<PAGE>
 
                                                                   EXHIBIT 10.19

                               TABLE OF CONTENTS

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ARTICLES                                                                    PAGE
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      1 - DEFINITIONS.....................................................   3

      2 - DEMISE AND TERM.................................................   6

      3 - RENT............................................................   6

      4 - USE OF DEMISED PREMISES.........................................   7

      5 - PREPARATION OF DEMISED PREMISES.................................   8

      6 - TAX AND OPERATING EXPENSE PAYMENTS..............................   8

      7 - OMITTED.........................................................   9

      8 - SECURITY........................................................   9

      9 - SUBORDINATION...................................................  10

     10 - QUIET ENJOYMENT.................................................  11

     11 - ASSIGNMENT, SUBLETTING AND MORTGAGING...........................  11

     12 - COMPLIANCE WITH LAWS............................................  14

     13 - INSURANCE AND INDEMNITY.........................................  15

     14 - RULES AND REGULATIONS...........................................  17

     15 - ALTERATIONS AND SIGNS...........................................  17

     16 - LANDLORD'S AND TENANT'S PROPERTY................................  18

     17 - REPAIRS AND MAINTENANCE.........................................  19

     18 - UTILITY CHARGES.................................................  20

     19 - ACCESS, CHANGES AND NAME........................................  20

     20 - MECHANICS' LIENS AND OTHER LIENS................................  21

     21 - NON-LIABILITY AND INDEMNIFICATION...............................  21
</TABLE>
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<TABLE>
     <S>                                                                    <C> 
     22 - DAMAGE OR DESTRUCTION...........................................  22

     23 - EMINENT DOMAIN..................................................  23

     24 - SURRENDER.......................................................  24

     25 - CONDITIONS OF LIMITATION........................................  25

     26 - RE-ENTRY BY LANDLORD............................................  26

     27 - DAMAGES.........................................................  27

     28 - AFFIRMATIVE WAIVERS.............................................  29

     29 - NO WAIVERS......................................................  29

     30 - CURING TENANT'S DEFAULTS........................................  30

     31 - BROKER..........................................................  30

     32 - NOTICES.........................................................  30

     33 - ESTOPPEL CERTIFICATES...........................................  31

     34 - ARBITRATION.....................................................  31

     35 - MEMORANDUM OF LEASE.............................................  31

     36 - MISCELLANEOUS...................................................  31
</TABLE>

                                   EXHIBITS

     Exhibit A - Omitted                                                      
                                                                              
     Exhibit B - Site Plan                                                    
                                                                              
     Exhibit C - Work and Installation to be Performed and Furnished in       
             Demised Premises                                               
                                                                              
     Exhibit D - Rules and Regulations                                        
                                                                              
     Exhibit E - Letter of Credit                                             
<PAGE>
 
                                                                          052997

     LEASE, dated June 10, 1997, between HARTZ MOUNTAIN INDUSTRIES, INC. a New
York corporation, having an office at 400 Plaza Drive, Secaucus, New Jersey
07094-3688 ("Landlord"), and PEPE JEANS USA, INC., a California corporation,
having an office at 10 Mulholland Drive, Hasbrouck Heights, NJ 07604 ("Tenant").

                            ARTICLE 1 - DEFINITIONS

     1.01. As used in this Lease (including in all Exhibits and any Riders
attached hereto, all of which shall be deemed to be part of this Lease) the
following words and phrases shall have the meanings indicated:

     A.  Advance Rent: $111,915.17

     B.  Additional Charges: All amounts that become payable by Tenant to
Landlord hereunder other than the Fixed Rent and Percentage Rent.

     C.  Architect: Kenneth Carl Bonte, or as Landlord may designate.

     D.  Broker: Chaus Realty

     E.  Building: The building or buildings located on the Land and known as
35 Henry Street, Secaucus, NJ.

     F.  Business Days: All days except Saturdays, Sundays, days observed by the
federal or state government as legal holidays.

     G.  Business Hours: Generally customary daytime business hours, but not
before 9:00 A.M. or after 6:00 P.M.

     H.  Calendar Year:  Any twelve-month period commencing on a January 1.

     I.  Commencement Date:   September 1, 1997, subject to Unavoidable Delays.

     J.  Demised Premises:  The Building and the Land known as 35 Henry Street,
Secaucus, New Jersey depicted on the site plan(s) attached hereto as Exhibit B,
outlined in red.  The Building on the Demised Premises contains approximately
323,610 square feet of Floor Space.

     K.  Expiration Date:  The date that is the day before the fifth (5th)
anniversary of the Commencement Date if the Commencement Date is the first day
of a month, or the fifth (5th) anniversary 

                                       3
<PAGE>
 
of the last day of the month in which the Commencement Date occurs if the
Commencement Date is not the first day of a month. However, if the Term is
extended by Tenant's effective exercise of Tenant's right, if any, to extend the
Term, the "Expiration Date" shall be changed to the last day of the latest
extended period as to which Tenant shall have effectively exercised its right to
extend the Term. For the purposes of this definition, the earlier termination of
this Lease shall not affect the "Expiration Date."

     L.  Fixed Rent: An amount at the annual rate of Four and 15/100 ($4.15)
Dollars multiplied by the Floor Space of the Demised Premises.

     M.  Floor Space: As to the Demised Premises, the sum of the floor area
stated in square feet bounded by the exterior faces of the exterior walls.  Any
reference to Floor Space of a building shall mean the floor area of all levels
or stories of such building, excluding any roof, except such portion thereof
(other than cooling towers, elevator penthouses, mechanical rooms, chimneys and
staircases, entrances and exits) as is permanently enclosed, and including any
interior basement level or mezzanine area not occupied or used by a tenant on a
continuing or repetitive basis, and any mechanical room, enclosed or interior
truck dock, and areas used for housing meters and/or other equipment or for
other purposes.  Any reference to the Floor Space is intended to refer to the
Floor Space of the entire area in question irrespective of the Person(s) who may
be the owner(s) of all or any part thereof.

     N.  Guarantor: None

     O.  Insurance Requirements: Rules, regulations, orders and other
requirements of the applicable board of underwriters disclosed to Tenant and/or
the applicable fire insurance rating organization and/or any other similar body
performing the same or similar functions and having jurisdiction or cognizance
over the Land and Building, whether now or hereafter in force.

     P.  Land: The land upon which the Demised Premises are located.

     Q.  Landlord's Work: The materials and work to be furnished, installed and
performed by Landlord at its expense in accordance with the provisions of
Exhibit C.

     R.  Legal Requirements: Laws and ordinances of all federal, state, county,
and municipal governments, and rules, regulations, orders and directives of all
departments, subdivisions, bureaus, agencies or offices thereof, and of any
other governmental, public or quasi-public authorities having jurisdiction over
the Land and Building, whether now or hereafter in force, including, but not
limited to, those pertaining to environmental matters.

     S.  Mortgage: A mortgage and/or a deed of trust.

     T.  Mortgagee: A holder of a mortgage or a beneficiary of a deed of trust.

     U.  Permitted Uses: Warehousing and distribution of non-hazardous
materials and ancillary offices and warehouse outlet store incidental to the
operation of the warehouse portion of the Demised Premises 

                                       4
<PAGE>
 
in an area not to exceed the lesser of (i) 2,500 square feet or (ii) the size
permitted by applicable zoning requirements.

     V.  Person: A natural person or persons, a partnership, a corporation, or
any other form of business or legal association or entity.

     W.  Ready for Occupancy: The condition of the Demised Premises when for
the first time the Landlord's Work shall have been substantially completed and a
temporary or permanent Certificate of Occupancy shall have been issued
permitting use of the Demised Premises for the warehousing and distribution of
non-hazardous materials and ancillary offices.  The Landlord's Work shall be
deemed substantially completed notwithstanding the fact that minor or
insubstantial details of construction, mechanical adjustment or decoration
remain to be performed, the noncompletion of which does not in Tenant's
reasonable judgement materially interfere with Tenant's use of the Demised
Premises.

     X.  Real Estate Taxes: The real estate taxes, assessments, special
assessments, sewer rents, water charges, and all other similar charges and
impositions imposed upon the Building and Land by any federal, state, municipal
or other governments or governmental bodies or authorities, and any expenses
incurred by Landlord in contesting such taxes or assessments and/or the assessed
value of the Building and Land, which expenses shall be allocated to the period
of time to which such expenses relate. If at any time during the Term the
methods of taxation prevailing on the date hereof shall be altered so that in
lieu of, or as an addition to or as a substitute for, the whole or any part of
such real estate taxes, assessments and special assessments now imposed on real
estate there shall be levied, assessed or imposed (a) a tax, assessment, levy,
imposition, license fee or charge wholly or partially as a capital levy or
otherwise on the rents received therefrom, or (b) any other such additional or
substitute tax, assessment, levy, imposition or charge, then all such taxes,
assessments, levies, impositions, fees or charges or the part thereof so
measured or based shall be deemed to be included within the term "Real Estate
Taxes" for the purposes hereof.

     Y.  Rent: The Fixed Rent, the Percentage Rent and the Additional Charges.

     Z.  Rules and Regulations: The reasonable rules and regulations that may
be promulgated by Landlord from time to time, which may be reasonably changed by
Landlord from time to time.  The Rules and Regulations now in effect are
attached hereto as Exhibit D.

     AA. Security Deposit: Such amount as Tenant has deposited or hereinafter
deposits with Landlord as security under this Lease.  Tenant is required to
deposit the sum of $111,915.17 with Landlord as security hereunder as of the
date hereof.

     BB. Successor Landlord:  As defined in Section 9.03.

     CC. Superior Lease:  Any lease to which this Lease is, at the time
referred to, subject and subordinate and which has been disclosed in writing to
Tenant.

     DD. Superior Lessor:  The lessor of a Superior Lease or its successor in
interest, at the time 

                                       5
<PAGE>
 
referred to.

     EE.   Superior Mortgage:  Any Mortgage to which this Lease is, at the time
referred to, subject and subordinate.

     FF.   Superior Mortgagee:  The Mortgagee of a Superior Mortgage at the time
referred to.

     GG.   Tenant's Property: As defined in Section 16.02.

     HH.   Tenant's Work: The facilities, materials and work which may be
undertaken by or for the account of Tenant (other than the Landlord's Work) to
equip, decorate and furnish the Demised Premises for Tenant's occupancy in
accordance with the provisions of Exhibit C.

     II.   Term: The period commencing on the Commencement Date and ending at
11:59 p.m. of the Expiration Date, but in any event the Term shall end on the
date when this Lease is earlier terminated.

     JJ.   Unavoidable Delays:  A delay arising from or as a result of a strike,
lockout, or labor difficulty, explosion, sabotage, accident, riot or civil
commotion, act of war, fire or other catastrophe, Legal Requirement or an act of
the other party and any cause beyond the reasonable control of that party,
provided that the party asserting such Unavoidable Delay has exercised its best
efforts to minimize such delay.

                          ARTICLE 2 - DEMISE AND TERM

     2.01. Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the Demised Premises, for the Term. This Lease is subject to (a) any
and all existing encumbrances, conditions, rights, covenants, easements,
restrictions and rights of way, of record, and other matters of record,
applicable zoning and building laws, regulations and codes, and such matters as
may be disclosed by an inspection or survey, and (b) easements now or hereafter
created by Landlord in, under, over, across and upon the Land for access, sewer,
water, electric, gas and other utility lines and services now or hereafter
installed; provided, however, Landlord represents covenants and warrants to
Tenant that the Demises Premises may be used and occupied for the purposes set
forth herein; and that the foregoing shall in no manner interfere with Tenant's
use and quiet enjoyment of the Demised Premises. Promptly following the
Commencement Date, the parties hereto shall enter into an agreement in form and
substance satisfactory to Landlord setting forth the Commencement Date.

                               ARTICLE 3 - RENT

     3.01. Tenant shall pay the Fixed Rent in equal monthly installments in
advance on the first day of each and every calendar month during the Term
(except that Tenant shall pay, upon the execution and delivery of this Lease by
Tenant, the Advance Rent, to be applied against the first installment or
installments of Fixed Rent becoming due under this Lease). If the Commencement
Date occurs on a day other than the first day of a calendar month, the Fixed
Rent for the partial calendar month at the

                                       6
<PAGE>
 
commencement of the Term shall be prorated.

     3.02.  The Rent shall be paid in lawful money of the United States to
Landlord at its office, or such other place, or Landlord's agent, as Landlord
shall designate by notice to Tenant. Tenant shall pay the Rent promptly when due
without notice or demand therefor and without any abatement, deduction or setoff
for any reason whatsoever, except as may be expressly provided in this Lease. If
Tenant makes any payment to Landlord by check, same shall be by check of Tenant
and Landlord shall not be required to accept the check of any other Person, and
any check received by Landlord shall be deemed received subject to collection.
If any check is mailed by Tenant, Tenant shall post such check in sufficient
time prior to the date when payment is due so that such check will be received
by Landlord on or before the date when payment is due. Tenant shall assume the
risk of lateness or failure of delivery of the mails, and no lateness or failure
of the mails will excuse Tenant from its obligation to have made the payment in
question when required under this Lease.

     3.03.  No payment by Tenant or receipt or acceptance by Landlord of a
lesser amount than the correct Rent shall be deemed to be other than a payment
on account, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed an accord and satisfaction, and
Landlord may accept such check or payment without prejudice to Landlord's right
to recover the balance or pursue any other remedy in this Lease or at law
provided.

     3.04.  If Tenant is in arrears in payment of Rent, Tenant waives Tenant's
right, if any, to designate the items to which any payments made by Tenant are
to be credited, and Landlord may apply any payments made by Tenant to such items
as Landlord sees fit, irrespective of and notwithstanding any designation or
request by Tenant as to the items to which any such payments shall be credited.

     3.05.  In the event that any installment of Rent due hereunder shall be
overdue, a "Late Charge" equal to four percent (4%) or the maximum rate
permitted by law, whichever is less ("Late Payment Rate") for Rent so overdue
may be charged by Landlord for each month or part thereof that the same remains
overdue. In the event that any check tendered by Tenant to Landlord is returned
for insufficient funds, Tenant shall pay to Landlord, in addition to the charge
imposed by the preceding sentence, a fee of $25.00. Any such Late Charges if not
previously paid shall, at the option of the Landlord, be added to and become
part of the next succeeding Rent payment to be made hereunder.

     3.06   It is intended that the Fixed Rent shall be an absolutely net return
to Landlord throughout the Term, free of any expense, charge or other deduction
whatsoever, with respect to the Demised Premises, the Building, the Land and/or
the ownership, leasing, operation, management, maintenance, repair, rebuilding,
use or occupation thereof, or any portion thereof, with respect to any interest
of Landlord therein.

