date of such
taking. If this Lease is not terminated in its entirety then it shall terminate
only as to the portion of the Premises taken and Base Rent and Tenant's
Proportionate Share shall be adjusted to reflect the new Net Rentable Area of
the Premises and/or the Project. If any portion of the Project shall be taken or
condemned for any public purpose to such an extent as to render the Project not
economically viable in Landlord's discretion, then whether or not the Premises
or any part thereof is taken or conveyed, Landlord may by notice in writing to
Tenant terminate this Lease, and the Base Rent and other charges shall be paid
or refunded as of the date of termination.

          (b) If during the Term of this Lease the entire Premises shall be
taken by eminent domain or destroyed by the action of any public or quasi-public
authority or in the event of conveyance in lieu thereof, this Lease shall
terminate as of the day possession shall be taken by such authority, and Tenant
shall pay Rent up to that date with an appropriate refund by Landlord of such
Rent as shall have been paid in advance for a period subsequent to the date of
the taking of possession.

          (c) If a temporary taking of all or a portion of the Premises occurs,
there shall be no abatement of Rent and Tenant shall remain fully obligated for
performance of all of the covenants and obligations on its part to be performed
pursuant to the terms of this Lease. All proceeds awarded or paid with respect
thereto shall belong to Tenant.

          (d) All compensation awarded for any such taking or conveyance whether
for the whole or a part of the Premises shall be the property of Landlord,
whether such damages shall be awarded as compensation for diminution in the
value of the leasehold or of the fee of or underlying leasehold interest in the
Premises, and Tenant waives all claims against Landlord and the condemning
authority for

                                       37
<PAGE>

damages for termination of its leasehold interest or interference with its
business and hereby assigns to Landlord all of Tenant's right, title and
interest in and to any and all such compensation; provided, however, that Tenant
                                                  --------  -------
shall be entitled to claim, prove and receive in separate proceedings such
separate award as may under the laws of the State of Washington be expressly
allocated to Tenant's personal property or relocation expenses, and for the
value of Tenant's leasehold interest, provided that such award shall be made by
the court in addition to and shall not result in a reduction of the award made
to Landlord.

                                  ARTICLE 13.
                                    DEFAULT
                                    -------

     13.1 Events of Default. The occurrence of any of the following shall
constitute an event of default ("Event of Default") on the part of Tenant:

          (a) Intentionally Omitted.

          (b) Non-payment of Rent.  Failure to pay any installment of Base Rent,
Operating Costs or the fee for Parking Passes under Section 14.22 when payment
                                                    -------------
is due, or failure to pay any other items of Rent within five (5) days after
receiving notice that same is past due;

          (c) Other Obligations. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in Section 13.1(b),
                                                                ---------------
such failure continuing for twenty (20) days after written notice of such
failure (or with respect to non-monetary obligations only, such longer period as
is reasonably necessary to remedy such default, provided that Tenant shall
continuously and diligently pursue such remedy at all times until such default
is cured);

          (d) General Assignment. A general assignment for the benefit of
creditors by Tenant or any guarantor of Tenant's obligations hereunder
("Guarantor");

          (e) Bankruptcy.  The filing of any voluntary petition in bankruptcy by
Tenant or Guarantor, or the filing of an involuntary petition by Tenant's or
Guarantor's creditors, which involuntary petition remains undischarged for a
period of sixty (60) days.  If under applicable law the trustee in bankruptcy or
Tenant has the right to affirm this Lease and continue to perform the
obligations of Tenant hereunder, such trustee or Tenant shall, in such time
period as may be permitted by the bankruptcy court having jurisdiction, cure all
defaults of Tenant hereunder outstanding as of the date of the affirmance of
this Lease and provide to Landlord such adequate assurances as may be necessary
to ensure Landlord of the continued performance of Tenant's obligations under
this Lease;

          (f) Receivership.  The employment of a receiver to take possession of
substantially all of Tenant's assets or the Premises, if such receivership
remains undissolved for a period of sixty (60) days after creation thereof;

          (g) Attachment. The attachment, execution or other judicial seizure of
all or substantially all of Tenant's assets or the Premises, if such attachment
or other seizure remains undismissed or undischarged for a period of sixty (60)
days after the levy thereof;

          (h) Insolvency. The admission by Tenant or Guarantor in writing of its
inability to pay its debts as they become due, the filing by Tenant or Guarantor
of a petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, the filing by Tenant or Guarantor of an
answer admitting or failing timely to contest a material allegation of a
petition filed against Tenant or Guarantor in any such proceeding or, if within
sixty (60) days after the commencement of any proceeding against Tenant or
Guarantor seeking any reorganization, or arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceeding shall not have been dismissed.

          (i) Chronically Late Payment of Rent. If Tenant fails to make any
payment of Base Rent , Estimated Operating Costs or the fee for Parking Passes
under Section 14.22 when due more
      -------------

                                       38
<PAGE>

than two (2) times in any Lease Year, then Landlord shall have the right to
issue written notice to Tenant that any subsequent default for late payment of
Rent in that same Lease Year will result in Tenant being deemed "Chronically
Late." If after such notice Tenant subsequently fails to make any payment of
Rent on the date such payment is due then Tenant shall be deemed to be
Chronically Late and in default under this Lease. Tenant may be permitted to
cure such Chronically Late condition by payment of all arrearages and the
Additional Security Deposit as set forth in Section 3.1 above but shall have
                                            -----------
permanently forfeited certain rights as set forth herein.

     13.2 Remedies Upon Default.

          (a) Termination. If an Event of Default occurs, Landlord shall have
the right, with or without notice or demand, immediately (after expiration of
the applicable grace periods specified herein) to terminate this Lease, and at
any time thereafter recover possession of the Premises or any part thereof and
expel and remove therefrom Tenant and any other person occupying the same, by
any lawful means, and again repossess and enjoy the Premises without prejudice
to any of the remedies that Landlord may have under this Lease, or at law or
equity by reason of Tenant's Event of Default or of such termination.

          (b) Continuation After Default. Even though Tenant has breached this
Lease and/or abandoned the Premises, this Lease shall continue in effect for so
long as Landlord does not terminate Tenant's right to possession under Section
                                                                       -------
13.2(a) hereof, and Landlord may enforce all of its rights and remedies under
-------
this Lease, including (but without limitation) the right to recover Rent as it
becomes due.  Acts of maintenance, preservation or efforts to lease the Premises
or the appointment of receiver upon application of Landlord to protect
Landlord's interest under this Lease shall not constitute an election to
terminate Tenant's right to possession.

          (c) Cure. Landlord may cure such default or perform such obligation on
Tenant's behalf and at Tenant's expense as an Extra Service, provided that,
except as permitted elsewhere in this Lease, Landlord shall not perform such
obligations during any period in which Tenant is diligently pursuing cure in
accordance with Section 13.1(c) for up to a total of thirty (30) days after the
                ---------------
occurrence of such default.  Tenant shall reimburse Landlord on demand pursuant
to Section 5.4.
   -----------

     13.3 Damages Upon Termination. Should Landlord terminate this Lease
pursuant to the provisions of Section 13.2(a) hereof, Landlord shall have all
                              ---------------
the rights and remedies of a landlord under applicable law and, in addition,
Landlord shall be entitled to recover from Tenant: (a) the worth at the time of
award of the unpaid Rent and other amounts which had been earned at the time of
termination; (b) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such Rent loss that the Tenant proves could have
been reasonably avoided; (c) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such Rent loss that Tenant proves could be reasonably
avoided; (d) all costs incurred by Landlord in reletting the Premises, including
without limitation, reasonable, market-based brokerage commissions, attorneys'
fees, marketing and advertising expenses and expenses of cleaning, restoring or
remodeling the Premises to the extent required for general office use; and (e)
any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which, in the ordinary course of things, would be likely to result
therefrom. The "worth at the time of award" of the amounts referred to in (a)
and (b) shall be computed with interest at eighteen percent (18%) per annum or
the highest lawful commercial interest rate, whichever is the lower. The "worth
at the time of award" of the amount referred to in (c) shall be computed by
discounting such amount at the "discount rate" of the Federal Reserve Bank of
San Francisco in effect as of time of award plus one percent (1%) and, where
rental value is a material issue, shall be based upon competent appraisal
evidence.

                                       39
<PAGE>

     13.4 Computation of Rent for Purposes of Default. For purposes of computing
unpaid Rent that would have accrued and become payable under this Lease pursuant
to the provisions of Section 13.3, unpaid Rent shall consist of the sum of:
                     ------------

          (a) the total Base Rent for the balance of the Term, plus

          (b) a computation of the Operating Costs for the balance of the Term,
the assumed Operating Costs for the calendar year in which the Event of Default
occurs and each future calendar year in the Term to be equal to the Operating
Costs for the calendar year prior to the year in which the Event of Default
occurs compounded at a per annum rate equal to the mean average rate of
inflation for the preceding five (5) calendar years as determined by reference
to the Consumer Price Index - All Items for Seattle-Tacoma-Bremerton, All Urban
Consumers, published by the Bureau of Labor Statistics of the United States
Department of Labor (Base Year 1982-84=100), or such successor index as may be
established to provide a measure of the current purchasing power of the dollar
(provided, however, that if no successor index is published by the United States
 -------- --------
Department of Labor, Landlord may select in its reasonable discretion a
substitute index or method of measuring inflation).

     13.5 Late Charge. In addition to its other remedies, if any payment of Rent
is not received by the fifth (5th) day after the due date thereof, Tenant shall
pay a late fee in an amount equal to Two Hundred Fifty Dollars ($250.00) plus
five percent (5%) of the delinquency for each month or portion thereof that the
delinquency remains outstanding, the parties agreeing that Landlord's damage by
virtue of such delinquencies would be difficult to compute and the amount stated
herein represents a reasonable estimate thereof. The provision for a late charge
set forth in this Section 13.5, and any collection of a late charge by Landlord,
                  ------------
shall not be deemed a waiver of any breach or Event of Default by Tenant under
this Lease.  If Tenant is deemed Chronically Late and does not post the
increased Security Deposit within the time permitted under Section 3.1 above,
                                                           -----------
then it shall be a non-curable default under this Lease and Landlord shall be
entitled to reject any subsequent late payment and exercise its remedies under
Section 13.2.  If Tenant's Rent checks are returned by the bank without payment
------------
then Landlord may require Tenant to pay future installments of Rent by certified
or cashiers' check.

     13.6 Remedies Cumulative. All of the remedies permitted or available to
Landlord under this Lease, or at law or in equity, shall be cumulative and not
alternative and invocation of any such right or remedy shall not constitute a
waiver or election of remedies with respect to any other permitted or available
right or remedy.

     13.7 Tenant's Remedies. Landlord shall not be in default unless Landlord
fails to cure a default by Landlord of its obligations under this Lease within
sixty (60) days after its receipt of notice thereof from Tenant, or if such
default is not capable of being cured within said sixty (60) day period,
Landlord has failed to commence such cure and diligently pursue such cure until
completion. In no event shall Landlord be liable for consequential damages.
Tenant shall not sue, seek any remedy or enforce any right against Landlord
until (a) Tenant gives written notice to all Senior Parties, and (b) a
reasonable time for such Senior Party, at its option, to remedy the act or
omission has elapsed following the giving of notice by Tenant to Senior Party
required hereunder, including, without limitation, time to obtain possession
from Landlord by power of sale or judicial foreclosure, it being agreed that the
Senior Party shall have no obligation to Tenant to cure or remedy any act or
omission of Landlord. Tenant shall look solely to Landlord's interest in the
Building for recovery of any judgment from Landlord whether from a breach hereof
or from a right created by statute or at common law. Landlord and Landlord
Parties shall not be personally liable for any such judgment. Tenant agrees that
no other property or assets of Landlord or any partner or member of Landlord
shall be subject to levy, execution or other enforcement procedures for
satisfaction of any such judgment or decree; no partner or member of Landlord
shall be sued or named as a party in any suit or action (except as may be
necessary to secure jurisdiction over Landlord); no service of process shall be
made against any partner or member of Landlord (except as may be necessary to
secure jurisdiction over Landlord); no judgment shall be taken against partner
or member of Landlord;

                                       40
<PAGE>

no writ of execution shall ever be levied against the assets of any partner or
member of Landlord; and these covenants, limitations and agreements are
enforceable both by Landlord and by any partner or member of Landlord. Any lien
obtained to enforce any such judgment and any levy of execution thereon shall be
subject and subordinate to any Senior Instrument.

     13.8 Obligation to Mitigate Damages. Both Landlord and Tenant shall have
the obligation to take reasonable steps to mitigate their damages arising from
any default under this Lease.

     13.9 Dispute Resolution Procedures. The parties agree to attempt to resolve
any disputes under this Lease in good faith prior to resorting to litigation.
Each party agrees to provide a person authorized and empowered to resolve a
particular dispute to meet face to face with the person from the other party so
authorized and empowered. Such meeting shall take place at a mutually convenient
location within ten (10) days after receipt of a written request. Each party
shall negotiate in good faith to attempt to resolve the dispute for as long as
either party so desires and in good faith believes progress can be made, but in
no event for longer than ten (10) days. This provision shall not apply to Events
of Default described in Sections 13.1(b), (d), (e), (f), (g), (h) or (i).
                        ----------------  ---  ---  ---  ---  ---    ---

                                  ARTICLE 14.
                                 MISCELLANEOUS
                                 -------------

     14.1 No Waiver. Failure of Landlord or Tenant to declare any default
immediately upon occurrence thereof, or delay in taking any action in connection
therewith, shall not waive such default, but Landlord or Tenant, as the case may
be, shall have the right to declare any such default at any time thereafter. No
waiver by Landlord of an Event of Default, or any agreement, term, covenant or
condition contained in this Lease, shall be effective or binding on Landlord
unless made in writing and no such waiver shall be implied from any omission by
Landlord to take action with respect to such Event of Default or other such
matter. No express written waiver by Landlord of any Event of Default, or other
such matter, shall affect or cover any other Event of Default, matter or period
of time, other than the Event of Default, matter and/or period of time specified
in such express waiver. One or more written waivers by Landlord of any Event of
Default, or other matter, shall not be deemed to be a waiver of any subsequent
Event of Default, or other matter, in the performance of the same provision of
this Lease. Acceptance of Rent by Landlord hereunder, or endorsement of any
check, shall not, in and of itself, constitute a waiver of any breach or Event
of Default or of any agreement, term, covenant or condition of this Lease,
except as to the payment of Rent so accepted, regardless of Landlord's knowledge
of any concurrent Event of Default or matter. Landlord may, at its election,
apply any Rent received from Tenant to the oldest obligation outstanding from
Tenant to Landlord, any endorsement or other statement of Tenant to the contrary
notwithstanding. No course of conduct between Landlord and Tenant, and no
acceptance of the keys to or possession of the Premises before the termination
of the Term by Landlord or any employee of Landlord shall constitute a waiver of
any such breach or of any term, covenant or condition of this Lease or operate
as a surrender of this Lease.

     14.2 Holding Over. If Tenant (or anyone claiming under Tenant) remains in
possession after expiration or termination of this Lease without the written
consent of Landlord, Tenant shall comply with all terms and conditions of this
Lease except that Tenant shall pay Base Rent for each month or partial month of
occupancy thereafter at a rate equal to two hundred percent (200%) of the Base
Rent for the last month of the Term, together with such other amounts as may
become due hereunder. No occupancy or payment of Rent by Tenant after expiration
of the Term shall operate to renew or extend the Term. If Tenant remains in
possession after the expiration or termination of this Lease without Landlord's
consent, in addition to the payment described in the first sentence of this
Section 14.2, Tenant shall indemnify, defend, protect and hold Landlord and
------------
Landlord Parties harmless from and against any and all Claims for damages by any
other tenant or third person to whom Landlord may have leased or offered to
lease all or any part of the Premises effective on or after the termination of
this Lease, together with all loss, cost, expense, damages and liabilities in
connection with any such reletting, including, without limitation,

                                       41
<PAGE>

attorneys' fees and Landlord's lost revenues. If Tenant holds over with the
consent of Landlord in writing Tenant shall thereafter occupy the Premises under
this Lease on a month-to-month basis and Base Rent shall be increased to one
hundred twenty five percent (125%) of the Base Rent for the last month of the
Term.

     14.3 Attorneys' Fees. If either party places the enforcement of this Lease,
or any part thereof, or the collection of any Rent due, or to become due
hereunder, or recovery of the possession of the Premises in the hands of an
attorney or collection agency, or files suit upon the same, or seeks a judicial
declaration of rights hereunder, the prevailing party shall recover its
reasonable attorneys' fees, court costs and collection agency charges. As used
herein, "prevailing party" shall mean the party who substantially prevails in
the matter at issue, including without limitation, a party who dismisses an
action for recovery hereunder in exchange for payment of the sums allegedly due,
performance of covenants allegedly breached or consideration substantially equal
to the relief sought in the action.

     14.4 Amendments. This Lease may not be altered, changed or amended, except
by an instrument in writing signed by both parties.

     14.5 Transfers by Landlord. Landlord shall have the right to transfer and
assign, in whole or in part, all of its rights and obligations hereunder and in
the Project. If Landlord sells or otherwise transfers the Building or the
Project, or if Landlord assigns its interest in this Lease, other than an
assignment solely for security purposes, such purchaser, transferee or assignee
thereof shall be deemed to have assumed Landlord's obligations hereunder, and
Landlord shall thereupon be relieved of all liabilities hereunder arising
thereafter, but this Lease shall otherwise remain in full force and effect.
Landlord or any person or party succeeding to possession of the Project as a
successor to Landlord shall be subject to Landlord's obligations hereunder only
during the period of such person's or party's ownership.

     14.6 Severability. If any term or provision of this Lease, or the
application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision of
this Lease shall be valid and shall be enforceable to the extent permitted by
law.

     14.7 Notices. All notices, demands, consents and approvals that may or are
required to be given by either party to the other hereunder shall be in writing
and shall be deemed to have been fully given by personal delivery or three (3)
days following deposit in the United States mail, certified or registered,
postage prepaid, and addressed to the party to be notified at the address for
such party specified on the Basic Lease Information Sheet, or to such other
place as the party to be notified may from time to time designate by at least
fifteen (15) days notice to the notifying party. Tenant shall deliver a copy of
any notice given to Landlord to (a) Landlord's property manager, (b) any Senior
Party whose address is known to Tenant, and (c) to 2800 Post Oak Boulevard, 50th
floor, Houston Texas 77056-6118, Attention: C. Hastings Johnson. Notwithstanding
the foregoing, personal delivery of notices to Tenant may be made by leaving a
copy of the notice, addressed to Tenant, at the Premises. Tenant appoints as its
agent to receive service of all default notices and notice of commencement of
unlawful detainer proceedings the person in charge of or apparently in charge of
or occupying the Premises at the time, and, if there is no such person, then
such service may be made by attaching the same on the main entrance of the
Premises. A courtesy copy of any notice required hereunder to be given to Tenant
shall be delivered to (a) General Counsel, HomeGrocer.com, Inc. Legal Department
at Tenant's address for notice, and (b) to Gordon W. Tanner, Stoel Rives, LLP,
600 University Street, #3600, Seattle, Washington 98101-3197

     14.8 Intentionally Omitted.

     14.9 No Option. Submission of this instrument for examination or signature
by Tenant does not constitute a reservation of or an option to lease, and it is
not effective as a lease or otherwise until

                                       42
<PAGE>

execution and delivery by both Landlord and Tenant. Landlord shall not be deemed
to have made an offer to Tenant by furnishing Tenant with a copy of this Lease
with particulars inserted. No contractual or other rights shall exist or be
created between Landlord and Tenant until all parties hereto have executed this
Lease and until it has been approved in writing by any Senior Party and fully
executed copies have been delivered to Landlord and Tenant. Tenant agrees to
make such changes herein as may be requested by any Senior Party so long as such
do not increase Rent or other charges due from Tenant hereunder or otherwise
materially alter Tenant's rights hereunder.

