<PAGE>   1














                               AGREEMENT OF LEASE

                                     BETWEEN

                             F.S. REALTY CORPORATION
                                    LANDLORD

                                       AND

                          GT INTERACTIVE SOFTWARE CORP.
                                     TENANT






                                    PREMISES:

                                417 FIFTH AVENUE
                               7TH AND 8TH FLOORS
                            NEW YORK, NEW YORK 10016




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<PAGE>   2

                                TABLE OF CONTENTS

                                                                          Page

ARTICLE 1     PREMISES; RENT........................................        5
ARTICLE 2     CONDITION OF PREMISES.................................        7
ARTICLE 3     ARBITRATION...........................................        8
ARTICLE 4     REAL ESTATE TAX ESCALATION............................       10
ARTICLE 5     USE...................................................       12
ARTICLE 6     ALTERATIONS AND INSTALLATIONS.........................       14
ARTICLE 7     REPAIRS...............................................       17
ARTICLE 8     REQUIREMENTS OF LAW...................................       19
ARTICLE 9     INSURANCE, LOSS, REIMBURSEMENT, LIABILITY.............       21
ARTICLE 10    DAMAGE BY FIRE OR OTHER CAUSE.........................       24
ARTICLE 11    ASSIGNMENT, MORTGAGING, SUBLETTING, ETC...............       26
ARTICLE 12    ELECTRICITY...........................................       31
ARTICLE 13    ADJACENT EXCAVATION - SHORING.........................       33
ARTICLE 14    CONDEMNATION..........................................       34
ARTICLE 15    ACCESS TO PREMISES; CHANGES...........................       35
ARTICLE 16    CONDITIONS OF LIMITATION..............................       37
ARTICLE 17    RE-ENTRY BY LANDLORD; INJUNCTION......................       38
ARTICLE 18    DAMAGES...............................................       39
ARTICLE 19    LANDLORD'S RIGHT TO PERFORM TENANT'S
              OBLIGATIONS...........................................       41
ARTICLE 20    QUIET ENJOYMENT.......................................       41
ARTICLE 21    SERVICES AND EQUIPMENT................................       41
ARTICLE 22    HAZARDOUS MATERIALS...................................       45
ARTICLE 23    INVALIDITY OF ANY PROVISION...........................       46
ARTICLE 24    BROKERAGE.............................................       46
ARTICLE 25    SUBORDINATION.........................................       47
ARTICLE 26    CERTIFICATE OF TENANT/LANDLORD........................       49
ARTICLE 27    LEGAL PROCEEDINGS AND WAIVER OF JURY TRIAL............       50
ARTICLE 28    SURRENDER OF PREMISES.................................       50
ARTICLE 29    RULES AND REGULATIONS.................................       51
ARTICLE 30    CONSENTS AND APPROVALS................................       51
ARTICLE 31    NOTICES...............................................       51
ARTICLE 32    NO WAIVER.............................................       52
ARTICLE 33    INABILITY TO PERFORM..................................       53
ARTICLE 34    ENTIRE AGREEMENT; NO REPRESENTATIONS;
              NO ORAL MODIFICATION..................................       54
ARTICLE 35    SECURITY..............................................       54
ARTICLE 36    INTENTIONALLY OMITTED.................................       56
ARTICLE 37    NON-LIABILITY AND INDEMNIFICATION.....................       56


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ARTICLE 38    INTENTIONALLY OMITTED.................................       57
ARTICLE 39    RIGHT OF FIRST OFFER..................................       57
ARTICLE 40    MISCELLANEOUS.........................................       58
ARTICLE 41    ROOF SPACE............................................       59
ARTICLE 42    OPTION................................................       61

SCHEDULES

            1 -  Floor  Plan  for  7th  and  8th  floors  2  -  Cleaning
            Specifications-Intentionally  Omitted  3 - Form of  Estoppel
            Letter 4 - Rules and Regulations 5 - Construction  Rules and
            Regulations 6 - Crosshatch of Roof Premises

EXHIBITS

            A - Work Letter
            B-  Assignment and Assumption Agreement
            C - Nondisturbance Agreement


                                      -iii-

<PAGE>   4

         AGREEMENT OF LEASE dated as of December  12, 1996,  by and between F.S.
REALTY CORP, a New York  Corporation,  with its office at c/o Prince  Management
Corp., 57-18 Flushing Avenue,  Maspeth, New York 11378 (hereinafter  referred to
as "Landlord") and, GT INTERACTIVE  SOFTWARE CORP., a Delaware  Corporation with
an office at 16 East 40th Street, New York, New York 10016 (hereinafter referred
to as "Tenant").


                                 REFERENCE PAGE

LEASE DEFINITIONS

         In  addition  to other  terms  elsewhere  defined  in this  Lease,  the
following words and phrases  whenever used in this Lease shall have the meanings
set forth in this Reference Page.

         "Alteration"   shall   mean   any  and   every   structural   addition,
construction,  improvement,  installation  or modification of or to the Premises
which affects building services outside the Premises including,  but not limited
to, electrical, plumbing, heating, ventilating and air-conditioning services.

         "Base  Taxes"  shall mean the Taxes (as  hereinafter  defined)  for the
twenty  four-month  period  commencing  July 1, 1996 and  ending  June 30,  1998
divided by two.

         "Brokers" shall mean S.L. Green Real Estate and Jenel Management Corp.

         "Building" shall mean the building known as 417 Fifth Avenue, New York,
New York 10016.

         "Business  Days"  shall mean all days  excluding  Sundays  and all days
observed by the federal, state or local governments as legal holidays as well as
all other days recognized as holidays under applicable union contracts.

         "Business  Hours" shall mean the hours  between 8:00 a.m. and 6:00 p.m.
on Business  Days except that on Saturdays  Business  Hours shall mean the hours
between 8:00 a.m. and 1:00 p.m.

         "Commencement  Date"  shall  mean the date that the  Landlord  delivers
possession of the Premises to Tenant.

         "Construction Rules and Regulations" shall mean those certain rules and
regulations   issued  by  Landlord  with  respect  to  the  performance  of  any
construction at the Premises annexed hereto and incorporated  herein as Schedule
5.

         "Consumer  Price Index" or the "CPI-U"  shall mean the  Consumer  Price
Index for All Urban Consumers of the United States  Department of Labor's Bureau
of Labor


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<PAGE>   5

Statistics in effect for New York,  Northeastern  N.J.  (1984=100) and generally
published at the time the  computation  is to be made. If the CPI-U is no longer
published,  then another price index,  generally  recognized  as  authoritative,
shall be  substituted by mutual  agreement of Landlord and Tenant.  In the event
the parties are unable to so agree,  the matter  shall be  submitted  to binding
arbitration  according  to the rules of the  American  Arbitration  Association.
During any period while the  determination of such a dispute is pending,  Tenant
shall continue to pay the sum previously in effect; provided,  however, that the
adjusted sum as finally determined shall be retroactive from the prescribed date
and  any  deficiency  owed  by  Tenant  shall  be  paid  promptly  upon a  final
determination of the dispute.

         "Expiration  Date" shall mean the tenth anniversary of the Commencement
Date as the same may be extended.

         "Fair Market  Rental  Value" shall mean the fair market rental value of
the Premises  six months  prior to the end of the Initial  Term (as  hereinafter
defined) with respect to Option 1 (as hereinafter  defined) and six months prior
to the end of  Option  1 with  respect  to  Option  2 (as  hereinafter  defined)
respectively.  In the event that  Landlord and Tenant are unable to agree on the
Fair Market  Rental  Value of the  Premises  five months prior to the end of the
Initial  Term for  Option  1 or five  months  prior to the end of  Option 1 with
respect to Option 2, then the same shall be determined by binding arbitration in
accordance  with  Article 3 of this Lease.  The  arbitrator  shall make  his/her
respective  determination  based upon the following  assumptions and directions,
and the arbitrator shall be so instructed and bound with respect thereto:


         (i) The Premises is available in the then rental market for  comparable
tenant space in comparable buildings in the City of New York;

         (ii) Neither Landlord nor Tenant is under a compulsion to rent;

         (iii) The  Premises  is to be rented as a whole to a single  tenant for
general office use for a term of five (5) years,  taking into consideration such
market factors and other lease  provisions as may then  customarily be in effect
and applicable to the rental of such space in that location;

         (iv) The Premises shall be rented in an "as is," condition equal to the
condition  of the  Premises as it exists six months prior to the end of the Term
with respect to Option 1 and equal to the condition of the Premises as it exists
six months prior to the end of Option 1 with respect to Option 2;

         (v) Landlord is not paying a brokerage commission to lease the Premises
for either Option 1 or Option 2;


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<PAGE>   6

         (vi)  Landlord is not making any  improvements  or  alterations  to the
Premises for either Option 1 or Option 2; and

         (vii)  Landlord is not giving Tenant any period of free rent for Option
1 or Option 2.

         "Fixed Annual Rent," "Fixed Rent" or "fixed annual rent" shall mean One
Million  Two-Hundred  Thousand Dollars  ($1,200,000.00) per annum for the period
from  the  first  anniversary  of  the  Commencement  Date  through  the  second
anniversary  of the  Commencement  Date.  Provided  Tenant is not  otherwise  in
default of the terms and conditions of this Lease,  beyond applicable notice and
grace  periods,  Fixed  Annual  Rent  shall be abated  for the  period  from the
Commencement  Date through the first  anniversary of the Commencement  Date (all
additional  rent  (as  hereinafter  defined)  shall  remain  due  and  payable).
Thereafter,  Fixed  Annual  Rent shall be adjusted  on each  anniversary  of the
Commencement  Date beginning on the second  anniversary of the Commencement Date
through  the tenth  anniversary  of the  Commencement  Date by  multiplying  the
immediately  preceding year's Fixed Annual Rent by a fraction,  the numerator of
which shall be the  Consumer  Price  Index (as defined  herein) in effect on the
anniversary of the Commencement  Date for the year in which Fixed Annual Rent is
being adjusted and the denominator of which shall be the Consumer Price Index in
effect on the immediately  preceding anniversary of the Commencement Date, which
escalation  shall not exceed three (3) percent per annum.  The  increases in the
Fixed Annual Rent set forth herein shall always be  calculated  upon,  and added
to, the prior year's Fixed Annual Rent.

         "Initial  Term" shall mean a period of ten (10) years  beginning on the
Commencement Date.

         "Interest  Rate" shall mean a  fluctuating  rate of interest  per annum
equal to the  lesser  of (a) 2%  above  the  prime  commercial  lending  rate of
interest  announced  from time to time by The  Chase  Manhattan  Bank,  National
Association (or any successor  institution,  or, if said bank and its successors
are no longer in existence, any other member bank of The New York Clearing House
Association selected by Landlord),  at its principal office in New York City, in
effect from time to time or (b) the maximum  applicable  legal rate of interest,
if any.