                      ARTICLE 4 - USE OF DEMISED PREMISES

     4.01.  Tenant shall use and occupy the Demised Premises for the Permitted
Uses, and Tenant shall not use or permit or suffer the use of the Demised
Premises or any part thereof for any other purpose.

                                       7
<PAGE>
 
     4.02.  If any governmental license or permit, including a certificate of
occupancy or certificate of continued occupancy (a "Certificate of Occupancy")
for the Demised Premises, shall be required for the proper and lawful conduct of
Tenant's business in the Demised Premises or any part thereof, Tenant shall duly
procure and thereafter maintain such license or permit and submit the same to
Landlord for inspection. Tenant shall at all times comply with the terms and
conditions of each such license or permit. Tenant shall not at any time use or
occupy, or suffer or permit anyone to use or occupy the Demised Premises, or do
or permit anything to be done in the Demised Premises, in any manner which (a)
violates the Certificate of Occupancy for the Demised Premises or for the
Building; (b) causes or is liable to cause injury to the Building or any
equipment, facilities or systems therein; (c) constitutes a violation of the
Legal Requirements or Insurance Requirements; (d) impairs or tends to impair the
character, reputation or appearance of the Building; (e) impairs or tends to
impair the proper and economic maintenance, operation and repair of the Building
and/or its equipment, facilities or systems. Notwithstanding the foregoing,
Landlord shall be responsible for obtaining the initial temporary or permanent
certificate of occupancy or continued occupancy upon the completion of the
Landlord's Work.

                  ARTICLE 5 - PREPARATION OF DEMISED PREMISES

     5.01.  The Demised Premises shall be completed and prepared for Tenant's
occupancy in the manner described in, and subject to the provisions of, Exhibit
C. Tenant shall occupy the Demised Premises promptly after the same are Ready
for Occupancy and possession thereof is delivered to Tenant by Landlord giving
to Tenant a notice of such effect. Except as expressly provided to the contrary
in this Lease, the taking of possession by Tenant of the Demised Premises shall
be conclusive evidence as against Tenant that the Demised Premises and the
Building were in good and satisfactory condition at the time such possession was
taken. Except as expressly provided to the contrary in this Lease, Tenant is
leasing the Demised Premises "as is" on the date hereof, subject to reasonable
wear and tear and the rights of the present occupant(s) of the Demised Premises
to remove its or their trade fixtures and other property from the Demised
Premises.

     5.02.  If the substantial completion of the Landlord's Work shall be
delayed due to (a) any act or omission of Tenant or any of its employees, agents
or contractors (including, without limitation, [i] any delays due to changes in
or additions to the Landlord's Work, or [ii] any delays by Tenant in the
submission of plans, drawings, specifications or other information or in
approving any working drawings or estimates or in giving any authorizations or
approvals), or (b) any additional time needed for the completion of the
Landlord's Work by the inclusion in the Landlord's Work of any items specified
by Tenant that require long lead time for delivery or installation, then the
Demised Premises shall be deemed Ready for Occupancy on the date when they would
have been ready but for such delay(s). The Demised Premises shall be
conclusively presumed to be in satisfactory condition on the Commencement Date
except for the minor or insubstantial details of which Tenant gives Landlord
notice within thirty (30) days after the Commencement Date specifying such
details with reasonable particularity.

     5.03.  If Landlord is unable to give possession of the Demised Premises on
the Commencement Date because of the holding-over or retention of possession by
any tenant, undertenant or occupant, Landlord shall not be subject to any
liability for failure to give possession, the validity of this Lease shall

                                       8
<PAGE>
 
not be impaired under such circumstances, and the Term shall not be extended,
but the Rent shall be abated if Tenant is not responsible for the inability to
obtain possession.

     5.04.  Landlord reserves the right, at any time and from time to time, to
increase, reduce or change the number, type, size, location, elevation, nature
and use of the Building and any other buildings and other improvements on the
Land, including, without limitation, the right to move and/or remove same,
provided same shall not unreasonably block or interfere with Tenant's means of
ingress or egress to and from the Demised Premises or its right to uninterrupted
use and enjoyment of the entire Floor Space under this Lease.

                ARTICLE 6 - TAX AND OPERATING EXPENSE PAYMENTS

     6.01.  Promptly following the Commencement Date, Landlord shall provide
written notice to the Town of Secaucus advising that tax invoices should be
remitted directly to the Tenant. Tenant shall pay all Real Estate Taxes not
later than thirty (30) days prior to the date when such Real Estate Taxes shall
first become due. Not later than fifteen days prior to such due date, Tenant
shall deliver to Landlord evidence of such payment. Any Real Estate Taxes for a
real estate fiscal tax year, a part of which is included within the Term and a
part of which is not so included, shall be apportioned on the basis of the
number of days in the real estate fiscal tax year included in the Term, and the
real estate fiscal tax year for any improvement assessment will be deemed to be
the one-year period commencing on the date when such assessment is due, except
that if any improvement assessment is payable in installments, the real estate
fiscal tax year for each installment will be deemed to be the one-year period
commencing on the date when such installment is due. In addition to the
foregoing, Tenant shall be responsible for any increase in Real Estate Taxes
attributable to assessments for improvements installed by or for the account of
Tenant at the Demised Premises. If the Demised Premises are not separately
assessed, the amount of any such increase shall be determined by reference to
the records of the tax assessor.

     6.02.  Subject to the provisions of Article 17, Tenant shall be solely
responsible for the full and prompt payment of all expenses of or relating to
the Demised Premises and all utilities servicing same provided, however, that in
no event shall Tenant be responsible for the payment of any of Landlord's ground
rent, mortgage debt service, or Landlord's income taxes, or capital gains, or
mortgage or transfer taxes imposed upon Landlord.

                              ARTICLE 7 - OMITTED

                             ARTICLE 8 - SECURITY

     8.01.  (a) In the event Tenant deposits with Landlord any Security
Deposit, the same shall be held as security for the full and faithful payment
and performance by Tenant of Tenant's obligations under this Lease. If Tenant
defaults in the full and prompt payment and performance of any of its
obligations under this Lease, including, without limitation, the payment of
Rent, Landlord may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any Rent or any other sums
as to which Tenant is in default or for any sum which Landlord may expend or may
be required to

                                       9
<PAGE>
 
expend by reason of Tenant's default in respect of any of Tenant's obligations
under this Lease, including, without limitation, any damages or deficiency in
the reletting of the Demised Premises, whether such damages or deficiency accrue
before or after summary proceedings or other re-entry by Landlord. If Landlord
shall so use, apply or retain the whole or any part of the security, Tenant
shall upon demand immediately deposit with Landlord a sum equal to the amount so
used, applied and retained, as security as aforesaid. If Tenant shall fully and
faithfully pay and perform all of Tenant's obligations under this Lease, the
security or any balance thereof to which Tenant is entitled shall be returned or
paid over to Tenant no later than thirty (30) days after the date on which this
Lease shall expire or sooner end or terminate, and after delivery to Landlord of
entire possession of the Demised Premises. In the event of any sale or leasing
of the Land, Landlord shall have the right to transfer the security to which
Tenant is entitled to the vendee or lessee and Landlord shall thereupon be
released by Tenant from all liability for the return or payment thereof; and
Tenant shall look solely to the new landlord for the return or payment of the
same; and the provisions hereof shall apply to every transfer or assignment made
of the same to a new landlord. Tenant shall not assign or encumber or attempt to
assign or encumber the monies deposited herein as security, and neither Landlord
nor its successors or assigns shall be bound by any such assignment,
encumbrance, attempted assignment or attempted encumbrance.

     8.01.  (b) In lieu of the cash security required by this Lease, Tenant
shall provide to Landlord an irrevocable transferrable Letter of Credit in the
amount of the Security Deposit in form and substance attached hereto as Exhibit
E and issued by a financial institution approved by Landlord. Landlord shall
have the right, upon written notice to Tenant (except that for Tenant's non-
payment of Rent or for Tenant's failure to comply with Article 8.03, no such
notice shall be required) and regardless of the exercise of any other remedy the
Landlord may have by reason of a default, to draw upon said Letter of Credit to
cure any default of Tenant or for any purpose authorized by section 8.01(a) of
this Lease and if Landlord does so, Tenant shall, upon demand, additionally fund
the Letter of Credit with the amount so drawn so that Landlord shall have the
full deposit on hand at all times during the Term of the Lease and for a period
of thirty (30) days' thereafter. In the event of a sale of the Building or a
lease of the Building subject to this Lease, Landlord shall have the right to
transfer the security to the vendee or lessee.

     8.02.  The Letter of Credit shall expire not earlier than thirty (30) days
after the Expiration Date of this Lease. Upon Landlord's prior consent, the
Letter of Credit may be of the type which is automatically renewed on an annual
basis (Annual Renewal Date), provided however, in such event Tenant shall
maintain the Letter of Credit and its renewals in full force and effect during
the entire Term of this Lease (including any renewals or extensions) and for a
period of thirty (30) days thereafter. The Letter of Credit will contain a
provision requiring the issuer thereof to give the beneficiary (Landlord) sixty
(60) days' advance written notice of its intention not to renew the Letter of
Credit on the next Annual Renewal Date.

     8.03.  In the event Tenant shall fail to deliver to Landlord a substitute
irrevocable Letter of Credit, in the amount stated above, on or before thirty
(30) days prior to the next Annual Renewal Date, said failure shall be deemed a
default under this Lease. Landlord may, in its discretion treat this the same as
a default in the payment of Rent or any other default and pursue the appropriate
remedy. In addition, and not in limitation, Landlord shall be permitted to draw
upon the Letter of Credit as in the case of any other

                                       10
<PAGE>
 
default by Tenant under the Lease.

                           ARTICLE 9 - SUBORDINATION

     9.01.  To the extent they have been disclosed in writing to Tenant, this
Lease, and all rights of Tenant hereunder, are and shall be subject and
subordinate to all ground leases and underlying leases of the Land and/or the
Building now or hereafter existing and to all Mortgages which may now or
hereafter affect the Land and/or building and/or any of such leases, whether or
not such Mortgages or leases shall also cover other lands and/or buildings, to
each and every advance made or hereafter to be made under such Mortgages, and to
all renewals, modifications, replacements and extensions of such leases and such
Mortgages and spreaders and consolidations of such Mortgages. The provisions of
this Section 9.01 shall be self-operative and no further instrument of
subordination shall be required. In confirmation of such subordination, Tenant
shall promptly execute, acknowledge and deliver any instrument that Landlord,
the lessor under any such lease or the Mortgagee of any such Mortgage or any of
their respective successors in interest may reasonably request to evidence such
subordination; and if Tenant fails to execute, acknowledge or deliver any such
instruments within 10 days after request therefor, Tenant hereby irrevocably
constitutes and appoints Landlord as Tenant's attorney-in-fact, coupled with an
interest, to execute and deliver any such instruments for and on behalf of
Tenant.

     9.02.  If any act or omission of Landlord would give Tenant the right,
immediately or after lapse of a period of time, to cancel or terminate this
Lease, or to claim a partial or total eviction, Tenant shall not exercise such
right (a) until it has given written notice of such act or omission to Landlord
and each Superior Mortgagee and each Superior Lessor whose name and address
shall previously have been furnished to Tenant, and (b) until a reasonable
period for remedying such act or omission shall have elapsed following the
giving of such notice and following the time when such Superior Mortgagee or
Superior Lessor shall have become entitled under such Superior Mortgage or
Superior Lease, as the case may be, to remedy the same (which reasonable period
shall in no event be less than the period to which Landlord would be entitled
under this Lease or otherwise, after similar notice, to effect such remedy),
provided such Superior Mortgagee or Superior Lessor shall with due diligence
give Tenant notice of intention to, and commence and continue to, remedy such
act or omission.

     9.03.  If any Superior Lessor or Superior Mortgagee shall succeed to the
rights of Landlord under this Lease, whether through possession or foreclosure
action or delivery of a new lease or deed, then at the request of such party so
succeeding to Landlord's rights ("Successor Landlord") and upon such Successor
Landlord's written agreement to accept Tenant's attornment, Tenant shall attorn
to and recognize such Successor Landlord as Tenant's landlord under this Lease
and shall promptly execute and deliver any instrument that such Successor
Landlord may reasonably request to evidence such attornment.  Upon such
attornment this Lease shall continue in full force and effect as a direct lease
between the Successor Landlord and Tenant upon all of the terms, conditions and
covenants as are set forth in this Lease except that the Successor Landlord
shall not (a) be liable for any previous act or omission of Landlord under this
Lease; (b) be subject to any offset, not expressly provided for in this Lease,
which theretofore shall have accrued to Tenant against Landlord; (c) be liable
for the return of any Security Deposit, in whole or in part, to the extent that
same is not paid over to the Successor Landlord; or (d) be bound by any previous

                                       11
<PAGE>
 
modification of this Lease or by any previous prepayment of more than one
month's Fixed Rent or Additional Charges, unless such modification or prepayment
shall have been expressly approved in writing by the Superior Lessor of the
Superior Lease or the Mortgagee of the Superior Mortgage through or by reason of
which the Successor Landlord shall have succeeded to the rights of Landlord
under this Lease.

     9.04.   If any then present or prospective Superior Mortgagee shall require
any modification(s) of this Lease, Tenant shall promptly execute and deliver to
Landlord such instruments effecting such modification(s) as Landlord shall
request, provided that such modification(s) do not adversely affect in any
material respect any of Tenant's rights under this Lease and do not affect
Tenant's financial obligations hereunder in any respect.

                         ARTICLE 10 - QUIET ENJOYMENT

     10.01.  So long as Tenant pays all of the Rent and performs all of Tenant's
other obligations hereunder, Tenant shall peaceably and quietly have, hold and
enjoy the Demised Premises without hindrance, ejection or molestation by
Landlord or any person lawfully claiming through or under Landlord, subject,
nevertheless, to the provisions of this Lease and to Superior Leases and
Superior Mortgages.

               ARTICLE 11 - ASSIGNMENT, SUBLETTING AND MORTGAGING

     11.01.  Tenant shall not, whether voluntarily, involuntarily, or by
operation of law or otherwise, (a) assign or otherwise transfer this Lease, or
offer or advertise to do so, (b) sublet the Demised Premises or any part
thereof, or offer or advertise to do so, or allow the same to be used, occupied
or utilized by anyone other than Tenant, or (c) mortgage, pledge, encumber or
otherwise hypothecate this Lease in any manner whatsoever, without in each
instance obtaining the prior written consent of Landlord. Notwithstanding the
foregoing, Landlord acknowledges it is the intention of the parties that Tenant
will sublet approximately 100,000 square feet of the warehouse space for the
period not to exceed the first two years of the Lease Term and Landlord's
consent to same shall not be unreasonably withheld.