     14.10  Integration and Interpretation. The terms of this Lease are intended
by the parties as a final expression of their agreement with respect to such
terms as are included in this Lease and may not be contradicted by evidence of
any prior or contemporaneous agreement, arrangement, understanding or
negotiation (whether oral or written). The parties further intend that this
Lease constitutes the complete and exclusive statement of its terms, and no
extrinsic evidence whatsoever may be introduced in any judicial proceeding
involving this Lease. The language in all parts of this Lease shall in all cases
be construed as a whole and in accordance with its fair meaning and not
construed for or against any party, regardless of which party may have drafted
the provision in question, it being agreed that this is a negotiated agreement.
The following exhibits and schedules are attached hereto and incorporated by
this reference as if fully set forth herein:

          Exhibit A-1   Site Plan of the Premises
          Exhibit A-2   Site Plan of the Project
          Exhibit A-3   Site Plan of Expansion Space
          Exhibit B     Legal Description of the Project
          Exhibit C     Initial Improvement of the Premises
          Schedule C-1  Base Building Improvements
          Schedule C-2  Definition of Building Standard Improvements
          Schedule C-3  List of Base Building Plans
          Schedule C-4  Description of Prime Contract
          Exhibit D     Rules and Regulations
          Exhibit E     Lease Commencement Certificate
          Exhibit F     Form of Tenant Estoppel
          Exhibit G     Form of Subordination Agreement
          Exhibit H     Form of Letter of Credit
          Exhibit  I    Janitorial Specifications

     14.11  Quitclaim. Upon expiration or earlier termination of this Lease,
Tenant shall, immediately upon request of Landlord, execute, acknowledge and
deliver to Landlord a recordable deed quit-claiming to Landlord all interest of
Tenant in the Premises, the Project and this Lease.

     14.12  No Easement for Light, Air and View. Except as otherwise provided in
this Section, this Lease conveys to Tenant no rights for any light, air or view
except as provided in this Section 14.12. No diminution of light, air or view,
                           -------------
or any impairment of the visibility of the Premises from inside or outside the
Building, by any structure or other object that may hereafter be erected on any
property other than the Real Property (whether or not by Landlord) shall entitle
Tenant to any reduction of Rent under this Lease, constitute an actual or
constructive eviction of Tenant, result in any liability of Landlord to Tenant,
or in any other way affect this Lease or Tenant's obligations hereunder;
provided, however, that Landlord shall not construct any improvements on the
--------  -------
Real Property, as described on Exhibit B, that interfere with the visibility of
                               ----------
the Tenant Sign or with the view from the south side of the Premises.

     14.13  No Merger. The voluntary or other surrender or termination of this
Lease by Tenant, or a mutual cancellation thereof shall not work a merger, but,
at Landlord's sole option, shall either terminate all existing subleases or
subtenancies or shall operate as an assignment to Landlord of all such subleases
or subtenancies.

                                       43
<PAGE>

     14.14  Memorandum of Lease. Tenant shall, upon request of Landlord,
execute, acknowledge and deliver a short form memorandum of this Lease (and any
amendment hereto or consolidation hereof), in form suitable for recording. In no
event shall this Lease or any memorandum thereof be recorded without the prior
written consent of Landlord, and any attempt to do so shall constitute a default
by Tenant.

     14.15  Survival. All of the covenants and obligations contained in this
Lease shall survive the expiration or earlier termination of this Lease. No
provision of this Lease providing for termination in certain events shall be
construed as a limitation or restriction of the parties' rights and remedies at
law or in equity available upon a breach of this Lease.

     14.16  Financial Statements. If Landlord intends to sell all or any portion
of the Building or Project (or any interest therein), or obtain a loan secured
by the Building or Project (or any interest therein), then Tenant shall, within
fifteen (15) days of Landlord's written request, furnish Landlord with financial
statements, dated no earlier than one (1) year before such request, certified as
accurate by Tenant, or, if available, audited financial statements prepared by
an independent certified public accountant with copies of the auditor's
statement, reflecting Tenant's then current financial condition, or the
financial condition of the individuals comprising Tenant, in such form and
detail as Landlord may reasonably request. In addition, if Landlord finances the
construction of improvements on and to the Building or Project, or otherwise
procures financing secured by Building or Project, or any portion thereof or
interest therein, then the terms and provisions of this Lease may be subject to
review and approval by the source providing such financing.

    14.17  No Joint Venture. This Lease shall not be construed to create a
partnership, joint venture or similar relationship or arrangement between
Landlord and Tenant hereunder.

     14.18  Successors and Assigns. Except as otherwise provided herein, this
Lease shall be binding upon and inure to the benefit of Landlord, its successors
and assigns; and shall be binding upon and inure to the benefit of Tenant, its
successors, and to the extent assignment may be approved by Landlord hereunder,
Tenant's assigns.

     14.19  Applicable Law. All rights and remedies of Landlord and Tenant under
this Lease shall be construed and enforced according to the laws of the State of
Washington. Any actions or proceedings brought under this Lease, or with respect
to any matter arising under or out of this Lease, shall be brought and tried
only in courts located in the County of King, Washington (excepting appellate
courts).

     14.20  Time of the Essence. Time is of the essence of each and every
covenant herein contained. If either party to this Lease, as the result of any
(i) strikes, lockouts, or labor disputes that the party does not have the
ability to resolve directly and independently; (ii) failure of power or other
utilities not caused directly by such party; (iii) inability to obtain labor or
materials or reasonable substitutes therefor; (iv) war, governmental action,
court order, condemnation, civil unrest, riot, fire or other casualty; (v)
extreme or unusual weather conditions, acts of God or unforeseen soil
conditions; or (vi) other conditions similar to those enumerated in this Section
beyond the reasonable control of the party obligated to perform (except for
financial inability), fails punctually to perform any obligation on its part to
be performed under this Lease, then such failure shall be excused and not be a
breach of this Lease by the party in question but only to the extent occasioned
by such event. If any right or option of either party to take any action under
or with respect to this Lease is conditioned upon the same being exercised
within any prescribed period of time or at or before a named date, then such
prescribed period of time and such named date shall be deemed to be extended or
delayed, as the case may be, for a period equal to the period of the delay
occasioned by any event described above. Notwithstanding anything herein
contained, however, the provisions of this Section shall not be applicable to
Tenant's obligation to pay Rent under this Lease or its obligations to pay any
other sums, monies, costs, charges or expenses required to be paid by Tenant
hereunder.

                                       44
<PAGE>

     14.21  Interpretation. Except as specifically provided otherwise in this
Lease, Landlord may act in its sole and absolute discretion when required to act
hereunder or when deciding to grant its approval of any Tenant act. The term,
"including" shall mean "including, without limitation." All indemnities
contained herein shall survive termination of this Lease with respect to any
act, condition or event that is the subject matter of such indemnity and that
occurs prior to the Expiration Date. Notwithstanding anything herein to the
contrary, all provisions of this Lease which require the payment of money or the
delivery of property after the Expiration Date shall survive termination of the
Lease.

     14.22  Parking.

            (a) Parking Passes. Landlord shall provide and Tenant shall purchase
parking stickers and/or cards (the "Parking Passes") equal to the number of
Parking Passes calculated in accordance with Item 13 of the Basic Lease
                                             -------
Information Sheet each month of the Term, starting with the Term Commencement
Date. In addition to Tenant's initial allocation of Parking Passes (as set forth
in the Basic Lease Information Sheet), upon the terms and conditions set forth
in this Section, Landlord, unless precluded by any governmental authority, shall
provide and Tenant shall purchase, an additional allocation of Parking Passes
equal to three-fourths (.75) of a Parking Pass for each one thousand (1,000)
square feet of Useable Area in the Premises (the "Additional Allocation").
Tenant acknowledges that providing the Additional Allocation may only be
achieved by instituting special parking management procedures and that Landlord
may adopt any and all such procedures as Landlord, in its discretion, deems
necessary to achieve its responsibility to provide parking under this Lease, any
other lease in the Project, and under any requirements imposed by any
governmental authority. Tenant shall provide Landlord with ninety (90) days
prior written notice if Tenant wishes to purchase the Additional Allocation of
Parking Passes. Thereafter, so long as Landlord makes the Additional Allocation
of Parking Passes available to Tenant, Tenant shall purchase the Additional
Allocation of Parking Passes each month, except that Tenant may, upon ninety
(90) days written notice to Landlord, elect to permanently terminate its right
and obligation to purchase the Additional Allocation of Parking Passes. If
Tenant terminates its obligation to purchase the Additional Allocation of
Parking Passes, such termination shall be irrevocable and Landlord shall have no
further obligation to make the Additional Allocation of Parking Passes available
to Tenant. If Tenant does not purchase the number of Parking Passes allocated to
Tenant herein, then Landlord may, at its option in its sole discretion, treat
such failure as a default under this Lease, or Landlord may permanently reduce
Tenant's allocation of Parking Passes by the number of Parking Passes allocated
to Tenant but not purchased by Tenant.

            (b) Cost. Tenant shall pay the monthly fee per Parking Pass
established by Landlord from time to time for the applicable type of permit,
which monthly fee shall be no more than the fair market rate for such parking,
plus any tax or assessment imposed by any governmental authority in connection
with such parking privileges. The base monthly fee (exclusive of taxes) as of
the Term Commencement Date shall be Seventy-five Dollars ($75.00) and is subject
to change at any time as required to maintain a fair market rate for such
Parking Passes.

            (c) Use of the Garage. Each Parking Pass shall entitle the vehicle
on which the Parking Permit is presented to park in the parking garage located
beneath the Buildings (the "Garage") at any time twenty-four (24) hours per day,
seven (7) days a week, 365 days a year on a non-preferential and non-exclusive
basis. Landlord shall have exclusive control over the day-to-day operations of
the Garage. No specific spaces in the Garage shall be assigned to Tenant.
Landlord may make, modify and enforce reasonable rules and regulations relating
to the parking of vehicles in the Garage, and Tenant shall abide by such rules
and regulations and shall cause its employees and invitees to abide by such
rules and regulations. In lieu of providing parking stickers or cards, Landlord
may use any reasonable alternative means of identifying and controlling vehicles
authorized to be parked in the Garage. Landlord may designate areas within the
Garage for short term or non-tenant parking only and Landlord may change such
designations from time to time. Landlord reserves the right to alter the size of
the Garage and the configuration of parking spaces and driveways therein.
Landlord may assign any unreserved and

                                       45
<PAGE>

unassigned parking spaces and/or make all or a portion of such spaces reserved
or institute any other measures, including but not limited to valet, assisted or
tandem parking, that Landlord determines are necessary or desirable for tenant
requirements or orderly and efficient parking, provided, however, that Landlord
                                               --------  -------
shall not discriminate against Tenant or unduly favor another tenant if Landlord
elects to reserve all or a substantial majority of the spaces in the Garage.

            (d) Third Party Operator. Landlord may operate the Garage or, in its
discretion, may arrange for the Garage to be operated by a third party and, for
purposes of this Section 14.22, such operator shall be entitled to exercise any
                 -------------
rights granted to Landlord under this Section.  Upon request, Tenant will
execute and deliver a parking agreement with the operator of the Garage on the
operator's standard form of agreement used generally for the tenants of the
Project.  If Landlord hires a third party to operate the Garage then the monthly
parking charges shall be paid to such operator at such place as the operator may
direct but the parking charges shall be considered additional Rent hereunder.

     14.23  Antennae. Tenant shall have the right to install, maintain and
repair communications equipment on the roof of the Building for the sole purpose
of serving and providing Tenant's non-commercial, corporate communications (the
"Antennae"), at Tenant's sole cost and expense, provided that Tenant shall not
be permitted to use more than Tenant's Proportionate Share of the space on the
roof available to tenants in the Building. Tenant's Antennae may, subject to
Landlord's approval which shall not be unreasonably withheld, include microwave
antenna and satellite dishes. Tenant shall not be required to pay any rent for
the space on the roof where the Antennae are located. The right granted herein
is personal to HomeGrocer.com, Inc. and shall not be assignable to any other
party in connection with any assignment of this Lease or any sublease of all or
any part of the Premises and Tenant may not grant any other party any right to
use the Antennae for any purpose whatsoever. The design, appearance, size,
location and method of installation of the Antennae shall be subject to
Landlord's approval, the Design Manual, and to all applicable laws and
regulations. Landlord shall not unreasonably withhold its approval if the
Antennae are located within the area on the roof designated for tenant use.
Landlord may withhold or condition its approval of any equipment located outside
the area on the roof designated for tenant use, in its sole discretion, and,
once Landlord's consent is obtained for the installation of Antennae outside the
area designated for tenant use, Tenant acknowledges that it may be required at
any time, and at Tenant's expense, to relocate such Antennae, and may be unable
to relocate such Antennae outside the area on the roof designated for tenant
use. Landlord does not represent that the Antennae will be permitted under
applicable laws or that the Antennae will function and Tenant shall be solely
responsible for designing the Antennae to comply with laws and to be compatible
with the design of the Building and the other equipment located on the roof.
Except as provided herein, Landlord reserves all rights to use the roof of the
Building for any purpose whatsoever and shall have no obligation to ensure that
any equipment installed on the roof is compatible with Tenant's Antennae. If at
any time the Antennae cease to be permitted under applicable laws, Tenant's
rights under this Section shall terminate and be of no further force and effect.

     Tenant's rights under this Section 14.23 shall terminate and be of no
                                -------------
further force and effect during any time Tenant ceases to occupy at least two
and one half (2.5) floors in the Building or if an Event of Default is
outstanding under this Lease.  Upon termination of Tenant's rights under this
Section or upon Lease termination, upon notice by Landlord, Tenant at its sole
cost and expense shall promptly remove the Antennae and all related wiring and
equipment from the Building and shall restore the Building to its condition
prior to such installation.  Tenant shall be solely responsible for installation
and maintenance of the Antennae and shall ensure that installation and
maintenance do not void or limit any warranty Landlord may have on the roof or
roof membrane.  Tenant shall provide Landlord with full plans and specifications
for the Antennae prior to installation thereof and such plans shall include
details regarding Tenant's proposed method of installation.

     Subject to availability of such space, Tenant shall be permitted to
install, maintain, remove and replace cables or lines within the Building
outside the Premises (at locations designated by Landlord) to

                                       46
<PAGE>

connect the Antennae to the Premises at no charge to Tenant. Prior to
commencement of any work hereunder, Tenant shall obtain and deliver to Landlord
all necessary governmental permits for the Antennae and related equipment.
Tenant shall indemnify and hold harmless Landlord from any Claims arising out or
in connection with the Antennae or the related equipment in the Building. Tenant
acknowledges and agrees that Landlord has not represented or warranted that
Tenant will have unlimited access to riser space or other space outside the
Premises for the purpose of connecting the Antennae to the Premises and Landlord
shall have no obligation to construct or designate additional riser space or
equipment space to accommodate the Antennae or related equipment. Tenant
acknowledges that riser space is a finite commodity and that Landlord may in its
discretion limit Tenant's total use of such space to accommodate and take into
account use of the Building systems and the needs of other Building tenants.

     14.24  Generator. The Project shall be equipped with a generator sufficient
in Landlord's reasonable judgment to provide emergency power services for life
safety systems of the Project, including the Premises. Landlord reserves the
right to alter such backup generator or replace such generator with alternative
emergency power services solely for life safety systems of the Project,
including the Premises, as Landlord deems appropriate throughout the Term.

     Landlord shall provide Tenant with space in a location designated by
Landlord for installation and maintenance of a diesel fuel powered generator and
a diesel fuel tank (collectively, the "Generator").  If the space for the
Generator is located in the Garage, it shall be no larger than the size of three
(3) parking stalls and if the space for the Generator is elsewhere in the
Building, the size and cost of such shall be subject to Landlord's discretion.
Tenant shall be solely responsible for complying with all laws, rules and
regulations with respect to the Generator and, prior to commencement of
installation, Tenant shall obtain all necessary governmental permits therefor.
Tenant shall obtain insurance (naming Landlord as an additional insured)
insuring against any loss or damage arising out of or relating to any
contamination or release of any fuel from the Generator and shall not be
permitted to install the fuel tank until Tenant has provided a certificate of
such policy to Landlord.  Tenant shall be permitted to install, maintain, remove
and replace cables or lines and ducts within the Building outside the Premises
to connect the Generator to the Premises and to exhaust fumes at locations
designated by Landlord.  If the Generator is located in the Garage, Landlord
will be prevented from selling parking permits for the space occupied by the
Generator and Tenant shall pay Landlord, as Rent for the space occupied by the
Generator, a sum equal to the rate charged by Landlord for reserved parking
spaces in the Garage which shall initially be equal to two hundred percent
(200%) of the fee for a non-reserved Parking Pass under Section 14.22.  The
                                                        -------------
number of parking spaces eliminated to accommodate the Generator shall be
deducted from Tenant's allocation of Parking Passes.  Prior to the end of the
Lease Term, Tenant shall, if requested by Landlord, remove the Generator and
associated equipment (including the diesel fuel tank) and properly dispose of
same and shall restore the Building to its condition prior to installation of
the Generator.  If the Generator fails to work properly or to provide power to
the Premises, Landlord shall have no obligation or liability whatsoever with
respect to such failure.  Tenant shall pay all costs of designing, installing,
operating and maintaining the Generator. Tenant acknowledges and agrees that
Landlord has not represented or warranted that Tenant will have unlimited access
to riser space or other space outside the Premises for the purpose of the
Generator, and Landlord shall have no obligation to construct or designate
additional riser space or other space outside the Premises to accommodate the
Generator beyond what is included in the Base Building Improvements or any
changes or upgrades to the Base Buildings Improvements initially designed and
approved by Landlord and paid for by Tenant pursuant to Exhibit C.  Tenant
                                                        ---------
acknowledges that roof and riser space are a finite commodity and that Landlord
may in its discretion limit Tenant's total use of such space to accommodate and
take into account use of the Building systems and the needs of other Building
tenants.

     14.25  Brokers. Tenant and Landlord each represent and warrant to the other
that it has had no dealing with any broker or agent other than the Brokers
identified in the Basic Lease Information Sheet as

                                       47
<PAGE>

Item 16.  Landlord has a separate listing agreement with the Brokers which sets
-------
forth the commission and any other compensation payable in connection with this
Lease. Tenant and Landlord shall each indemnify, defend and hold the other party
harmless from and against any and all liabilities for commissions or other
compensation or charges claimed by any other broker or agent based on dealings
with the indemnifying party with respect to this Lease. The foregoing indemnity
shall survive termination or earlier expiration of this Lease.

     14.26  INTENTIONALLY DELETED.

     14.27  Phased Development. Tenant acknowledges that the Project and some of
the Buildings or Common Areas may be under construction after the Term
commences. Tenant shall have no claim against Landlord for any loss or damage
relating to such construction or lack of construction so long as Tenant has
access to the Premises and to the number of parking spaces in the Garage
required hereunder, and further provided that Tenant's use of the Premises is
not materially, adversely affected.

     IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above written.

                             LANDLORD:     BELLEVUE HINES DEVELOPMENT, L.L.C.