         "Landlord"  shall mean only the owner,  or the mortgagee in possession,
of the Land (as  hereinafter  defined) and Building (and the owner of a lease of
the Building or of the Land and Building),  so that in the event of any transfer
of title to the Land and  Building or said lease,  or in the event of a lease of
the Building,  or of the Land and Building,  upon notification to Tenant of such
transfer or lease the said  transferor  Landlord shall be and hereby is entirely
freed and relieved of future covenants,  obligations and liabilities of Landlord
hereunder.  It shall be deemed and construed as a covenant running with the land
without further agreement between the parties or


                                       -3-

<PAGE>   7

their successors in interest, or between the parties and the transferee of title
to the Land and Building or said lease,  or the said lessee of the Building,  or
of the Land and  Building,  that the  transferee  or the lessee has  assumed and
agreed to carry out any and all such  covenants,  obligations and liabilities of
Landlord hereunder from and after the date of such transfer.

         "Legal  Requirement(s)"  shall mean (i) any laws, statutes,  ordinances
(including  building  codes  and  zoning  regulations  and  ordinances  and  the
Americans with  Disabilities  Act of 1990) and the orders,  rules,  regulations,
directives and requirements of all federal,  state,  county, city, municipal and
borough  departments,  bureaus,  boards  (including  the New York  Board of Fire
Underwriters),  agencies,  offices,  commissions and subdivisions thereof, or of
any  official  thereof,  or of any other  governmental  public  or  quasi-public
authority,  whether now or hereafter in force,  which may be  applicable  to the
Land, the Building or the Premises or any part thereof, or the sidewalks,  curbs
or areas adjacent thereto, and (ii) all requirements, obligations and conditions
of all instruments of record on the date of this Lease.

         "Lien"  shall  mean any and every lien of any kind  whatsoever  for the
furnishing  (or  alleged  furnishing)  of (or on account  of) labor,  materials,
services, facilities or any other things whatsoever.

         "Premises"  shall mean the entire seventh (7th) and eighth (8th) floors
of the Building and the Roof Premises (as defined in Article 41 hereof) as shown
hatched on the floor plan annexed hereto as Schedules 1 and 6 respectively.

         "Permitted  Use" shall mean  executive  and general  offices  including
kitchen facilities,  employee  cafeteria,  executive dining room, employee snack
bar concession,  product display room,  telemarketing  operation and for similar
uses excluding any and all  manufacturing and retail sales to the public but for
no other purposes whatsoever.

         "Security  Deposit"  shall  have the  meaning  set forth in  Article 35
hereof.

         "Tenant's   Proportionate   Share"  shall  mean  18.2%.   The  Tenant's
Proportionate  Share shall decrease in the  proportion to the  additional  space
built on top of the roof of the  Building  and the  adjustment  of the  Tenant's
Proportionate  Share  shall  become  effective  upon the sale or  rental  of the
additional space.

         "Term"  shall  mean the  Initial  Term as the same may be  extended  by
Option 1 and Option 2.  Notwithstanding  anything in this Lease to the contrary,
(a)  provided  (i) Tenant is not  otherwise  in default of this Lease beyond all
applicable  notice and cure  periods  and (ii)  Tenant  provides  Landlord  with
written  notice no later than six months prior to the end of the Initial Term of
its  exercise  of this  option,  Tenant is  entitled to extend this Lease for an
additional  five years ("Option 1") beginning on the day after the expiration of
the Initial Term and ending on the fifth anniversary of the day after


                                       -4-

<PAGE>   8

the  expiration  of the  Initial  Term at a Fixed  Annual  Rent  which is ninety
percent (90%) of the Fair Market Rental Value (as such term is defined  herein);
and (b) provided (i) Tenant is not otherwise in default of this Lease beyond all
applicable  notice and cure  periods  and (ii)  Tenant  provides  Landlord  with
written notice no later than six months prior to the end of the term of Option 1
of its exercise of this  option,  Tenant is entitled to extend this Lease for an
additional  five years ("Option 2") beginning on the day after the expiration of
the term of Option 1 and  ending on the fifth  anniversary  of the day after the
expiration  of the  term of  Option 1 at a Fixed  Annual  Rent  which is  ninety
percent (90%) of the Fair Market Rental Value (as such term is defined herein).

         The Reference Pages information is incorporated into and made a part of
the within  Lease.  In the event of any  conflict  between any  Reference  Pages
information and the Lease, the Lease shall control.


                              W I T N E S S E T H:


         The  parties  hereto,  for  themselves,   their  heirs,   distributees,
executors,  administrators,  legal  representatives,  trustees,  successors  and
assigns, hereby covenant as follows:

                                   ARTICLE 1.

                                 PREMISES: RENT

         1.(a)  Landlord  hereby leases to Tenant,  and Tenant hereby hires from
Landlord, the Premises for the Initial Term to commence on the Commencement Date
and to end at 11:59 p.m. on the Expiration  Date or until such term shall sooner
cease and  terminate  or be extended as herein  provided.  In the event that the
Commencement  Date does not occur on or before the six-month  anniversary  after
the date this Lease is executed by Landlord,  Tenant may elect to terminate this
Lease,  by first  providing  Landlord  with a thirty (30) day written  notice of
Tenant's  election to terminate this Lease, and if such situation shall continue
and shall not be  remedied by  Landlord  within such thirty (30) days,  then the
Term shall  expire at the  expiration  of such thirty (30) days,  and the estate
hereby granted shall  terminate with the same effect as if that day were the end
of the Term  (provided  that Tenant,  its agents,  servants or employees are not
responsible for the Commencement Date not occurring).

         1.(b) (i) From and after the  Commencement  Date,  Tenant  shall pay to
Landlord  the  Electrical   Charge  and  after  the  first  anniversary  of  the
Commencement  Date,  Tenant  shall pay to Landlord  the fixed annual rent at the
fixed annual rental rate set forth in the Reference Page, which shall be payable
in equal monthly installments


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<PAGE>   9

in advance on the first day of each and every  calendar  month  during the Term.
The first monthly  installment of fixed annual rent due on the first anniversary
of the  Commencement  Date shall be payable by Tenant upon the execution of this
Lease and shall be applied to the first full  installment  of Fixed  Annual Rent
due hereunder. Should the Commencement Date fall on any day other than the first
day of a  month,  the  fixed  annual  rent  due on the  first  day of the  first
anniversary of the Commencement Date shall be pro-rated on a per diem basis, and
Tenant shall pay the amount for such  partial  month on the  Commencement  Date.
Should  the last day of the Term  fall on any day  other  than the last day of a
month,  then the fixed annual rent for such partial period shall be pro-rated on
a per diem basis.

                  (ii) Any sum other than fixed  annual rent  payable  hereunder
(hereinafter  called  "additional  rent") shall be deemed  additional  rent, and
together  with fixed annual rent shall be included in the term "rent" and shall,
unless  otherwise  stated,  be due within seven days after demand.  Fixed annual
rent and  additional  rent shall be paid in lawful money of the United States by
good and sufficient  check (subject to collection)  drawn to Landlord's order or
as Landlord may direct.  Said checks shall be sent to Landlord at its address as
hereinabove  set forth,  or to such other party or parties  and/or at such other
address(es) as Landlord shall designate by notice to Tenant.

                  (iii) Tenant shall pay the fixed annual rent promptly when due
without  notice or demand and additional  rent when billed  therefor and without
offset,  credit,  abatement,  deduction,  counterclaim,  set off for any  reason
whatsoever, except such deduction as may be expressly set forth herein.

         1.(c) If any of the fixed annual rent or additional  rent payable under
the terms and provisions of this Lease shall be or become uncollectible, reduced
or required to be refunded because of any Legal Requirements, Tenant shall enter
into such  agreement(s)  and take such other  steps as Landlord  may  reasonably
request  and as legally  may be  permissible  to permit  Landlord to collect the
maximum rents that,  from time to time during the continuance of such legal rent
restriction,  legally  may be  permissible  (and not in  excess  of the  amounts
reserved  therefor  under this Lease).  Upon the  termination of such legal rent
restriction,  (a) the rents  shall  become  and  thereafter  shall be payable in
accordance  with the  amounts  reserved  herein for the periods  following  such
termination and (b) Tenant shall pay to Landlord,  to the maximum extent legally
permissible, an amount equal to (i) the rents that would have been paid pursuant
to this Lease but for such legal  rent  restriction  less (ii) the rents paid by
Tenant during the period such legal rent restriction was in effect.

         1.(d) No payment by Tenant or receipt or  acceptance  by  Landlord of a
lesser  amount than the correct  fixed annual rent or  additional  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


                                       -6-

<PAGE>   10

satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's  right to recover the balance or pursue any other remedy  provided in
this Lease or at law.

         1.(e) In order to  compensate  Landlord  for the  expenses  involved in
handling  delinquent  payments,  Tenant  shall pay, as  additional  rent, a late
charge of four (4%)  percent of the amount of any  installment  of fixed  annual
rent or  payment  of  additional  rent  remaining  unpaid on the tenth day after
written  notice to Tenant.  Nothing  herein  contained  shall excuse Tenant from
paying all rent or any other sum due under this Lease on the dates when same are
due hereunder.

         1.(f)  Landlord  shall have the same  rights and  remedies  (including,
without limitation, the right to commence a summary proceeding) for a default in
the payment of  additional  rent as for a default in the payment of fixed annual
rent notwithstanding the fact that Tenant may not then also be in default in the
payment of fixed annual rent.

                                   ARTICLE 2.

                              CONDITION OF PREMISES

         2.(a) Tenant is fully  familiar  with the condition of the Premises and
hereby  accepts  possession  of the Premises in their  current "as is" condition
except for latent defects other than asbestos.

         2.(b) Tenant acknowledges that the Building including the Premises,  is
sprinklered  and that the  bathrooms in the Premises will be delivered to Tenant
in their current "as-is" condition.