     11.02.  If at any time (a) the original Tenant named herein, (b) the then
Tenant, (c) any Guarantor, or (d) any Person owning a majority of the voting
stock of, or directly or indirectly controlling, the then Tenant shall be a
corporation or partnership, any transfer of voting stock or partnership interest
resulting in the person(s) who shall have owned a majority of such corporation's
shares of voting stock or the general partners' interest in such partnership, as
the case may be, immediately before such transfer, ceasing to own a majority of
such shares of voting stock or general partner's interest, as the case may be,
except as the result of transfers by inheritance, shall be deemed to be an
assignment of this Lease as to which Landlord's consent shall have been
required, and in any such event Tenant shall notify Landlord. The provisions of
this Section 11.02 shall not be applicable to any corporation all the
outstanding voting stock of which is listed on a national securities exchange
(as defined in the Securities Exchange Act of 1934, as amended) or is traded in
the over-the-counter market with quotations reported by the National Association
of Securities Dealers through its automated system for reporting quotations and
shall not apply to transactions with a corporation into or with which the then
Tenant is merged or consolidated or to which substantially all of the then
Tenant's assets are transferred or to any corporation which controls or is
controlled by the

                                       12
<PAGE>
 
then Tenant or is under common control with the then Tenant, provided that in
any of such events (i) the successor to Tenant has a net worth computed in
accordance with generally accepted accounting principles at least equal to the
greater of (1) the net worth of Tenant immediately prior to such merger,
consolidation or transfer, or (2) the net worth of the original Tenant on the
date of this Lease, and (ii) proof satisfactory to Landlord of such net worth
shall have been delivered to Landlord at least 10 days prior to the effective
date of any such transaction. For the purposes of this Section, the words
"voting stock" shall refer to shares of stock regularly entitled to vote for the
election of directors of the corporation. Landlord shall have the right at any
time and from time to time during the Term to inspect the stock record books of
the corporation to which the provisions of this Section 10.02 apply, and Tenant
will produce the same on request of Landlord.

     11.03.  If this Lease is assigned, whether or not in violation of this
Lease, Landlord may collect rent from the assignee.  If the Demised Premises or
any part thereof are sublet or used or occupied by anybody other then Tenant,
whether or not in violation of this Lease, Landlord may, after default by
Tenant, and expiration of Tenant's time to cure such default, collect rent from
the subtenant or occupant.  In either event, Landlord may apply the net amount
collected to the Rent, but no such assignment, subletting, occupancy or
collection shall be deemed a waiver of any of any of the provisions of Section
11.01 or Section 11.02, or the acceptance of the assignee, subtenant or occupant
as tenant, or a release of Tenant from the performance by Tenant of Tenant's
obligations under this Lease.  The consent by Landlord to any assignment,
mortgaging, subletting or use or occupancy by others shall not in any way be
considered to relieve Tenant from obtaining the express written consent of
Landlord to any other or further assignment, mortgaging or subletting or use or
occupancy by others not expressly permitted by this Article 10. References in
this Lease to use or occupancy by others (that is, anyone other than Tenant)
shall not be construed as limited to subtenants and those claiming under or
through subtenants but shall be construed as including also licensees and others
claiming under or through Tenant, immediately or remotely.

     11.04.  Any permitted assignment or transfer, whether made with Landlord's
consent pursuant to Section 10.01 or without Landlord's consent if permitted by
Section 11.02, shall be made only if, and shall not be effective until, the
assignee shall execute, acknowledge and deliver to Landlord an agreement in form
and substance satisfactory to Landlord whereby the assignee shall assume
Tenant's obligations under this Lease and whereby the assignee shall agree that
all of the provisions in this Article 10 shall, notwithstanding such assignment
or transfer, continue to be binding upon it in respect to all future assignments
and transfers.  Notwithstanding any assignment or transfer, whether or not in
violation of the provisions of this Lease, and notwithstanding the acceptance of
Rent by Landlord from an assignee, transferee, or any other party during the
Term, the original Tenant and any other person(s) who at any time was or were
Tenant shall remain fully liable for the payment of the Rent and for Tenant's
other obligations under this Lease.

     11.05.  The liability of the original named Tenant and any other Person(s)
(including but not limited to any Guarantor) who at any time are or become
responsible for Tenant's obligations under this Lease shall not be discharged,
released or impaired by any agreement extending the time of, or modifying any of
the terms or obligations under this Lease, or by any waiver or failure of
Landlord to enforce, any of this Lease.

                                       13
<PAGE>
 
     11.06.  The listing of any name other than that of Tenant, whether on the
doors of the Demised Premises or the Building directory, or otherwise, shall not
operate to vest any right or interest in this Lease or in the Demised Premises,
nor shall it be deemed to be the consent of Landlord to any assignment or
transfer of this Lease or to any sublease of the Demised Premises or to the use
or occupancy thereof by others.  Notwithstanding anything contained in this
Lease to the contrary, Landlord shall have the absolute right to withhold its
consent to an assignment or subletting to a Person who is otherwise a tenant or
occupant of the Building, or of a building owned or managed by Landlord or its
affiliated entities.

     11.07.  Without limiting any of the provisions of Article 24, if pursuant
to the Federal Bankruptcy Code (or any similar law hereafter enacted having the
same general purpose), Tenant is permitted to assign this Lease notwithstanding
the restrictions contained in this Lease, adequate assurance of future
performance by an assignee expressly permitted under such Code shall be deemed
to mean the deposit of cash security in an amount equal to the sum of one (1)
year's Fixed Rent plus an amount equal to the Percentage Rent and the Additional
Charges for the Calendar Year preceding the year in which such assignment is
intended to become effective, which deposit shall be held by Landlord for the
balance of the Term, without interest, as security for the full performance of
Tenant's obligations under this Lease, to be held and applied in the manner
specified for security in Article 8.

     11.08.  If Tenant shall propose to assign or in any manner transfer this
Lease or any interest therein, or sublet the Demised Premises or any part or
parts thereof, or grant any concession or license or otherwise permit occupancy
of all or any part of the Demised Premises by any person, Tenant shall give
notice thereof to Landlord, together with a copy of the proposed instrument that
is to accomplish same and such financial and other information pertaining to the
proposed assignee, transferee, subtenant, concessionaire or licensee as Landlord
shall require, and Landlord may, in addition to Landlord's right to give or
withhold consent, terminate this Lease by notice given to Tenant within thirty
(30) days after receipt of said proposed instrument and financial and other
information, and upon the date specified in such notice, which date shall be not
less than thirty (30) days and not more than sixty (60) days after the giving of
said notice, this Lease shall terminate.  If Landlord does not so terminate this
Lease, and (if Landlord consents to the subject transaction or if Landlord's
consent is not required to same) if Tenant does not consummate the subject
transaction within sixty (60) days after the last day on which Landlord might
have so terminated this Lease as a result of such transaction, Tenant shall
again be required to comply with the provisions of this Section 11.07. in
connection with any such transaction as if the notice by Tenant referred to
above in this Section 11.07. had not been given.  Notwithstanding anything
contained in this Lease to the contrary and except as provided in Section 11.01,
Landlord shall not be obligated to entertain or consider any request by Tenant
to consent to any proposed assignment of this Lease or sublet of all or any part
of the Demised Premises unless each request by Tenant is accompanied by a non-
refundable fee payable to Landlord in the amount of One Thousand Dollars
($1,000.00) to cover Landlord's administrative, legal, and other costs and
expenses incurred in processing each of Tenant's requests.  Neither Tenant's
payment nor Landlord's acceptance of the foregoing fee shall be construed to
impose any obligation whatsoever upon Landlord to consent to Tenant's request.

                       ARTICLE 12 - COMPLIANCE WITH LAWS

                                       14
<PAGE>
 
     12.01.  Subject to the provisions of Article 36.13(iv), Tenant shall comply
with all Legal Requirements which shall, in respect of the Demised Premises or
the use and occupation thereof, or the abatement of any nuisance in, on or about
the Demised Premises, impose any violation, order or duty on Landlord or Tenant;
and Tenant shall pay all the cost, expenses, fines, penalties and damages which
may be imposed upon Landlord or any Superior Lessor by reason of or arising out
of Tenant's failure to fully and promptly comply with and observe the provisions
of this Section.  However, Tenant need not comply with any such law or
requirement of any public authority so long as Tenant shall be contesting the
validity or the applicability thereof to the Demised Premises, in accordance
with Section 12.02.

     12.02.  Tenant may contest, by appropriate proceedings prosecuted
diligently and in good faith, the validity, or applicability to the Demised
Premises, of any Legal Requirement, provided that (a) Landlord shall not be
subject to criminal penalty or to prosecution for a crime, and neither the
Demised Premises nor any part thereof shall be subject to being condemned or
vacated, by reason of non-compliance or otherwise by reason of such contest; (b)
before the commencement of such contest, Tenant shall furnish to Landlord either
(i) the bond of a surety company satisfactory to Landlord, which bond shall be,
as to its provisions and form, satisfactory to Landlord, and shall be in an
amount at least equal to 125% of the cost of such compliance (as estimated by a
reputable contractor designated by Landlord) and shall indemnify Landlord
against the cost thereof and against all liability for damages, interest,
penalties and expenses (including reasonable attorneys' fees and expenses),
resulting from or incurred in connection with such contest or non-compliance, or
(ii) other security in place of such bond satisfactory to Landlord; (c) such 
non-compliance or contest shall not constitute or result in any violation of any
Superior Lease or Superior Mortgage, or if any such Superior Lease and/or
Superior Mortgage shall permit such non-compliance or contest on condition of
the taking of action or furnishing of security by Landlord, such action shall be
taken and such security shall be furnished at the expense of Tenant; and (d)
Tenant shall keep Landlord advised as to the status of such proceedings. Without
limiting the application of the above, Landlord shall be deemed subject to
prosecution for a crime if Landlord, or its managing agent, or any officer,
director, partner, shareholder or employee of Landlord or its managing agent, as
an individual, is charged with a crime of any kind or degree whatsoever, whether
by service of a summons or otherwise, unless such charge is withdrawn before
Landlord or its managing agent, or such officer, director, partner, shareholder
or employee of Landlord or its managing agent (as the case may be) is required
to plead or answer thereto. Notwithstanding anything contained in this Lease to
the contrary, Tenant shall not file any Real Estate Tax appeal without the prior
written consent of Landlord, which consent may be given or withheld in
Landlord's absolute discretion. Notwithstanding anything contained in this Lease
to the contrary, Tenant shall not file any Real Estate Tax Appeal with respect
to the Land, Building or the Demised Premises.

                      ARTICLE 13 - INSURANCE AND INDEMNITY

     13.01.  During the Term Tenant shall maintain at its own cost and expense
the following insurance: (a) comprehensive general public liability insurance in
respect of the Demised Premises and the conduct and operation of business
therein, having limits of not less than $5,000,000.00 combined single limit per
occurrence for bodily injury or death to any one person and for bodily injury or
death to any number of persons in any one occurrence, and for property damage,
including water damage and sprinkler leakage 

                                       15
<PAGE>
 
legal liability (coverage to include but not be limited to (i) premises
operation, completed operations, broad form contractual liability and product
liability, (ii) comprehensive automobile, truck and vehicle liability insurance
covering all owned, hired and non-owned vehicles used by the contractor(s) in
connection with their work and any loading of such vehicles, with limits as
stated above and (iii) workmen's compensation, employers liability and
occupational disease insurance as required by statutes, but in any event not
less than $500,000.00 for Coverage B covering all damages and injuries arising
from each accident or occupational disease), (b) All-Risk insurance (including
flood and earthquake) covering the Demised Premises against loss or damage in an
amount equal to the full replacement value thereof as same might increase from
time to time or such higher amount as either may be required by the holder of
any fee mortgage covering the Demises Premises or is necessary to prevent
Landlord and/or Tenant from becoming a co-insurer, including boiler and
machinery insurance, if applicable (c) rent insurance with broad form extended
coverage endorsement in an amount equal to the Rent, and all other charges
payable by Tenant pursuant to this Lease for a period of one (1) year and (d)
any other insurance required for compliance with the Insurance Requirements.
Landlord may at any time and from time to time require that the limits for the
comprehensive general public liability insurance to be maintained by Tenant be
increased to the limits that new Tenants in similar buildings are required by
Landlord to maintain. The insurance carried pursuant to Section 13.01 (b) shall
be carried in favor of Landlord and the holder of any fee mortgage on the
Premises and the standard mortgagee clause shall be attached to the appropriate
policies. Insurance carried pursuant to Section 13.01 (b) shall provide that the
loss, if any, shall be adjusted with and payable to the party who will perform
the work of restoration pursuant to Article 22 and such mortgagee as their
interests may appear. Tenant shall deliver to Landlord and any additional named
insured(s) certificates for such fully paid-for policies upon execution hereof.
Upon request of Landlord, Tenant shall furnish Landlord with copies of all such
insurance policies. Tenant shall procure and pay for renewals of such insurance
from time to time before the expiration thereof, and Tenant shall deliver to
Landlord and any additional insured(s) certificates therefor at least thirty
(30) days before the expiration of any existing policy. All such policies shall
be issued by companies of recognized responsibility, having a Bests Key Rating
Guide of not less than A, Class VII, licensed to do business in New Jersey, and
all such policies shall contain a provision whereby the same cannot be canceled
unless Landlord and any additional insured(s) are given at least thirty (30)
days' prior written notice of such cancellation. The certificates of insurance
to be delivered to Landlord by Tenant shall name Landlord as an additional
insured and, at Landlord's request, shall also name any Superior Lessors or
Superior Mortgagees as additional insureds, and the following phrase must be
typed on the certificate of insurance: "Hartz Mountain Industries, Inc., and its
respective subsidiaries, affiliates, associates, joint ventures, and
partnerships, are hereby named as additional insureds as their interests may
appear (and if Landlord has so requested, Tenant shall include any Superior
Lessors and Superior Mortgagees as additional insured(s)). It is intended for
this insurance to be primary and non-contributing." Tenant shall give Landlord
at least thirty (30) days' prior written notice that any such policy is being
canceled or replaced.