                                           By: /s/ Tom Owens
                                              ----------------------------------
                                           Name:  Thomas D. Owens
                                           Title: Manager

                             TENANT:       HOMEGROCER.COM, INC.
                                           a Delaware corporation

                                           By: /s/ Terry Drayton
                                              ----------------------------------
                                           Name: J. Terrence Drayton
                                                --------------------------------
                                           Title: President
                                                 -------------------------------

NOTE:  Both parties must initial Basic Lease Information Sheet and Tenant must
initial Section 11.4(a)

                                       48
<PAGE>

STATE OF TEXAS             )
                           )  ss.
COUNTY OF HARRIS           )

     On this 5th day of April, 2000, before me, a Notary Public in and for the
State of Texas, personally appeared Thomas D. Owens, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person who
executed this instrument, on oath stated that he was authorized to execute the
instrument, and acknowledged it as the Manager of BELLEVUE HINES DEVELOPMENT,
L.L.C.  to be the free and voluntary act and deed of said limited liability
company for the uses and purposes mentioned in the instrument.

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

                    /s/ Gena M. Murphy
                    ------------------------------------------------------------
                    NOTARY PUBLIC in and for the State of Texas,
                    residing at Harris County
                                ------------------------------------------------
                    My appointment expires 3/23/2000
                    Print Name  Gena M. Murphy
                               -------------------------------------------------

STATE OF WASHINGTON      )
                         )  ss.           [NOTARY STAMP OF GENA M. MURPHY]
COUNTY OF KING           )

     On this 22nd day of March, 2000, before me, a Notary Public in and for the
State of Washington, personally appeared J. Terrence Drayton, personally known
to me (or proved to me on the basis of satisfactory evidence) to be the person
who executed this instrument, on oath stated that he/she was authorized to
execute the instrument, and acknowledged it as the President of HOMEGROCER.COM,
INC. to be the free and voluntary act and deed of said corporation for the uses
and purposes mentioned in the instrument.

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

                              /s/ Ursula M. Lazo
                              --------------------------------------------------
 [NOTARY SEAL OF              NOTARY PUBLIC in and for the State of Washington,
  URSULA LAZO]                residing at Kirkland
                                          --------------------------------------
                              My appointment expires 8-4-2003
                                                     ---------------------------
                              Print Name Ursula Lazo
                                         ---------------------------------------

                                      49

<PAGE>

                                  EXHIBIT A-1

                              PREMISES SITE PLANS

                      Floor Plan South Building - Floor 4

                      Floor Plan South Building - Floor 5

                      Floor Plan South Building - Floor 6

                                    A-1 - 1
<PAGE>

                                  EXHIBIT A-2

                               PROJECT SITE PLAN

                           Site Map 112th Avenue NE

                                    A-2 - 1
<PAGE>

                                  EXHIBIT A-3

                          EXPANSION SPACE SITE PLANS

                      Floor Plan South Building - Floor 1

                      Floor Plan South Building - Floor 2

                      Floor Plan south Building - Floor 3

                                    A-3 - 1
<PAGE>

                                   EXHIBIT B

                       LEGAL DESCRIPTION OF THE PROJECT

PARCEL A
--------

THE SOUTH 30 FEET OF THE SOUTHWEST QUARTER OF THE NORTHEAST QUARTER OF THE
SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 5 EAST, WILLAMETTE
MERIDIAN, IN KING COUNTY, WASHINGTON;

EXCEPT THAT PORTION THEREOF CONVEYED TO THE CITY OF BELLEVUE BY DEED RECORDED
UNDER RECORDING NUMBER 6615029; AND

EXCEPT ANY PORTION THEREOF CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1 UNDER RECORDING NUMBER 6685642.

PARCEL B
--------

THAT PORTION OF THE EAST 264 FEET OF THE WEST 434 FEET OF THE SOUTHWEST QUARTER
OF THE NORTHEAST QUARTER OF THE SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25
NORTH, RANGE 5 EAST, WILLAMETTE MERIDIAN, IN KING COUNTY WASHINGTON;

EXCEPT THE SOUTH 30 FEET THEREOF, LYING SOUTHEASTERLY OF THE FOLLOWING LINE:

BEGINNING AT THE SOUTHWEST CORNER OF THE ABOVE-DESCRIBED PARCEL;

THENCE SOUTH 88 degrees 6'55" EAST ALONG THE SOUTH LINE THEREOF 103.65 FEET;

THENCE NORTH 73 degrees 0'26" EAST 72.90 FEET;

THENCE NORTH 54 degrees 30'00" EAST 111.33 FEET TO THE EAST LINE OF SAID
PROPERTY AND THE TERMINUS OF SAID LINE;

EXCEPT ANY PORTION THEREOF CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1 UNDER RECORDING NUMBER 6685642.

PARCEL C
--------

THE NORTH 464.40 FEET OF THE NORTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE
SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 5 EAST, WILLAMETTE
MERIDIAN, IN KING COUNTY WASHINGTON;

EXCEPT THE EAST 250 FEET THEREOF; AND

EXCEPT THAT PORTION THEREOF LYING WITHIN F.A. NISONGER ROAD (112TH AVENUE
NORTHEAST); AND

EXCEPT THOSE PORTIONS CONVEYED TO THE STATE OF WASHINGTON FOR SECONDARY STATE
HIGHWAY NO. 2-A MIDLAKES TO KIRKLAND BY DEEDS BEARING RECORDING NUMBERS 4354524
AND 4354525; AND

EXCEPT THOSE PORTIONS CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1, UNDER RECORDING NUMBERS 4927203 AND 6685642; AND

EXCEPT THAT PORTION CONVEYED TO THE CITY OF BELLEVUE BY DEED RECORDED UNDER
RECORDING NUMBER 6615029; AND

EXCEPT THAT PORTION CONDEMNED BY THE CITY OF BELLEVUE IN KING COUNTY SUPERIOR
COURT CAUSE NUMBER 90-2-03249-3.

                                      B-1
<PAGE>

                                   EXHIBIT C

                      INITIAL IMPROVEMENT OF THE PREMISES

  1. Base Building.  Landlord shall design, develop, construct or install those
items listed on the attached Schedule C-1, and more fully described in the
                             ------------
drawings and plans listed on the attached Schedule C-3 (collectively, "Base
                                          ------------
Building Improvements") without cost or expense to Tenant. Landlord shall be
solely responsible for the design, development, construction and installation of
the Base Building Improvements in accordance with the Base Building Plans (as
defined below). Landlord has contracted with Kendall Heaton Associates
("Landlord's Architect"') for design services and preparation of the detailed
construction drawings and final plans and specifications describing the Base
Building Improvements (as the same may be modified from time to time hereafter,
the "Base Building Plans"), and has contracted with PCL Construction ("General
Contractor") for construction of the Base Building Improvements.  In the event
of any conflict between the description on Schedule C-1 and the Base Building
                                           ------------
Plans, the Base Building Plans shall control.  If the Base Building Plans
include any items listed on Schedule C-2, such items shall not be considered
                            ------------
Base Building Improvements and any items designated as Tenant's responsibility
in Schedule C-1 shall be Tenant's responsibility notwithstanding the fact that
   ------------
they appear in the Base Building Plans.

          (a) Tenant Upgrades.  Landlord shall have no obligation to alter any
              ---------------
portion of the Base Building Improvements or the Base Building Plans to
accommodate the Tenant Improvements.  If Tenant desires any changes, relocations
or other modifications or upgrades to the Base Building Improvements to
accommodate the Tenant Improvements (collectively "Upgrades"), Tenant shall
notify Landlord of its requested change in writing providing sufficient detail
for Landlord to evaluate the proposal. All Upgrades shall require Landlord's
prior approval which may be given, withheld or subject to such conditions as
Landlord in its sole discretion desires, provided that Landlord agrees to
consider such requests in good faith.  If Landlord approves the Upgrades and
Tenant's requested Upgrades will increase the cost of construction or will cause
a delay in completing construction of the Project, Landlord's approval notice
shall include Landlord's rough order of magnitude estimate based on the General
Contractor's and/or the Landlord's Architect's estimates of the amount of delay
that would be caused by the proposed Upgrades and/or the increased costs
associated with the proposed Upgrades (the "ROM Estimate").  Upon receipt of
Landlord's approval notice and ROM Estimate, if applicable, if Tenant still
wishes the Upgrades to be made, Tenant shall so notify Landlord in writing
within three (3) Business Days thereafter or within any shorter response period
specified in Landlord's notice).  If Tenant does not respond within the
designated response time then it shall be deemed to have withdrawn its request.
If Tenant elects to proceed with a proposed Upgrade, then the parties shall
proceed under subparagraph (ii) below if there is sufficient time to follow such
              -----------------
procedures before the work must begin, or under subparagraph (iii) if the work
                                                ------------------
must commence immediately.

          (i)  Plans.  If Tenant decides to proceed with the approved Upgrades,
               -----
Tenant shall hire through Landlord, at Tenant's sole cost and expense,
Landlord's Architect to prepare all required documentation and make necessary
changes to the Base Building Plans to construct the Upgrades and shall present
them to Landlord for review and approval (the "Upgrade Plans").  Tenant's
Upgrade Plans must be approved by Landlord's Architect and by Landlord in
writing, which approval may be given, withheld or subject to such conditions as
Landlord in its sole discretion desires.  Landlord's approval of the Upgrade
Plans shall not be deemed to be a representation or warranty that the Upgrades
will be adequate to meet Tenant's needs.

          (ii) Timely Requests. After Landlord has approved the Upgrade Plans,
               ---------------
Landlord will obtain from the General Contractor a cost proposal for the
Upgrades as shown in the Upgrade Plans in a lump sum amount or as a guaranteed
maximum price for the actual work described therein ("Cost Proposal").  Tenant
shall promptly deposit the full amount of the Cost Proposal with

                                      C-1
<PAGE>

Landlord (the "Upgrade Payment"). Landlord shall not authorize the General
Contractor to proceed with construction of the Upgrades until it has received
Tenant's Upgrade Payment.

          (iii)     Late Requests.  If the ROM Estimate is based on work
                    -------------
proceeding before the General Contractor has prepared a Cost Proposal, Tenant's
decision to proceed shall indicate that it wishes to proceed with the work with
out full pricing information.  Tenant must deposit the full amount of the costs
identified in the ROM Estimate with Landlord (the "Estimated Payment").
Landlord shall not authorize the General Contractor to proceed with construction
of the Upgrades until it has received Tenant's Estimated Payment.  Thereafter,
Landlord shall obtain a Cost Proposal as described  in subparagraph (ii) above
and any variance between Tenant's Estimated Payment and the Upgrade Payment,
shall be paid in accordance with Paragraph 13 below.
                                 ------------
          (iv)  Costs. Notwithstanding the ROM Estimate or the Cost Proposal,
                -----
Tenant shall be responsible for all costs of the Upgrades, anticipated or
unanticipated, direct or indirect, including all costs to re-design or
reconstruct the Base Building Improvements to accommodate such Upgrades, costs
for changes to the Base Building Plans, additional permitting or fees which may
be required in connection with such Upgrades, and any increased costs of
construction of the Base Building Improvements. Tenant shall pay Landlord for
all costs associated with any Upgrades approved by Landlord (including
additional architectural and engineering fees) plus an administrative fee equal
to ten percent (10%) of the costs of such Upgrades. Tenant shall be responsible
for any out-of-pocket costs incurred by Landlord or the General Contractor to
prepare a Cost Proposal even if Tenant subsequently rejects the Cost Proposal.

          (v) General.  Tenant and Landlord have discussed Tenant's desire to
              -------
include a data center in the Premises and to include some or all of the Expanded
Uses in the Premises, which may require Upgrades, including additional power,
backup power, and additional HVAC and telecommunications systems.  Landlord is
amenable in concept to such proposed changes but any such changes or Upgrades
shall be subject to all of the terms of this Paragraph 1.  Tenant acknowledges
                                             -----------
that time is of the essence and that construction of the Base Building
Improvements is already in progress and design thereof has been completed.  If
Tenant wishes to request Landlord's approval of any Upgrades, it should make
specific requests as soon as possible because the costs of Upgrades will
increase as construction progresses.  Landlord shall not be required to modify
Landlord's schedule for construction of the Base Building Improvements to
accommodate any Upgrades requested by Tenant even if approved by Landlord.  To
the extent feasible in Landlord's good faith but sole discretion, Landlord will
cooperate with Tenant to determine the scope of any such Upgrades and, to the
extent reasonably feasible, to include the approved Upgrades in the initial
construction of the Base Building Improvements to prevent or minimize any Tenant
Delay.

          (b) Mandatory Changes and Landlord-Initiated Changes.  Tenant
              ------------------------------------------------
acknowledges the Base Building Plans may be modified by Landlord from time to
time.  Tenant understands and agrees that Landlord may make any changes to the
Base Building Plans that are required by governmental authorities, Landlord's
value engineering efforts or to address any and all physical conditions of the
Real Property or the Project arising during construction.  Material changes to
the Base Building Improvements initiated by Landlord (and not covered by the
preceding sentence) may be made by Landlord in its sole discretion provided that
such discretionary changes shall not (i) materially increase the cost of the
Tenant Improvements unless Landlord pays for such increased costs, or (ii)
materially adversely affect the quality or scope of the Base Building
Improvements or the Project as described in the plans listed in Schedule C-3.
                                                                ------------
Landlord shall notify Tenant of potential material changes arising under this
Paragraph as such changes occur and shall inform Tenant of the impacts of such
changes on the Tenant Improvements, to the extent Landlord believes there is an
impact. The cost of all changes to the Base Building Plans made under this

Paragraph 1(b) shall be paid by Landlord as part of Landlord's payment of Base
--------------
Building Improvements costs except that Tenant shall be responsible for the cost
of revising the TI Working Drawings to accommodate any changes described in the
first sentence of this Paragraph 1(b).
                       --------------

                                      C-2
<PAGE>

  2. Improvements.  Any work in addition to Base Building Improvements and any
Upgrades approved by Landlord is referred to herein as "Tenant Improvements" and
shall be furnished and installed within the Premises substantially in accordance
with the Design Manual and the TI Working Drawings (as defined below) to be
prepared by the TI Architect (as defined below) and approved by Landlord in
accordance with this Exhibit C.  All Tenant Improvements shall be furnished and
                     ---------
installed by Landlord at the expense of Tenant, except for the amount of the
Cash Allowance (as defined in Paragraph 14 below).  For purposes hereof, the
                              ------------
cost of the Tenant Improvements shall include all costs associated with the
design and construction of the Tenant Improvements, including, without
limitation, all building permit fees, payments to design consultants for
services and disbursements, all demolition and other preparatory work, premiums
for insurance and bonds, such inspection fees as Landlord may incur, sales tax,
reimbursement to Landlord for permit and other fees Landlord may incur that are
fairly attributable to the Tenant Improvement work.  The cost of Upgrades and
Tenant Extra Improvements shall not be paid from the Cash Allowance unless
Landlord determines at the time of its approval that such items will add
permanent value to the Building.

     Landlord shall enter a construction contract ("TI Construction Contract")
with the general contractor selected by the process described in Paragraph 9
                                                                 -----------
below for the construction of the Tenant Improvements.  The TI Construction
Contract shall incorporate the terms of the TI Bid (as defined in Paragraph 9
                                                                  -----------
below) approved by Tenant.  The Tenant Improvements shall be constructed in
accordance with the TI Construction Contract and the TI Working Drawings
prepared by Tenant and approved by Landlord and as permitted by the City of
Bellevue.

  3. Tenant's Architect.  Tenant, at its sole cost and expense, shall hire
Callison Architectural, Inc. (the "TI Architect") to design the Tenant
Improvements and to obtain all required building or other permits to allow
construction of the Tenant Improvements in the Premises.  TI Architect shall, on
Tenant's behalf, retain the consultants designing the Building's structural,
mechanical, electrical, plumbing and telecommunication systems to design these
components of the Tenant Improvements.  The cost of preparing all plans and
specifications for the Tenant Improvements (including without limitation the
Conceptual Plans and the TI Working Drawings), and the cost of preparing any
changes thereto and the cost of obtaining all required permits shall be paid by
Tenant, although Tenant may apply a portion of the Cash Allowance equal to no
more than two dollars ($2.00) per square foot of Net Rentable Area to the
payment of Tenant's design costs.

  4. Submittal of Conceptual Plans.  Tenant shall submit to Landlord conceptual
plans (i.e. design development drawings) for the Tenant Improvements, including
architectural, electrical, mechanical and reflected ceiling drawings
(collectively, the "Conceptual Plans") by no later than the deadline set forth
in Paragraph 20 below.  Within ten (10) Business Days after receipt of the
   ------------
complete Conceptual Plans, Landlord shall review, comment on and return the
Conceptual Plans to Tenant, marked "Approved," "Approved as Noted" or
"Disapproved as Noted, Revise and Resubmit."  Such Conceptual Plans shall be for
the general information of Landlord, and to assist in the coordination of the
design and construction of the Tenant Improvements, and failure to respond to
the Conceptual Plans shall not constitute approval by Landlord of the design or
specifications shown thereon.

          (a) If the Conceptual Plans are returned to Tenant marked "Approved,"
the Conceptual Plans shall be deemed approved by Landlord and the procedure set
forth in Paragraph 5 below shall be followed.
         ------------

          (b) If the Conceptual Plans are returned to Tenant marked "Approved as
Noted," the Conceptual Plans so submitted shall be deemed approved by Landlord
and the procedure set forth in Paragraph 5 below shall be followed; provided,
                               -----------                          --------
however, in preparing the TI Working Drawings, Tenant shall cause the TI
-------
Architect to incorporate Landlord's noted items into the TI Working Drawings.

          (c) If the Conceptual Plans are returned to Tenant marked "Disapproved
as Noted, Revise and Resubmit," Tenant shall cause the Conceptual Plans to be
revised, taking into account the

                                      C-3
<PAGE>

reasons for Landlord's disapproval, and shall resubmit revised plans to Landlord
for review within five (5) days after return of the Conceptual Plans to Tenant
by Landlord. Landlord shall review and return the revised Conceptual Plans to
Tenant within five (5) Business Days after receipt of a complete set of the
revised Conceptual Plans. The same procedure shall be repeated until Landlord
approves the Conceptual Plans. In order to meet later deadlines, Tenant should
ensure that the Conceptual Plans are revised and resubmitted in time to meet
the deadline for approval set forth in Paragraph 20 below but failure to do so
                                       ------------
shall not in itself constitute a Tenant Delay. Landlord shall not be required to
review the Conceptual Plans more than three (3) times and if Landlord does not
approve the third set of Conceptual Plans Landlord may elect to terminate this
Lease by written notice to Tenant.

  5. Submittal of TI Working Drawings.  Following Landlord's approval of the
Conceptual Plans, Tenant shall deliver to Landlord one (1) set of reproducible
sepia and three (3) sets of blue-lined prints of detailed construction drawings,
final plans and specifications (hereinafter referred to collectively as the "TI
Working Drawings") for the Tenant Improvements.  Tenant shall also deliver to
Landlord a diskette containing the TI Working Drawings in the AutoCAD format (or
other computer assisted design format approved by Landlord) ("CAD").  The TI
Working Drawings shall be consistent with, and a logical extension of, the
Conceptual Plans approved by Landlord.  Within ten (10) Business Days after
receipt of a full and complete draft of the TI Working Drawings from Tenant,
Landlord shall return to Tenant one (1) sepia set of the TI Working Drawings
marked "Approved," "Approved as Noted" or "Disapproved as Noted, Revise and
Resubmit"; provided, however, that failure to respond to the TI Working Drawings
           --------  -------
shall not constitute approval by Landlord of the design or specifications shown
thereon.