         2.(c)  Landlord  shall  not be  required  to  perform  any  work in the
Premises except that Landlord  shall,  at its sole cost and expense,  remove all
asbestos from the Premises of which Tenant informs Landlord in writing, prior to
the completion of Tenant's Initial Work (as hereinafter defined). Landlord shall
not be  responsible  for removing any asbestos from the Premises of which Tenant
fails to inform Landlord in writing prior to completion of Tenant's Initial Work
and Landlord  shall not be  responsible  for removing any floor or ceiling tiles
containing asbestos.  Landlord shall perform all such asbestos removal work: (i)
promptly after being notified of the existence of any such asbestos by Tenant in
writing;  (ii) in a manner  so as not to  interfere  with,  or  delay,  Tenant's
Initial Work; and (iii) in compliance with all Legal Requirements.  In the event
that Landlord shall fail to perform any such asbestos removal work in accordance
with all of the terms and conditions of the immediately  preceding  sentence and
Landlord does not remedy any such failure within ten (10) days following written
notice from Tenant, then Tenant, following an additional (10) day written notice
to Landlord, shall have the right to perform any such asbestos


                                       -7-

<PAGE>   11

removal  work on behalf of  Landlord  and may offset  Tenant's  reasonable  cost
therefor  against  the next  installments  of fixed  annual  rent due under this
Lease.  Prior to Tenant's  completion of Tenant's  Initial Work,  Landlord shall
deliver to Tenant a letter from the asbestos removal company indicating that the
asbestos  that Tenant  informed  Landlord  of in writing  was  removed  from the
Premises.  Notwithstanding  anything  to  the  contrary  contained  herein,  any
asbestos  which may be  discovered in the Premises  following the  completion of
Tenant's Initial Work,  shall be promptly removed by Landlord,  (provided Tenant
informs  Landlord in writing of the asbestos to be removed),  in accordance with
all Legal  Requirements and in a manner so as not to interfere with Tenant's use
of the  Premises.  Tenant  shall  reimburse  Landlord  for  one  half  of all of
Landlord's  actual costs in connection  with such  removal.  Landlord and Tenant
acknowledge that the removal of asbestos from the Premises by Landlord may occur
simultaneously  with the  performance of Tenant's  Initial Work and Landlord and
Tenant  agree to  cooperate  in good  faith,  with the other  party so as not to
interfere with the performance of each other's work.

         2.(d) All work performed by Tenant in accordance with the provisions of
this Lease shall require the  installation of new materials at least  comparable
to the quality now present in the Building and shall be performed in  accordance
with the terms and  conditions  of this  Lease  and the  Construction  Rules and
Regulations.

         2.(e) Landlord shall make available to Tenant, the amount of Landlord's
Contribution  (as such term is  defined  in the Work  Letter  annexed  hereto as
Exhibit A and made a part hereof) subject to, and in accordance  with, the terms
of such Work Letter.

                                   ARTICLE 3.

                                   ARBITRATION

         3.(a) In any case in which it is specifically  provided by the terms of
this Lease that a matter shall be determined by  arbitration,  such  arbitration
shall be conducted by a single arbitrator pursuant to applicable statutes of the
State of New York at the time in effect  and,  to the extent  permitted  by said
statutes,  in the  manner  specified  in this  Article 3 and,  to the extent not
inconsistent  with said  statutes  and this  Article 3, in  accordance  with the
Commercial  Arbitration Rules for expedited arbitration at the time in effect of
the American  Arbitration  Association;  provided that the  arbitrator  selected
hereunder shall be a person of recognized  competence who is  unaffiliated  with
either  party to this  Lease  (either  by direct  or  indirect  relationship  or
significant  business  relationship)  and shall  have at least  ten (10)  years'
experience  as a commercial  real estate  broker or appraiser in the City of New
York. The arbitrator shall be chosen by the American Arbitration  Association in
accordance with the Commercial Arbitration Rules for expedited arbitration.


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<PAGE>   12

         3.(b) The party desiring such arbitration  shall give written notice to
that effect to the other party and, in such notice,  shall specify the nature of
the  dispute to be  arbitrated.  Each of Tenant  and  Landlord  shall  submit (a
"Submission")  stating its position (including all relevant figures and amounts,
as appropriate) in such dispute to the arbitrator,  in writing, within seven (7)
days of the selection of the arbitrator and such arbitrator shall determine such
matter as promptly as possible; provided that:

           (i) The  arbitrator  shall have the right only to interpret and apply
the terms of this Lease,  and may not change any such terms or deprive any party
to this Lease of any right or remedy  expressly  or  impliedly  provided in this
Lease.  Landlord  and Tenant  each shall be  entitled  to present  evidence  and
arguments to the arbitrator; and

          (ii)  The  arbitrator  shall  select  either  Tenant's  or  Landlord's
Submission (without modification) as its decision, which decision shall be final
and binding in  accordance  with the  provisions of the laws of the State of New
York. The arbitrator shall give written notice of its  determination to Landlord
and Tenant and shall furnish to each a signed copy of such determination.

         3. (c) The fees and expenses of the  arbitrator  shall be borne equally
by Landlord and Tenant.

         3.  (d) In the  event  of the  failure,  refusal  or  inability  of the
arbitrator to act, a new arbitrator  shall be appointed in his/her stead,  which
appointment  shall be made in the same manner as  hereinbefore  provided for the
appointment  of the  arbitrator  so  failing,  refusing  or unable to act, or to
continue to act.

         3.(e)  During any period of  arbitration  under this Article 3, neither
Landlord  nor  Tenant  shall be  deemed to be in  default  with  respect  to the
performance of any covenant, duty or obligation relating to such matter, and any
grace period or permitted delay in such  performance  otherwise  provided for in
this  Lease  shall be  automatically  extended  by such  period of  arbitration.
However,  notwithstanding  the  foregoing  in the event that Fair Market  Rental
Value for Option 1 or Option 2 is being determined by arbitration, Tenant agrees
to pay during the period of arbitration, the Fixed Annual Rent chargeable and in
effect on the  Expiration  Date with respect to Option 1, and on the last day of
Option 1 with respect to Option 2, without  prejudice to any of its rights until
there has been a determination of the arbitration.  After such  determination of
the  arbitrator  the Fixed Annual Rent shall be adjusted in accordance  with the
arbitrator's  decision  and Tenant  shall be  credited  for any  overpayment  or
debited for the additional Fixed Annual Rent due and owing.


                                       -9-

<PAGE>   13

                                   ARTICLE 4.

                           REAL ESTATE TAX ESCALATION

         4.(a) For the  purposes of this  Article 4, the  following  definitions
shall apply:

                  (i) The  term  "Taxes"  shall  mean  all  real  estate  taxes,
assessments, sewer and water rents, governmental levies, municipal taxes, county
taxes  or any  other  governmental  charge,  general  or  special,  ordinary  or
extraordinary,  unforeseen as well as foreseen, of any kind or nature whatsoever
(excluding metered charges) that are or may be assessed,  levied or imposed upon
all or any part of the land (hereinafter referred to as the "Land") on which the
Building is situated,  the Building and the sidewalks,  vaults (excluding vaults
used by  tenants),  arcades,  plazas,  alleys or streets in front of or adjacent
thereto,  including  any tax,  excise or fee payable as a result of the Building
being situated in a business improvement district,  including any tax, excise or
fee  measured by or payable  with  respect to any rent levied  against  Landlord
and/or the Land and/or the Building as though this was the only  property of the
Landlord,  under the laws of the United  States,  the State of New York,  or any
political  subdivision  thereof,  or by the City of New York,  or any  political
subdivision  thereof but excluding  any income,  franchise,  corporate,  estate,
inheritance,  succession,  capital  stock,  transfer or mortgage  recording  tax
levied on Landlord.  If, due to a future  change in the method of taxation or in
the taxing  authority,  a new or  additional  real estate  tax, or a  franchise,
income,  transit,  profit  or  other  tax or  governmental  imposition,  however
designated,  shall be  levied  against  Landlord,  and/or  the Land  and/or  the
Building, and/or the sidewalks, arcades,  plazas,--alleys or streets in front of
or adjacent thereto, in substitution in whole or in part for any tax which would
constitute "Taxes," or in lieu of additional Taxes, such tax or imposition shall
be deemed for the purposes hereof to be included within the term "Taxes."

                  (ii) The term "Tax  Year"  shall  mean  each  period of twelve
months, commencing on the first day of July of each such period, in which occurs
any part of the Term or such other period of twelve months  occurring during the
Term as  hereafter  may be duly  adopted as the fiscal  year for real estate tax
purposes of the City of New York.

                  (iii) The term  "Escalation  Statement" shall mean a statement
setting forth the amount  payable by Tenant for a specified Tax Year pursuant to
this  Article 4 as  reasonably  estimated  by  Landlord  (not to exceed  105% of
Tenant's Tax Payment (as hereinafter  defined) for the preceding Tax Year) and a
copy of all relevant tax bills.

         4.(b)  (i)  Tenant  shall  pay as  additional  rent  for the  Tax  Year
beginning  on July 1,  1998  and each Tax  Year  thereafter  a sum  (hereinafter
referred to as "Tenant's Tax Payment") equal to Tenant's  Proportionate Share of
the amount by which the Taxes for such Tax Year exceed the Base Taxes.  Tenant's
Tax Payment for each Tax


                                      -10-

<PAGE>   14

Year shall be due and  payable in advance in monthly  installments  on the first
day of each month  during  each Tax Year,  initially  based upon the  Escalation
Statement  furnished prior to the commencement of such Tax Year, until such time
as the amount of the Taxes for such Tax Year shall be  determined by the City of
New York, at which point, such monthly  installments  shall be adjusted based on
the actual amount of the Taxes for such Tax Year.  Tenant  shall,  within thirty
(30) days  thereafter,  pay to  Landlord  an amount  equal to the  amount of any
underpayment  of Tenant's  Tax Payment  with respect to any Tax Year and, in the
event of an overpayment,  Tenant may credit against subsequent payments of fixed
annual rent and  additional  rent the amount of Tenant's  overpayment.  If there
shall be any  increase in Taxes for any Tax Year,  whether  during or after such
Tax Year,  Landlord  shall furnish a revised  Escalation  Statement for such Tax
Year,  and  Tenant's  Tax Payment  for such Tax Year shall be adjusted  and paid
substantially  in the same  manner as  provided in the  preceding  sentence.  If
during  the  Term,  Taxes  are  required  to be paid to the  appropriate  taxing
authorities   in  full  or  in  monthly,   quarterly,   semiannually   or  other
installments,  on any other date or dates than as  presently  required,  then at
Landlord's option, Tenant's Tax Payments shall be correspondingly accelerated or
revised so that said Tenant's Tax Payments are due at least 30 days prior to the
date payments are due to the taxing authorities. The benefit of any discount for
any early  payment or  prepayment of Taxes shall accrue solely to the benefit of
Landlord and such discount  shall not be subtracted  from Taxes.  Landlord shall
provide  Tenant  with a copy of the tax  invoices  upon which the  Tenant's  Tax
Payment is based.  Tenant  shall not pay any portion of late charges or interest
on late Tax Payments.

                  (ii) If the real  estate  tax  fiscal  year of The City of New
York shall be changed during the Term, any Taxes for such fiscal year, a part of
which is  included  within a  particular  Tax Year and a part of which is not so
included, shall be apportioned on the basis of the number of days in such fiscal
year  included  in the  particular  Tax  Year  for the  purpose  of  making  the
computations under this Section 4.(b).