     13.02.  Tenant shall not do, permit or suffer to be done any act, matter,
thing or failure to act in respect of the Demised Premises or use or occupy the
Demised Premises or conduct or operate Tenant's business in any manner
objectionable to any insurance company or companies whereby the fire insurance
or any other insurance then in effect in respect to the Land and Building or any
part thereof shall become void or suspended or whereby any premiums in respect
of insurance maintained by Landlord shall be

                                       16
<PAGE>
 
higher than those which would normally have been in effect for the occupancy
contemplated under the Permitted Uses. In case of a breach of the provisions of
this Section 13.02, in addition to all other rights and remedies of Landlord
hereunder, Tenant shall (a) indemnify Landlord and the Superior Lessors and hold
Landlord and the Superior Lessors harmless from and against any loss which would
have been covered by insurance which shall have become void or suspended because
of such breach by Tenant and (b) pay to Landlord any and all increases of
premiums on any insurance, including, without limitation, rent insurance,
resulting from any such breach.

     13.03.  Tenant shall indemnify and hold harmless Landlord and all Superior
Lessors and its and their respective partners, joint venturers, directors,
officers, agents, servants and employees from and against any and all claims
arising from or in connection with (a) the conduct or management of the Demised
Premises or of any business therein, or any work or thing whatsoever done, or
any condition created (other than by Landlord) in the Demised Premises during
the Term or during the period of time, if any, prior to the Commencement Date
that Tenant may have been given access to the Demised Premises; (b) any act,
omission or negligence of Tenant or any of its subtenants or licensees or its or
their partners, joint venturers, directors, officers, agents, employees or
contractors; (c) any accident, injury or damage whatever (unless caused solely
by Landlord's negligence) occurring in the Demised Premises; and (d) any breach
or default by Tenant in the full and prompt payment and performance of Tenant's
obligations under this Lease; together with all costs, expenses and liabilities
incurred in or in connection with each such claim or action or proceeding
brought thereon, including, without limitation, all attorneys' fees and
expenses.  In case any action or proceeding is brought against Landlord and/or
any Superior Lessor and/or its or their partners, joint venturers, directors,
officers, agents and/or employees in connection with conduct or management of
the Demised Premises or by reason of any claim referred to above, Tenant, upon
notice from Landlord or such Superior Lessor, shall, at Tenant's cost and
expense, resist and defend such action or proceeding by counsel reasonably
satisfactory to Landlord.

     13.04.  Neither Landlord nor any Superior Lessor shall be liable or
responsible for, and Tenant hereby releases Landlord and each Superior Lessor
from, all liability and responsibility to Tenant and any person claiming by,
through or under Tenant, by way of subrogation or otherwise, for any injury,
loss or damage to any person or property in or around the Demised Premises or to
Tenant's business irrespective of the cause of such injury, loss or damage, and
Tenant shall require its insurers to include in all of Tenant's insurance
policies which could give rise to a right of subrogation against Landlord or any
Superior Lessor a clause or endorsement whereby the insurer waives any rights of
subrogation against Landlord and such Superior Lessors or permits the insured,
prior to any loss, to agree with a third party to waive any claim it may have
against said third party without invalidating the coverage under the insurance
policy.


     13.05.  Tenant shall not be liable or responsible for, and Landlord hereby
releases Tenant from, all liability and responsibility to Landlord and any
person claiming by, through or under Landlord, by way of subrogation for any
injury, loss or damage to any property in or around the Common Areas, the
Building (exclusive of the Demised Premises) or to Landlord's business
irrespective of the cause of such injury, loss or damage, and Landlord shall
require its insurers to include in all of Landlord's insurance policies which
could give rise to a right of subrogation against Tenant a clause or endorsement
whereby the insurer waives 

                                       17
<PAGE>
 
any rights of subrogation against Tenant or permits the insured, prior to any
loss, to agree with a third party to waive any claim it may have against said
third party without invalidating the coverage under the insurance policy.

                      ARTICLE 14 - RULES AND REGULATIONS

     14.01.  Tenant and its employees and agents shall faithfully observe and
comply with the Rules and Regulations and such reasonable changes therein
(whether by modification, elimination or addition) as Landlord at any time or
times hereafter may make and communicate to Tenant, which in Landlord's
judgment, shall be necessary for the reputation, safety, care or appearance of
the Land and Building, or the preservation of good order therein, or the
operation or maintenance of the Building or its equipment and fixtures, and
which do not unreasonably affect the conduct of Tenant's business in the Demised
Premises; provided, however, that in case of any conflict or inconsistency
between the provisions of this Lease and any of the Rules and Regulations, the
provisions of this Lease shall control.

                      ARTICLE 15 - ALTERATIONS AND SIGNS

     15.01.  Tenant shall not make any alterations or additions to the Demised
Premises, or make any holes or cuts in the walls, ceilings, roofs, or floors
thereof, or change the exterior color or architectural treatment of the Demised
Premises, without on each occasion first obtaining the consent of Landlord.
Tenant shall submit to Landlord plans and specifications for such work at the
time Landlord's consent is sought. Tenant shall pay to Landlord upon demand the
reasonable cost and expense of Landlord in (a) reviewing said plans and
specifications and (b) inspecting the alterations to determine whether the same
are being performed in accordance with the approved plans and specifications and
all Legal Requirements and Insurance Requirements, including, without
limitation, the fees of any architect or engineer employed by Landlord for such
purpose. Before proceeding with any permitted alteration which will cost more
than $50,000 (exclusive of the costs of decorating work and items constituting
Tenant's Property), as estimated by a reputable contractor designated by
Landlord, Tenant shall obtain and deliver to Landlord either (i) a performance
bond and a labor and materials payment bond (issued by a corporate surety
licensed to do business in New Jersey), each in an amount equal to 125% of such
estimated cost and in form satisfactory to Landlord, or (ii) such other security
as shall be satisfactory to Landlord. Tenant shall fully and promptly comply
with and observe the Rules and Regulations then in force in respect of the
making of alterations. Any review or approval by Landlord of any plans and/or
specifications with respect to any alterations is solely for Landlord's benefit,
and without any representation or warranty whatsoever to Tenant in respect to
the adequacy, correctness or efficiency thereof or otherwise.

     15.02.  Tenant shall obtain all necessary governmental permits and
certificates for the commencement and prosecution of permitted alterations and
for final approval thereof upon completion, and shall cause alterations to be
performed in compliance with all applicable Legal Requirements and Insurance
Requirements.  Alterations shall be diligently performed in a good and
workmanlike manner, using new materials and equipment at least equal in quality
and class to the better of (a) the original installations of the Building, or
(b) the then standards for the Building established by Landlord. 

                                       18
<PAGE>
 
Alterations shall be performed by contractors first approved by Landlord;
provided, however, that any alterations in or to the mechanical, electrical,
sanitary, heating, ventilating, air conditioning or other systems of the
Building shall be performed only by the contractor(s) designated by Landlord.
Alterations shall be made in such manner as not to unreasonably interfere with
or delay and as not to impose any additional expense upon Landlord in the
construction, maintenance, repair or operation of the Building; and if any such
additional expense shall be incurred by Landlord as a result of Tenant's making
of any alterations, Tenant shall pay any such additional expense upon demand.
Throughout the making of alterations (not including the Landlord's Work), Tenant
shall carry, or cause to be carried, workmen's compensation insurance in
statutory limits and general liability insurance, with completed operation
endorsement, for any occurrence in or about the Building, under which Landlord
and its managing agent and any Superior Lessor whose name and address shall
previously have been furnished to Tenant shall be named as parties insured, in
such limits as Landlord may reasonably require, with insurers reasonably
satisfactory to Landlord. Tenant shall furnish Landlord with reasonably
satisfactory evidence that such insurance is in effect at or before the
commencement of alterations and, on request, at reasonable intervals thereafter
during the making of alterations.

     15.03.  Tenant shall not place any signs on the roof, exterior walls or
grounds of the Demised Premises without first obtaining Landlord's written
consent thereto.  In placing any signs on or about the Demised Premises, Tenant
shall, at its expense, comply with all applicable legal requirements and obtain
all required permits and/or licenses.

                 ARTICLE 16 - LANDLORD'S AND TENANT'S PROPERTY

     16.01.  All fixtures, equipment, improvements and appurtenances attached to
or built into the Demised Premises at the commencement of or during the Term,
whether or not by or at the expense of Tenant, shall be and remain a part of the
Demised Premises, shall be deemed to be the property of Landlord and shall not
be removed by Tenant, except as provided in Section 16.02.  Further, any
carpeting or other personal property in the Demised Premises on the Commencement
Date, unless installed and paid for by Tenant, shall be and shall remain
Landlord's property and shall not be removed by Tenant.

     16.02.  All movable partitions, business and trade fixtures, machinery and
equipment, communications equipment and office equipment, whether or not
attached to or built into the Demised Premises, which are installed in the
Demised Premises by or for the account of Tenant without expense to Landlord and
can be removed without structural damage to the Building and all furniture,
furnishings, and other movable personal property owned by Tenant and located in
the Demised Premises (collectively, "Tenant's Property") shall be and shall
remain the property of Tenant and may be removed by Tenant at any time during
the Term; provided that if any of the Tenant's Property is removed, Tenant shall
repair or pay the cost of repairing any damage to the Demised Premises,
resulting from the installation and/or removal thereof.  Any equipment or other
property for which Landlord shall have granted any allowance or credit to Tenant
shall not be deemed to have been installed by or for the account of Tenant
without expense to Landlord, shall not be considered as the Tenant's Property
and shall be deemed the property of Landlord.

                                       19
<PAGE>
 
     16.03.  At or before the Expiration Date or the date of any earlier
termination of this Lease, or within fifteen (15) days after such an earlier
termination date, Tenant shall remove from the Demised Premises all of the
Tenant's Property (except such items thereof as Landlord shall have expressly
permitted to remain, which property shall become the property of Landlord if not
removed), and Tenant shall repair any damage to the Demised Premises resulting
from any installation and/or removal of the Tenant's Property. Any items of the
Tenant's Property which shall remain in the Demised Premises after the
Expiration Date or after a period of fifteen (15) days following an earlier
termination date, may, at the option of Landlord, be deemed to have been
abandoned, and in such case such items may be retained by Landlord as its
property or disposed of by Landlord, without accountability, in such manner as
Landlord shall determine at Tenant's expense.

                      ARTICLE 17 - REPAIRS AND MAINTENANCE

     17.01.  Tenant shall, throughout the Term, take good care of the Demised
Premises, the fixtures and appurtenances therein, and shall not do, suffer, or
permit any waste with respect thereto.  Tenant shall keep and maintain all
interior and exterior portions of the Demised Premises including, without
limitation, all Building equipment, windows, doors, loading bay doors and
shelters, plumbing and electrical systems, heating, ventilating and air
conditioning ("HVAC") systems in a clean and orderly condition and in good order
and repair.  Tenant shall keep and maintain all floors, sidewalks, landscaping
(including lawn areas), curbing, exterior fencing, paving whether in driveways,
parking areas or access easements.  The phrase "keep and maintain" as used
herein includes repairs, replacement and/or restoration as appropriate; however,
nothing in this Lease requires Tenant to repair or restore the Building and/or
Land to any condition better than the condition they were delivered to Tenant on
the Commencement Date.  Tenant shall maintain the exterior areas of the Demised
Premises free of accumulation of snow, ice, dirt and rubbish.  Tenant shall not
permit or suffer any over-loading of the floors of the Building. Tenant shall be
responsible for all other repairs, interior and exterior, structural and
nonstructural, ordinary and extraordinary, in and to the Demised Premises,
including the Building and Land and the facilities and systems thereof, the need
for which arises out of (a) the performance or existence of the Tenant's Work or
alterations, (b) the installation, use or operation of the Tenant's Property in
the Demised Premises, (c) the moving of the Tenant's Property in or out of the
Building, or (d) the act, omission, misuse or neglect of Tenant or any of its
subtenants or its or their employees, agents, contractors or invitees. Upon
request by Landlord, Tenant shall furnish Landlord with true and complete copies
of maintenance contracts and with copies of all invoices for work performed,
confirming Tenant's compliance with its obligations under this Article. In the
event Tenant fails to furnish such copies, Landlord shall have the right, at
Tenant's cost and expense, to conduct such inspections or surveys as may be
required to determine whether or not Tenant is in compliance with this Article
and to have any work required of Tenant performed at Tenant's cost and expense.
Tenant shall promptly replace all scratched, damaged or broken doors and glass
in and about the Demised Premises and shall be responsible for all repairs,
maintenance and replacement of wall and floor coverings in the Demised Premises
and for the repair and maintenance of all sanitary and electrical fixtures and
equipment therein. Tenant shall promptly make all repairs in or to the Demised
Premises and any repairs required to be made by Tenant to the mechanical,
electrical, sanitary, heating, ventilating, air-conditioning or other systems of
the Building shall be performed only by contractor(s) designated by Landlord.
Any other repairs in or to the Building and the facilities and systems thereof
for which Tenant

                                       20
<PAGE>
 
is responsible may, at Landlord's option, be performed by Landlord at Tenant's
expense; but Landlord may, at its option, before commencing any such work or at
any time thereafter, require Tenant to furnish to Landlord such security, in
form (including, without limitation, a bond issued by a corporate surety
licensed to do business in New Jersey) and amount, as Landlord shall deem
necessary to assure the payment for such work by Tenant.

     17.02.  Except as provided in Article 17.01:(i) Landlord shall be
responsible for structural repairs to the foundation, steel supports, and
structural support to the roof of the Building and shall, at its cost and
expense, make all repairs and replacements thereto; however, Tenant shall be
responsible for maintenance, repairs or replacement of the roof and roof deck)
and (ii) Landlord shall be responsible for the repair of future depressions in
the floors, provided further that Tenant does not permit the overloading of the
floors.

     17.03.  Except as otherwise expressly provided in this Lease, Landlord
shall have no liability to Tenant, nor shall Tenant's covenants and obligations
under this Lease be reduced or abated in any manner whatsoever, by reason of any
inconvenience, annoyance, interruption or injury to business arising from
Landlord's doing any repairs, maintenance, or changes which Landlord is required
or permitted by this Lease, or required by Law, to make in or to any portion of
the Building.

     17.04.  Tenant shall not permit or suffer the overloading of the floors of
the Demised Premises beyond 250 pounds per square foot, or lesser  amount as may
be applicable to any mezzanine areas.

                          ARTICLE 18 - UTILITY CHARGES

     18.01.  Tenant shall pay all charges for gas, water, sewer, electricity,
heat or other utility or service supplied to the Demised Premises as measured by
meters relating to Tenant's use, and the cost of repair, maintenance,
replacement, and reading of any meters measuring Tenant's consumption thereof.
Tenant expressly agrees that Landlord shall not be responsible for the failure
of supply to Tenant of any of the aforesaid, or any other utility service.
Landlord shall not be responsible for any public or private telephone service to
be installed in the space, particularly conduit if required.