          (a) If the TI Working Drawings are returned to Tenant marked
"Approved," the TI Working Drawings, as so submitted, shall be deemed approved
by Landlord

          (b) If the TI Working Drawings are returned to Tenant marked "Approved
as Noted," the draft of the TI Working Drawings shall be deemed approved by
Landlord; provided, however, in preparing the final approved TI Working
          -------- --------
Drawings, Tenant shall cause TI Architect to incorporate Landlord's noted items
into the TI Working Drawings.

          (c) If the TI Working Drawings are returned to Tenant marked
"Disapproved as Noted, Revise and Resubmit," Tenant shall cause such TI Working
Drawings to be revised, taking into account the reasons for Landlord's
disapproval and shall resubmit revised plans to Landlord for review.  The same
procedure shall be repeated until Landlord fully approves the TI Working
Drawings.

          (d) Tenant shall be solely responsible for:  (i) the completeness of
the TI Working Drawings; (ii) subject to Paragraph 8 below, the conformity of
                                         -----------
the TI Working Drawings with the existing conditions in the Building and the
Premises and the Base Building Plans; (iii) the compatibility of the TI Working
Drawings with the Base Building Improvements including the mechanical, plumbing,
life safety or electrical systems of the Building; and (iv) the compliance of
the TI Working Drawings with all applicable regulations, laws, ordinances, codes
and rules, including, without limitation, the Americans With Disabilities Act.

          (e) When the TI Working Drawings are approved by Landlord and Tenant,
the parties shall each acknowledge their approval by signing or initialing each
sheet of the TI Working Drawings. Tenant shall also deliver to Landlord a
diskette containing the approved TI Working Drawings in the CAD format.  Tenant
shall be solely responsible for ensuring that the approved TI Working Drawings
are submitted for permitting by the TI Architect so that permits are obtained by
the deadline set forth in Paragraph 20 below (subject to the terms of Paragraph
                          ------------                                ---------
6 below) and any failure to do so shall constitute Tenant Delay.  Tenant may
-
submit draft TI Working Drawings for permits provided that any submission must
be revised to include any changes required by Landlord prior to Landlord's
approval of the TI Working Drawings.

                                      C-4
<PAGE>

  6. Deadlines for Approval.

          (a) Tenant shall cause the Conceptual Plans and TI Working Drawings to
be prepared by the TI Architect, submitted to Landlord and, where required,
revised so as to obtain the approval of the TI Working Drawings by Landlord on
or before milestone date set forth in Paragraph 20 below.  If Landlord fails to
                                      ------------
respond to Tenant's submittal of the Conceptual Plans or the TI Working Drawings
within the time periods set forth herein, then the milestone dates under

Paragraph 20 below shall be extended by one (1) Business Day for each Business
------------
Day of Landlord's delay in responding.  Notwithstanding the foregoing, if any
delay is made up in any later period, then subsequent deadlines shall not be
extended.  If any deadline would end on a Saturday, Sunday or holiday, the
deadline shall be extended to the next Business Day.

          (b) Any consent or approval to any act or matter required under this

Exhibit C shall, to the extent reasonably practical, be in writing and shall
---------
apply only with respect to the particular act or matter to which such consent or
approval is given, and shall not relieve any party from the obligation to obtain
consent or approval, as applicable, whenever required under this Exhibit C for
                                                                 ---------
any other act or matter.  To the extent any approval given by Tenant or Landlord
is verbal, a written confirmation of such verbal approval shall be submitted to
the other party promptly thereafter, or shall be reflected in the notes of any
meetings of the parties or their representatives; provided, however, Landlord
                                                  --------  -------
shall not be liable to Tenant for any failure to provide written notes of any
meetings.

          (c) Except as otherwise stated in this Exhibit C, Tenant or Landlord,
                                                 ---------
as the case may be, shall be deemed to have acted promptly if a response is made
within three (3) Business Days from the date of receipt of any request for
response or approval or within such longer or shorter period as is expressly
provided herein or as is specified in the request for approval.  Tenant's
failure to respond within the required response period shall constitute Tenant's
approval of the matter submitted for approval or consent. Landlord's failure to
respond within the required response period shall constitute Landlord's
disapproval of the matter submitted for approval or consent.

  7. Landlord's Review Responsibilities.  Tenant acknowledges and agrees that
Landlord's review and approval, if granted, of all Conceptual Plans and TI
Working Drawings is solely for the benefit of Landlord and to protect the
interests of Landlord in the Building and the Premises, and Landlord shall not
be the guarantor of, nor in any way or to any extent responsible for, the
correctness or accuracy of any Conceptual Plans or TI Working Drawings or of the
compliance of the Conceptual Plans or TI Working Drawings with applicable
regulations, laws, ordinances, codes and rules or of the conformance or
compatibility of the Conceptual Plans or TI Working Drawings with the Base
Building Plans or with existing conditions in the Building or Premises or with
the Base Building Improvements to be constructed by Landlord. Landlord shall
make a good faith effort to identify for Tenant any irregularity or lack of
compliance identified by Landlord or Landlord's Architect during review of
Conceptual Plans and TI Working Drawings but shall not be liable to Tenant if
Landlord or Landlord's Architect fails to do so.

  8. Existing Conditions.  Prior to commencement of construction of the Tenant
Improvements, Tenant shall require and shall be solely responsible for insuring
that the TI Architect and the engineers and contractors employed by Tenant or
the TI Architect verify all existing conditions in the Building, insofar as they
are relevant to, or may affect, the design and construction of the Tenant
Improvements.  Tenant shall be solely responsible for the completeness of the TI
Working Drawings and for conformity of the TI Working Drawings with the Base
Building Plans and existing conditions in the Building and the Premises.  Tenant
shall ensure that the TI Architect inspects the Premises to verify existing
conditions and construction prior to the start of construction of the Tenant
Improvements.  Tenant shall notify Landlord immediately following such
inspection of any discrepancy between existing conditions and/or construction
and the Base Building Plans; otherwise, Landlord shall be conclusively deemed to
have met its obligations relating to the construction of the Premises to the
extent the Premises

                                      C-5
<PAGE>

are complete as of the date of such inspection. If Tenant notifies Landlord of
any discrepancy under the preceding sentence, Landlord shall either (i) correct
the discrepancy at Landlord's expense, or (ii) reimburse Tenant for the cost of
revising the TI Working Drawings to accommodate such existing conditions. In the
absence of notice from Tenant of any discrepancies, Tenant shall be responsible
for any modifications to the TI Working Drawings necessary to accommodate
existing conditions and construction. Except as provided otherwise herein,
Landlord shall have no liability to Tenant for any inaccuracy or incorrectness
in any of the information supplied by Landlord with regard to existing
conditions. Tenant shall be solely responsible for, and Landlord specifically
reserves the right to require Tenant to make at any time and from time to time
during the construction of the Tenant Improvements, any changes to the
Conceptual Plans and/or the TI Working Drawings necessary (a) to obtain any
permit, (b) to comply with all applicable regulations, laws, ordinances, codes
and rules, (c) to achieve the compatibility, as reasonably determined by
Landlord's Architect of the Conceptual Plans and TI Working Drawings with the
Base Building Plans, or (d) to avoid impairing or voiding any third-party
warranties.

  9. Pricing the Work.  Upon approval of the TI Working Drawings by Landlord,
Tenant shall cause TI Architect to deliver to Landlord the number of copies of
the TI Working Drawings which Landlord may reasonably request for use in
obtaining bids for the work and in the course of construction.

          (a) Procedures for Construction by General Contractor.
              -------------------------------------------------

          (i) By no later than May 15, 2000, Tenant shall elect to proceed under
one of the following options and if Tenant fails to make such election in a
timely manner, Landlord shall decide which alternative to proceed under in its
sole discretion.

          (A) Upon receipt of the copies of the TI Working Drawings from Tenant
or TI Architect Landlord shall solicit bids from at least two (2) general
contractors (one of whom may be the General Contractor) for the work shown on
the TI Working Drawings, in accordance with the procedures set forth in

Paragraph 9(a)(ii) - (iv) below.  Landlord may solicit bids from general
-------------------------
contractors selected by Landlord unless Tenant, upon delivery to Landlord of the
TI Working Drawings, notifies Landlord in writing of the name of not more than
one (1) general contractor from whom Tenant would like bids solicited; provided,
                                                                       --------
however, firms other than those on the list of approved general contractors for
-------
the Project (which shall be obtained from Landlord and shall include Unimark and
Lease Crutcher Lewis) must be approved in advance by Landlord in writing, which
approval may be granted or withheld in the sole discretion of Landlord.
Landlord shall solicit bids from the general contractor named in the notice from
Tenant and from any other contractors from which Landlord desires to solicit
bids.

          (B)  Tenant may agree to use the General Contractor as the TI
Contractor based on the fee and general terms and conditions included in the
contract for the Base Building Improvements between Landlord and the General
Contractor (the "Prime Contract") as summarized on Schedule C-4 attached hereto.
                                                   ------------
If Tenant elects to have the General Contractor serve as the TI Contractor, then
the provisions of Paragraph 9(a)(ii) - (iv) shall apply to the selection of the
                  -------------------------
major subcontractors (which shall include at least the electrical, mechanical,
and plumbing subcontractors for the Tenant Improvements) instead of to the
selection of the General Contractor, but as modified by Paragraph 9(a)(v) below.
                                                        -----------------

          (C) Tenant may select two (2) general contractors from the list of
contractors approved by Landlord to work in the Project (which shall include
Unimark and Lease Crutcher Lewis).  Landlord and Tenant shall meet with each of
the contractors selected by Tenant to discuss the scope of the Tenant
Improvements and the contractor's fee and the general conditions.  After
consultation with Tenant and good faith consideration of Tenant's preference,
Landlord shall select, in its sole discretion, one (1) of the general
contractors with whom to negotiate a contract for construction of the Tenant
Improvements and that contractor shall be the TI Contractor.  If the TI
Contractor is selected under this option then the provisions of Paragraph 9(a)
                                                                --------------
(ii) - (iv) shall apply to the selection of the major subcontractors (which
-----------
shall include at least the electrical, mechanical, and plumbing subcontractors
for

                                      C-6
<PAGE>

the Tenant Improvements) instead of to the selection of the General Contractor,
but as modified by Paragraph 9(a)(v) below.
                   -----------------

          (ii) Upon receipt of bids ("TI Bids") from the contractors from whom
bids were solicited (excluding any contractor that does not submit a bid within
the time period specified by Landlord in the request for bids) Landlord shall
notify Tenant of the amount of each of the bids and the general contractor (the
"TI Contractor") selected by Landlord (taking into account, in Landlord's good
faith judgment, all factors associated with the bids, including without
limitation, price, quality of materials to be used, estimated completion time
and reputation of subcontractors to be used).  Upon request, Landlord shall
allow Tenant to review Landlord's complete copies of the TI Bids (including, to
the extent such items are included and separately shown in the TI Bid, the
General Conditions and General Requirements to be included in the TI
Construction Contract, a cost breakdown of the pricing for the Tenant
Improvements) at times and at a place acceptable to Landlord.

          (iii)     Tenant shall have five (5) Business Days after receipt of
notice from Landlord regarding the selection of the TI Contractor in which to
give written notice to Landlord of Tenant's specific objection to the selected
TI Bid.  If Tenant accepts or fails to object within the time set forth above,
the TI Bid selected by Landlord shall be deemed approved and the identified TI
Contractor shall construct the Tenant Improvements.  If Tenant timely objects to
the bid, Tenant shall meet with Landlord, TI Architect and/or the selected TI
Contractor within five (5) Business Days to discuss mutually acceptable
revisions to the TI Bid or to Tenant's TI Working Drawings.  All costs of
changes required by any such revisions shall be the sole responsibility of
Tenant.  Following such revisions, Landlord shall submit to Tenant, as soon as
reasonably practicable, a revised TI Bid from the selected TI Contractor, and
the same procedure shall be followed as set forth above until Tenant has no
reasonable objection to the TI Bid.  In revising the TI Bid Landlord may, if it
deems appropriate, resolicit bids from the other originally solicited
contractors.  Following such revisions and/or resolicitation, Landlord shall
submit to Tenant, as soon as reasonably practicable, a revised bid from the
successful bidder, and the same procedure shall be followed as set forth above
until Tenant has no reasonable objection to the TI Bid; provided, however, that
                                                        --------  -------
Tenant shall not have the right to compel Landlord to retain any TI Contractor
that is not reasonably acceptable to Landlord or any subcontractor that is not
reasonably acceptable to Landlord and the TI Contractor.

          (iv) Landlord shall be entitled to receive an administrative fee for
the supervision of the TI Contractor in an amount equal to the sum of (A) three
percent (3%) of the first Thirty Dollars ($30.00) of costs per square foot of
Useable Area of constructing the Tenant Improvements in the Premises, and (B)
one percent (1%) of any additional costs of constructing the Tenant Improvements
in the Premises.  The administrative fee shall be included in the cost of the
Tenant Improvements.

          (v) If Tenant elects to use the General Contractor as the TI
Contractor pursuant to Option B above or proceeds under Option C above, then the
Landlord and TI Contractor shall obtain a minimum of two (2) competitive bids
from qualified subcontractors for the major trades involved in the Tenant
Improvements (one of whom may be the designated subcontractor for the Base
Building Improvements); provided, however, that Landlord shall not be required
                        --------  -------
to solicit bids from two (2) subcontractors for any portion of the work for
which two (2) qualified subcontractors are not available.  In such event,
Landlord shall consult with Tenant and consider Tenant's preferences before
selecting the subcontractors.  The subcontractor's bids shall be available for
Tenant's review and comment as provided in this Section for the TI Bids.

          (vi) If Tenant selects Option B or if the General Contractor is
selected as the TI Contractor pursuant to Option A, then the TI Construction
Contract shall consist of a change order/cost proposal to the Prime Contract in
the amount of the actual cost of the TI Bid.  Tenant acknowledges that

                                      C-7
<PAGE>

the Prime Contract includes the terms and conditions generally described on
Schedule C-4 attached hereto.
------------

          (b) Payment of Tenant's Share of Costs.  When Tenant has approved the
              ----------------------------------
TI Bid or subcontractor bids, as applicable, Tenant shall deposit with Landlord,
for payment in accordance with Paragraph 14 below, an amount (the "Construction
                               ------------
Payment") equal to the difference between the Cash Allowance and the total
amount of the approved TI Bid plus Landlord's administrative fee as described in
Paragraphs 1(a)(iv) and 9(a)(iv).  Landlord shall not authorize construction of
-------------------     --------
the Tenant Improvements to commence until Landlord has received the Construction
Payment.

  10. Administration of Work.

          (a) After acceptance of the TI Bid and receipt of the Construction
Payment, Landlord shall administer the construction of Tenant Improvements in
accordance with the final, approved and permitted TI Working Drawings
("Landlord's Work"'); provided, however, that Landlord shall not be required to
                      -------- --------
install any Tenant Improvements that do not conform to the approved TI Working
Drawings, or conflict with elements of the approved TI Working Drawings, or do
not comply with applicable regulations, laws, ordinances, codes and rules; such
conformity being the obligation of Tenant.

          (b) All Tenant Improvements shall be constructed by the TI Contractor
and its  subcontractors selected pursuant to Paragraph 9 with the exception of
                                             -----------
work stations, wall finishes (other than paint), built-in custom bookcases and
other nonstandard millwork, office equipment and information technology and
telecommunications equipment and wiring ("Tenant's Work"') which shall be
designed, constructed, installed or provided by Tenant in accordance with the
Design Manual.

          (c) Landlord shall provide Tenant with the opportunity to have access
and entry to each floor of the Initial Premises prior to installation of the
ceiling grid for installation of Tenant's cabling at times consistent with the
schedule for completion of Landlord's Work, subject to all the terms and
conditions of the Lease including all of the terms of this Exhibit C.  Tenant
                                                           ---------
shall be solely responsible for arranging such early access with Landlord and
its contractors based on the construction schedules that Landlord will provide
to Tenant pursuant to Paragraph 16. Tenant acknowledges that the estimated date
                      ------------
on which Tenant may access the Initial Premises for installation of such cabling
may change from time to time and Landlord shall not be liable to Tenant for any
such changes in schedule. Landlord shall have no obligation to alter its
construction schedule or to cease or delay any portion of Landlord's Work to
permit Tenant to install such cabling. Tenant shall be solely responsible for
arranging such early access and Landlord shall not be liable nor shall
Substantial Completion or Rent Commencement be delayed because Tenant is not
able to complete such work while Landlord's Work is in progress.  All Tenant's
Work shall be installed in a manner that conforms with the General Contractor's
and the TI Contractor's and/or subcontractors' schedules for completion of the
Base Building Improvements and the Tenant Improvements and the work of
installation shall be handled in such a manner as to maintain harmonious labor
relations and as not to interfere with or delay Landlord's Work.  No portion of
the Landlord's Work shall be dependent upon completion of any Tenant's Work and
the Landlord's Work shall have priority over any Tenant's Work.  The
contractors, subcontractors and materialmen performing Tenant's Work shall be
subject to prior approval by Landlord and shall be subject to the administrative
supervision of Landlord or Landlord's general contractor and rules of the site.
Contractors, subcontractors and materialmen performing Tenant's Work shall take
all necessary steps to insure, so far as may be possible, the progress of the
work without interruption on account of strikes, work stoppage or similar causes
for delay.  In the event that the contractors or subcontractors performing
Tenant's Work do not promptly cause any pickets to be withdrawn and all other
disruptions to the operations of the Building promptly to cease, or in the event
that Landlord notifies Tenant that Landlord has in good faith concluded that
picketing or other disruptive activities are an imminent threat, Tenant shall
immediately cause the withdrawal from the job of all its contractors,
subcontractors or materialmen involved in the dispute.  Any delay caused to the
General Contractor or the TI Contractor attributable to Tenant's Work shall
constitute

                                      C-8
<PAGE>

Tenant's Delay, and in addition to the obligations set forth elsewhere herein,
Tenant shall be obligated to pay all cost and expense incurred by Landlord in
connection therewith, including lost rental income. No portion of Tenant's Work
shall be taken into account in determining whether or not the Premises are
Substantially Complete.

          (d) Landlord and Tenant shall each require that each of its
contractors, subcontractors and materialmen maintain commercial general
liability insurance in an amount of not less than Two Million Dollars
($2,000,000.00) on a combined single limit basis and all worker's compensation
insurance required by law.

          (e) Landlord shall provide Tenant with access and entry to the
Premises only at times consistent with the schedule for completion of Landlord's
Work, subject to all the terms and conditions of the Lease and this Exhibit C
                                                                    ---------
and in accordance with any site rules imposed by the General Contractor and the
TI Contractor.  Upon and following any entry into the Premises by Tenant prior
to Substantial Completion, Tenant shall perform all of the obligations of Tenant
applicable under the Lease during the Term (except the obligation to pay Base
Rent and Tenant's Proportionate Share of Operating Costs, unless a Rent
Commencement Date has occurred), including, without limitation, obligations
pertaining to insurance, indemnity, compliance with laws and Hazardous
Materials.  In addition to the indemnity obligations of Tenant under the Lease,
Tenant shall indemnify, defend and protect Landlord and hold Landlord harmless
from and against any and all claims, proceedings, losses, costs, damages, causes
of action, liabilities, injuries or expenses arising out of or related to claims
of injury to or death of persons or damage to property occurring or resulting
directly or indirectly from the presence in the Premises or the Project of
Tenant's contractors or representatives or the activities of Tenant or its
contractors or representatives in or about the Premises or Project during the
construction period, such indemnity to include, without limitation, the
obligation to provide all costs of defense against any such claims.  This
indemnity shall survive the expiration or sooner termination of the Lease.