                  (iii) If the  Taxes for any Tax Year for  which  Tenant  shall
have paid additional rent pursuant to this Article shall be adjusted,  corrected
or reduced whether as the result of protest of any tentative  assessment,  or by
means of agreement,  or as the result of legal proceedings,  the additional rent
becoming due for said Tax Year  pursuant to this Article  shall be determined on
the basis of said  corrected,  adjusted or reduced  Taxes.  If Tenant shall have
paid any additional rent pursuant to this Article for such Tax Year prior to any
said  adjustment,  Landlord  shall credit or refund to Tenant any excess  amount
thus paid as reflected by said adjusted Taxes, less Tenant's Proportionate Share
of any cost,  expense or fees,  not to exceed  thirty three percent (33%) of the
Tax reduction  (including experts' and attorneys' fees but excluding  Landlord's
actual  out-of-pocket  costs of  administration  and  coordination)  incurred by
Landlord in obtaining said tax  adjustment.  If said tax adjustment  shall occur
prior to Tenant's payment of any said Taxes due hereunder as additional rent,


                                      -11-

<PAGE>   15

Tenant shall pay, as additional rent, Tenant's  Proportionate Share of any cost,
expenses  or  fees  (including   experts'  and  attorneys'  fees  but  excluding
Landlord's costs of  administration  and  coordination)  incurred by Landlord in
obtaining said tax adjustment.

         4.(c) In the event that the date of the expiration or other termination
of this  Lease  shall be a day other than the last day of a Tax Year,  then,  in
applying the  provisions of this Article 4 with respect to any Tax Year in which
such event shall have occurred, appropriate adjustments shall be made to reflect
the  occurrence  of such event on the basis of the portion of such Tax Year that
shall have elapsed prior to the date of such  expiration or  termination  in the
case of the Expiration Date or other termination.

         4.(d) In no event shall the fixed  annual rent be reduced by  operation
of this  Article 4. Except as provided in Section  4(e)  hereof,  the rights and
obligations  of Landlord and Tenant under the  provisions of this Article 4 with
respect to any additional rent shall survive the expiration or other termination
of this Lease.

         4.(e) Landlord's failure to render an Escalation Statement with respect
to any Tax Year shall not  prejudice  Landlord's  right  thereafter to render an
Escalation  Statement with respect thereto or with respect to any subsequent Tax
Year so long as the Escalation  Statement is rendered within one (1) year of the
preceding Tax Year. For example, Landlord may render an Escalation Statement for
the  1998/1999  Tax Year through and  including  June 30,  2000.  Subject to the
previous   sentence,   payments  shall  be  made  pursuant  to  this  Article  4
notwithstanding  the fact that an  Escalation  Statement  is furnished to Tenant
after the expiration of the Term.

         4.(f)  Landlord  shall deliver to Tenant within a reasonable  time upon
its  receipt,  a  statement  containing  a copy of the  City's  tax bill for the
applicable  Tax Year  ("Statement")  which shall be conclusive  and binding upon
Tenant  unless  within 60 days after  receipt of such  Statement,  Tenant  shall
notify  Landlord in writing  that it disputes  the  correctness  of Tenant's Tax
Payment  for such Tax Year,  specifying  the  particular  respects in which such
Statement is claimed to be incorrect. Pending the determination of such dispute,
Tenant shall pay  additional  rent in  accordance  with the relevant  Escalation
Statement, without prejudice to Tenant's position.

                                   ARTICLES 5.

                                       USE

         5.(a) The Premises may only be used by Tenant for the Permitted Use and
for no other purpose whatsoever.


                                      -12-

<PAGE>   16

         5.(b)  Tenant  shall not use or permit the use of the  Premises  or any
part  thereof in any way that would  violate any of the  covenants,  agreements,
terms,  provisions and conditions of this Lease or for any unlawful  purposes or
in any  unlawful  manner.  Tenant shall not suffer or permit the Premises or any
part thereof to be used in any manner or anything to be done therein or anything
to be brought  into or kept  therein  that shall in any way impair or  interfere
with (a) the  character,  reputation  or  appearance  of the  Building as a high
quality office building,  (b) any of the Building  services,  (c) the proper and
economic heating, cleaning, air-conditioning,  ventilating or other servicing of
the  Building or the  Premises,  or (d) the use of any of the other areas of the
Building by, or occasional discomfort,  inconvenience or annoyance to any of the
other  tenants or  occupants  of the  Building.  Tenant  shall not  install  any
electrical  or other  equipment  of any kind that  causes  any such  impairment,
interference, discomfort, inconvenience or annoyance.

         5.(c) If any  governmental  license or permit (other than a Certificate
of  Occupancy  for the Building or any other  license or permit  required of all
tenants  occupying  space for executive and general office use in the Borough of
Manhattan)  shall be  required  for the proper and  lawful  conduct of  Tenant's
business in the Premises or any part  thereof or for  Tenant's  occupancy of the
Premises,  Tenant at its expense  shall  procure,  maintain  and comply with the
terms and  conditions  of such license or permit and,  promptly  after  request,
submit the same to Landlord for inspection.

         5.(d) Tenant acknowledges and agrees that the value of the Premises and
the  reputation  of the Landlord  will be seriously  injured if the Premises are
used for any  obscene or  pornographic  purposes or any sort of  commercial  sex
establishment.  Tenant  agrees  that it will not bring or permit any  obscene or
pornographic  material on the  Premises,  however,  Tenant may  receive  obscene
software  for its review only and shall not permit or conduct any  pornographic,
nude, or semi-nude  live  performances  on the  Premises,  nor permit use of the
Premises for nude modeling,  rap sessions,  or as a so-called rubber goods shop,
or as a sex club of any sort, or as a "massage  parlor."  Tenant agrees  further
that it will not permit any of these uses by any  sublessee  of the  Premises or
assignee of this Lease.  This Section 5(d) shall directly bind any successors in
interest to Tenant.  Tenant  agrees  that if at any time it violates  any of the
provisions of this Section 5(d),  such  violation  shall be deemed a breach of a
substantial  obligation  of the terms of this Lease and  objectionable  conduct.
Pornographic  material  is defined  for  purposes  of this  Section  5(d) as any
written or pictorial  matter with  prurient  appeal or any objects or instrument
that are primarily  concerned  with lewd or prurient  sexual  activity.  For the
purposes  of this  Section  5.(d) the term  "obscene  material"  shall  have the
meaning as set forth in New York State Penal Law Section 235.00.


                                      -13-

<PAGE>   17

                                   ARTICLE 6.

                          ALTERATIONS AND INSTALLATIONS

         6.(a) Tenant shall make no  Alterations  in or to the Premises  without
Landlord's prior written consent  (including,  without  limitation,  any work in
connection with the Tenant's  initial  occupancy of the Premises) which approval
shall not be unreasonably  withheld,  conditioned or delayed.  Every  Alteration
shall be done at  Tenant's  sole cost and  expense  and in the case of  Tenant's
Initial  Work,  shall be performed in  accordance  with the Work Letter  annexed
hereto as Exhibit A and  incorporated  herein.  Tenant shall notify  Landlord in
writing  of  every   addition,   construction,   improvement,   installation  or
modification  of or to the  Premises  which  requires  filings with any state or
municipal agency,  including, but not limited to the New York City Department of
Buildings  and Landlord  shall  cooperate  in  processing  and signing  Tenant's
filings to perform such alterations.

         6.(b) Every  Alteration  in or to the  Premises  shall be  performed in
accordance  with and shall  conform  to the  Contractor  Rules  and  Regulations
incorporated  herein in Schedule 5 and the provisions of this Lease and shall be
effected  solely in accordance with plans and  specifications  first approved in
writing by Landlord. Such plans and specifications shall be prepared at Tenant's
sole  cost and  expense  by a  professional  registered  architect  and shall be
complete,  finished detailed  architectural  drawings and specifications for the
Alteration.  Landlord  will not  unreasonably  withhold,  condition or delay its
consent to any  Alterations,  the plans therefor or the  contractors  who are to
perform same.

         6.(c)    With respect to every Alteration:

                  (i) All work  shall be done in a good and worker  like  manner
and shall  not  interfere  with the  operation  of the  Building  or impose  any
additional  expense upon Landlord in the  construction,  maintenance,  repair or
operation of the Building.

                  (ii) Tenant  will  inform  Landlord in writing of the names of
any contractor or subcontractor  Tenant proposes to use in the Premises at least
ten days prior to the beginning of work by such contractor or subcontractor. Any
contractor  employed  by Tenant (and all  subcontractors)  shall agree to employ
only such  labor as will not  result in  jurisdictional  disputes  or strikes or
cause disharmony with other workers employed at the Building. Upon the happening
of any such dispute, strike or disharmony,  Tenant shall immediately upon notice
from Landlord  discontinue  the labor giving rise  thereto.  In the event Tenant
fails to do so,  Landlord,  in addition to any rights available to it under this
Lease and pursuant to law,  shall have the right to seek an  injunction  with or
without notice.


                                      -14-

<PAGE>   18

                  (iii) Except with  respect to Tenant's  Initial  Work,  Tenant
shall pay its contractors or subcontractors, in a timely fashion and perform the
work shown on Tenant's approved plans and  specifications  subject to reasonable
retainage.  Within a reasonable time, not to exceed 30 days, after completion of
the  Alteration,  Tenant shall furnish  Landlord with  reasonable  evidence that
payment  has been  made for the  Alteration  together  with a waiver  of lien by
Tenant's contractor in the amount of such payment.

                  (iv)  Tenant  shall  cause  the   Alteration  to  be  made  in
compliance with Legal  Requirements.  Tenant shall furnish to Landlord copies of
all governmental  permits and authorizations  that may be required in connection
with any Alteration.  All such governmental  permits and authorizations shall be
obtained by Tenant at its sole cost and expense and Tenant shall pay the cost of
filing  Tenant's  plans and  specifications  with the  appropriate  governmental
authorities.

                  (v) Tenant shall perform any Alterations so that they: (i) are
of good quality;  (ii) are free and clear of Liens; (iii) substantially  conform
to the plans and specifications as approved by Landlord; and (iv) be fit for the
intended use and purpose.  In the event that the  Alterations do not comply with
provisions (i) through (iv) of this subparagraph,  Tenant shall commence to cure
such nonconforming work within five (5) days after written notice from Landlord.

                  (vi) Tenant shall keep the Building and the Premises  free and
clear of all Liens for any work or material  claimed to have been  furnished  to
Tenant or to the  Premises on Tenant's  behalf,  and all work to be performed by
Tenant shall be done in a manner that will not  unreasonably  interfere  with or
disturb other tenants or occupants of the Building.

                  (vii)  During the  progress  of the work to be done by Tenant,
said work  shall be subject  to  reasonable  inspection  by  representatives  of
Landlord who shall be permitted  access and the  opportunity to inspect,  at all
reasonable times on reasonable  notice,  but this provision shall not in any way
whatsoever create any obligation on Landlord to conduct any such inspection.

                  (viii) Except with respect to Tenant's Initial Work as defined
in the Work Letter annexed hereto and incorporated  herein,  with respect to any
Alteration  costing more than  $100,000.00,  Tenant agrees to pay  Landlord,  as
additional rent, within ten days of demand, an amount equal to Landlord's out of
pocket expenses in connection  with the Alteration (not to exceed  $1,000.00) in
question for the review of Tenant's plans and specifications.