     18.02.  Tenant's use of electric energy in the Demised Premises shall not
at any time exceed the capacity of any of the electrical conductors and
equipment in or otherwise serving the Demised Premises. In order to insure that
such capacity is not exceeded and to avert possible adverse effect upon the
Building's electric service, Tenant shall not, without Landlord's prior consent
in each instance (which shall not be unreasonably withheld), connect any
fixtures, appliances or equipment to the Building's electric distribution system
or make any alteration or addition to the electric system of the Demised
Premises existing on the Commencement Date.  Should Landlord grant such consent,
all additional risers or other equipment required therefor shall be provided by
Landlord and the cost thereof shall be paid by Tenant to Landlord on demand.

                     ARTICLE 19 - ACCESS, CHANGES AND NAME

                                       21
<PAGE>
 
     19.01.  Omitted

     19.02.  Landlord and its agents shall have the right to enter and/or pass
through the Demised Premises at any time or times (a) to examine the Demised
Premises and to show then to actual and prospective Superior Lessors, Superior
Mortgagees, or prospective purchasers of the Building, and (b) to make such
repairs, alterations, additions and improvements in or to the Demised Premises
and/or in or to the Building or its facilities and equipment as Landlord is
required or desires to make.  Landlord shall be allowed to take all materials
into and upon the Demised Premises that may be required in connection therewith,
without any liability to Tenant and without any reduction of Tenant's
obligations hereunder. During the period of eighteen (18) months prior to the
Expiration Date, Landlord and its agents may exhibit the Demised Premises to
prospective tenants.  Notwithstanding the foregoing, Landlord covenants that it
will minimize any interference with Tenant's right to use and enjoyment of the
Demised Premises.

     19.03.  If at any time any windows of the Demised Premises are temporarily
darkened or obstructed by reason of any repairs, improvements, maintenance
and/or cleaning in or about the Building, or if any part of the Building is
temporarily or permanently closed or inoperable, the same shall not be deemed a
constructive eviction and shall not result in any reduction or diminution of
Tenant's obligations under this Lease.

     19.04.  If, during the last month of the Term, Tenant has removed all or
substantially all of the Tenant's Property from the Demised Premises, Landlord
may, with Tenant's prior consent, immediately enter the Demised Premises and
later, renovate and decorate the same, without liability to Tenant and without
reducing or otherwise affecting Tenant's obligations hereunder.

     19.05.  Landlord reserves the right, at any time and from time to time, to
make such changes, alterations, additions and improvements in or to the Building
and the fixtures and equipment thereof as Landlord shall deem necessary or
desirable provided they do not reduce or otherwise affect Tenant's rights under
this Lease. Landlord may adopt any name for the Building. Landlord reserves
the right to change the name and/or address of the Building at any time.

                 ARTICLE 20 - MECHANICS' LIENS AND OTHER LIENS

     20.01.  Nothing contained in this Lease shall be construed to imply any
consent of Landlord to subject Landlord's interest or estate to any liability
under any mechanic's, construction or other lien law. If any lien or any Notice
of Intention (to file a lien), Lis Pendens, or Notice of Unpaid Balance and
Right to File Lien is filed against the Land, the Building, or any part thereof,
or the Demised Premises, or any part thereof, for any work, labor, services or
materials claimed to have been performed or furnished for or on behalf of
Tenant, or anyone holding any part of the Demised Premises through or under
Tenant, Tenant shall cause the same to be canceled and discharged of record by
payment, bond or order of a court of competent jurisdiction within thirty (30)
days after notice by Landlord to Tenant.

                ARTICLE 21 - NON-LIABILITY AND INDEMNIFICATION

                                       22
<PAGE>
 
     21.01.  Neither Landlord nor any partner, joint venturer, director,
officer, agent, servant or employee of Landlord shall be liable to Tenant for
any loss, injury or damage to Tenant or to any other Person, or to its or their
property, irrespective of the cause of such injury, damage or loss, unless
caused by or resulting from the negligence of Landlord, its agents, servants or
employees in the operation or maintenance of the Land or Building without
contributory negligence on the part of Tenant or any of its subtenants or
licensees or its or their employees, agents or contractors.  Further, neither
Landlord nor any partner, joint venturer, director, officer, agent, servant or
employee of Landlord shall be liable (a) for any such damage caused by other
tenants or Persons in, upon or about the Land or Building, or caused by
operations in construction of any private, public or quasi-public work; or (b)
even if negligent, for consequential damages arising out of any loss of use of
the Demised Premises or any equipment or facilities therein by Tenant or any
Person claiming through or under Tenant.

     21.02.  Notwithstanding any provision to the contrary, Tenant shall look
solely to the estate and property of Landlord in and to the Land and Building
(or the proceeds received by Landlord on a sale of such estate and property but
not the proceeds of any financing or refinancing thereof) in the event of any
claim against Landlord arising out of or in connection with this Lease, the
relationship of Landlord and Tenant or Tenant's use of the Demised Premises, and
Tenant agrees that the liability of Landlord arising out of or in connection
with this Lease, the relationship of Landlord and Tenant or Tenant's use of the
Demised Premises shall be limited to such estate and property of Landlord (or
sale proceeds). No other properties or assets of Landlord or any partner, joint
venturer, director, officer, agent, servant or employee of Landlord shall be
subject to levy, execution or other enforcement procedures for the satisfaction
of any judgement (or other judicial process) or for the satisfaction of any
other remedy of Tenant arising out of, or in connection with, this Lease, the
relationship of Landlord and Tenant or Tenant's use of the Demised Premises and
if Tenant shall acquire a lien on or interest in any other properties or assets
by judgment or otherwise, Tenant shall promptly release such lien on or interest
in such other properties and assets by executing, acknowledging and delivering
to Landlord an instrument to that effect prepared by Landlord's attorneys.
Tenant hereby waives the right of specific performance and any other remedy
allowed in equity if specific performance or such other remedy could result in
any liability of Landlord for the payment of money to Tenant, or to any court or
governmental authority (by way of fines or otherwise) for Landlord's failure or
refusal to observe a judicial decree or determination, or to any third party.

                      ARTICLE 22 - DAMAGE OR DESTRUCTION

     22.01.  If the Building or the Demised Premises shall be partially or
totally damaged or destroyed by fire or other casualty (and if this Lease shall
not be terminated as in this Article 22 hereinafter provided), Landlord shall
repair the damage and restore and rebuild the Building and/or the Demised
Premises (except for the Tenant's Property) with reasonable dispatch after
notice to it of the damage or destruction and the collection of the insurance
proceeds attributable to such damage.

     22.02.  Deleted

     22.03.  If (a) the Building or the Demised Premises shall be totally
damaged or destroyed by fire or other casualty, or (b) the Building shall be so
damaged or destroyed by fire or other casualty that its

                                       23
<PAGE>
 
repair or restoration requires the expenditure, as estimated by a reputable
contractor or architect designated by Landlord, of more than twenty percent
(20%) (or ten percent [10%] if such casualty occurs during the last two [2]
years of the Term) of the full insurable value of the Building immediately prior
to the casualty, or (c) the Building shall be damaged or destroyed by fire or
other casualty and either the loss shall not be covered by Landlord's insurance
or the net insurance proceeds (after deducting all expenses in connection with
obtaining such proceeds) shall, in the estimation of a reputable contractor or
architect designated by Landlord be insufficient to pay for the repair or
restoration work, then in either such case Landlord may terminate this Lease by
giving Tenant notice to such effect within seventy five (75) days after the date
of the fire or other casualty. If the Demised Premises shall be so damaged or
destroyed by fire or other casualty that its repair would take more than twelve
(12) months to accomplish, as reasonably estimated by the Architect (the
"Architect's Determination"), either party shall have the right to terminate
this Lease upon written notice to the other given within sixty (60) notice of
the Architect's Determination. Landlord shall give Tenant written notice of the
Architect's Determination within sixty (60) days of such damage or destruction.

     22.04.  Tenant shall not be entitled to terminate this Lease and no
damages, compensation or claim shall be payable by Landlord for inconvenience,
loss of business or annoyance arising from any repair or restoration of any
portion of the Building pursuant to this Article 22.  Landlord shall use its
best efforts to make such repair or restoration promptly and in such manner as
to not unreasonably interfere with Tenant's use and occupancy of the Demised
Premises, but Landlord shall not be required to do such repair or restoration
work except during Business Hours on Business Days.

     22.05.  Notwithstanding any of the foregoing provisions of this Article 22,
if by reason of some act or omission on the part of Tenant or any of its
subtenants or its or their partners, directors, officers, servants, employees,
agents or contractors, either (a) Landlord or any Superior Lessor or any
Superior Mortgagee shall be unable to collect all of the insurance proceeds
(including, without limitation, rent insurance proceeds) applicable to damage or
destruction of the Building by fire or other casualty, or (b) the Building shall
be damaged or destroyed or rendered completely or partially untenantable on
account of fire or other casualty, then, without prejudice to any other remedies
which may be available against Tenant, there shall be no abatement or reduction
of the Rent.  Further, nothing contained in this Article 21 shall relieve Tenant
from any liability that may otherwise exist as a result of any damage or
destruction by fire or other casualty.

     22.06.  Landlord will not carry insurance of any kind on the Tenant's
Property, and, except as provided by law or by reason of Landlord's breach of
any of its obligations hereunder, shall not be obligated to repair any damage to
or replace the Tenant's Property.

     22.07.  The provisions of this Article 22 shall be deemed an express
agreement governing any case of damage or destruction of the Building by fire or
other casualty, and any law providing for such a contingency in the absence of
an express agreement, now or hereafter in force, shall have no application in
such case.

                          ARTICLE 23 - EMINENT DOMAIN

                                       24
<PAGE>
 
     23.01. If the whole of the Demised Premises shall be taken by any public or
quasi-public authority under the power of condemnation, eminent domain or
expropriation, or in the event of conveyance of the whole of the Demised
Premises in lieu thereof, this Lease shall terminate as of the day possession
shall be taken by such authority. If 25% or less of the Floor Space of the
Building shall be so taken or conveyed, this Lease shall terminate only in
respect of the part so taken or conveyed as of the day possession shall be taken
by such authority. If more than 25% of the Floor Space of the Building shall be
so taken or conveyed, this Lease shall terminate only in respect of the part so
taken or conveyed as of the day possession shall be taken by such authority, but
either party shall have the right to terminate this Lease upon notice given to
the other party within 30 days after such taking possession. If so much of the
parking facilities shall be so taken or conveyed that the number of parking
spaces necessary, in Tenant's reasonable judgment, for the continued operation
of the Tenant's business shall not be available, Tenant may by notice to
Landlord, terminate this Lease as of the day possession shall be taken provided
that Landlord shall first be given (upon thirty (30) days notice) the
opportunity to replace such parking spaces within reasonable walking distance of
the Demised Premises. If this Lease shall continue in effect as to any portion
of the Demised Premises not so taken or conveyed, the Rent shall be computed as
of the day possession shall be taken on the basis of the remaining Floor Space
of the Building. Except as specifically provided herein, in the event of any
such taking or conveyance there shall be no reduction in Rent. If this Lease
shall continue in effect, Landlord shall, at its expense, but shall be obligated
only to the extent of the net award or other compensation (after deducting all
expenses in connection with obtaining same) available to Landlord for the
improvements taken or conveyed (excluding any award or other compensation for
land or for the unexpired portion of the term of any Superior Lease), make all
necessary alterations so as to constitute the remaining Building a complete
architectural and tenantable unit, except for the Tenants' property, and Tenant
shall make all alterations or replacements to the Tenant's Property and
decorations in the Demised Premises. All awards and compensation for any taking
or conveyance, whether for the whole or a part of the Land or Building, shall be
property of Landlord, and Tenant hereby assigns to Landlord all of Tenant's
right, title and interest in and to any and all such awards and compensation,
including, without limitation, any award or compensation for the value of the
unexpired portion of the Term. Tenant shall be entitled to claim, prove and
receive in the condemnation proceeding such award or compensation as may be
allowed for the Tenant's property and for loss of business, good will, and
depreciation or injury to and cost of removal of the Tenant's property, but only
if such award or compensation shall be made by the condemning authority in
addition to, and shall not result in a reduction of, the award or compensation
made by it to Landlord.

     23.02. If the temporary use or occupancy of all or any part of the Demised
Premises shall be taken during the Term, Tenant shall be entitled, except as
hereinafter set forth, to receive that portion of the award or payment for such
taking which represents compensation for the use and occupancy of the Demised
Premises, for the taking of the Tenant's Property and for moving expenses, and
Landlord shall be entitled to receive that portion which represents
reimbursement for the cost of restoration of the Demised Premises for purposes
of this Article 23, "temporary" means no more than six (6) months.  This Lease
shall be and remain unaffected by such taking and Tenant shall continue to be
responsible for all of its obligations hereunder insofar as such obligations are
not affected by such taking and shall continue to pay the Rent in full when due.
If the period of temporary use or occupancy shall extend beyond the Expiration
Date, that part of the award or payment which represents compensation for the
use and 

                                       25
<PAGE>
 
occupancy of the Demised Premises (or a part thereof) shall be divided between
Landlord and Tenant so that Tenant shall receive (except as otherwise provided
below) so much thereof as represents compensation for the period up to and
including the Expiration Date and Landlord shall receive so much thereof as
represents compensation for the period after the Expiration Date. All monies to
be paid to Tenant as, or as part of, an award or payment for temporary use and
occupancy for a period beyond the date to which the Rent has been paid shall be
received, held and applied by the first Superior Mortgagee (or if there is no
Superior Mortgagee, by Landlord as a trust fund) for payment of the Rent
becoming due hereunder.

                            ARTICLE 24 - SURRENDER

     24.01.  On the Expiration Date, or upon any earlier termination of this
Lease, or upon any re-entry by Landlord upon the Demised Premises, Tenant shall
quit and surrender the Demised Premises to Landlord "broom-clean" and in good
order, condition and repair, except for ordinary wear and tear and such damage
or destruction as Landlord is required to repair or restore under this Lease,
and Tenant shall remove all of Tenant's property therefrom except as otherwise
expressly provided in this Lease.

     24.02.  If Tenant remains in possession of the Demised Premises after the
expiration of the Term, Tenant shall be deemed to be occupying the Demised
Premises at the sufferance of Landlord subject to all of the provisions of this
Lease, except that the monthly Fixed Rent shall be twice the Fixed Rent in
effect during the last month of the Term, plus 1/12th of the average annual
Percentage Rent for the immediately preceding three full Calendar Years.

     24.03.  No act or thing done by Landlord or its agents shall be deemed an
acceptance of a surrender of the Demised Premises, and no agreement to accept
such surrender shall be valid unless in writing and signed by Landlord.