  11. Obligation of Tenant to Provide As Built Plans.  Within sixty (60) days of
Substantial Completion, Tenant shall cause TI Architect to provide Landlord with
a complete set of plans on mylar and specifications reflecting the actual
conditions of the Tenant Improvements as constructed in the Premises, together
with a copy of such plans on diskette in the CAD format.

  12. Reimbursement and Compensation.  Tenant shall reimburse Landlord for all
actual costs incurred by Landlord in connection with the design and review of
Conceptual Plans and TI Working Drawings for the Tenant Improvements, and
Landlord shall be entitled to receive the administrative fee provided in

Paragraph 9 of this Exhibit C.  Landlord may obtain any reimbursement or
-----------         ---------
compensation required hereunder by deducting the amount of such reimbursement or
compensation from Cash Allowance and the Construction Payment.  Tenant shall be
responsible for delays and additional costs incurred by Landlord in completing
the Base Building Improvements due to inadequacies in the TI Working Drawings or
Tenant requested changes to the Base Building Improvements.

  13. Tenant Payments. Landlord shall make progress payments for Landlord's Work
on a pro rata basis from Cash Allowance and the Construction Payment (in the
proportion that the Cash Allowance and Construction Payment bear to the total
cost for construction of the Tenant Improvements) from time to time as the
Tenant Improvements are constructed. If for any reason the Cash Allowance and
Construction Payment are not adequate to make all required payments, Tenant
shall pay to Landlord such additional required amount as determined by Landlord
within ten (10) days after Landlord's submittal to Tenant of a request for
payment together with the documentation called for in this Section. Statements
or invoices may be rendered by Landlord during the progress of the work so as to
enable Landlord to pay the TI Contractor, subcontractors, Landlord's Architect
or engineers without advancing Landlord's funds to pay the cost of Tenant
Improvements. If for any reason the Construction Payment is not fully utilized
to make all required payments, Landlord shall upon completion of the Tenant
Improvements refund to Tenant any unused portion of the Construction Payment.
Landlord shall be entitled to suspend or

                                      C-9
<PAGE>

terminate construction of the Tenant Improvements and to declare Tenant in
default in accordance with the terms of the Lease if payment by Tenant of any
amounts required to be paid by Tenant under this Exhibit C is not received
                                                 ---------
when due, subject to any applicable notice and cure period under the Lease.

          (a) On a monthly basis during construction of the Tenant Improvements,
Landlord shall provide Tenant with a summary on Landlord's standard form that it
uses for internal purposes, documenting the status of any change orders and the
budget for the Tenant Improvements.  All Landlord's requests for additional
payments from Tenant during construction of the Tenant Improvements shall have
attached thereto legible copies of applicable statements or invoices and copies
of  the documentation required from the TI Contractor under the TI Construction
Contract as a condition to payment thereunder.

          (b) Not later than one hundred twenty (120) days after Landlord has
received the as-built plans from Tenant, Landlord shall submit to Tenant
Landlord's standard form of project summary, including copies of any
documentation required from the TI Contractor under the TI Construction Contract
to reconcile costs actually incurred for changes and costs due to Tenant Delay.

  14. Cash Allowance. Landlord shall provide a total of up to Twenty-seven
Dollars ($27.00) per square foot of Useable Area in the Premises ("Cash
Allowance") toward the payment for the design, development, construction and
installation of the Tenant Improvements in the Premises. The Cash Allowance
shall be used solely for the construction of Tenant Improvements above the Base
Building Improvements and other costs permitted herein. Subject to the
limitations set forth elsewhere herein, Landlord shall in accordance with this
Exhibit C apply the Cash Allowance to the cost of designing and constructing
---------
the Building Standard Improvements, space planning fees, design fees,
architectural and engineering fees, permit fees, recovery of Landlord's
construction administration fee and Washington State sales tax and for the other
purposes specifically provided in this Exhibit C.  The obligation of Landlord
                                       ---------
to make any one or more payments pursuant to the provisions of this Paragraph
                                                                    ---------
14 or to proceed with the construction of the Tenant Improvements shall be
--
suspended without further act of the parties during any such time as there
exists an Event of Default under the Lease or any event or condition which, with
the passage of time or the giving of notice or both would constitute such an
Event of Default. Nothing in this Paragraph 14 shall affect the obligations of
                                  ------------
Tenant under the Lease with respect to any alterations, additions and
improvements within the Premises, including, without limitation, any obligation
to obtain the prior written consent of Landlord thereto. The Cash Allowance
shall not be used to pay for Tenant Extra Improvements or Upgrades unless
Landlord determines that such items will add permanent value to the Building.
Notwithstanding the foregoing, Landlord agrees that the Cash Allowance may be
applied to the cost of upgraded carpeting and raceways and conduits (excluding
cabling) that are placed above the ceiling in a standard configuration that is
acceptable to Landlord and does not impede or interfere with the base building
systems.

  15. Tenant Modifications.

          (a) Discretionary Changes.  If Tenant desires to change or revise the
              ---------------------
Tenant Improvements specified by the approved TI Working Drawings, then Tenant
shall submit such change in writing for Landlord's approval, which shall not be
unreasonably withheld, conditioned or delayed and such request shall be
accompanied by plans, specifications and details as may be required to fully
identify and quantify such changes.  Landlord shall not be required to approve
any modifications if, in Landlord's judgment such modification would delay
completion of the Base Building Improvements or have an adverse impact on the
mechanical, electrical, life safety or HVAC systems in the Building.  Landlord
shall notify Tenant in writing (an "Approval Notice") whether it will approve
the requested change within ten (10) Business Days after the date Landlord
receives Tenant's request; provided, however, that Landlord's response time will
                           --------  -------
be extended by any need to obtain information or estimates from the TI
Contractor or any subcontractor as to time or cost of the proposed changes.  If
the change is requested less than ten (10) Business Days before that portion of
Landlord's Work is scheduled to begin, Landlord shall

                                     C-10
<PAGE>

make a reasonable effort to expedite its response. If Landlord approves such
changes, then Tenant will provide Landlord with revised Working Drawings
incorporating the changes. If Tenant's request will increase the cost of
construction or will cause a delay in completing the construction, Landlord's
Approval Notice shall include Landlord's good faith estimate of the amount of
delay it will cause and/or the increased costs associated with the change. Upon
receipt of an Approval Notice, if Tenant still wishes the change to be made,
Tenant shall so notify Landlord in writing within three (3) Business Days
thereafter and shall pay Landlord any sum necessary to pay for such change
whereupon Landlord shall execute a change order directing the TI Contractor to
make the approved changes. If Tenant does not respond and increase the
Construction Payment within three (3) Business Days then it shall be deemed to
have withdrawn its request. Landlord shall be entitled to its administrative fee
for overseeing the change order. If, incident to a requested change to the
Working Drawings or Landlord's Work, Landlord stops work pending resolution of
whether Tenant finally approves or disapproves the additional costs or delay of
a proposed change, then whether or not Tenant ultimately approves or disapproves
the proposed change and its attendant additional cost and delays, any delay
resulting from the work stoppage will constitute a Tenant Delay. Tenant shall be
responsible for any costs incurred by Landlord or the contractor to prepare a
proposed change order even if Tenant subsequently rejects the change order.
Tenant shall be responsible for all costs of any resulting delay in the
completion of the Premises or the Base Building Improvements due to modification
of the TI Working Drawings even if the costs are not included in Landlord's good
faith estimate as set forth in the Approval Notice. The actual cost of any
approved changes shall be added to the Construction Payment, unless the Cash
Allowance is sufficient to pay the cost of such change.

          (b) Mandatory Changes.  Tenant shall modify the TI Working Drawings to
              -----------------
include any changes required by any applicable government authority during the
permitting process and such changes shall be subject to Landlord's approval
which shall not be unreasonably withheld.  During the course of construction,
Landlord shall be authorized to make any changes to the Tenant Improvements if
required by governmental authority and the cost thereof shall be paid by Tenant.
Except to the extent of ongoing minor "field changes" by the TI Contractor at
the time of construction, any material discretionary change to Tenant
Improvements shall be authorized in writing by Tenant and Landlord, on one or
more forms to be prepared by the TI Contractor and approved by Landlord and
Tenant.  All such proposed changes shall be presented to Tenant by written
notice as soon as they become known.  Tenant shall approve or reject such
proposed changes promptly and acknowledges that this may require decisions to be
made immediately during the course of construction.  If Tenant does not respond
promptly then Landlord may direct the TI Contractor to delay that portion of
construction and any delay shall be a Tenant Delay.  Any costs of such changes
including Landlord's costs associated with Tenant Delay shall be included in the
Tenant Improvements Costs

  16. Designation of Construction Representatives.  Tenant hereby designates
Paul Klansnic as its representative to act on its behalf and represent its
interests with respect to all matters requiring Tenant action in this Exhibit C
                                                                      ---------
and Landlord shall be entitled to rely upon the decisions and agreements made by
such representative as binding upon Tenant.  Landlord hereby appoints Michael
Welebit and/or Dan Matheson as its representative to act on its behalf and
represent its interests with respect to all matters requiring Landlord action in
this Exhibit C.  The parties may change the identity of their representatives by
     ---------
notice in writing to each other.  All inquiries, requests, instructions,
authorizations, and other communications under this Exhibit C may be made by the
                                                    ---------
parties to the other party's representative, and any approvals to be given by a
party under this Exhibit C may be given by that party's representative.
                 ---------
Landlord and Tenant hereby expressly recognize and agree that no other person
claiming to act on behalf of Tenant or Landlord is authorized to do so. Landlord
and Tenant shall each be entitled to rely upon the decisions and agreements made
by the other party's representative with respect to matters covered by this

Exhibit C as binding upon it but neither party's representative shall have any
---------
authority to amend or modify the terms of the Lease (including this Exhibit C)
                                                                    ---------
or to act with respect to any matters except those expressly covered by this
Exhibit C.  No consent, authorization or other action shall bind a party unless
---------
in

                                     C-11
<PAGE>

writing and signed by their respective representative.  If  a party complies
with any request or direction presented to it by anyone claiming to act on
behalf of the other party other than the designated representative, then such
compliance shall be at such party's sole risk and responsibility and shall not
in any way alter or diminish the obligations and requirements created and
imposed by this Exhibit.  Both parties shall have the right to enforce
compliance with this Exhibit without suffering any waiver, dilution or
mitigation of any of their rights hereunder.  Notice of all disputes arising
under this Exhibit C shall be given to the parties and the parties'
           ---------
representative by notice as provided in the Lease.

     Landlord shall have the right to observe the construction of the Tenant
Improvements. Landlord shall include Tenant on the distribution list for updates
to the construction schedule for the Building and the Tenant Improvements but
neither Landlord, the General Contractor nor the TI Contractor shall be required
to provide any special reports, updates or schedules for Tenant's benefit.
During construction of the Tenant Improvements, the representatives of Landlord
and Tenant, General Contractor, TI Architect, and TI Contractor shall meet upon
request of either party (but no more often than two (2) times per month unless
otherwise agreed by the parties) in order to review status and scheduling for
construction of the Tenant Improvements and possible changes required, delays
anticipated, costs being incurred and related matters. Tenant shall inform
Landlord of all construction meetings with respect to Tenant's Work and Landlord
shall have the right to attend all meetings of Tenant and its contractor and
subcontractors, and the Tenant's construction contract(s) shall so provide.
Landlord shall inform Tenant of all regularly scheduled construction meetings
regarding Tenant Improvements and Tenant shall have the right to attend such
meetings.  Tenant acknowledges that the Tenant Improvements may be constructed
at the same time as Landlord is constructing the Base Building Improvements.
Subject to the limitation set forth in Section 10 above, each party shall cause
                                       ----------
its architects, engineers and contractors to cooperate fully and promptly with
each other as and when deemed necessary by such party in its good faith
determination in the course of construction of the Tenant Improvements.  If
Tenant's Work interferes with Landlord's Work and Tenant fails to comply with
Landlord's requests for cooperation then Landlord may require Tenant to cease
work in the Premises.

  17. Substantial Completion. As used herein, "Substantial Completion" shall
mean (and each floor of the Premises shall be deemed "Substantially Complete")
when (i) installation of Building Standard Improvements and Tenant Extra
Improvements in such portion of the Premises has occurred, to the extent such
improvements can, in Landlord's reasonable judgment, be installed within the
timeframe for completion of Building Standard Improvements, (ii) Tenant has
direct access to the elevator lobby on the floor (or floors) where the Premises
are located, (iii) Basic Services are available to the Premises, and (iv) the
City of Bellevue has issued a temporary or permanent certificate of occupancy
permitting Tenant to occupy such portion of the Premises for the Permitted Use
or has taken such other action as may be customary to permit occupancy or use
thereof for the Permitted Use. Notwithstanding the foregoing, Substantial
Completion shall be deemed to have occurred on the date on which Tenant takes
occupancy of the Premises and commences to do business therein. Substantial
Completion shall be deemed to have occurred even if a "punch-list" or similar
corrective work remains to be completed. Within ten (10) days after Landlord
delivers possession of the Premises to Tenant, Landlord, Tenant, and the
Landlord's Architect shall prepare a "punch-list" which shall consist of the
items that have not been, but should have been, finished or furnished prior to
such date or which do not conform to the TI Working Drawings or the Base
Building Drawings (but only to the extent that the Base Building Improvements
were not complete at the time of Tenant's inspection under Paragraph 8 above).
                                                           -----------
Landlord shall complete and furnish all punch-list items within thirty (30) days
after Substantial Completion or as soon thereafter as is possible with the
exercise of due diligence. The cost thereof shall be borne by the General
Contractor under its contract to construct the Base Building Improvements or
Upgrades, or the TI Contractor under the TI Construction Contract, as the case
may be.

  18. Tenant's Delay.  If Substantial Completion shall be delayed as a result of
any of the following causes, such delay shall be considered a "Tenant Delay":

                                     C-12
<PAGE>

          (a) Tenant's failure to obtain approval of the TI Working Drawings by
Landlord or to obtain permits from the City by the dates set forth in Paragraph
                                                                      ---------
20 below (as such dates may be extended or modified pursuant to the terms of
--
this Exhibit C);
     ---------

          (b) Change(s) in TI Working Drawings requested by Tenant after
approval of the TI Working Drawings by Landlord;

          (c) Any delays in starting construction due Tenant's disapproval of
any TI Bids or the need to revise TI Bids or TI Working Drawings to reduce
costs; or

          (d) Tenant's request for materials, finishes or installations other
than Building Standard Improvements which require a longer time than Building
Standard Improvements to obtain, install or complete; or

          (e) Tenant's failure to comply with the TI Contractor's or the General
Contractor's or any subcontractor's schedule or to meet any deadline or to
respond within any time limit provided herein; or

          (f) An Event of Default by Tenant under the Lease or the existence of
any event or condition which, with the passage of time or the giving of notice
or both would constitute such an Event of Default;

          (g) Any delay caused by or attributable to Tenant's desire to include
Expanded Uses in the Premises, including delays in issuance of certificates of
occupancy or construction; or

          (h) Delays caused by Tenant in construction.

     In the event of a Tenant Delay, Landlord shall, to the extent feasible
based on the type of delay, the stage of construction and other factors, make
good faith efforts to make up for the period of Tenant Delay by paying overtime
or other methods acceptable to Landlord, the TI Contractor, the General
Contractor and their subcontractors; provided that Tenant shall be solely
responsible for all costs related thereto.  If Landlord's efforts are successful
and all or a portion of the period of a Tenant Delay is made up through such
efforts, then the following sentence shall not apply to the period of Tenant
Delay that is made up. In the event of any Tenant Delay, notwithstanding any
provision to the contrary contained in the Lease, or if Substantial Completion
is delayed due to Tenant Delay, the Term Commencement Date and the Rent
Commencement Date for each floor shall be the earlier of the date of Substantial
Completion of such floor or the date when Substantial Completion of such floor
would have occurred if there had been no Tenant Delay.  Tenant acknowledges that
the length of any Tenant Delay is to be measured by the duration of the delay in
Substantial Completion caused by the event or conduct constituting Tenant Delay,
which may exceed the duration of such event or conduct due to the necessity of
rescheduling work or other causes.

  19. Reliance on Plans.  Landlord and Tenant shall each be entitled to rely on
the Base Building Plans and the TI Working Drawings for work to be done by Land
lord or Tenant. If (a) Tenant notifies Landlord of any construction
discrepancies following its inspection pursuant to Paragraph 8 above, or (b)
                                                   -----------
Tenant is required to modify the TI Working Drawings due to changes in the
Base Building Plans initiated by Landlord for value-engineering purposes or for
discretionary reasons after Landlord's approval of the TI Working Drawings, then
Landlord shall reimburse Tenant for the actual, out-of-pocket cost of revising
the TI Working Drawings to accommodate such existing conditions or changes in
the Base Building Plans. In addition, if Landlord changes the Base Building
Plans after Tenant submits the TI Working Drawings to Landlord for approval and
Tenant is required to change the TI Working Drawings to comply with Landlord's
changes to the Base Building Plans, then the milestone dates under Paragraph 20
                                                                   ------------
may be extended for such reasonable period of time (not to exceed five (5)
Business Days) as is necessary for Tenant to modify the Working Drawings to
conform to the changes to the Building Plans; provided, however, that the dates
                                              --------  -------
shall not be extended unless Tenant notifies Landlord, within two

                                     C-13
<PAGE>

(2) Business Days after Tenant receives notice of the changes, of the number of
days Tenant will need to make such revisions. Notwithstanding the foregoing, if
any delay is made up in any later period, then subsequent deadlines shall not be
extended. If any deadline would end on a Saturday, Sunday or holiday, the
deadline shall be extended to the next Business Day.

  20. Schedule of Milestone Dates.  Tenant shall be responsible for meeting the
following deadlines except as otherwise provided herein.  If Landlord sells the
Project prior to completion of the Tenant Improvements then each of the
following deadlines shall be extended by fifteen (15) days.

          Tenant's Delivery of Conceptual Plans to Landlord:  May 15, 2000

          Tenant's Plan Delivery Date (approval of TI Working Drawings):  August
          1, 2000

          TI Construction Contract Finalized, Permits in Place and Final
          Construction Drawings Completed:  September 1, 2000

          Substantial Completion/Scheduled Commencement Date:  February 15, 2001

  21. Warranties.  Landlord shall obtain from the General Contractor, TI
Contractor, Landlord's Architect and all other consultants, design
professionals, engineers, contractors, subcontractors, and suppliers providing
design services, material, labor or equipment in the construction of the Base
Building Improvements and Tenant Improvements such warranties as Landlord deems
to be commercially necessary or desirable for their respective materials, labor
or equipment.  If there exists any defect in the Base Building Improvements or
Tenant Improvements which is covered by an express or implied warranty obtained
by Landlord, then Landlord shall seek to enforce such warranties in accordance
with their terms for the benefit of the Landlord and the Tenant (with respect to
the Tenant Improvements).  To the extent permitted by law and by the warranty to
be assigned, Landlord hereby assigns all warranties with respect to workmanship
and materials supplied in connection with the Tenant Improvements to Tenant (in
common with Landlord) and Tenant may enforce any warranties on the Tenant
Improvements if Landlord fails to do so after notice from Tenant.

                                     C-14
<PAGE>

                                  SCHEDULE C-1

                    DEFINITION OF BASE BUILDING IMPROVEMENTS

The following work is to be provided by Landlord as the Base Building
Improvements constructed in accordance with the drawings submitted to the City
of Bellevue for building permits (and as further described on Schedule C-3),
                                                              ------------
which may be modified to accommodate City requirements, value engineering, and
changes made at Tenant's request and with Landlord's approval in Landlord's sole
discretion.  Except as otherwise provided in the Lease or in Exhibit C to the
                                                             ---------
Lease, Tenant shall accept the Base Building Improvements "AS IS" upon
completion  of construction.