                  (ix) Prior to commencement of any Alteration, Tenant's Initial
Work,  or any  subsequent  structural  work,  Tenant  shall  furnish to Landlord
original certificates

                                      -15-

<PAGE>   19

of  insurance  naming  Landlord  and  its  designated  managers  and  agents  as
additional insureds as their respective  interests may appear and evidencing the
existence of:

                         o Workers' compensation  insurance covering all persons
employed for such work; and

                         o Commercial general liability  (including  contractual
liability) and property damage  insurance,  with coverage of at least $5,000,000
per occurrence for bodily or personal injury (including death) and $1,000,000 in
respect of property damage.

Such  insurance  shall be maintained at all times during the  performance of the
work and shall not be  cancelable  except on 30 days'  prior  written  notice to
Landlord.

                  (x) Upon completion of each  Alteration,  Tenant shall remove,
at its sole cost and expense, all debris from the Premises and clean the same.

                  (xi) Upon  completion of each  Alteration  for which plans are
prepared,  Tenant shall deliver "marked" or "as-built" plans for such Alteration
to Landlord at Tenant's sole cost and expense.

         6.(d)  Landlord  shall not be  responsible  for any labor or  materials
furnished  to  Tenant,  or  for  delays  of any  kind  experienced  by  Tenant's
contractors  unless  such  delay is caused by  Landlord.  No Lien for any labor,
materials,  or other  services or things  furnished to Tenant shall attach to or
affect  Landlord's  estate or  interest  in the  Premises,  the Land  and/or the
Building.  Tenant agrees to discharge,  at Tenant's expense (whether by payment,
bonding,  or otherwise)  every Lien filed against the Premises,  the Land and/or
the Building for work claimed to have been done for or materials claimed to have
been  furnished to Tenant,  within 30 days after  receiving  notice of the same.
Tenant  shall  require  that  all  contractors  and  subcontractors  engaged  in
connection  with  Tenant's  Alterations  indemnify  and hold  Landlord  harmless
against any and all claims for injury to persons or damage to property by reason
of such  contractor's or  subcontractor's  use of the Premises or performance of
the work,  including any claims, fines and penalties imposed due to a failure to
comply with Laws.

         6.(e) Notice is hereby given that Landlord  shall not be liable for any
labor or materials  furnished or to be furnished to Tenant upon credit, and that
no mechanic's  or other Lien for any such labor or materials  shall attach to or
affect the  reversion  or other  estate or  interest  of  Landlord in and to the
Premises.

         6.(f) All Alterations, additions, paneling, partitions, doors, railings
and like  installations  installed in the Premises at any time, either by Tenant
or by Landlord or others on Tenant's  behalf and whether  installed or purchased
at Landlord's or


                                      -16-

<PAGE>   20

Tenant's expense (collectively,  the "Leasehold  Improvements") shall become the
property of Landlord upon the  expiration or earlier  termination of this Lease.
The Leasehold Improvements shall remain upon, and shall be surrendered with, the
Premises.

         6.(g) If any  alterations,  installations,  additions,  improvements or
other  property  that Tenant  shall be obligated to remove are not removed on or
prior to the  expiration  of the Term,  Landlord  shall have the right to remove
such property and to dispose of the same without accountability to Tenant and at
the sole cost and  expense of Tenant.  In case of any damage to the  Premises or
the Building resulting from the removal of the property by Tenant,  Tenant shall
repair  such  damage  or, in  default  thereof,  shall  reimburse  Landlord  for
Landlord's  actual  out of  pocket  cost  in  repairing  such  damage.  Tenant's
obligations  under this  Section  6.(g) shall  survive the  expiration  or other
termination of this Lease.

         6.(h) Tenant shall keep records of Tenant's Alterations, installations,
additions and improvements costing in excess of $5,000.00,  and of the component
(category) cost thereof.  Tenant shall, within 45 days after demand by Landlord,
furnish to Landlord  copies of such records and cost if Landlord  shall  require
same in connection  with any proceeding to reduce the assessed  valuation of the
Building, or in connection with any proceeding instituted pursuant to Article 14
hereof.


                                   ARTICLE 7.

                                     REPAIRS

         7.(a) (i) Tenant shall, at its sole cost and expense, take good care of
the  Premises and the fixtures and  appurtenances  therein  (including,  without
limitation,  bathroom and  plumbing  fixtures  and  appurtenances)  and make all
repairs  thereto as and when needed to preserve  them in good working  order and
condition  and maintain the Premises in a condition  consistent  with offices in
comparable  office  buildings.  Landlord,  at its sole cost and  expense,  shall
promptly  replace  all broken  glass of the  exterior  windows in the  Premises.
Tenant shall be responsible for all repairs, maintenance and replacement of wall
and floor  coverings in the Premises and for the repair and  maintenance  of all
sanitary and  electrical  fixtures  (excluding the Class E System) and equipment
therein. Subject to the provisions of Sections 9(h)(i) and 9(h)(iii) hereof, all
damage  or  injury  to  the  Premises  and to its  fixtures,  appurtenances  and
equipment or to the Building or to its  fixtures,  appurtenances  and  equipment
caused by or which  arises out of (i) Tenant  moving  property  in or out of the
Building,  or (ii) the  installation or removal of furniture,  fixtures or other
property  by Tenant,  or (iii) the  performance  by Tenant or  existence  of any
Alterations  or  repairs  in the  Premises  or  (iv)  the  installation,  use or
operation  of Tenant's  property in the  Premises or (v)  negligence,  wilful or
improper conduct on the part of Tenant, its servants,

                                      -17-

<PAGE>   21

employees,  agents,  visitors,  or  licensees,  shall be  repaired,  restored or
replaced   promptly  at  Tenant's  sole  cost  and  expense  to  the  reasonable
satisfaction  of  Landlord.  However,  if by  reason  of (1)  strike,  (2) labor
troubles,  (3) governmental  preemption in connection with a national emergency,
(4) any rule, order or regulation of any governmental  agency, or (5) conditions
of supply  or  demand  which are  affected  by war or other  national,  state or
municipal emergency (each, a "Force Majeure Event"), Tenant shall not be able to
fulfill its obligations under this Lease, this Lease and Tenant's  obligation to
pay fixed annual rent and  additional  rent  hereunder,  shall not  otherwise be
affected,  impaired or excused, but Tenant shall not be deemed in default in the
performance  of any  obligations  under this  Lease,  provided,  that as soon as
Tenant shall learn of the  happening of any Force  Majeure  Event,  Tenant shall
promptly notify Landlord of same, and, if ascertainable, its estimated duration,
and Tenant will proceed  promptly and  diligently  with the  fulfillment  of its
obligations as soon as reasonably  possible.  Any repairs required to be made by
Tenant to the mechanical,  electrical, plumbing, sanitary, heating, ventilating,
Building's air-conditioning,  fire safety or other systems of the Building shall
be performed only by contractor(s) who are reasonably acceptable and approved by
Landlord. All repairs,  restorations and replacements made by Tenant shall be in
quality and class equal to the original work or  installations  currently in the
Building.  If Tenant fails to make such  repairs,  restoration  or  replacements
within  thirty  (30) days after  notice  and  demand,  subject to any  necessary
extension as a result of a Force Majeure Event,  same may be made by Landlord at
the expense of Tenant and such expense shall be collectible  as additional  rent
and  shall be paid by Tenant  within  ten (10) days  after  rendition  of a bill
therefor.

                  (ii) Except as  otherwise  provided  for herein,  the exterior
walls of the Building, elevators and elevator shafts, and other Building shafts,
and  conduits  which  extend to any floor above or below the  Premises,  and the
portions of any window sills  outside the windows,  and the windows are not part
of the Premises and Landlord reserves all rights to such parts of the Building.

         7.(b)  Tenant  shall not  place a load  upon any floor of the  Premises
exceeding  the floor load per square  foot area that such floor was  designed to
carry and that is allowed by law. If Tenant  shall desire a floor load in excess
of that  which  such  floor was  designed  to carry and which is allowed by law,
Tenant shall submit plans and specifications for such floor load to Landlord for
Landlord's  review  and  approval  which  shall  not be  unreasonably  withheld,
conditioned  or delayed.  In determining  whether to grant its consent  Landlord
shall  consider  whether  the work  necessary  to  increase  such floor load (i)
adversely affects the structure of the Building, (ii) interferes with the amount
or availability of any space adjoining  alongside,  above or below the Premises,
(iii) will  interfere  with the  occupancy of other  tenants in the Building and
(iv) may be accomplished  without disturbing the load bearing columns,  walls or
configuration of the Building.


                                      -18-

<PAGE>   22

         7.(c) Business  machines and  mechanical  equipment used by Tenant that
cause  vibration,  noise,  cold or heat that may be  transmitted to the Building
structure  or to  any  leased  space  to  such  a  degree  as  to be  reasonably
objectionable to Landlord or to any other tenant in the Building shall be placed
and  maintained  by Tenant at its expense in settings of cork,  rubber or spring
type  vibration  eliminators  sufficient to absorb and prevent such vibration or
noise, or prevent transmission of such cold or heat.

         7.(d) Except as otherwise  specifically  provided in this Lease,  there
shall be no  allowance  to  Tenant  for a  diminution  of  rental  value  and no
liability  on the part of  Landlord  by reason of  inconvenience,  annoyance  or
injury  to  business  arising  from  the  making  of any  repairs,  alterations,
additions or  improvements  in or to any portion of the Building or the Premises
or in  or to  fixtures,  appurtenances  or  equipment  thereof.  Landlord  shall
exercise  reasonable  diligence so as to minimize any interference with Tenant's
business  operations,  but  shall  not be  required  to  perform  the same on an
overtime or premium pay basis unless the  inconvenience or annoyance to Tenant's
business materially interferes with Tenant's business operations.

         7.(e) Tenant will not clean, nor require,  permit,  suffer or allow any
window in the  Premises to be cleaned  from the outside in  violation of Section
202 of the Labor Law or any other applicable Legal Requirement.

         7.(f)  Landlord  shall  maintain and repair the exterior and structural
portions of the Building  including the structural  portions of the Premises and
shall maintain and repair the public portions of the Building's interior and the
Building's plumbing,  fire safety,  electrical,  heating and ventilating systems
serving the Premises.

                                   ARTICLE 8.