                     ARTICLE 25 - CONDITIONS OF LIMITATION

     25.01.  This Lease is subject to the limitation that whenever Tenant or any
Guarantor (a) shall make an assignment for the benefit of creditors, or (b)
shall commence a voluntary case or have entered against it an order for relief
under any chapter of the Federal Bankruptcy Code (Title 11 of the United States
Code) or any similar order or decree under any federal or state law, now in
existence, or hereafter enacted having the same general purpose, and such order
or decree shall have not been stayed or vacated within 30 days after entry, or
(c) shall cause, suffer, permit or consent to the appointment of a receiver,
trustee, administrator, conservator, sequestrator, liquidator or similar
official in any federal, state or foreign judicial or nonjudicial proceeding, to
hold, administer and/or liquidate all or substantially all of its assets, and
such appointment shall not have been revoked, terminated, stayed or vacated and
such official discharged of his duties within 30 days of his appointment then
Landlord, at any time after the occurrence of any such event, may give Tenant a
notice of intention to end the Term at the expiration of five (5) days from the
date of service of such notice of intention, and upon the expiration of said
five (5) day period, whether or not the

                                       26
<PAGE>
 
Term shall theretofore have commenced, this Lease shall terminate with the same
effect as if that day were the expiration date of this Lease, but Tenant shall
remain liable for damages as provided in Article 27.

     25.02.  This Lease is subject to the further limitations that: (a) if
Tenant shall default in the payment of any Rent, or (b) if Tenant shall, whether
by action or inaction, be in default of any of its obligations under this Lease
(other than a default in the payment of Rent) and such default shall continue
and not be remedied within twenty five (25) days after Landlord shall have given
to Tenant a notice specifying the same, or, in the case of a default which
cannot with due diligence be cured within a period of twenty five (25) days and
the continuance of which for the period required for cure will not subject
Landlord or any Superior Lessor or prosecution for a crime (as more particularly
described in the last sentence of Section 12.02) or termination of any Superior
Lease or foreclosure of any Superior Mortgage, if Tenant shall not, (i) within
said twenty five (25) day period advise Landlord of Tenant's intention to take
all steps necessary to remedy such default, (ii) duly commence within said
twenty five (25) day period, and thereafter diligently prosecute to completion
all steps necessary to remedy the default, and (iii) complete such remedy within
a reasonable time after the date of said notice by Landlord, or (c) if any event
shall occur or any contingency shall arise whereby this Lease would, by
operation of law or otherwise, devolve upon or pass to any person, firm or
corporation other than Tenant, except as expressly permitted by Article 11, or
(d) if Tenant shall vacate or abandon the Demised Premises, or (e) if there
shall be any default by Tenant (or any person which, directly or indirectly,
controls, is controlled by, or is under common control with Tenant) under any
other lease with Landlord (or any person which, directly or indirectly, controls
is controlled by, or is under common control with Landlord) which shall not be
remedied within the applicable twenty five (25) day notice period, if any,
provided therefor under such other lease, then in any of said cases Landlord may
give to Tenant a notice of intention to end the Term at the expiration of five
(5) days from the date of the service of such notice of intention, and upon the
expiration of said five (5) days, whether or not the Term shall theretofore have
commenced, this Lease shall terminate with the same effect as if that day were
the expiration date of this Lease, but Tenant shall remain liable for damages as
provided in Article 27.

                       ARTICLE 26 - RE-ENTRY BY LANDLORD

     26.01.  If Tenant shall default in the payment of any Rent, or if this
Lease shall terminate as provided in Article 25, Landlord or Landlord's agents
and employees may immediately or at any time thereafter re-enter the Demised
Premises, or any part thereof, either by summary dispossess proceedings or by
any suitable action or proceeding at law without being liable to indictment,
prosecution or damages therefor, and may repossess the same, and may remove any
Person therefrom, to the end that Landlord may have, hold and enjoy the Demised
Premises.  The word "re-enter," as used herein, is not restricted to its
technical legal meaning.  If this Lease is terminated under the provisions of
Article 25, or if Landlord shall re-enter the Demised Premises under the
provisions of this Article 26, or in the event of the termination of this Lease,
or of re-entry, by or under any summary dispossess or other proceedings or
action or any provision of law by reason of default hereunder on the part of
Tenant, Tenant shall thereupon pay to Landlord the Rent payable up to the time
of such termination of this Lease, or of such recovery of possession of the
Demised Premises by Landlord, as the case may be, and shall also pay to Landlord
damages as provided in Article 27.

                                       27
<PAGE>
 
     26.02.  In the event of a breach or threatened breach by Tenant of any of
its obligations under this Lease, Landlord shall also have the right of
injunction.  The special remedies to which Landlord may resort hereunder are
cumulative and are not intended to be exclusive of any other remedies to which
Landlord may lawfully be entitled at any time and Landlord may invoke any remedy
allowed at law or in equity as if specific remedies were not provided for
herein.

     26.03.  If this Lease shall terminate under the provisions of Article 25,
or if Landlord shall re-enter the Demised Premises under the provisions of this
Article 26, or in the event of the termination of this Lease, or of re-entry, by
or under any summary dispossess or other proceeding or action or any provision
of law by reason of default hereunder on the part of Tenant, Landlord shall be
entitled to retain all monies, if any, paid by Tenant to Landlord, whether as
Advance Rent, security or otherwise, but such monies shall be credited by
Landlord against any Rent due from Tenant at the time of such termination or re-
entry or, at Landlord's option, against any damages payable by Tenant under
Article 27 or pursuant to law.

                             ARTICLE 27 - DAMAGES

     27.01.  If this Lease is terminated under the provisions of Article 25, or
if Landlord shall re-enter the Demised Premises under the provisions of Article
26, or in the event of the termination of this Lease, or of re-entry, by or
under any summary dispossess or other proceeding or action or any provision of
law by reason of default hereunder on the part of Tenant, Tenant shall pay as
Additional Charges to Landlord, at the election of Landlord, either or any
combination of:

             (a)  a sum which at the time of such termination of this Lease or
     at the time of any such re-entry by Landlord, as the case may be,
     represents the then value of the excess, if any, of (i) the aggregate
     amount of the Rent which would have been payable by Tenant (conclusively
     presuming the average monthly Percentage Rent and Additional Charges to be
     the same as were the average monthly Percentage Rent and Additional Charges
     payable for the year, or if less than 365 days have then elapsed since the
     Commencement Date, the partial year, immediately preceding such termination
     or re-entry) for the period commencing with such earlier termination of
     this Lease or the date of any such re-entry, as the case may be, and ending
     with the Expiration Date, over (ii) the aggregate rental value of the
     Demised Premises for the same period; or

             (b)  sums equal to the Fixed Rent, Percentage Rent (in the same
     monthly amount as the average monthly Percentage Rent payable for the year,
     or if less than three hundred sixty five (365) days have then elapsed since
     the Commencement Date, the partial year, immediately preceding such
     termination or re-entry) and the Additional Charges which would have been
     payable by Tenant had this Lease not so terminated, or had Landlord not so
     re-entered the Demised Premises, payable upon the due dates therefor
     specified herein following such termination or such re-entry and until the
     Expiration Date, provided, however, that if Landlord shall relet the
     Demised Premises during said period, Landlord shall credit Tenant with the
     net rents received by Landlord from such reletting, such net rents to be
     determined by first deducting from the gross rents as and when received by
     Landlord from such reletting the expenses incurred or paid by Landlord in
     terminating

                                       28
<PAGE>
 
     this Lease or in re-entering the Demised Premises and in securing
     possession thereof, as well as the expenses of reletting, including,
     without limitation, altering and preparing the Demised Premises for new
     tenants, brokers' commissions, legal fees, and all other expenses properly
     chargeable against the Demised Premises and the rental therefrom, it being
     understood that any such reletting may be for a period shorter or longer
     than the period ending on the Expiration Date; but in no event shall Tenant
     be entitled to receive any excess of such net rents over the sums payable
     by Tenant to Landlord hereunder, nor shall Tenant be entitled in any suit
     for the collection of damages pursuant to this subdivision (b) to a credit
     in respect of any rents from a reletting, except to the extent that such
     net rents are actually received by Landlord. If the Demised Premises or any
     part thereof should be relet in combination with other space, then proper
     apportionment on a square foot basis shall be made of the rent received
     from such reletting and of the expenses of reletting; or

          (c) a sum which at the time of such termination of this Lease or at
     the time of any such re-entry by Landlord, as the case may be, represents
     the aggregate amount of the Rent which would have been payable by Tenant
     (conclusively presuming the average monthly Additional Charges to be the
     same as were the average monthly Additional Charges payable for the year,
     or if less than 365 days have then elapsed since the Commencement Date, the
     partial year, immediately preceding such termination or re-entry) for the
     period commencing with such earlier termination of this Lease or the date
     of any such re-entry, as the case may be, and ending with the Expiration
     Date; provided, however, that if Landlord shall relet the Demised Premises
     during said period, Landlord shall credit Tenant with the net rents
     received by Landlord from such reletting, such net rents to be determined
     by first deducting from the gross rents as and when received by Landlord
     from such reletting the expenses incurred or paid by Landlord in
     terminating this Lease or in re-entering the Demised Premises and in
     securing possession thereof, as well as the expenses of reletting,
     including, without limitation, altering and preparing the Demised Premises
     for new tenants, brokers' commissions, legal fees, and all other expenses
     properly chargeable against the Demised Premises and the rental therefrom,
     it being understood that any such reletting may be for a period shorter or
     longer than the period ending on the Expiration Date; but in no event shall
     Landlord have to account to Tenant for any rents in excess of the total
     damages recovered by Landlord hereunder, nor shall Tenant be entitled in
     any suit for the collection of damages pursuant to this subsection (c) to a
     credit in respect of any rents from a reletting, except to the extent that
     such net rents are actually received by Landlord.  If the Demised Premises
     or any part thereof should be relet in combination with other space, then
     proper apportionment on a square foot basis shall be made of the rent
     received from such reletting and of the expenses of reletting.

If the Demised Premises or any part thereof be relet by Landlord before
presentation of proof of such damages to any court, commission or tribunal, the
amount of rent reserved upon such reletting shall, prima facie, be the fair and
reasonable rental value for the Demised Premises, or part thereof, so relet
during the term of the reletting.  Landlord shall not be liable in any way
whatsoever for its failure to relet the Demised Premises or any part thereof, or
if the Demised Premises or any part thereof are relet, for its inability to
collect the rent under such reletting, and no such failure to relet or failure
to collect rent shall release or affect Tenant's liability for damages or
otherwise under this Lease.

                                       29
<PAGE>
 
     27.02.  Suit or suits for the recovery of such damages or, any installments
thereof, may be brought by Landlord at any time and from time to time at its
election, and nothing contained herein shall be deemed to require Landlord to
postpone suit until the date when the Term would have expired if it had not been
so terminated under the provisions of Article 24, or under any provision of law,
or had Landlord not re-entered the Demised Premises.  Nothing herein contained
shall be construed to limit or preclude recovery by Landlord against Tenant of
any sums or damages to which, in addition to the damages particularly provided
above, Landlord may lawfully be entitled by reason of any default hereunder on
the part of Tenant.  Nothing herein contained shall be construed to limit or
prejudice the right of Landlord to prove for and obtain as damages by reason of
the termination of this Lease or re-entry of the Demised Premises for the
default of Tenant under this Lease, an amount equal to the maximum allowed by
any statute or rule of law in effect at the time, whether or not such amount be
greater than, equal to, or less than any of the sums referred to in Section
27.01.

     27.03.  In addition, if this Lease is terminated under the provisions of
Article 25, or if Landlord shall re-enter the Demised Premises under the
provisions of Article 26, Tenant covenants that:  (a) the Demised Premises then
shall be in the same condition as that in which Tenant has agreed to surrender
the same to Landlord at the Expiration Date; (b) Tenant shall have performed
prior to any such termination any obligation of Tenant contained in this Lease
for the making of any alteration or for restoring or rebuilding the Demised
Premises or the Building, or any part thereof; and (c) for the breach of any
covenant of Tenant set forth above in this Section 27.03, Landlord shall be
entitled immediately, without notice or other action by Landlord, to recover,
and Tenant shall pay, as and for liquidated damages therefor, the cost of
performing such covenant (as estimated by an independent contractor selected by
Landlord).

     27.04.  In addition to any other remedies Landlord may have under this
Lease, and without reducing or adversely affecting any of Landlord's rights and
remedies under this Article 27, if any Rent or damages payable hereunder by
Tenant to Landlord are not paid upon demand therefor, the same shall bear
interest at the Late Payment Rate or the maximum rate permitted by law,
whichever is less, from the due date thereof until paid, and the amounts of such
interest shall be Additional Charges hereunder.

     27.05.  In the event of Tenant's default under this Lease and Landlord's
re-entry and recovery or possession of the Demised Premises, Landlord shall use
commercially reasonable efforts to mitigate Landlord's damages by reletting of
the Demised Premises.  The net proceeds of any such reletting received by
Landlord shall be credited against Tenant's then-outstanding obligations under
this Lease.  As used herein, "net proceeds" shall mean the full amount of rent
and other similar charges paid to Landlord by all succeeding tenants of all or
any portion of the Demised Premises less Landlord's actual expenses of reletting
the Demised Premises (including, but not limited to expenses or work done to the
Demised Premises in connection with such reletting, broker's fees and attorneys'
fees).  Nothing contained herein shall require Landlord to relet the Demised
Premises prior to or with any preference over the leasing of any other similar
premises of Landlord or any affiliate of Landlord, nor shall any rental of such
other premises reduce the damages which Landlord would be entitled to recover
from Tenant.

                       ARTICLE 28 - AFFIRMATIVE WAIVERS

                                       30
<PAGE>
 
     28.01.  Tenant, on behalf of itself and any and all persons claiming
through or under Tenant, does hereby waive and surrender all right and privilege
which it, they or any of them might have under or by reason of any present or
future law, to redeem the Demised Premises or to have a continuance of this
Lease after being dispossessed or ejected from the Demised Premises by process
of law or under the terms of this Lease or after the termination of this Lease
as provided in this Lease.

     28.02.  Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, and Tenant's use or occupancy of the
Demised Premises including, without limitation, any claim of injury or damage,
and any emergency and other statutory remedy with respect thereto.  Except for
mandatory counterclaims, Tenant shall not interpose any counterclaim of any kind
in any action or proceeding commenced by Landlord to recover possession of the
Demised Premises.