Sitework:

1. Plaza

   a.   Provide cement concrete pavements, curbs and sidewalks in the plaza;

   b.   Provide adequate site drainage per local requirements for storm water
        control;

   c.   Provide cast in place colored concrete paving;

   d.   Furnish and install steel ornamental fences and its accessories;

   e.   Furnish and install site benches and trash receptacle complete with
        accessories;

   f.   Furnish and install tree grates, trench grates, traffic bollards;

2. Landscaping

   a.   Provide site landscaping of trees, shrubs, groundcover, including
        existing stored plant materials, seeding and sodding in conformance with
        the requirement of local codes and ordinances for aesthetics and
        identity;

   b.   Furnish and install irrigation as required by local code;

3. Parking Garage

   a.   Provide a four-level underground parking structure;

   b.   Provide men and women shower facilities on the P1 level of the garage;

4. Exterior Lighting

   a.   Provide surface mounted lighting in the garage as required by code;

   b.   Furnish and install lighting fixtures complete with lamps on the plaza,
        building exterior and grounds per local code for safety, security,
        aesthetics and identity;

5. Signage

   a.   Provide signage per local code for direction, information, public safety
        and security;

Building Systems

6. Sanitary Sewer:

   a.   Provide connections to existing sanitary sewer systems in predetermined
        locations per local code;

   b.   Furnish and install sanitary sewer piping, cleanouts and manholes with
        connections to building plumbing systems for the Base Building
        Improvements in conformance with local codes and ordinances;

                                    C-1 - 1
<PAGE>

   c.   Provide common under slab sanitary sewer lines per local code with any
        additional plumbing services required for Tenant Premises be constructed
        at Tenant cost;

7. Storm Sewer:

   a.   Furnish and install catch basins, control structures, spill control
        structures, storm drainage piping, and foot drains necessary for the
        Base Building Improvement in conformance with the requirements of local
        codes and ordinances;

8. Electrical

   a.   Provide electrical service through 480Y/277 volt power from main panel
        board in garage in locations determined by Landlord that are in
        conformance with the requirements of local codes and ordinances. Any
        additional electrical distribution requested by Tenant is a Tenant
        Improvement;

   b.   Provide a minimum of one (1) K13 electrical transformer per Building
        floor;

   c.   Provide 120/208 volt panel boards on each floor or equivalent to supply
        a minimum of 1.5 watts per usable square foot for tenant lighting loads
        and 2.5 watts per usable square foot for tenant convenience loads;

   d.   Provide sufficient electrical capacity for all common area loads and
        building standard HVAC loads.

   e.   Provide an emergency power system to serve the fire pump, life safety
        loads, legally required standby loads and optional building standby
        loads in a location as determined by Landlord and in conformance with
        the requirement of local codes and ordinances.

9. Mechanical System

   a.   Provide a four (4) air-cooled rooftop DX units system with 100% fresh
        air economizer mode for each Building;

   b.   Provide access to condenser water from a roof-mounted cooling tower,
        including a vertical riser with stub-outs on each floor. All
        distribution from the vertical riser and all other costs associated with
        using the condenser water loop shall be Tenant Improvements;

   c.   Provide a Heating, Ventilation, and Air Conditioning (HVAC) system to
        sufficiently handle building standard and common area electrical loads
        based on the following design criteria:

        . Summer outdoor design conditions: ASHRAE Design Data: 85 degrees F dry
          bulb, 67 degrees F wet bulb;
        . Winter outdoor design conditions: ASHRAE Design Data: 17 degrees F dry
          bulb
        . Summer indoor temperature will be 74 degrees F (+-2 degrees);
        . Winter indoor temperature will be 72 degrees F (+-2 degrees);
        . Humidity is variable with no direct control provided;
        . Outside air is at 20 cfm/person minimum (7 people per 1000 rentable
          square feet), which can be increased to 100 percent outside air by
          operating with an air economizer cycle;
        . Acoustical criteria is NC-40 (+-2) within 15 feet of the core;

   d.   Provide a digital climate control system for after-hours service
        requests made by tenants, through an on-demand touch-tone phone menu or
        other automated system;

                                    C-1 - 2
<PAGE>

   e.   Provide the main-loop HVAC distribution system to each floor and control
        equipment that includes:

        . Installation of all vertical ductwork;

        . Installation of the main horizontal air distribution loop on each
          floor;

        . Stock variable air volume series Fan Powered Terminal Units (FPTUs)
          ready for installation in accordance with building standard mechanical
          layouts prepared by Flack + Kurtz Consulting Engineers. Installation
          costs are a Building Standard Improvement and is a Tenant's cost;
          Installation of all other air distribution is to be completed as a
          Tenant Improvement;

10. Plumbing System

   a.   Provide common overhead water supply line in sizes and location
        determined by Landlord to serve the Base Building Improvements, namely
        restrooms on each floor, including lavatories, toilets and drinking
        fountains. Any additional plumbing services requested by Tenant for the
        Premises shall be constructed as a Tenant Extra Improvement at Tenant's
        sole cost;

11. Life Safety Systems

   a.   Provide a fully sprinklered Building with quick-response semi-concealed
        type heads in lobby and areas with finished ceilings at a minimum
        density required by code for the Base Building Improvements;

   b.   Provide plain brass, upright pendant or side wall sprinklers heads in
        unfinished tenant areas; at a minimum density required by code for the
        Base Building Improvements;

   c.   Provide smoke detectors in all common areas at a minimum density
        required by code for the Base Building Improvements;

   d.   Provide smoke detectors in the HVAC ductwork ceilings at a minimum
        density required by code for Base Building Improvements;

   e.   Provide fire control panels as required by code;

   f.   Manual fire alarm pull stations, exit lights, and audible fire alarm
        speakers shall be provided at the Building stair doors and elevator
        lobbies.

12. Security Systems

   a.   Provide a 24 hours per day, 7 days per week accessible security system
        in a location determined by Landlord having:

        . Card controlled access to the Building and the garage;

        . Card readers in each elevator cab;

        . Closed circuit security camera system;

13. Telecommunications

   a.   Provide separate telecommunication access pathways from an off-site
        location to a central telecom site located on the P-1 level of garage or
        a location determined by Landlord;

   b.   Provide at least one (1) telephone closet with punch-down boards
        (terminations) on each floor of Building;

   c.   Provide conduit from the Project to telecommunications providers in the
        street;

                                    C-1 - 3
<PAGE>

   d.   Provide multiple sleeves in each Building to accommodate vertical
        distribution for tenant telecommunications service providers with any
        other vertical or horizontal distribution required for Tenant be
        constructed at Tenant's cost;

Building Shell

14.  Frame:

   a.   Provide building foundation and structure;

   b.   Provide a steel structure with structural concrete on metal deck having
        lateral resistance achieved through braced frames;

   c.   Provide typical floor to floor heights of 13'-0" from finished floor to
        finished floor;

15.  Roof:

   a.   Provide a multiple-ply SBS polymer modified asphalt sheet roofing with
        mineral granule surfacing that includes roof membrane traffic pad and
        membrane protection materials, aggregate ballast and decorative ballast;

   b.   Provide a roof that includes an extended roof warranty of 20 years
        including the costs of repairing leaks that result from defects in any
        component(s) of the system or the workmanship involved in installation;

   c.   Provide sheet metal items related to roofing work, waterproofing,
        including metal gutters and downspouts, scupper and flashings;

16. Exterior Building Walls:

   a.   Provide an exterior building wall comprised of pre-cast concrete, a
        panelized brick system and curtain wall;

   b.   Install perimeter panels and exterior glass windows to enclose each
        floor of the Premises;

17. Lighting Fixtures / Controls:

   a.   Stock two (2) lamp, 18 cell parabolic light fixtures ready for
        installation of a quantity not to exceed one (1) 2'x4' recessed
        fluorescent lighting fixture per 80 square feet of usable area less
        Common Areas as provided by Landlord. Installation of the Base Building
        Improvement fixtures is a Building Standard Improvement and any fixtures
        provided and installed in excess of the Base Building Improvements are
        considered a Tenant Extra Improvement;

   b.   Provide building standard lighting in Common Area locations in locations
        determined by Landlord.

   c.   Provide a microprocessor lighting control system for timed lighting
        control in predetermined locations including an automatic shutoff,
        occupancy sensors for restrooms and photocell control and time clock
        control for external lighting.

Interior Building Finishes

18. Tenant Premises

   a.   Install drywall, finish taped and ready for paint covering core walls,
        stairwells, surfaces beneath or above exterior windows and columns where
        appropriate;

   b.   Provide and install building standard window covering on perimeter
        windows;

   c.   Stock on the floor the suspended metal grid system, complete with Class
        A acoustical mineral and/or ceramic fiber 24"x 48" lay in ceiling panels
        for typical floor lease space;

                                    C-1 - 4
<PAGE>

   d.   Provide concrete floors that are constructed to a plane, flat surface
        with variations not to exceed F(L) 17 floor levelness, F(F) 20 floor
        flatness in accordance with ASTME 1155. Floor shall be left broom clean;

   e.   Install door and hardware at all vertical shafts used as exits;

19. Multi-Tenant Floors

   a.   Finish all multi-tenant corridors with standard materials including
        paint, carpeting, and lighting;

   b.   Finish all elevator lobbies on multi-tenant floors with standard
        materials including paint, carpeting and lighting.;

   c.   Install the suspended metal grid system, complete with Class A
        acoustical mineral and/or ceramic fiber 24"x 48" lay in ceiling panels
        for typical floor lease space in multi-tenant corridors and lobbies;

20. Common Areas

   a.   Provide fire stairs designed to meet current governmental codes;

   b.   Provide high-speed traction elevators with 3500-pound capacity. Finish
        elevator cabs with materials that are consistent in quality to the
        building lobby;

   c.   Provide and install door and hardware at all electrical rooms, telephone
        closets and janitor closets constructed as part of the Base Building
        Improvement;

   d.   Provide and install door and hardware at all vertical shafts used as
        exits;

   e.   Finish ground floor lobbies, including carpeting, drywall and wood
        paneling, lighting, mail alcove, and security station;

   f.   Finish men's and women's restrooms on each office floor including
        vitreous china fixtures as required by code, tile flooring and wet
        walls, stone vanities, hung painted metal toilet partitions, lay-in
        ceiling, paint and lighting. In locker rooms on the P1 level, install
        lockers and showers.

                                    C-1 - 5
<PAGE>

                                  SCHEDULE C-2

                 DEFINITION OF BUILDING STANDARD IMPROVEMENTS

For the purposes of this Lease, Building Standard Improvements shall consist of:

  1. Partitions.

     One (1) linear foot of ceiling height partition per twelve (12) square feet
     of Net Rentable Area less Common Areas.  All required partitions shall be
     5/8" gypsum board, painted with two coats of latex on 2-1/2" metal studs at
     24" on center, with 2-1/2" base.

  2. Doors and Hardware.

     One (1) full height, solid core, hardwood veneer door with a aluminum frame
     and lever handle latch set hardware per three hundred (300) square feet of
     Net Rentable Area less Common Areas.

  3. Ceiling.

     Installation of the suspended metal grid system, complete with Class A
     acoustical mineral and/or ceramic fiber 24"x 48" lay in ceiling panels for
     typical floor lease space throughout the Premises as selected or provided
     by Landlord.

  4. Lighting.

     Installation of two (2) lamp, 18 cell parabolic light fixtures ready for
     installation per Tenant's plans of a quantity not to exceed one (1) 2'x4'
     recessed fluorescent lighting fixture per 80 square feet of usable area of
     a fixture selected or provided by Landlord.

  5. Electrical Outlets.

     One (1) duplex wall-mounted convenience outlet mounted at standard
     locations with white plastic cover plate for each one hundred twenty (120)
     square feet of Net Rentable Area less Common Areas.

  6. Telephone Outlets.

     One (1) telephone wall outlet mounted at standard locations for each two
     hundred ten (210) square feet of Net Rentable Area less Common Areas with
     pull wire through the partition.

  7. Floor Covering.

     Building Standard carpet or a credit of $15.00 per square yard of carpeted
     area.

  8. Switch.

     One (1) dual light switch, rocker type, mounted at standard locations with
     white plastic cover plate for each three hundred (300) square feet of Net
     Rentable Area less Common Areas.

  9. Life Safety Systems.

     Rapid Response fire sprinkler heads to conform with typical Tenant
     partition layout, utilizing the Building Standard partition and lighting,
     for light hazard occupancy design criteria.  Manual fire alarm pull
     stations, exit lights, and audible fire alarm speakers, if any, in excess
     of the Base Building Improvements.

10.  HVAC.

     Installation of the variable air volume series Fan Powered Terminal Units
     (FPTUs) provided by Landlord and installed in accordance with building
     standard mechanical layouts to suit normal general office space.

                                    C-2 - 1
<PAGE>

                                  SCHEDULE C-3

                          LIST OF BASE BUILDING PLANS

1.   Bid Documents issued by Kendall/Heaton Associates, Inc.

<TABLE>
 <S>                                                        <C>
     .       Landscape Drawings                               L0.01-L2.02 dated April 7, 1999  Addendum No. 4
             By Weisman Design Group                          Includes Addendum No 4 & 11

     .       Civil Drawings                                   C0.0-C7.0 dated March 1, 1999 & April 7, 1999
             By Coughlin Porter Lundeen                       Includes Construction & Addendum No 4

     .       Architectural Drawings                           A1.01-A9.31 dated April 22, 1999 & May 17, 1999, & June 11, 99.
             By G2 & Kendall Heaton                           Includes Construction drawings, Addendum No. 10 & 11.

     .       Security Drawings                                SS1.01-SS4.02 dated April 22, 1999
             By Kendall Heaton                                Includes Construction drawings

     .       Window Washing Drawings                          WW1.10-WW1.30 dated April 22, 1999
             By Kendall Heaton                                Includes Construction drawings

     .       Parking Control Drawings                         PL-101 dated April 22, 1999

     .       By Kendall Heaton                                Includes Construction drawings

     .       Soil Nail Drawings                               N1.01-N3.01 dated June 11, 1999 & March 1, 1999
             By Couglin Porter Lundeen                        Includes Construction drawings & Addendum No. 11

     .       Structural Drawings                              S1.010-SH3 dated April 7, 1999 & June 11, 1999
             By Couglin Porter Lundeen                        Addendum No 4 & Addendum No 11

     .       Mechanical Drawings                              M1.01-M5.02P dated April 22, 1999 & June 11, 1999
             By Flack + Kurtz                                 Includes Construction & Addendum No. 11

     .       Electrical Drawings                              E1.0-E6.1 dated June 11, 1999 & April 22, 1999 & May 17, 1999
             By Flack + Kurtz                                 Includes Construction, Addendum No. 11, Addendum 10

     .       Electrical Drawings                              UT0.01-UT0.4  dated June 11, 1999 Addendum No 11
             By Flack + Kurtz

     .       Plumbing Drawings                                P1.01-P6.2 April 22, 1999 & June 11, 1999 & May 17, 1999
             By Flack + Kurtz                                 Includes Construction, Addendum No. 11, Addendum 10
</TABLE>
2.   Project Manual (Specifications) issued by Kendall Heaton Associated Inc.
     dated March, 1999. Project 9838

     These plans and specification are subject to revision as stated in the
     Lease.

                                    C-3 - 1
<PAGE>

                                  SCHEDULE C-4

                         DESCRIPTION OF PRIME CONTRACT

The General Conditions and Contractor's fee from the Prime Contract will be
increased by an amount equal to seven and one half percent (7.5%) of the actual
Cost of the Work for the Tenant Improvements provided that Tenant's TI Working
Drawings are delivered to the General Contractor before August 15, 2000, and
provided that there is no material difference between the TI Working Drawings
presented on such date and the TI Working Drawings used in construction.  If the
TI Working Drawings are delivered after such date or if the TI Working Drawings
used in construction are materially different, then General Contractor shall be
entitled to increased General Conditions.

     Under the Prime Contract, "General Conditions" means the TI Contractor's
costs for (i) project staff, (ii) project overhead (excluding security services,
inspections, testing, design fees, other consulting services and legal
expenses), (iii) completion bond, (iv) contractor's license, (v) builder's risk
and liability insurance, (vi) B&O tax, necessary to complete the Tenant
Improvements.

     Under the Prime Contract, "Cost of the Work" means the sum of money for
performance of work to be performed pursuant to the Prime Contract that is paid
by the General Contractor for labor,  materials, supplies and transportation
necessary for the proper execution of the subject work.

                                   C-4 - 1
<PAGE>

                                   EXHIBIT D

                             RULES AND REGULATIONS

  1. Sidewalks, doorways, halls, stairways, vestibules and other similar areas
shall not be obstructed by any Tenant or used by them for purpose other than
ingress to and egress from their respective Premises, and for going from one
part of the Building to another part.

  2. Plumbing fixtures shall be used only for their designated purpose, and no
foreign substances of any kind shall be deposited therein.  Damage to any such
fixture resulting from misuse by Tenant or any employee or invitee of Tenant
shall be repaired at the expense of Tenant.

  3. Nails, screws and other attachments to the Building require prior written
consent from Landlord.

  4. All contractors and technicians rendering any installation service to
Tenant shall be subject to Landlord's approval and supervision prior to
performing services. This applies to all work performed in the Building,
including, but not limited to, installation of telecommunications equipment, and
electrical devices, as well as all installation affecting floors, walls,
woodwork, windows, ceilings, and any other physical portion of the Building.

  5. Movement in or out of the Building of furniture, office equipment, or other
bulky material which requires the use of elevators, stairways, or Building
entrance and lobby shall be restricted to hours established by Landlord.  All
such movement shall be under Landlord's supervision, and the use of an elevator
for such movements shall be made restricted to the Building's freight elevators,
or an elevator for such movements shall be made restricted to the Building's
freight elevators.  Prearrangements with Landlord shall be made regarding the
time, method, and routing of such movement, and Tenant shall assume all risks of
damage and pay the cost of repairing or providing compensation for damage to the
Building, to articles moved and injury to persons or public resulting from such
moves.  Landlord shall not be liable for any acts or damages resulting from any
such activity.

  6. Corridor doors, when not is use, shall be kept closed.

  7. Tenant shall cooperate with Landlord in maintaining the Premises.  Tenant
shall not employ any person for the purpose of cleaning the Premises other than
the Building's cleaning and maintenance personnel.

  8. Deliveries of water, soft drinks, newspapers, or other such items to any
Premises shall be restricted to hours established by Landlord and made by use of
the freight elevators if Landlord so directs.

  9. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts, or stairways. No birds, fish, or animals of any kind shall be brought
into or kept in, on or about the Premises.

  10. No cooking shall be done in the Premises except in connection with
convenience lunch room or beverage service for employees and guests (on a non-
commercial basis) in a manner which complies with all of the provisions of the
Lease and which does not produce fumes or odors.

  11. Food, soft drink or other vending machines shall not be placed within the
Premises without Landlord's prior written consent.

  12. Tenant shall not use or keep on its Premises any kerosene, gasoline, or
inflammable or combustible fluid or material other than limited quantities
reasonably necessary for the operation and maintenance of office equipment.

  13. Tenant shall not tamper with or attempt to adjust temperature control
thermostats in the Premises.  Landlord shall make adjustments in thermostats on
call from Tenant.