                               REQUIREMENTS OF LAW

         8.(a) If  Tenant  receives  any  notice of any  violation  of any Legal
Requirement, Tenant shall give prompt written notice thereof to Landlord. Tenant
shall comply with all Legal Requirements which shall impose any violation, order
or duty upon Landlord or Tenant with respect to the Premises (including, without
limitation,  the  performance  of  any  alterations  under  the  Americans  with
Disabilities  Act of 1990) or the use or  occupation  thereof  (in  which  event
Tenant shall  effect such  compliance  at its sole cost and  expense)  provided,
however,  that the need for compliance with any such Legal Requirement  directly
arises out of Tenant's  particular  manner of use of the  Premises  and is not a
Legal Requirement of general application.  Landlord shall be responsible, at its
own cost and expense, for compliance with all other Legal Requirements. If, as a
result of any act by Tenant in violation of this Lease, any Legal Requirement is
violated,  Tenant, at its sole cost and expense,  shall cause any such violation
to be promptly  cured.  The foregoing  shall include any structural  alterations
necessary to


                                      -19-

<PAGE>   23

effect such a cure  provided  the act or omission by Tenant in violation of this
Lease is attributable to Tenant's use or occupancy of the Premises.

         8.(b) (i) Without  limiting the  generality  of Section  8.(a),  if any
Legal  Requirement  shall require (i) the inspection of Building  systems or any
Tenant  improvement  to ascertain  the amount of  chlorofluorocarbons  ("CFCs"),
including  freon,  that Tenant  improvements  are  emitting or leaking  into the
atmosphere,  (ii) additional  maintenance of any Tenant improvements relating to
the presence of CFCs, or (iii) any Tenant improvement to reduce or eliminate the
emission  or  presence  of CFCs,  then  Tenant  shall pay upon  written  demand,
Tenant's  Proportionate  Share of the cost of such  compliance  by  Landlord  or
Tenant shall, at Tenant's sole cost and expense,  promptly make such conversion,
change, alteration,  modification or replacement of Tenant's improvements as may
be necessary or required in the Premises.

                  (ii) Without limiting the generality of Section 8.(a), Tenant,
at its sole cost and expense, shall comply with all Legal Requirements regarding
the  collection,  sorting,  separation  and  recycling  of its  waste  products,
garbage,  refuse and trash.  Tenant shall sort and separate such waste products,
garbage,  refuse  and trash into such  categories  as is  provided  by any Legal
Requirements. Each separately sorted category of waste products, garbage, refuse
and trash shall be placed in  separate  receptacles  reasonably  supplied by and
approved by Landlord.  Such separate  receptacles may, at Landlord's  option, be
removed from the Premises in accordance with a collection schedule prescribed by
any Legal  Requirements.  Landlord  reserves  the right to refuse to  collect or
accept  from  Tenant any waste  products,  garbage,  refuse or trash that is not
separated and sorted as required by any Legal Requirement, and to require Tenant
to arrange for such  collection at Tenant's  sole cost and expense,  utilizing a
contractor satisfactory to Landlord. In the event Landlord receives any monetary
benefit from the disposal or  recycling of Tenant's  garbage,  refuse and trash,
Tenant shall receive a credit,  after  Landlord  deducts its  reasonable  actual
expenses,  in the amount of Tenant's  Proportionate Share of such amount, to its
fixed annual rental payment in the month after  Landlord  receives such monetary
benefit.

         8.(c)  Notwithstanding  the  provisions  of  Sections  8.(a)  and 8.(b)
hereof,  Tenant,  at its own cost and  expense,  in its  name  and/or  (whenever
necessary)  Landlord's  name,  may  contest,  in  any  manner  permitted  by law
(including  appeals to a court or  governmental  department or authority  having
jurisdiction in the matter), the validity or the enforcement of any governmental
act, regulation or directive with which Tenant is required to comply pursuant to
this  Lease,  and may  defer  compliance  therewith  during  the  course of such
contest,  provided that (a) such  non-compliance  shall not subject  Landlord to
criminal  prosecution  or subject the Land and/or  Building to Lien or sale, (b)
such  non-compliance  shall not be in  violation  of any fee  mortgage or of any
ground  or  underlying  lease  or any  mortgage  thereon  and (c)  Tenant  shall
prosecute such contest promptly and diligently to its conclusion.


                                      -20-

<PAGE>   24

         8.(d)  Landlord,  without  expense or liability to it, shall  cooperate
with Tenant and execute any  documents or pleadings  required for such  purpose,
provided that Landlord shall be reasonably satisfied that the facts set forth in
any such documents or pleadings are accurate.


                                   ARTICLE 9.

                  INSURANCE. LOSS. REIMBURSEMENT AND LIABILITY

         9.(a) Tenant shall not do, permit or suffer to be done any act or thing
upon the Premises that would invalidate or be in conflict with New York standard
fire and property damage insurance policies covering the Building,  and fixtures
and property therein, or that would increase the rate of insurance applicable to
the Building to an amount  higher than it  otherwise  would be; and Tenant shall
not do nor shall  Tenant  permit to be done any act or thing  upon the  Premises
that shall or might  subject  Landlord to any  liability or  responsibility  for
injury to any person or  persons or to  property  by reason of any  business  or
operation being carried on within the Premises.

         9.(b) If, as a result of any act or omission by Tenant or  violation of
this Lease,  after applicable  notice,  grace and cure periods,  the rate of any
insurance applicable to the Building shall be increased to an amount higher than
it otherwise would be, Tenant shall reimburse Landlord and provide copies of all
insurance  bills for all  increases of Landlord's  insurance  premiums so caused
provided that Landlord  provides to Tenant copies of Landlord's  insurance bills
evidencing any such increase;  such  reimbursement to be additional rent payable
upon the first day of the  month  following  any  outlay  by  Landlord  for such
increased insurance  premiums.  In any action or proceeding wherein Landlord and
Tenant are  parties,  a  schedule  or  "make-up"  of rates for the  Building  or
Premises issued by the body making  insurance  rates for the Premises,  shall be
presumptive  evidence of the facts  therein  stated and of the several items and
charges in the insurance rate then applicable to the Premises.

         9.(c)  Landlord  or its  agents  shall not be liable  for any injury or
damage to persons or  property  (including,  but not limited to, loss of profits
and injury to business) resulting from fire, explosion,  falling plaster, steam,
gas, electricity, water, rain or snow or leaks from any part of the Building, or
from the  pipes,  appliances  or  plumbing  works or from the  roof,  street  or
subsurface  or from any other  place or by dampness or by any other cause of any
nature,  unless any of the foregoing shall be caused by or due to the negligence
or  willful  misconduct  of  Landlord,  its  agents,  servants,  contractors  or
employees.

         9.(d)  Landlord  shall not be liable  for any damage  which  Tenant may
sustain,  if at any time any window of the  Premises is broken,  due to Tenant's
arbitrary  or negligent  acts nor shall  Landlord be liable for any damage which
Tenant may sustain,


                                      -21-

<PAGE>   25

if at any time any window of the  Premises is broken,  or  temporarily  darkened
unless same is due to  Landlord's  arbitrary  or  negligent  acts.  For purposes
hereof, "temporarily" shall mean five (5) days or less.


         9.(e)  Subject  to  the  provisions  of  Section  8.(c)  hereof,  where
applicable,  Tenant shall have the right,  at Tenant's own cost and expense,  to
participate in the defense of any action or proceeding brought against Landlord,
and in negotiations  for settlement  thereof if, pursuant to this Section 9.(e),
Tenant could have any liability in connection therewith.

         9.(f) Tenant shall give Landlord  notice in case of fire,  discovery of
asbestos or accidents in the Premises  promptly  after Tenant  becomes  aware of
such event.

         9.(g) Landlord's officers, directors and members (and, in case Landlord
shall be a joint venture, partnership,  tenancy-in-common,  association or other
form of joint  ownership,  the members of any such joint  venture,  partnership,
tenancy-in-common,  association  or other  form of joint  ownership)  shall have
absolutely no personal  liability with respect to any provision of this Lease or
any  obligation  or  liability  arising  therefrom.  Tenant shall look solely to
Landlord's  estate and interest in the Land and  Building,  and the lease of the
Building or of the Land and Building,  the Premises and  insurance  proceeds for
the  satisfaction  of any  right or remedy of  Tenant  for the  collection  of a
judgment (or other judicial process) requiring the payment of money by Landlord.
No other  property  or assets of  Landlord  or any agent,  officer,  director or
member shall be subject to levy,  execution,  attachment,  or other  enforcement
procedure for the  satisfaction  of Tenant's  remedies  under or with respect to
this Lease, the relationship of Landlord and Tenant  hereunder,  or Tenant's use
and  occupancy of the  Premises,  or any other  liability of Landlord to Tenant.
However,  nothing  contained in this Section shall be construed to permit Tenant
to offset  against rents due a successor  landlord a judgment (or other judicial
process)  requiring  the  payment  of money by reason of any  default of a prior
landlord.  Notwithstanding  anything herein to the contrary,  Tenant's officers,
shareholders,  directors  and  members  shall have no  personal  liability  with
respect to any provisions of this Lease.

         9.(h) (i) Landlord shall obtain all-risk  insurance for the Building in
amount equal to the replacement cost thereof,  including the replacement cost of
Tenant's leasehold  improvements but, excluding Tenant's furniture,  furnishings
and other removable personal property and fixtures.  Such policies shall include
appropriate  clauses  pursuant to which the  insurance  companies  (i) waive all
right of  subrogation  against  Tenant with respect to losses payable under such
policies and (ii) agree that such policies shall not be  invalidated  should the
insured  waive in writing  prior to a loss any or all right of recovery  against
any party for losses covered by such policies.


                                      -22-

<PAGE>   26

                  (ii) Tenant shall obtain all-risk insurance in an amount equal
to the full  replacement  cost of  Tenant's  furniture,  furnishings  and  other
removable  personal  property  and all  fixtures to the extent that the same has
been paid for by Landlord's Contribution (as defined in the Work Letter). Tenant
shall include in any property insurance policy or policies  appropriate  clauses
pursuant  to which the  insurance  company or  companies  (i) waive the right of
subrogation  against  Landlord  and/or any tenant of space in the Building  with
respect to losses  payable under such policy or policies  and/or (ii) agree that
such policy or policies  shall not be  invalidated  should the insured  waive in
writing  prior to a loss any or all  right of  recovery  against  any  party for
losses covered by such policy or policies.

                  (iii)  Provided that  Landlord's  right of full recovery under
its  policy or  policies  aforesaid  is not  adversely  affected  or  prejudiced
thereby,  Landlord  hereby  waives any and all right of  recovery  that it might
otherwise have against Tenant, its servants,  agents and employees,  for loss or
damage occurring to the Building and the fixtures,  appurtenances  and equipment
therein,  to the extent of the net  proceeds of insurance  actually  received by
Landlord as a result of such loss or damage,  notwithstanding  that such loss or
damage may result from the negligence or fault of Tenant,  its servants,  agents
or employees.  Provided that Tenant's right of full recovery under its aforesaid
policy or  policies is not  adversely  affected or  prejudiced  thereby,  Tenant
hereby  waives  any and all  right of  recovery  which it might  otherwise  have
against Landlord, its servants, and employees, and against every other tenant in
the  Building  who shall  have  executed  a similar  waiver as set forth in this
Section  9.(h)(iii)  for loss or damage  to,  Tenant's  furniture,  furnishings,
fixtures and other property  removable by Tenant under the provisions  hereof to
the extent of the net  proceeds of  insurance  actually  received by Tenant as a
result  of such loss or  damage,  notwithstanding  that such loss or damage  may
result  from the  negligence  or fault of  Landlord,  its  servants,  agents  or
employees, or such other tenant and the servants, agents or employees thereof.