                            ARTICLE 29 - NO WAIVERS

     29.01.  The failure of either party to insist in any one or more instances
upon the strict performance of any one or more of the obligations of this Lease,
or to exercise any election herein contained, shall not be construed as a waiver
or relinquishment for the future of the performance of such one or more
obligations of this Lease or of the right to exercise such election, but the
same shall continue and remain in full force and effect with respect to any
subsequent breach, act or omission.  The receipt by Landlord of Fixed Rent,
Percentage Rent or Additional Charges with knowledge of breach by Tenant of any
obligation of this Lease shall not be deemed a waiver of such breach.

                     ARTICLE 30 - CURING TENANT'S DEFAULTS

     30.01.  If Tenant shall default in the performance of any of Tenant's
obligations under this Lease, Landlord, without thereby waiving such default,
may (but shall not be obligated to) perform the same for the account and at the
expense of Tenant, without notice in a case of emergency, and in any other case
only if such default continues after the expiration of twenty five (25) days
from the date Landlord gives Tenant notice of the default.  Bills for any
expenses incurred by Landlord in connection with any such performance by it for
the account of Tenant, and bills for all costs, expenses and disbursements of
every kind and nature whatsoever, including reasonable attorneys' fees and
expenses, involved in collecting or endeavoring to collect the Rent or any part
thereof or enforcing or endeavoring to enforce any rights against Tenant or
Tenant's obligations hereunder, under or in connection with this Lease or
pursuant to law, including any such cost, expense and disbursement involved in
instituting and prosecuting summary proceedings or in recovering possession of
the Demised Premises after default by Tenant or upon the expiration of the Term
or sooner termination of this Lease, and interest on all sums advanced by
Landlord under this Article at the rate of 4% percent per month or the maximum
rate permitted by law, whichever is less, may be sent by Landlord to Tenant
monthly, or immediately, at Landlord's option, and such amounts shall be due and
payable in accordance with the terms of such bills.

                              ARTICLE 31 - BROKER

                                       31
<PAGE>
 
     31.01.  Tenant represents that no broker except the Broker was instrumental
in bringing about or consummating this Lease and that Tenant had no
conversations or negotiations with any broker except the Broker concerning the
leasing of the Demised Premises.  Tenant agrees to indemnify and hold harmless
Landlord against and from any claims for any brokerage commissions and all
costs, expenses and liabilities in connection therewith, including, without
limitation, attorneys' fees and expenses, arising out of any conversations or
negotiations had by Tenant with any broker other than the Broker.  Landlord
shall pay any brokerage commissions due the Broker pursuant to a separate
agreement between Landlord and the Broker.

                             ARTICLE 32 - NOTICES

     32.01.  Any notice, statement, demand, consent, approval or other
communication required or permitted to be given, rendered or made by either
party to the other, pursuant to this Lease or pursuant to any applicable Legal
Requirement, shall be in writing and shall be deemed to have been properly
given, rendered or made only if hand delivered or sent by United States
registered or certified mail, return receipt requested, addressed to the other
party at the address hereinabove set forth (except that after the Commencement
Date, Tenant's address, unless Tenant shall give notice to the contrary, shall
be the Building) as to Landlord, to the attention of General Counsel with a
concurrent Notice to the attention of Controller, and shall be deemed to have
been given, rendered or made on the second day after the day so mailed, unless
mailed outside the State of New Jersey, in which case it shall be deemed to have
been given, rendered or made on the third business day after the day so mailed.
Either party may, by notice as aforesaid, designate a different address or
addresses for notices, statements, demands, consents, approvals or other
communications intended for it.  In addition, upon and to the extent requested
by Landlord, copies of notices shall be sent to the Superior Mortgagee.

                      ARTICLE 33 - ESTOPPEL CERTIFICATES

     33.01.  Each party shall, at any time and from time to time, as requested
by the other party, upon not less than ten (10) days' prior notice, execute and
deliver to the requesting party a statement certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), certifying the dates to which the Fixed Rent and Additional
Charges have been paid, stating whether or not, to the best knowledge of the
party giving the statement, the requesting party is in default in performance of
any of its obligations under this Lease, and, if so, specifying each such
default of which the party giving the statement shall have knowledge, and
stating whether or not, to the best knowledge of the party giving the statement,
any event has occurred which with the giving of notice or passage of time, or
both, would constitute such a default of the requesting party, and, if so,
specifying each such event; any such statement delivered pursuant hereto shall
be deemed a representation and warranty to be relied upon by the party
requesting the certificate and by others with whom such party may be dealing,
regardless of independent investigation.  Tenant also shall include in any such
statement such other information concerning this Lease as Landlord may
reasonably request.

                           ARTICLE 34 - ARBITRATION

                                       32
<PAGE>
 
     34.01.  Landlord may at any time request arbitration, and Tenant may at any
time when not in default in the payment of any Rent request arbitration, of any
matter in dispute but only where arbitration is expressly provided for in this
Lease.  The party requesting arbitration shall do so by giving notice to that
effect to the other party, specifying in said notice the nature of the dispute,
and said dispute shall be determined in Newark, New Jersey, by a single
arbitrator, in accordance with the rules then obtaining of the American
Arbitration Association (or any organization which is the successor thereto).
The award in such arbitration may be enforced on the application of either party
by the order or judgment of a court of competent jurisdiction.  The fees and
expenses of any arbitration shall be borne by the parties equally, but each
party shall bear the expense of its own attorneys and experts and the additional
expenses of presenting its own proof.  If Tenant gives notice requesting
arbitration as provided in this Article, Tenant shall simultaneously serve a
duplicate of the notice on each Superior Mortgagee and Superior Lessor whose
name and address shall previously have been furnished to Tenant, and such
Superior Mortgagees and Superior Lessor shall have the right to participate in
such arbitration.

                       ARTICLE 35 - MEMORANDUM OF LEASE

     35.01.  Tenant shall not record this Lease.  However, at the request of
Landlord, Tenant shall promptly execute, acknowledge and deliver to Landlord a
memorandum of lease in respect of this Lease sufficient for recording.  Such
memorandum shall not be deemed to change or otherwise affect any of the
obligations or provisions of this Lease.  Whichever party records such
memorandum of Lease shall pay all recording costs and expenses, including any
taxes that are due upon such recording.

                          ARTICLE 36 - MISCELLANEOUS

     36.01.  Tenant expressly acknowledges and agrees that Landlord has not made
and is not making, and Tenant, in executing and delivering this Lease, is not
relying upon, any warranties, representations, promises or statements, except to
the extent that the same are expressly set forth in this Lease or in any other
written agreement(s) which may be made between the parties concurrently with the
execution and delivery of this Lease.  All understandings and agreements
heretofore had between the parties are merged in this Lease and any other
written agreement(s) made concurrently herewith, which alone fully and
completely express the agreement of the parties and which are entered into after
full investigation.  Neither party has relied upon any statement or
representation not embodied in this Lease or in any other written agreement(s)
made concurrently herewith.  The submission of this Lease to Tenant does not
constitute by Landlord a reservation of, or an option to Tenant for, the Demised
Premises, or an offer to lease on the terms set forth herein and this Lease
shall become effective as a lease agreement only upon execution and delivery
thereof by Landlord and Tenant.

     36.02.  No agreement shall be effective to change, modify, waive, release,
discharge, terminate or effect an abandonment of this Lease, in whole or in
part, unless such agreement is in writing, refers expressly to this Lease and is
signed by the party against whom enforcement of the change, modification,
waiver, release, discharge, termination or effectuation of abandonment is
sought.

                                       33
<PAGE>
 
     36.03.  If Tenant shall at any time request Landlord to sublet or let the
Demised Premises for Tenant's account, Landlord or its agent is authorized to
receive keys for such purposes without releasing Tenant from any of its
obligations under this Lease, and Tenant hereby releases Landlord of any
liability for loss or damage to any of the Tenant's Property in connection with
such subletting or letting.

     36.04.  Except as otherwise expressly provided in this Lease, the
obligations under this Lease shall bind and benefit the successors and assigns
of the parties hereto with the same effect as if mentioned in each instance
where a party is named or referred to; provided, however, that (a) no violation
of the provisions of Article 11 shall operate to vest any rights in any
successor or assignee of Tenant and (b) the provisions of this Section 36.04
shall not be construed as modifying the conditions of limitation contained in
Article 25.

     36.05.  Except for Tenant's obligations to pay Rent, the time for Landlord
or Tenant, as the case may be, to perform any of its respective obligations
hereunder shall be extended if and to the extent that the performance thereof
shall be prevented due to any strikes, lockouts, civil commotions, warlike
operations, invasions, rebellions, hostilities, military or usurped power,
governmental regulations or controls, inability to obtain labor or materials
despite due diligence, acts of God, or other causes beyond the control of the
party whose performance is required.  Except as expressly provided to the
contrary, the obligations of Tenant hereunder shall not be affected, impaired or
excused, nor shall Landlord have any liability whatsoever to Tenant, (a) because
Landlord is unable to fulfill, or is delayed in fulfilling, any of its
obligations under this Lease due to any of the matters set forth in the first
sentence of this Section 36.05, or (b) because of any failure or defect in the
supply, quality or character of electricity, water or any other utility or
service furnished to the Demised Premises for any reason beyond Landlord's
reasonable control.

     36.06.  Any liability for payments hereunder (including, without
limitation, Additional Charges) shall survive the expiration of the Term or
earlier termination of this Lease.

     36.07.  If Tenant shall request Landlord's consent and Landlord shall fail
to refuse to give such consent, Tenant shall not be entitled to any damages for
any withholding by Landlord of its consent; Tenant's sole remedy shall be an
action for specific performance or injunction, and such remedy shall be
available only in those cases where Landlord has expressly agreed in writing not
to unreasonably withhold or delay its consent or where as a matter of law
Landlord may not unreasonably withhold its consent.

     36.08.  If an excavation shall be made upon land adjacent to or under the
Building, or shall be authorized to be made, Tenant shall afford to the Person
causing or authorized to cause such excavation, license to enter the Demised
Premises for the purpose of performing such work as said Person shall reasonably
deem necessary or desirable to preserve and protect the Building from injury or
damage and to support the same by proper foundations, without any claim for
damages or liability against Landlord or Tenant and without reducing or
otherwise affecting either party's obligations under this Lease.

     36.09.  Tenant shall not exercise its rights under Article 14 or any other
provision of this Lease in a manner which would violate Landlord's union
contracts or create any work stoppage, picketing labor disruption or dispute or
any interference with the business of Landlord.  Landlord shall not exercise its

                                       34
<PAGE>
 
rights under Article 14 or any other provision of this Lease in a manner which
would violate Tenant's union contracts or create any work stoppage, picketing or
labor disruption.

     36.10.  The parties shall give prompt notice to the other party of (a) any
occurrence in or about the Demised Premises for which the other party might be
liable, (b) any fire or other casualty in the Demised Premises, (c) any damage
to or defect in the Demised Premises, including the fixtures and equipment
thereof, for the repair of which the other party might be responsible, and (d)
any damage to or defect in any part of the Building's sanitary, electrical,
heating, ventilating, air-conditioning, elevator or other systems located in
passing through the Demised Premises or any part thereof.

     36.11.  This Lease shall be governed by and construed in accordance with
the laws of the State of New Jersey.  Tenant hereby irrevocably agrees that any
legal action or proceeding arising out of or relating to this Lease may be
brought in the Courts of the State of New Jersey, or the Federal District Court
for the District of New Jersey, as the initiating party may elect. By execution
and delivery of this Lease, the parties hereby irrevocably accepts and submits
generally and unconditionally for themselves and with respect to their
properties, to the jurisdiction of any such court in any such action or
proceeding, and hereby waives in the case of any such action or proceeding
brought in the courts of the State of New Jersey, or Federal District Court for
the District of New Jersey, any defenses based on jurisdiction, venue or forum
non coveniens.  If any provision of this Lease shall, be invalid or
unenforceable, the remainder of this Lease shall not be affected and shall be
enforced to the extent permitted by law.  The table of contents, captions,
headings and titles in this Lease are solely for convenience of reference and
shall not affect its interpretation.  This Lease shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Lease to be drafted.  If any words or phrases in this Lease shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Lease shall be construed as if the words or
phrases so stricken out or otherwise eliminated were never included in this
Lease and no implication or inference shall be drawn from the fact that said
words or phrases were so stricken out or otherwise eliminated.  Each covenant,
agreement, obligation or other provision of this Lease on Tenant's part to be
performed, shall be deemed and construed as a separate and independent covenant
of Tenant, not dependent on any other provision of this Lease.  All terms and
words used in this Lease, regardless of the number or gender in which they are
used, shall be deemed to include any other number and any other gender as the
context may require.  Tenant specifically agrees to pay all of Landlord's costs,
charges and expenses, including attorneys' fees, incurred in connection with any
document review requested by Tenant and upon submission of bills therefor.  In
the event Landlord permits Tenant to examine Landlord's books and records with
respect to any Additional Charge imposed under this Lease, such examination
shall be conducted at Tenant's sole cost and expense and shall be conditioned
upon Tenant retaining an independent accounting firm for such purposes which
shall not be compensated on any type of contingent fee basis with respect to
such examination.  Wherever in this Lease or by law a party is authorized to
charge or recover costs and expenses for legal services or attorneys' fees, same
shall include, without limitation, the costs and expenses for in-house or staff
legal counsel or outside counsel at rates not to exceed the reasonable and
customary charges for any such services as would be imposed in an arms length
third party agreement for such services.

     36.12.  Within thirty (30) days of each anniversary date of this Lease,
Tenant shall annually furnish to Landlord a copy of its then current audited
financial statement which shall be employed by Landlord for purposes of
financing the Demised Premises and not distributed otherwise without prior
authorization of Tenant.  Any material adverse change of Tenant's financial
condition shall be furnished to Landlord in writing forthwith and without
request by Landlord for same.

                                       35
<PAGE>
 
     36.13.  (i) At least ninety (90) days prior to Tenant's termination of its
lease, and any extensions thereof, Tenant agrees to seek a determination from
the New Jersey Department of Environmental Protection and Energy ("NJDEPE") in
the form of a Letter of Non-applicability ("LNA"), that the  New Jersey
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA"), is inapplicable
to the Tenant's cessation of operations and termination of its lease. Tenant
represents, warrants, and covenants that any information contained in any
application for an LNA submitted pursuant to this subsection will be true and
complete. Tenant represents that the Standard Industrial Classification (SIC)
number applicable to Tenant's operations would not subject this transaction to
the requirements of ISRA.