                                      D-1
<PAGE>

  14. Tenant shall comply with all requirements necessary for the security of
the Premises, including the use of service passes issued by Landlord for after
hours movement of office equipment/packages, and signing security register in
Building lobby after hours.

  15. Landlord shall furnish Tenant with a reasonable number of initial keys for
entrance doors into the Premises and may charge Tenant for additional keys,
thereafter.  All such keys shall remain the property of Landlord.  No additional
locks are allowed on any door of the Premises without Landlord's prior written
consent and Tenant shall not make any duplicate keys, except those provided by
Landlord.  Upon termination of this Lease, Tenant shall surrender to Landlord
all keys to the Premises, and give to Landlord the combination of all locks for
safes and vault doors, if any, in the Premises.

  16. Landlord retains the right, without notice or liability to any tenant, to
change the name and street address of the Building.

  17. Canvassing, peddling, soliciting, and distribution of handbills in the
Building are prohibited and each tenant shall cooperate to prevent these
activities.

  18 . The Building public hours of operation are (excluding holidays):

      8:00 A.M. to 6:00 P.M. Monday through Friday

      9:00 A.M. to 1:00 P.M. Saturday

  19. Tenant shall take reasonable steps to prevent the unnecessary generation
of refuse (e.g., choosing and using products, packaging, or other materials in
business that minimize solid waste or that are durable, reusable, or
recyclable). Tenant shall provide or obtain recycling containers in its business
for use by employees and customers, shall recycle acceptable materials in the
recycling containers provided by Landlord, and shall otherwise participate in
the recycling program established by Landlord for the Project. Acceptable
recyclable materials may include, but are not limited to, the following:
newspaper, cardboard, paperboard, office paper and other mixed paper, aluminum,
tin and other metal, glass, and #1 (PETE) and #2 (HDPE) plastics.

  20. Tenant shall not and shall cause its employees, agents, contractors,
invitees, customers and visitors, not to smoke in the Premises or in any portion
of the Project except those areas expressly designated as smoking areas by
Landlord.  Persons may smoke cigarettes in designated areas only if the smoker
uses designated receptacles for ashes and cigarette butts and does not annoy any
non-smoking persons using the area or interfere with access to the Buildings.

  21. Landlord reserves the right to rescind or modify any of these rules and
regulations and to make future rules and regulations required for the safety,
protection, and maintenance of the Building, the operation and preservation of
good order thereof, and the protection and comfort of the tenants and their
employees and visitors.  Such rules and regulations, when made and written
notice given to Tenant, shall be binding as if originally included herein.

                                      D-2
<PAGE>

                                   EXHIBIT E

                                 SAMPLE FORM OF
                         LEASE COMMENCEMENT CERTIFICATE

Re:  HomeGrocer.com, Inc.
     [Suite No.]
      ----------
     One Twelfth @ Twelfth

     ______________________
     Bellevue, Washington

     This is to certify that pursuant to the terms of that certain Office Lease
Agreement dated as of ______________, between [Tenant's Name] ("Tenant") and
                                               -------------
Bellevue Hines Development L.L.C., Tenant has taken possession of Premises
described above.  Tenant hereby certifies and agrees that the following
information is true and correct:

 1. Term Commencement Date:
                           --------------------------------------

 2. Lease Expiration Date:
                          ----------------------------------------

 3. Net Rentable Area of Premises:
                                  --------------------------------

 4. Total Construction Payment (Exhibit C to Lease) Due From Tenant to Landlord:

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

 5. Security Deposit Paid:
                          ----------------------------------------

 6. Total Prepaid Rent:
                       -------------------------------------------

 7. Months to Which Prepaid Rent Applies:
                                         -------------------------

 8. Attached hereto is a the Insurance Certificate required by Article 11 of the
Lease

[Name of Tenant]
 --------------

By:
   -----------------------

Name:
     ---------------------

Title:
      --------------------

Date:
     ---------------------

                                      E-1
<PAGE>

                                   EXHIBIT F

                           TENANT ESTOPPEL AGREEMENT

     The undersigned is the tenant ("Tenant") under a Lease dated __________,
20__, between BELLEVUE HINES DEVELOPMENT, L.L.C., as landlord and
HOMEGROCER.COM, INC., as tenant [as amended by amendments dated __________ ___,
20___ and ________ ___, 20__] (the "Lease") of premises located at
_____________________, _________________, Bellevue, Washington (the "Premises").
BELLEVUE HINES DEVELOPMENT, L.L.C., is the current landlord under the Lease (the
"Landlord").

     For valuable consideration paid, the receipt and adequacy of which is
hereby acknowledged, the undersigned Tenant represents and warrants to
BankBoston, N.A., as Agent (the "Mortgagee"), and to each Bank which will be the
holder of a Note secured or to be secured by a mortgage upon the above Premises
and a collateral assignment of all leases pertaining to the above Premises, and
to its successors and assigns, that the following statements are true as of the
date of this agreement.

     1.   The Lease is a complete statement of the agreement between the parties
          with respect to the letting of the Premises referred to therein.

     2.   A true and complete copy of the Lease including all amendments is
          attached hereto as Exhibit A.
                             ---------

     3.   The Lease is presently in full force and effect according to its terms
          and is the valid and binding obligation of the undersigned as of the
          date hereof.

     4.   The term of the Lease has commenced [and the full rental is now
          accruing thereunder].

     5.   The undersigned has accepted possession of the Premises and any
          improvements required by the terms of the Lease to be made by the
          Landlord have been completed to the satisfaction of the undersigned.

     6.   No rent under the Lease has been paid more than 30 days in advance of
          its due date.

     7.   The address for notices to be sent to the undersigned is as set forth
          in the Lease.

     8.   The undersigned, as of this date, is not in default under the terms of
          the Lease and has no charge, lien, or claim of offset (under the Lease
          or otherwise) against rents or other charges due or to become due to
          Landlord thereunder.  Landlord is not in default in the performance of
          its obligations to Tenant under the Lease.

     9.   The undersigned has not made nor is there presently contemplated any
          assignment by the undersigned for the benefit of creditors or any
          filing by the undersigned of a proceeding under the United States
          Bankruptcy Code or bankruptcy or similar laws of any State seeking its
          liquidation or reorganization, and, to the undersigned's knowledge, no
          such proceedings are currently pending or threatened against the
          undersigned.

     The undersigned understands that the Mortgagee is relying on these
representations and warranties as a basis for making a loan to the Landlord or
its affiliates or one or more of the Landlord and its affiliates.

     This Agreement shall be binding on the undersigned and its successors and
assigns and shall inure to the benefit of the Mortgagee and its successors and
assigns, and may not be amended or modified except by an agreement in writing
signed by Mortgagee and the undersigned.

                                     F-1
<PAGE>

     This Estoppel Agreement has been executed as an instrument under seal,
governed by the laws of the Commonwealth of Massachusetts and effective as of
the date set forth below.

Dated:  _______________, 20___   [Name of Tenant]

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

STATE OF _______________

County of _________________      _________ __, 20___

   Then personally appeared ___________________________, acknowledged that he is
the _______________________ of ______________________, the Tenant named above,
and that he executed the foregoing Estoppel Agreement as the free act and deed
of such corporation by order of its Board of Directors, before me,

                             --------------------------------
                             Notary Public
                             My Commission Expires:
                                                   --------------------

                                      F-2
<PAGE>

                                   EXHIBIT G
                      FORM OF NON-DISTURBANCE, ATTORNMENT
                          AND SUBORDINATION AGREEMENT

     This Agreement is made and entered into as of this ____ day of _________,
2000, by and among BANKBOSTON, N.A., a national banking association (hereinafter
called the "Lender") as administrative agent for itself and the other Lenders
who become parties to a certain Construction and Term Loan Agreement dated June
30, 1999, HOMEGROCER.COM, INC., a Delaware corporation (hereinafter called the
"Tenant") and BELLEVUE HINES DEVELOPMENT, L.L.C. (hereinafter called the
"Landlord").

                                  WITNESSETH:

     WHEREAS, Landlord owns certain real Property located in King County,
Washington, and more particularly described in Exhibit A attached hereto and
                                               ---------
made a part hereof (said Property being hereinafter called the "Property"); and

     WHEREAS, Landlord and Tenant made and entered into that certain Office
Building Lease, dated _______________________, 2000, with respect to certain
premises constituting a portion of the property therein described (said Lease
being hereinafter called the "Lease" and said premises being hereinafter called
the "Leased Premises"); and

     WHEREAS, as of June 30, 1999, Landlord has entered into and delivered that
certain Deed of Trust, Assignment of Leases and Rents and Security Agreement in
favor of Lender recorded in the King County Recorder's Office prior to the
recording of this Agreement (said Deed of Trust, Assignment of Leases and Rents
and Security Agreement being hereinafter called the "Security Deed"), conveying
the Property to secure the payment of the indebtedness described in the Security
Deed; and

     WHEREAS, as of June 30, 1999, Landlord has entered into and delivered that
certain Assignment of Leases and Rents in favor of Lender recorded in the King
County Recorder's Office prior to the recording of this Agreement (said
Assignment of Leases and Rents being hereinafter called the "Assignment of
Leases"), assigning all of Landlord's right, title and interest as lessor under
the Lease to further secure the indebtedness described in the Security Deed; and

     WHEREAS, the parties hereto desire to enter into this Non-Disturbance,
Attornment and Subordination Agreement;

     NOW, THEREFORE, for and in consideration of the mutual covenants
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Lender, Tenant and Landlord hereby
covenant and agree as follows:

     1.   Estoppel.  Tenant hereby certifies to Lender that (i) the Lease, as
described above, is the true, correct and complete Lease, and has not been
modified or amended and constitutes the entire agreement between Landlord and
Tenant, and (ii) as far as is known to Tenant, there are no defaults of Landlord
under the Lease and there are no existing circumstances which with the passage
of time, or giving of  notice, or both, would give rise to a default under the
Lease and/or allow Tenant to terminate the Lease.

     2.   Non-Disturbance.  So long as no default exists, nor any event has
occurred which has continued to exist for such period of time (after notice, if
any, required by the Lease) as would entitle the lessor under the Lease to
terminate the Lease or would cause, without any further action on the part of
such lessor, the termination of the Lease or would entitle such lessor to
dispossess the lessee thereunder, the Lease shall not be terminated, nor shall
such lessee's use, possession or enjoyment of the Leased Premises or rights
under the Lease be interfered with in any foreclosure or other action or
proceeding in the nature of foreclosure instituted under or in connection with
the Security Deed or in case Lender takes

                                      G-1
<PAGE>

possession of the Property pursuant to any provisions of the Security Deed or
the Assignment of Leases, unless the lessor under the Lease would have had such
right if the Security Deed or the Assignment of Leases had not been made, except
that neither the person or entity acquiring the interest of the lessor under the
Lease as a result of any such action or proceeding or deed in lieu of any such
action or proceeding (hereinafter called the "Purchaser") nor Lender if Lender
takes possession of the Property shall be (a) liable for any act or omission of
any prior lessor under the Lease; or (b) liable for the return of any security
deposit which lessee under the Lease has paid to any prior lessor under the
Lease; or (c) subject to any offsets or defenses which the lessee under the
Lease might have against any prior lessor under the Lease; or (d) bound by any
base rent, percentage rent or any other payments which the lessee under the
Lease might have paid for more than the current month to any prior lessor under
the Lease; or (e) bound by any amendment or modification of the Lease made
without Lender's prior written consent; or (f) bound by any consent by any
lessor under the Lease to any assignment or sublease of the lessee's interest in
the Lease made without also obtaining Lender's prior written consent; or (g)
personally liable for any default under the Lease or any covenant or obligation
on its part to be performed thereunder as lessor, it being acknowledged that
Tenant's sole remedy in the event of such default shall be to proceed against
Purchaser's or Lender's interest in the Property. Notwithstanding anything
contained herein to be contrary, Lender shall have absolutely no obligation to
perform any of Landlord's construction covenants under the Lease, provided that
if Lender shall not perform such covenants in the event of foreclosure or deed
in lieu thereof and within a reasonable time following taking of possession by
Lender, then Tenant shall have the right to terminate its obligations under the
Lease and to pursue any and all legal remedies it may have against Landlord and
any third parties other than Lender.

     3.   Attornment.  Unless the Lease is terminated in accordance with
paragraph 2, if the interests of the lessor under the Lease shall be transferred
by reason of the exercise of the power of sale contained in the Security Deed
(if applicable), or by any foreclosure or other proceeding for enforcement of
the Security Deed, or by deed in lieu of foreclosure or such other proceeding,
or if Lender takes possession of the Property pursuant to any provisions of the
Security Deed or the Assignment of Leases, the lessee thereunder shall be bound
to the Purchaser or Lender, as the case may be, under all of the terms,
covenants and conditions of the Lease for the balance of the term thereof and
any extensions or renewals thereof which may be effected in accordance with any
option therefor in the Lease, with the same force and effect as if the Purchaser
or Lender were the lessor under the Lease, and Tenant, as lessee under the
Lease, does hereby attorn to the Purchaser and Lender if it takes possession of
the Property, as its lessor under the Lease.  Such attornment shall be effective
and self-operative without the execution of any further instruments upon the
succession by Purchaser to the interest of the lessor under the Lease or the
taking of possession of the Property by Lender.  Nevertheless, Tenant shall,
from time to time, execute and deliver such instruments evidencing such
attornment as Purchaser or Lender may require.  The respective rights and
obligations of Purchaser, Lender and of the lessee under the Lease upon such
attornment, to the extent of the then remaining balance of the term of the Lease
and any such extensions and renewals, shall be and are the same as now set forth
in the Lease except as otherwise expressly provided in Paragraph 2.

     4.   Subordination.  Tenant hereby subordinates all of its right, title and
interest as lessee under the Lease to the right, title and interest of Lender
under the Security Deed, and Tenant further agrees that the Lease now is and
shall at all times continue to be subject and subordinate in each and every
respect to the Security Deed (including, without limitation, the casualty and
condemnation provisions of the Lease, which are hereby specifically subordinated
to the Security Deed) and to any and all increases, renewals, modifications,
extensions, substitutions, replacements and/or consolidations of the Security
Deed.

     5.   Assignment of Leases.  Tenant hereby acknowledges that all of
Landlord's right, title and interest as lessor under the Lease is being duly
assigned to Lender pursuant to the terms of the Assignment of Leases, and that
pursuant to the terms thereof all rental payments under the Lease shall

                                      G-2
<PAGE>

continue to be paid to landlord in accordance with the terms of the Lease unless
and until Tenant is otherwise notified in writing by Lender. Upon receipt of any
such written notice from Lender, Tenant covenants and agrees to make payment of
all rental payments then due or to become due under the Lease directly to Lender
or to Lender's agent designated in such notice and to continue to do so until
otherwise notified in writing by Lender. Landlord hereby irrevocably directs and
authorizes Tenant to make rental payments directly to Lender following receipt
of such notice, and covenants and agrees that Tenant shall have the right to
rely on such notice without any obligation to inquire as to whether any default
exists under the Security Deed or the Assignment of Leases or the indebtedness
secured thereby, and notwithstanding any notice or claim of Landlord to the
contrary, and that Landlord shall have no right or claim against Tenant for or
by reason of any rental payments made by Tenant to Lender following receipt of
such notice. Tenant further acknowledges and agrees: (a) that under the
provisions of the Assignment of Leases, the Lease cannot be terminated (nor can
Landlord accept any surrender of the Lease) or modified in any of its terms, or
consent be given to the waiver or release of Tenant from the performance or
observance of any obligation under the Lease, without the prior written consent
of Lender, and without such consent no rent may be collected or accepted by
Landlord more than one month in advance; and (b) that the interest of Landlord
as lessor under the Lease has been assigned to Lender for the purposes specified
in the Assignment of Leases, and Lender assumes no duty, liability or obligation
under the Lease, except only under the circumstances, terms and conditions
specifically set forth in the Assignment of Leases.

     6.   Notice of Default by Lessor.  Tenant, as lessee under the Lease,
hereby covenants and agrees to give Lender written notice properly specifying
wherein the lessor under the Lease has failed to perform any of the covenants or
obligations of the lessor under the Lease, simultaneously with the giving of any
notice of such default to the lessor under the provisions of the Lease.  Tenant
agrees that Lender shall have the right, but not the obligation, within thirty
(30) days after receipt by Lender of such notice (or within such additional time
as is reasonably required to correct any such default) to correct or remedy, or
cause to be corrected or remedied, each such default before the lessee under the
Lease may take any action under the Lease by reason of such default.  Such
notices to Lender shall be delivered in duplicate to:

               BankBoston, N.A.
               100 Federal Street
               Boston, Massachusetts 02110
               Attn:  James L. Keough, Real Estate Division

               and

               Goulston & Storrs P.C.
               400 Atlantic Avenue
               Boston, Massachusetts  02110
               Attn:  James H. Lerner, Esquire

or to such other address as the Lender shall have designated to Tenant by giving
written notice to Tenant at 10230 NE Points Drive, Kirkland, Washington 98033,
or to such other address as may be designated by written notice from Tenant to
Lender.

     7.   No Further Subordination.  Except as expressly provided to the
contrary in Paragraph 4 hereof, Landlord and Tenant covenant and agree with
Lender that there shall be no further subordination of the interest of lessee
under the Lease to any lender or to any other party without first obtaining the
prior written consent of Lender.  Any attempt to effect a further subordination
of lessee's interest under the Lease without first obtaining the prior written
consent of Lender shall be null and void.

                                      G-3
<PAGE>

     8.   As to Landlord and Tenant.  As between Landlord and Tenant, Landlord
and Tenant covenant and agree that nothing herein contained nor anything done
pursuant to the provisions hereof shall be deemed or construed to modify the
Lease.

     9.   As to Landlord and Lender.  As between Landlord and Lender, Landlord
and Lender covenant and agree that nothing herein contained nor anything done
pursuant to the provisions hereof shall be deemed or construed to modify the
Security Deed or the Assignment of Leases.

     10.  Title of Paragraphs.  The titles of the paragraphs of this agreement
are for convenience and reference only, and the words contained therein shall in
no way be held to explain, modify, amplify or aid in the interpretation,
construction or meaning of the provisions of this agreement.

     11.  Governing Law.  This agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.

     12.  Provisions Binding.  The terms and provisions hereof shall be binding
upon and shall inure to the benefit of the heirs, executors, administrators,
successors and permitted assigns, respectively, of Lender, Tenant and Landlord.
The reference contained to successors and assigns of Tenant is not intended to
constitute and does not constitute a consent by Landlord or Lender to an
assignment by Tenant, but has reference only to those instances in which the
lessor under the Lease and Lender shall have given written consent to a
particular assignment by Tenant thereunder.

     IN WITNESS WHEREOF, the parties have hereunto set their respective hands
and seals as of the day, month and year first above written.

                    TENANT:

                    HOMEGROCER.COM, INC., a Delaware corporation

                    By:
                       ------------------------------

                    Title:
                          ---------------------------

                    LENDER:

                    BANKBOSTON, N.A., a national banking association, as agent

                    By:
                       ------------------------------

                    Title:
                          ---------------------------

                                      G-4
<PAGE>

                    LANDLORD:

                    BELLEVUE HINES DEVELOPMENT, L.L.C.,
                    a Delaware limited liability company

                    By: Hines 1997 U.S. Office Development Fund, L.P.,
                        a Delaware limited partnership,
                        its sole member

                        By: Hines 1997 U.S. ODF GP Limited Partnership, a Texas
                            limited partnership, its general partner

                            By: Hines 1997 U.S. ODF LLC,
                                a Delaware limited liability company,
                                its general partner

                                By: Hines Interests Limited Partnership,
                                    a Delaware limited partnership,
                                    its sole member

                                    By: Hines Holdings, Inc.,
                                        a Texas close corporation,
                                        its general partner

                                        By:
                                           --------------------------
                                               Thomas D. Owens
                                               Vice President

STATE OF WASHINGTON      )
                         )  ss.
COUNTY OF KING           )

     On this _____ day of April, 2000, before me, a Notary Public in and for the
State of Washington, personally appeared ____________________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed this instrument, on oath stated that ___ was
authorized to execute the instrument, and acknowledged it as the
____________________ ________________________ of HomeGrocer.Com, Inc., to be the
free and voluntary act and deed of said Delaware corporation for the uses and
purposes mentioned in the instrument.