                  (iv) In the event that  Tenant  does not  obtain the  all-risk
property insurance provided for in Section 9(h)(ii) above, Tenant waives any and
all  claims  against  Landlord  for  loss  or  damage  to  all  such  furniture,
furnishings and other removable personal property and fixtures.  Notwithstanding
that such loss or damage may result from the negligence or fault of Tenant,  its
servants,  agents or  employees,  Tenant  agrees to indemnify  and hold Landlord
harmless  against any and all claims for loss or damage to  Tenant's  furniture,
furnishings and other removable personal property and fixtures.

         9.(i) (i) Tenant shall provide on or before the  Commencement  Date and
shall keep in force  during  the Term  hereof for the  benefit of  Landlord  and
Tenant a commercial  general liability  insurance policy (including  contractual
liability)  arising out of the use of the Premises or any appurtenances  thereto
or  occasioned by any  occurrence on or about the Premises or any  appurtenances
thereto. Such policy shall


                                      -23-

<PAGE>   27

be not less than the amount of $5,000,000  per occurrence for bodily or personal
injury  (including death) and in the amount of $1,000,000 in respect of property
damage.

                  (ii) All  insurance  required by this Lease shall be evidenced
by valid  and  enforceable  policies  issued by  companies  (i)  licensed  to do
business in the State of New York and (ii) having a financial  size  category of
not less than VII and with general  policy  holders rating of not less than "B+"
as rated  by  "Best's"  insurance  reports.  All  liability  insurance  policies
maintained by Tenant shall name Landlord and its designated  managers and agents
as additional  insureds.  The insurance  required by this Article may be carried
under a blanket policy covering the Premises and other  locations of Tenant,  if
any.  Prior to the time such insurance is first required to be carried by Tenant
and thereafter, at least 15 days prior to the effective date of any such policy,
Tenant shall  deliver to Landlord  either a duplicate  original of the aforesaid
policies or a  certificate(s)  evidencing  such insurance.  Said  certificate(s)
shall contain an endorsement that such insurance may not be canceled except upon
30 days' written notice to Landlord.


                                   ARTICLE 10.

                          DAMAGE BY FIRE OR OTHER CAUSE

         10.(a) If the Premises or any part thereof  shall be damaged by fire or
other casualty  Tenant shall give immediate  notice thereof to Landlord and this
Lease shall continue in full force and effect except as hereinafter set forth.

         10.(b) (i) If the Premises are partially damaged or rendered  partially
untenantable  by fire or other  casualty,  the damage thereto shall be repaired,
including  restoration  of the leasehold  improvements  by and at the expense of
Landlord  and the  fixed  annual  rent and the  additional  rent  payable  under
Articles 1 and 4 shall be paid for the portion of the  Premises  affected to the
time of the casualty and Tenant shall resume such payment in accordance with the
provisions of Article 10(b)(iv).

                   (ii) If the Premises are totally or substantially  damaged or
are rendered wholly or substantially untenantable by fire or other casualty, the
damage  thereto  shall  be  repaired,  including  restoration  of the  leasehold
improvements by and at the expense of Landlord and the fixed annual rent and the
additional  rent payable under Articles 1 and 4 shall be paid to the time of the
casualty and Tenant shall resume such payment in accordance  with the provisions
of Article 10(b)(iv).

                   (iii) If the Building shall be so damaged that Landlord shall
decide to  demolish  it or if at least 50% of the floor area of the  Premises is
damaged or


                                      -24-

<PAGE>   28

destroyed  during the last eighteen (18) months of the Initial Term,  or, if the
Term is extended by Tenant, then, during the last eighteen (18) months of Option
1 or Option 2, as the case may be, then, in any such events,  Landlord may elect
to terminate this Lease by written notice to Tenant.  Such notice shall be given
by Landlord within sixty (60) days after such fire or casualty specifying a date
for the  expiration of the Lease,  which date shall not be more than thirty (30)
days after the giving of such notice,  and upon the expiration date specified in
such notice the Term shall expire as fully and  completely  as if such date were
the date set forth  above for the  termination  of this Lease and  Tenant  shall
forthwith quit, surrender and vacate the Premises without prejudice, however, to
Landlord's  rights and remedies  against  Tenant under the Lease  provisions  in
effect prior to such  termination.  Any rent owing shall be paid up to such date
(subject to abatement as provided in subparagraphs 10.(b)(i) and (ii) above) and
any  payments  of rent  made  by  Tenant  that  were on  account  of any  period
subsequent  to such date shall be promptly  returned to Tenant.  Landlord  shall
make the required  repairs and  restoration,  in accordance  with  subparagraphs
10.(b)(i) and 10.(b)(ii) with all reasonable expedition during Business Days and
Business Hours,  subject to delays due to adjustment of insurance claims,  labor
troubles and causes beyond Landlord's control.  Notwithstanding  anything to the
contrary set forth herein, if at least  thirty-three  percent (33%) of the floor
area of the  Premises  is damaged  and:  (a) in the  opinion  of an  independent
architect selected by Landlord (which Landlord shall select within fourteen (14)
days of any such casualty),  and reasonably  acceptable to Tenant,  the Premises
cannot be  substantially  restored  within  twelve (12) months after the date of
such   casualty,   Tenant  may,   within   fifteen  (15)  days   following  such
determination,  terminate this Lease, by notice to Landlord and if Tenant timely
exercises such option,  this Lease shall ipso facto terminate and come to an end
as of the date that is thirty (30) days after such event as fully and completely
as if such date were the date set forth herein for the  expiration of this Lease
and Tenant shall  forthwith  quit,  surrender and vacate the  Premises,  without
prejudice  however,  to Landlord's  rights and remedies against Tenant under the
provisions in effect prior to such  termination;  or (b) if  restoration  of the
Premises is not substantially  completed within twelve (12) months from the date
of any such  casualty,  Tenant may  terminate  this  Lease,  by first  providing
Landlord with a thirty (30) day written  notice to cure,  and if such  situation
shall  continue and shall not be remedied by Landlord  within  thirty (30) days,
then  Tenant may give to Landlord a notice of  intention  to end the Term at the
expiration  of fifteen  (15) days from the date of the service of such notice of
intention  and upon the  expiration of said fifteen (15) days this Lease and the
Term and estate hereby granted,  shall terminate with the same effect as if that
day were the end of the Term. If less than 33% of the floor area of the Premises
is damaged and if Landlord does not  substantially  restore the Premises  within
twelve  (12)  months of such  casualty,  Tenant may at its  option,  restore the
Premises,  at its  own  cost  and  expense,  and  receive  an  abatement  of the
installments  of fixed  annual rent in an amount equal to the actual cost of the
repairs  together with interest at the Interest Rate until such time as Landlord
reimburses Tenant for such costs.


                                      -25-

<PAGE>   29

         (iv) After any such casualty,  Tenant shall  cooperate with  Landlord's
restoration  of the  Premises  by  removing  from the  Premises  as  promptly as
reasonably  possible,   all  of  Tenant's  salvageable   inventory  and  movable
equipment,  furniture  and other  property.  Tenant's  liability  for rent shall
resume sixty (60) days after  written  notice from Landlord that the Premises is
substantially  ready  for  Tenant's  occupancy,  and in fact,  the  Premises  is
substantially ready for Tenant's occupancy.

         10.(c) 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 Premises or of the Building  pursuant to this
Article 10.

         10.(d)  Landlord  will  not  carry  separate  insurance  of any kind on
Tenant's property, furniture,  furnishings and other removable personal property
and  fixtures  alterations,   installations  or  additions  (excluding  Tenant's
leasehold  improvements) made to the Premises, and, except as provided by law or
by  reason  of its  breach  of any of its  obligations  hereunder,  shall not be
obligated to repair any damage thereto or replace the same.

         10.(e) The provisions of this Article 10 shall be considered an express
agreement  governing any cause of damage or  destruction of the Premises by fire
or other  casualty,  and Section 227-a the Real Property Law of the State of New
York,  providing for such a contingency in the absence of an express  agreement,
and any other law of like  import,  now or  hereafter  in force,  shall  have no
application in such case.


                                   ARTICLE 11.

                    ASSIGNMENT. MORTGAGING. SUBLETTING. ETC.

         11.(a)  Except as otherwise  provided  for herein,  Tenant shall not by
operation of law or otherwise (a) assign or otherwise transfer this Lease or the
Term and estate hereby  granted,  (b) sublet the Premises or any part thereof or
allow  the same to be used or  occupied  by  others,  (c)  mortgage,  pledge  or
encumber  this Lease or the Premises or any part thereof in any manner by reason
of any act or omission on the part of Tenant or (d)  advertise,  or  authorize a
broker to advertise,  for a subtenant or assignee,  the price for any portion of
the Premises. For purposes of this Article 11, (i) the transfer of a majority of
the  issued and  outstanding  capital  stock of any  corporate  tenant,  or of a
corporate subtenant,  or the transfer of a majority of the total interest in any
partnership  tenant or  subtenant,  or the  transfer  of control in any  limited
partnership  tenant or  subtenant,  however  accomplished,  whether  in a single
transaction or in a series of related or unrelated transactions, shall be deemed
an assignment of this Lease,  or of such  sublease,  as the case may be, (ii) an
agreement  by any other  person or entity,  directly  or  indirectly,  to assume
Tenant's  obligations under this Lease shall be deemed an assignment,  (iii) any
person or legal


                                      -26-

<PAGE>   30

representative  of Tenant,  to whom Tenant's interest under this Lease passes by
operation of law, or otherwise, shall be bound by the provisions of this Article
11, and (iv) a  modification,  amendment  or  extension  of a sublease  shall be
deemed a sublease.