     (ii)  In the event that an LNA is denied by NJDEPE, notice of such denial
will be given to Landlord within two (2) business days of Tenant's receipt of
NJDEPE's denial of the LNA. Tenant shall satisfy its obligations under ISRA
prior to its lease termination date: (1) by securing an approval of the Tenant's
Negative Declaration; or (2) by securing an approval of the Tenant's Remedial
Action Workplan, and completing the implementation of such Plan, and obtaining
from NJDEPE a "No Further Action" letter. Tenant shall bear sole responsibility
for any investigation and cleanup costs, fees, penalties, or damages associated
with ISRA compliance. In the event that Tenant is unable to complete the its
ISRA compliance obligations by the date of its lease termination, Landlord shall
continue to provide Tenant with reasonable access to the Demised Premises,
provided that any work undertaken by Tenant shall be performed in such a manner
as to minimize interference with Landlord's or any other tenant's use of the
Demised Premises. However, Landlord reserves its rights to deem Tenant a
holdover tenant in the event that Tenant's ISRA compliance unreasonably
restricts the Landlord's use of the Demised Premises.

     (iii) Tenant shall provide Landlord with copies of all correspondence,
documents and reports, including sampling results submitted to or received from
any governmental agency or third party in connection with Tenant's compliance
with ISRA.

     (iv)  Landlord represents to Tenant that, to the best of its knowledge, the
Demised Premises are in compliance with all applicable present Environmental
Laws, as hereinafter defined, affecting the Demised Premises.  Landlord further
agrees that it shall defend, indemnify and save Tenant harmless from and against
all claims, loss, damage, liability and expense (including reasonable attorney's
fees and expenses) which the Tenant may sustain as a result of or on account of
non-compliance of the Demised Premises with the Environmental Laws as the result
of conditions existing on the Demised Premises prior to the Commencement Date.
Environmental Laws are defined as any state or federal laws, statutes,
ordinances or regulations relating to the discharge of "Hazardous Substances",
as defined under New Jersey law [N.J.A.C. 7:1E-1.7], into the air, water, lands
or groundwaters of the State of New Jersey, or the United States of America.



     IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of
the day and year first above written.

                                    HARTZ MOUNTAIN INDUSTRIES, INC.

                                    By:    /s/ Irwin A. Horowitz
                                          -------------------------------
                                          Irwin A. Horowitz
                                          Executive Vice President

                                       36
<PAGE>
 
                                    PEPE JEANS USA, INC.
 
                                    By:         /s/ Arthur A. Bargonetti
                                               -------------------------- 
                                               Name: Arthur A. Bargonetti
                                               Title: Executive Vice President

                                       37
<PAGE>
 
RIDER TO LEASE DATED JUNE 10, 1997, BETWEEN HARTZ MOUNTAIN INDUSTRIES, INC., AS
LANDLORD AND PEPE JEANS USA, INC., AS TENANT.

________________________________________________________________________________

     R1.  If any of the provisions of this Rider shall conflict with any of the
provisions, printed or typewritten, of this Lease, such conflict shall resolve
in every instance in favor of the provisions of this Rider.

     R2.  Provided Tenant is in compliance with all of the terms and conditions
contained herein, and provided Tenant has not assigned this Lease or sublet all
or any portion of the Demised Premises and is itself in occupation and
conducting business in the whole of the Demised Premises in accordance with the
terms of this Lease, Tenant expressly acknowledging and agreeing that the option
rights contained herein are personal to the original named Tenant, Tenant shall
have one option to extend the Term of its lease of the Demised Premises, from
the date upon which this Lease would otherwise expire for one extended period of
five years (herein referred to as the "Extended Period"), upon the following
terms and conditions:

     a.   If Tenant elects to exercise said option, it shall do so by giving
notice of such election to Landlord on or before the date which is twelve (12)
months before the beginning of the Extended Period for which the Term is to be
extended by the exercise of such option.  Tenant agrees that it shall have
forever waived its right to exercise any such option if it shall fail for any
reason whatsoever to give such notice to Landlord by the time provided herein
for the giving of such notice, whether such failure is inadvertent or
intentional, time being of the essence as to the exercise of each such option.

     b.   If Tenant elects to exercise said option, the Term shall be
automatically extended for the Extended Period covered by the option so
exercised without execution of an extension or renewal lease. Within ten (10)
days after request of either party following the effective exercise of any such
option, however, Landlord and Tenant shall execute, acknowledge and deliver to
each other duplicate originals of an instrument in recordable form confirming
that such option was effectively exercised.

     c.   The Extended Period shall be upon the same terms and conditions as are
in effect immediately preceding the commencement of such Extended Period;
provided, however, that Tenant shall have no right or option to extend the Term
for any period of time beyond the expiration of the Extended Period and,
provided further, that in the Extended Period the Fixed Rent shall be at Fair
Market Value. ("FMV").  FMV shall be determined by mutual agreement of the
parties.  If the parties are unable to agree on the FMV within thirty (30) days
of Tenant's exercise of its option, the parties shall choose a licensed Real
Estate Appraiser who shall determine the FMV.  The cost of said Real Estate
Appraiser shall be borne equally by the parties.  If the parties are unable to
agree on a licensed Real Estate Appraiser within forty-five (45) days of
Tenant's exercise of its option, each party shall select one Appraiser to
appraise the FMV. All appraisals shall be rendered within thirty (30) days of
appointment of the respective Appraiser appointed under this paragraph.  If the
difference between the two appraisals is 20% or less of the lower appraisal,
then the FMV shall be the average of the two appraisals.  If the difference
between the two appraisals is greater than 20% of the lower appraisal, the two
Appraisers shall select a third licensed Real Estate Appraiser to appraise the
FMV.  The FMV shall in such case be the average of the three appraisals. The
cost of the third appraisal shall be borne equally by the parties.

Anything to the contrary contained herein notwithstanding, the Fixed Rent for
such Extended Period shall not be less than the Fixed Rent for the period
immediately preceding the Extended Period for which the Fixed Rent is being
calculated.

                                       38
<PAGE>
 
     d.   Any termination, expiration, cancellation or surrender of this Lease
shall terminate any right or option for the Extended Period(s) not yet
exercised.

     e.   Landlord shall have the right, for thirty (30) days after receipt of
notice of Tenant's election to exercise any option to extend the Term, to reject
Tenant's election if Tenant gave such notice while Tenant was in default in the
performance of any of its obligations under the Lease, and such rejection shall
automatically render Tenant's election to exercise such option null and void and
of no effect.

     f.   The options provided herein to extend the Term of the Lease may not be
severed from the Lease or separately sold, assigned or otherwise transferred.
 
     R3.  Tenant shall have the right, subject to compliance by Tenant with all
Legal Requirements, to operate a warehouse outlet store in a portion of the
Demised Premises containing not more than 2,500 square feet of Floor Space.  In
the event Tenant operates such outlet store, Tenant shall pay to Landlord, in
addition to the Fixed Rent, a "Percentage Rent" (as hereinafter provided):

a.   Percentage Rent:  The amount for any period computed in accordance with the
     provisions of Paragraph e hereof.

b.   Percentage Rent Rate: 4%

c.   Gross Sales:  The dollar aggregate of: (a) the actual sales price of all
     goods and merchandise sold, leased or licensed and the charges for all
     services performed by Tenant  or otherwise in connection with all business
     conducted at or from the Demised Premises, whether made for cash, by check,
     credit or otherwise, without reserve or deduction for inability or failure
     to collect the same, including, without limitation, sales and services (i)
     where the orders therefor originate at or are accepted at or from the
     Demised Premises, whether delivery or performance thereof is made at or
     from the Demised Premises or any other place, it being understood that all
     sales made and orders received at or from the Demised Premises shall be
     deemed to have been made and completed therein even though the orders are
     fulfilled elsewhere or the payments of account are transferred to some
     other office for collection, (ii) where the orders therefor result from
     solicitation off the Demised Premises but which are conducted by personnel
     operating from or reporting to or under the control or supervision of any
     person at the Demised Premises, (iii) pursuant to mail, telegraph,
     telephone or other similar orders received or billed at or from the Demised
     Premises, and (iv) by means of mechanical or other vending devices, and (b)
     all monies or other things of value received by Tenant from its operations
     at the Demised Premises (which are not excluded from Gross Sales by the
     next succeeding sentence) including all finance charges, cost of gift or
     merchandise certificates and all deposits not refunded to customers.  Gross
     Sales shall not include (x) the exchange of merchandise between stores of
     Tenant where such exchange is made solely for the convenient operation of
     Tenant's business and neither for the purpose of depriving Landlord of the
     benefits of a sale which would otherwise be made at or from the Demised
     Premises nor for the purpose of consummating a sale which has been
     theretofore made at or from the Demised Premises, (y) sales of trade
     fixtures which are not part of Tenant's stock in trade and not sold in the
     regular course of Tenant's business, or (z) the amount of any city, county,
     state or federal sales tax, luxury tax or excise tax on sales if the tax is
     added to the selling price and separately stated and actually paid to the
     taxing authority by Tenant; provided, however, no franchise or capital
     stock tax and no income or similar tax based upon income, profits or Gross
     Sales shall be deducted from Gross Sales in any event whatsoever.  Cash or
     credit refunds made upon transactions included

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<PAGE>
 
     within the Gross Sales, but not exceeding the selling price of merchandise
     returned by the purchaser and accepted by Tenant, shall be deducted from
     the Gross Sales for the period when such refunds are made. Each charge or
     sale upon installment or credit or layaway, so called, shall be treated as
     a sale for the full price in the month during which such charge or sale
     shall be made, irrespective of the time when Tenant shall receive payment
     from its customer. Each lease or rental or license of merchandise to
     customers shall be treated as a sale in the month in which the lease,
     rental or license is made for a price equal to the total rent of license
     fee payable. For purposes of this paragraph the word "Tenant" shall include
     any of Tenant's subtenants, concessionaires and licensees.

d.   Breakpoint:  An amount at an annual rate of $300.00 per square foot of
     retail Floor Space; and, in the event the Tenant exercises its right to
     extend the Term, the Breakpoint shall be increased in the same proportion
     as Fixed Rent applicable to such Extended Period is increased.  If the
     Fixed Rent is not changed for such Extended Period, the Breakpoint shall
     remain the same as the Breakpoint in effect immediately preceding such
     Extended Period.  If for any reason the Fixed Rent is reduced or abated,
     the Breakpoint shall be reduced in the same proportion as the Fixed Rent is
     reduced or abated.

e.   Within thirty (30) days after the end of each calendar month during the
     Term, Tenant shall submit to Landlord a statement certified by Tenant (by
     an authorized officer if Tenant is a corporation or by a partner if Tenant
     is a partnership) stating the Gross Sales (including an itemization of all
     claimed deductions therefrom) for such month.  Within thirty (30) days
     after the end of each Calendar Quarter, Tenant shall pay to Landlord as
     Percentage Rent the amount, if any, by which the aggregate Gross Sales for
     the Calendar Year in which such Calendar Quarter occurs up to the end of
     such Calendar Quarter exceeds the Breakpoint for such period, or a pro-rata
     portion thereof for a partial Calendar Quarter, if applicable, multiplied
     by the Percentage Rent Rate. Within ninety (90) days after the end of each
     Calendar Year, including any partial Calendar Year at the beginning of the
     Term, and after the end of the Term, Tenant shall submit to Landlord a
     statement certified by an independent certified public accountant stating
     the Gross Sales (including an itemization of all claimed deductions
     therefrom) and the Percentage Rent for such Calendar Year, or partial
     Calendar Year if the Term shall begin on a date other than a January 1st
     and/or end on a date other than a December 31st, as the case may be, and if
     the Percentage Rent so stated for such period is more or less than the
     Percentage Rent paid for such period, Tenant shall pay to Landlord the
     deficiency, or Landlord shall refund to Tenant the excess, within twenty
     (20) days after submission of such statement of Gross Sales.  For at least
     thirty-six (36) months after the expiration of each Calendar Year,
     including any partial Calendar Year at the beginning of the Term, and after
     the end of the Term, Tenant shall keep and maintain (and shall cause all
     subtenants, concessionaires and licensees to keep and maintain) in the
     Demised Premises or the main office of Tenant full and accurate books of
     account and records from which the Gross Sales can be determined.  The
     books and records maintained shall include, but shall not be limited to (i)
     cash register tapes showing continuous grand total (from a sealed cash
     register), (ii) original source documents, (iii) sequentially numbered
     receipts, (iv) federal, state & local tax returns, (v) receipts from daily
     bank deposits, (vi) computer printouts and (vii) bank statements.  Landlord
     shall have the right from time to time during such thirty-six (36) month
     period to inspect and audit all such books and records relating to Gross
     Sales, and Tenant, each subtenant, concessionaire and licensee will produce
     the same on request of Landlord.  If any such inspection and audit
     discloses that the Gross Sales were understated, Tenant shall forthwith pay
     to Landlord any additional Percentage Rent shown to be payable, and if the
     Gross sales for any Calendar Year or partial Calendar Year were understated

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<PAGE>
 
     by more than One Thousand Dollars ($1,000.00), Tenant shall also pay the
     cost of Landlord's inspection and audit.  Landlord does not in any way, or
     for any purpose, become a partner or joint venturer with Tenant hereunder.
     The provisions of this Lease relating to Percentage Rent are included
     solely for the purpose of providing a method whereby rentals are to be
     measured and ascertained.

g.   Calendar Quarter:  Any three-month period commencing on either a January 1,
     an April 1, a July 1 or an October 1.

     R4.  Section R3 (a through g) shall not prevail if the 2,500 square feet of
Retail Space is used as an Employee Purchase Center that is available only to
employees of Tommy Hilfiger and its licensees. Upon request, Tenant shall
deliver to Landlord a representation stating same.

     R5.  Landlord further covenants and covenants and represents that, as of
the Commencement Date, the Building is structurally sound.   Landlord represents
to Tenant that, to the best of its knowledge, the  Building is in compliance
with all presently applicable laws affecting the  Building, which compliance
shall be deemed to be satisfied upon issuance of the permanent or continuing
certificate of occupancy. Landlord shall defend, indemnify and save Tenant
harmless from and against all claims, loss, damage, liability and expense
(including reasonable attorney's fees and expenses) which the Tenant may sustain
as a result of or on account of non-compliance of the  Building with applicable
laws as a result of conditions existing on the  Building prior to the
Commencement Date.


                                    HARTZ MOUNTAIN INDUSTRIES, INC.

                                    By:    /s/ Irwin A. Horowitz
                                          --------------------------------------
                                          Irwin A. Horowitz
                                          Executive Vice President

                                    PEPE JEANS USA, INC.
 
                                    By:    /s/ Arthur A. Bargonetti
                                          --------------------------------------
                                          Name: Arthur A. Bargonetti
                                          Title: Executive Vice President

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