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

                              --------------------------------------------------
                              NOTARY PUBLIC in and for the State of Washington,
                              residing at
                                         --------------------------------------
                              My appointment expires
                                                    ---------------------------
                              Print Name
                                        ---------------------------------------

                                      G-5
<PAGE>

COMMONWEALTH OF MASSACHUSETTS (S)

COUNTY OF _______________     (S)

     The foregoing instrument was acknowledged before me on the _____ day of
_________________, ______, by ______________________, ___________________ of
BANKBOSTON, N.A., a national banking association, on behalf of said association.

                    --------------------------------------------
                    Notary Public In And For The Commonwealth Of
                    Massachusetts
                    Printed Name
                                --------------------------------
                    My commission expires:
                                          ----------------------

STATE OF TEXAS      (S)

COUNTY OF ________  (S)

The foregoing instrument was acknowledged before me on the _____ day of
_________, ______, by ______________, ____________ of Hines Holdings, Inc., a
Texas close corporation, the general partner of Hines Interests Limited
Partnership, a Delaware limited partnership, the sole member of Hines 1997 U.S.
ODF LLC, a Delaware limited liability company, the general partner of Hines 1997
U.S. ODF GP Limited Partnership, a Texas limited partnership, the general
partner of Hines 1997 U.S. Office Development Fund, L.P., a Delaware limited
partnership, the sole member of BELLEVUE HINES DEVELOPMENT, L.L.C., a Delaware
limited liability company, on behalf of said entities.

                    -------------------------------------
                    Notary Public in and for the State of
                    Printed Name :
                                  -----------------------
                    My Commission Expires:
                                          ---------------

                                      G-6
<PAGE>

                                   EXHIBIT A

                           Property Legal Description

PARCEL A

THE SOUTH 30 FEET OF THE SOUTHWEST QUARTER OF THE NORTHEAST QUARTER OF THE
SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 5 EAST, WILLAMETTE
MERIDIAN, IN KING COUNTY, WASHINGTON;

EXCEPT THAT PORTION THEREOF CONVEYED TO THE CITY OF BELLEVUE BY DEED RECORDED
UNDER RECORDING NUMBER 6615029; AND

EXCEPT ANY PORTION THEREOF CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1 UNDER RECORDING NUMBER 6685642.

PARCEL B

THAT PORTION OF THE EAST 264 FEET OF THE WEST 434 FEET OF THE SOUTHWEST QUARTER
OF THE NORTHEAST QUARTER OF THE SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25
NORTH, RANGE 5 EAST, WILLAMETTE MERIDIAN, IN KING COUNTY WASHINGTON;

EXCEPT THE SOUTH 30 FEET THEREOF, LYING SOUTHEASTERLY OF THE FOLLOWING LINE:

BEGINNING AT THE SOUTHWEST CORNER OF THE ABOVE-DESCRIBED PARCEL;

THENCE SOUTH 88 degrees 6'55" EAST ALONG THE SOUTH LINE THEREOF 103.65 FEET;

THENCE NORTH 73 degrees 0'26" EAST 72.90 FEET;

THENCE NORTH 54 degrees 30'00" EAST 111.33 FEET TO THE EAST LINE OF SAID
PROPERTY AND THE TERMINUS OF SAID LINE;

EXCEPT ANY PORTION THEREOF CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1 UNDER RECORDING NUMBER 6685642.

PARCEL C

THE NORTH 464.40 FEET OF THE NORTHWEST QUARTER OF THE SOUTHEAST QUARTER OF THE
SOUTHEAST QUARTER OF SECTION 29, TOWNSHIP 25 NORTH, RANGE 5 EAST, WILLAMETTE
MERIDIAN, IN KING COUNTY WASHINGTON;

EXCEPT THE EAST 250 FEET THEREOF; AND

EXCEPT THAT PORTION THEREOF LYING WITHIN F.A. NISONGER ROAD (112TH AVENUE
NORTHEAST); AND

EXCEPT THOSE PORTIONS CONVEYED TO THE STATE OF WASHINGTON FOR SECONDARY STATE
HIGHWAY NO. 2-A MIDLAKES TO KIRKLAND BY DEEDS BEARING RECORDING NUMBERS 4354524
AND 4354525; AND

EXCEPT THOSE PORTIONS CONVEYED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1, UNDER RECORDING NUMBERS 4927203 AND 6685642; AND

EXCEPT THAT PORTION CONVEYED TO THE CITY OF BELLEVUE BY DEED RECORDED UNDER
RECORDING NUMBER 6615029; AND

EXCEPT THAT PORTION CONDEMNED BY THE CITY OF BELLEVUE IN KING COUNTY SUPERIOR
COURT CAUSE NUMBER 90-2-03249-3.

                                      G-7
<PAGE>

                                   EXHIBIT H

                            FORM OF LETTER OF CREDIT

[U.S. BANK LOGO]                                  U.S. BANK NATIONAL ASSOCIATION
                                                       INTERNATIONAL DEPARTMENT,
                                                    1420 FIFTH AVENUE, 9TH FLOOR
                                                        SEATTLE, WA 98101 U.S.A.
                                                             PHONE: 206-344-2398
                                                               FAX: 206-344-5374

                     ------------------------------------
                     IRREVOCABLE STANDBY LETTER OF CREDIT
                     ------------------------------------
DATE
--------------------------------------------------------------------------------
BENEFICIARY:                              APPLICANT:
Bellevue Hines Development, L.L.C.        HOMEGROCER.COM, INC.
or its assigns                            10230 N.E. POINTS DRIVE
10900 NE 4th St, Suite 920                KIRKLAND, WA 98033
Bellevue WA 98004
--------------------------------------------------------------------------------
LETTER OF CREDIT NUMBER:  SLCSSEA00
                          ************
--------------------------------------------------------------------------------
EXPIRY DATE:
          AT: OUR COUNTERS PRESENTLY LOCATED AT 1420 FIFTH AVENUE, 9TH FLOOR,
          INTERNATIONAL DEPARTMENT, SEATTLE, WA. 98101 ON OR BEFORE 4:00 P.M.
--------------------------------------------------------------------------------
AMOUNT:
NOT EXCEEDING $2,508,605.28
--------------------------------------------------------------------------------
WE HEREBY ISSUE THIS IRREVOCABLE STANDBY LETTER OF CREDIT AVAILABLE BY YOUR
DRAFT(S) DRAWN AT SIGHT ON U.S. BANK NATIONAL ASSOCIATION AND ACCOMPANIED BY THE
FOLLOWING DOCUMENTS:

1.   BENEFICIARY'S SIGNED STATEMENT, OR SIGNED STATEMENT FROM BENEFICIARY'S
     AGENT, THAT HOMEGROCER.COM, INC. HAS DEFAULTED UNDER THE TERMS AND
     CONDITIONS OF THE LEASE AGREEMENT DATED ________________ BETWEEN
     HOMEGROCER.COM, INC. AND Bellevue Hines Development, L.L.C., OR THAT
     BENEFICIARY IS ENTITLED UNDER THE TERMS AND CONDITIONS OF SAID LEASE TO
     DRAW UPON THE LETTER OF CREDIT.
2.   THE ORIGINAL OF THIS LETTER OF CREDIT INCLUDING ANY AMENDMENTS.

ADDITIONAL CONDITIONS:
1.   ALL BANKING CHARGES OTHER THAN THOSE OF THE ISSUING BANK ARE FOR ACCOUNT OF
     THE BENEFICIARY.
2.   PARTIAL DRAWINGS ALLOWED.
3.   THIS LETTER OF CREDIT IS TRANSFERABLE BY U.S. BANK NATIONAL ASSOCIATION
     ONLY, UPON RECEIPT OF YOUR WRITTEN INSTRUCTIONS SUBMITTED IN ACCORDANCE
     WITH THE ATTACHED TRANSFER FORM AND THE ORIGINAL OF THIS LETTER OF CREDIT.
     TRANSFER FEES ARE FOR ACCOUNT OF THE BENEFICIARY.

DRAFTS DRAWN UNDER THIS CREDIT MUST BEAR THE CLAUSE: "DRAWN UNDER U.S. BANK
NATIONAL ASSOCIATION IRREVOCABLE STANDBY LETTER OF CREDIT NO. SLCSSEA00XXX."

PURSUANT TO U.S. LAW WE ARE PROHIBITED FROM ISSUING, TRANSFERRING ACCEPTING OR
PAYING LETTERS OF CREDIT TO ANY PARTY OR ENTITY IDENTIFIED BY THE OFFICE OF
FOREIGN ASSETS

THIS PAGE 1 FORMS AN INTEGRAL PART OF LETTER OF CREDIT NO. SLCSSEA00XXX

[U.S. BANK LOGO]

CONTROL, U.S. DEPT. OF TREASURY, OR SUBJECT TO THE DENIAL OF EXPORT PRIVILEGES
BY THE U.S. DEPT. OF COMMERCE.

THIS CREDIT IS SUBJECT TO "THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS" (1993 REVISION) INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500

WE HEREBY ENGAGE WITH YOU THAT DRAFT(S) DRAWN AND/OR DOCUMENTS PRESENTED UNDER
AND IN COMPLIANCE WITH THE TERMS OF THIS IRREVOCABLE STANDBY LETTER OF CREDIT
WILL BE DULY HONORED UPON PRESENTATION TO US

                                        U.S. BANK NATIONAL ASSOCIATION
                                        INTERNATIONAL BANKING DIVISION

                                        ------------------------------
                                             AUTHORIZED SIGNATURE

THIS PAGE 2 FORMS AN INTEGRAL PART OF LETTER OF CREDIT NO. SLCSSEA00XXX

[U.S. BANK LOGO]

                         FORM OF TRANSFER INSTRUCTION

                       DATE: __________________________

U.S. BANK NATIONAL ASSOCIATION
1420 FIFTH AVENUE, 9TH FLOOR
SEATTLE, WA 98101

ATTENTION: LETTER OF CREDIT DEPARTMENT

RE: IRREVOCABLE LETTER OF CREDIT NO. ________ ISSUED BY U.S. BANK NATIONAL
    ASSOCIATION

LADIES AND GENTLEMEN:

FOR VALUE RECEIVED THE UNDERSIGNED BENEFICIARY (THE "TRANSFEROR") HEREBY
IRREVOCABLE TRANSFERS TO:

     (NAME OF TRANSFEREE)
     (ADDRESS)

(THE "TRANSFEREE) ALL RIGHTS OF THE TRANSFEROR WITH RESPECT TO THE ABOVE
REFERENCED IRREVOCABLE LETTER OF CREDIT") INCLUDING THE RIGHT TO DRAW UNDER SAID
LETTER OF CREDIT IN THE AMOUNT OF THE FULL UNUTILIZED BALANCE THEREOF. SAID
TRANSFEREE HAS SUCCEEDED THE TRANSFEROR AS BENEFICIARY UNDER THAT CERTAIN
STANDBY LETTER OF CREDIT NO. __________ DATED _____________ BY AND BETWEEN THE
APPLICANT AND THE BENEFICIARY.

BY VIRTUE OF THIS TRANSFER, THE TRANSFEREE SHALL HAVE THE SOLE RIGHT AS
BENEFICIARY OF SAID LETTER OF CREDIT, INCLUDING SOLE RIGHTS RELATING TO ANY PAST
OR FUTURE AMENDMENTS THEREOF, WHETHER DECREASES OR EXTENSIONS OR OTHERWISE. ALL
AMENDMENTS ARE TO BE ADVISED DIRECTLY TO THE TRANSFEREE WITHOUT NECESSITY OF ANY
CONSENT OF OR NOTICE TO THE TRANSFEROR.

BY ITS SIGNATURE BELOW, THE TRANSFEREE ACKNOWLEDGES THAT IT HAS DULY SUCCEEDED
THE TRANSFEROR AS TRUSTEE UNDER THE INDENTURE, AND AGREES TO BE BOUND BY TERMS
OF THE INDENTURE AS IF IT WERE THE ORIGINAL TRUSTEE THEREUNDER.

WE ARE DELIVERING HEREWITH THE LETTER OF CREDIT AND WE ASK YOU TO ENDORSE THE
LETTER OF CREDIT DIRECTLY TO THE TRANSFEREE.

                                        VERY TRULY YOURS,

                                        BY:
                                            ------------------------------
                                        NAME:
                                              ----------------------------
                                        TITLE:
                                               ---------------------------

ACKNOWLEDGED BY (INSERT NAME OF TRANSFEREE)
AS TRANSFEREE AND SUCCESSOR

BY:
    -----------------------------------------
(INSERT NAME AND TITLE OF AUTHORIZED OFFICER)

THIS PAGE 3 FORMS AN INTEGRAL PART OF LETTER OF CREDIT NO. SLCSSEA00XXX

                                      H-1
<PAGE>

                                   EXHIBIT I

               BUILDING STANDARD JANITORIAL AND CLEANING SERVICES

     The following building standard janitorial and cleaning services shall be
done by Landlord between 5:30 p.m. and 11:30 p.m. on Monday through Friday and
at such other times as may be mutually agreed upon between Landlord and Tenant.

A.  Office Areas
    ------------

    1.  Empty, clean and damp dust all waste receptacles and remove waste
        paper and rubbish from the Premises nightly, wash receptacles as
        necessary.

    2.  Vacuum nightly all rugs and carpeted areas in the Premises, lobbies
        and corridors.

    3.  Nightly hand dust and wipe clean with damp or treated cloth all office
        furniture, files, fixtures, window sills and all other horizontal
        surfaces; once every three weeks for vertical paneled surfaces; wash
        window sills when necessary.

    4.  Nightly damp wipe all glass furniture tops.

    5.  Nightly remove finger marks and smudges from vertical surfaces,
        including doors, door frames, glass, around light switches, private
        entrance glass and partitions.

    6.  Wash clean all water coolers nightly.

    7.  Sweep all private stairways nightly, vacuum nightly if carpeted.

    8.  Police all Common Area stairwells throughout the Project daily and
        keep in clean condition.

    9.  Nightly damp mop spillage in non-carpeted office and public areas.

    10. Nightly damp dust all telephones, desks and other furniture tops.

B.  Washrooms (Including Private Washrooms)
    ---------------------------------------

    1.  Wet mop and rinse floors nightly.

    2.  Scrub floors as necessary.

    3.  Clean all mirrors, bright work and enameled surfaces nightly.

    4.  Wash and disinfect all basins, urinals and bowls nightly using non-
        abrasive cleaners to remove stains and nightly clean undersides of rim
        of urinals and bowls.

    5.  Wash both sides of all toilet seats with soap, water and disinfectant
        nightly.

    6.  Nightly damp wipe and wash with disinfectant when necessary,
        partitions, tile walls and outside surface of dispensers and
        receptacles.

    7.  Empty and sanitize receptacles and sanitary disposals nightly;
        thoroughly clean and wash at least once per week.

    8.  Fill toilet tissue, soap and sanitary napkin dispensers nightly.

    9.  Clean flushometer, piping, toilet set hinges and other metal work
        nightly.

    10. Wash and polish walls, partitions, tile walls and enamel surfaces from
        trim to floor monthly.

    11. Vacuum all louvers, ventilating grilles and dust light fixtures
        weekly.

                                      I-1
<PAGE>

NOTE:  It is the intention to keep washrooms thoroughly cleaned and not to use a
       disinfectant to kill odor.  If a disinfectant is necessary, an
       odorless product will be used.

C.  Floors
    ------

    1.  Ceramic tile, marble and terrazzo floors to be swept nightly and
        washed, scrubbed and buffed as needed.

    2.  Asphalt, vinyl, rubber or other composition floors and bases to be
        swept nightly using dust down preparation; such floors in public areas
        on multitenancy floors to be waxed and buffed monthly.

    3.  Tile floors in office areas will be waxed and buffed monthly.

    4.  Floors re-waxed and old wax removed as necessary.

    5.  Carpeted areas and rugs unobstructed by furnishings to be vacuum
        cleaned nightly.

    6.  Carpet shampooing of public and common areas will be performed as
        necessary.

    7.  Carpet shampooing of Tenant areas will be performed at Tenant's
        request and billed to Tenant as an Extra Service.

    8.  All floor areas to be spot cleaned nightly.

    9.  Clean chair mats weekly.

D.  Glass
    -----

    1.  Clean all perimeter glass every six (6) months outside and every six
        (6) months inside.  Any additional cleaning to be at Tenant's expense.

    2.  Clean glass entrance doors and adjacent glass panels nightly.

    3.  Clean partition glass and interior glass doors quarterly.

    4.  Clean exterior of ground floor glass as needed.

E.  High Dusting (Quarterly)
    ------------------------

    1.  Dust and wipe clean closet shelving when empty and carpet sweep and
        dry mop floors in closets if such are empty.

    2.  Dust clean all vertical surfaces such as walls, partitions, doors,
        door bucks and other surfaces above shoulder height.

    3.  Damp dust ceiling air-conditioning diffusers, wall grilles, registers
        and other ventilating louvers.

    4.  Dust the exterior surfaces of lighting fixtures, including glass and
        plastic enclosures and aluminum louvers.

F.  Day Service
    ------------

    1.  At least once, but not more than twice during the day, check men's
        washrooms for toilet tissue replacement (excluding private restrooms).

    2.  At least once, but not more than twice during the day, check women's
        washrooms for toilet tissue and sanitary napkin replacement (excluding
        private restrooms).

    3.  Supply toilet tissue, soap and towels in men's and women's washrooms
        and sanitary napkins in women's washroom (excluding private
        restrooms).

    4.  As needed, vacuuming of elevator cabs will be performed.

                                      I-2
<PAGE>

    5.  There will be a constant surveillance of public areas to insure
        cleanliness.

G.  General
    -------

    1.  Wipe all interior metal window frames, mullions, and other unpainted
        interior metal surfaces of the perimeter walls of the building each
        time the interior of the windows is washed.

    2.  Keep janitor rooms in a clean, neat and orderly condition at all
        times.

    3.  Wipe clean all metal hardware fixtures nightly and polish bright work
        as necessary.

    4.  Dust and/or wash all directory boards as required and remove
        fingerprints and smudges nightly.

    5.  Maintain building lobby, corridors, elevators and other public areas
        in a clean condition.

    6.  Empty and clean all ash trays, screen all sand urns nightly and supply
        and replace sand as necessary.

H.  Special
    -------

    It is understood that no services of the character provided for in this
    Exhibit shall be provided on Saturdays, Sundays or days recognized as
    holidays pursuant to this Lease, unless specifically stated above.

This cleaning specification may be changed or altered by Landlord from time to
time to facilitate conformity with the latest methods of maintenance and
cleaning technology generally recognized as acceptable for Class A office
buildings in Bellevue, Washington, and Landlord reserves the right to alter the
level of such services from time to time as determined by Landlord to be
appropriate for a Class A office building.  In the event Tenant requires a
higher level of services to suit its particular needs, the cost of such service
shall be at Tenant's expense and billed as an Extra Service per the terms of the
Lease.

                                      I-3

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