         11. (b) Notwithstanding  anything to the contrary contained herein, any
transaction:  (i) with a corporation  into,  or with which,  Tenant is merged or
consolidated;  or (ii) with an entity to which all,  or  substantially  all,  of
Tenant's assets are  transferred;  or (iii) with an entity that controls,  or is
controlled by Tenant or is under common  control with Tenant;  or (vi) involving
the sale or transfer of the stock of Tenant over a nationally  recognized public
stock  exchange;  shall not be deemed to be an  assignment  for purposes of this
Lease and shall not require  Landlord's prior consent,  except that with respect
to any  transaction  pursuant  to which  Tenant is merged or  consolidated  with
another entity, the same shall not require Landlord's consent provided that: (i)
if such merger or  consolidation  occurs  during the first five (5) years of the
Term the entity  resulting  from such merger or  consolidation  shall have a net
worth of at least One Hundred  Million  Dollars  ($100,000,000.00);  and (ii) if
such merger or consolidation  occurs after the first five (5) years of the Term,
the entity resulting from such merger or consolidation shall have a net worth of
at least Forty Million Dollars ($40,000,000.00). In the event that the net worth
of Tenant following any such merger or consolidation  occurring during the first
five  (5)  years  of  the  Term  is  less  than  One  Hundred   Million  Dollars
($100,000,000.00),  Landlord's  prior consent shall not be required for any such
merger or  consolidation  provided that Tenant  delivers to Landlord a letter of
credit,  in the  amount of One  Million  Three  Hundred  Thirty  Three  Thousand
Dollars,  to be held by Landlord as additional  security in accordance  with the
provision  of Article 35 hereof.  Such letter of credit may be reduced by Tenant
to Six Hundred Sixty Seven Thousand Dollars  following the fifth  anniversary of
the  Commencement  Date. In the event that the net worth of Tenant following any
merger or consolidation  occurring after the first five (5) years of the Term is
less than Forty Million Dollars  ($40,000,000.00),  Landlord's prior consent for
such  merger  or  consolidation  shall not be  required,  provided  that  Tenant
delivers  to  Landlord a letter of credit,  in the amount of Six  Hundred  Sixty
Seven  Thousand  Dollars  to be held  by  Landlord  as  additional  security  in
accordance  with the  provisions of Articles 35 hereof.  Nothing in this Section
11(b) shall permit Tenant or any successor to use or occupy the Premises for any
purpose other than the purposes stated in Article 5 hereof.

         11.(c) Any assignment or transfer, whether made with Landlord's consent
as  required by Section  11(a) or without  Landlord's  consent  pursuant to this
Article  shall be made only if, and shall not be effective  until,  the assignee
shall execute,  acknowledge and deliver to Landlord a recordable  agreement,  in
the form annexed hereto as Exhibit B. Tenant covenants that, 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
or transferee or any other party, Tenant shall remain fully and primarily liable
for the payment of the





                                      -27-

<PAGE>   31

rent due and to become due under this  Lease and for the  performance  of all of
the covenants, agreements, terms, provisions and conditions of this Lease on the
part of Tenant to be performed or observed.

         11.(d) The liability of Tenant,  and the due  performance  by Tenant of
the  obligations  on its part to be  performed  under this  Lease,  shall not be
discharged,  released or impaired in any respect by an agreement or  stipulation
made by Landlord or any grantee or assignee of Landlord,  by way of mortgage, or
otherwise,  extending the time of, or modifying any of the obligations contained
in this  Lease,  or by any waiver or failure of  Landlord  to enforce any of the
obligations on Tenant's part to be performed under this Lease,  and Tenant shall
continue to be liable hereunder.  If any such agreement or modification operates
to increase the  obligations of a tenant under this Lease,  the liability  under
this Section  11.(d) of Tenant named in this Lease or any of its  successors  in
interest  (unless such party shall have  expressly  consented in writing to such
agreement  or  modification)  shall  continue  to be no  greater  than  if  such
agreement or modification had not been made.

         11.(e) Landlord shall not withhold or delay its consent unreasonably to
an  assignment  of this  Lease  or a  subletting  of the  whole or a part of the
Premises so long as:

                   (i) Tenant shall furnish  Landlord with the name and business
address of the proposed  subtenant or assignee,  information with respect to the
nature and  character of the proposed  subtenant's  or assignee's  business,  or
activities and such references and current financial information with respect to
net worth,  credit and financial  responsibility as are reasonably  requested by
Landlord;

                   (ii) the proposed  subtenant or assignee is a reputable party
whose financial net worth,  credit and financial  responsibility is, considering
the responsibilities  involved,  reasonably  satisfactory to Landlord,  and with
respect  to  any  proposed  assignment,  such  assignment  complies  with  those
requirements set forth paragraph 11.(c);

                   (iii) the nature and  character of the proposed  subtenant or
assignee,  its  business or  activities  and intended use of the Premises is, in
Landlord's  reasonable  judgment,  in keeping with the standards of the Building
and the floor or floors on which the Premises are located;

                   (iv) in the event that there is comparable space available to
be leased in the  Building,  the  proposed  subtenant or assignee is not then an
occupant  of any part of the  Building  or a party who dealt  with  Landlord  or
Landlord's  agent  (directly  or through a broker)  with respect to space in the
Building  during the six  months  immediately  preceding  Tenant's  request  for
Landlord's consent;


                                      -28-

<PAGE>   32

                   (v) all costs  incurred with respect to providing  reasonably
appropriate means of ingress and egress from the sublet space or to separate the
sublet space from the remainder of the Premises shall, subject to the provisions
of  Article  6  with  respect  to  alterations,   installations,   additions  or
improvements, be borne by Tenant;

                   (vi) each sublease  shall state  specifically  that (i) it is
subject to all of the terms, covenants, agreements, provisions and conditions of
this Lease,  (ii) the  subtenant or assignee,  as the case may be, will not have
the right to a further assignment thereof or sublease or assignment  thereunder,
or to allow the  Premises to be used by others,  except in  accordance  with the
terms of this Article,  (iii) a consent by Landlord  thereto shall not be deemed
or construed to modify,  amend or affect the terms and provisions of this Lease,
or Tenant's obligations hereunder, which shall continue to apply to the premises
involved,  and the occupants  thereof,  as if the sublease or assignment had not
been  made,  (iv) if Tenant  defaults  in the  payment  of any rent,  beyond any
applicable notice and grace period,  Landlord is authorized to collect any rents
due or accruing from any assignee,  subtenant or other  occupant of the Premises
and to apply the net amounts  collected to the fixed annual rent and  additional
rent  reserved  herein and (v) the receipt by  Landlord  of any amounts  from an
assignee or subtenant,  or other  occupant of any part of the Premises shall not
be deemed or construed as releasing Tenant from Tenant's  obligations  hereunder
or the acceptance of that party as a direct tenant;

                   (vii) Tenant,  shall have paid Landlord any reasonable  costs
incurred  by  Landlord  to  review  the  requested  consent  including,  without
limitation,  any reasonable  attorney's  fees incurred by Landlord not to exceed
$2,500.00;

                   (viii)  Tenant shall have  complied  with the  provisions  in
Section 11(f) with respect to any sublease;

                   (ix)  the  proposed  subtenant  or  assignee  is  not  (i) an
employment  or  recruitment  agency;  (ii)  a  school,  college,  university  or
educational  institution  whether or not for profit;  (iii) a government  or any
subdivision or agency thereof;  (iv) engaged in the business of providing office
space and  facilities to sublessees or licensees;  or (v) using the Premises for
manufacturing  or retail sales to the public;  or (vi) a public  stenographer or
typist,  barber shop, beauty shop, beauty parlor or shop, telephone or telegraph
agency, telephone or secretarial service, messenger service, commercial document
reproduction or offset printing service or public vending machine service;

                   (x) in the case of a subletting of a portion of the Premises,
the portion so sublet shall be regular in shape and suitable for normal  renting
purposes; and

                   (xi) the nature of the occupancy of the proposed  assignee or
subtenant  will not cause an  excessive  density of employees or traffic or make
excessive demands on the Building's services or facilities.


                                      -29-

<PAGE>   33

         11.(f) All subleases for which Landlord's  consent is required shall be
in a form reasonably  satisfactory to Landlord's counsel and approved in writing
at least two weeks prior to the  commencement  date of the sublease  term on all
the terms  contained in this Lease,  except that said sublease  shall provide as
follows:

                    (i)  The  sublease  shall  provide  that  in the  case  of a
subletting of a portion of the Premises subtenant shall erect a demising wall as
is  necessary  to separate  the  subleased  premises  from the  remainder of the
Premises and to provide access thereto; and

                    (ii) Such sublease shall negate expressly any intention that
any estate  created by or under such  sublease be merged  with any other  estate
held by either of the parties thereto.

         11.(g) If  Landlord  shall give its consent to any  assignment  of this
Lease or to any  sublease,  Tenant,  in  consideration  therefor,  shall pay the
following to Landlord, as additional rent:

                    o in the case of an  assignment,  an amount  equal to thirty
percent (30%) of all sums and other consideration paid to Tenant by the assignee
for or by reason of such  assignment  (including,  but not limited to, sums paid
for the sale or rental of Tenant's fixtures, leasehold improvements,  equipment,
furniture,  furnishings or other personal  property) less, in the case of a sale
thereof,  an amount  equal to the then net  unamortized  or  undepreciated  cost
thereof to Tenant determined on the basis of Tenant's federal income tax returns
except that,  with  respect to Tenant's  fixtures  and  leasehold  improvements,
depreciation  shall be computed on a straight-line  basis over the Term, without
regard to any renewal options); and

                    o in the case of a  sublease,  thirty  percent  (30%) of any
rents,  additional charges and other consideration payable under the sublease to
Tenant by the subtenant in excess of the fixed annual rent and  additional  rent
accruing  during the term of the sublease in respect of the subleased  space (at
the rate per square foot payable by Tenant hereunder)(including, but not limited
to,  sums  paid  for  the  sale  or  rental  of  Tenant's  fixtures,   leasehold
improvements, equipment, furniture or other personal property, less, in the case
of  the  sale  thereof,   an  amount  equal  to  the  then  net  unamortized  or
undepreciated cost thereof to Tenant determined on the basis of Tenant's federal
income tax returns except that, with respect to Tenant's  Fixtures and leasehold
improvements,  depreciation  shall be computed on a straight line basis over the
Term, without regard to any renewal options).

The sums payable  under this Section 11(g) shall be paid to Landlord as and when
paid by the assignee or subtenant to Tenant.


                                      -30-

<PAGE>   34

         11.(h) Notwithstanding  anything in this Lease to the contrary,  Tenant
shall  be  permitted  to  sublet,  on  no  more  than  three  occasions,  up  to
Twenty-Thousand  (20,000)  square feet of the Premises,  in  aggregate,  without
first  obtaining  Landlord's  prior written  consent so long as Tenant  provides
Landlord with (at least two weeks prior to its commencement  date) a copy of the
sublease and erects a demising wall in accordance with Section 11.(f)(i).

         11.(i) Tenant shall have the right,  without obtaining Landlord's prior
written consent,  to sublet all, or any part, of the Premises,  to any affiliate
or related entity of Tenant for purposes hereof; "affiliate" or "related entity"
shall  mean any  entity  in which  Tenant  owns  more  than  fifty  (50%) of the
interests  or any  entity  which  owns  more  than  fifty  percent  (50%) of the
interests in Tenant.

         11.(j) Tenant shall have the right,  without obtaining Landlord's prior
written consent,  to sublet all, or any part, of the Premises,  to any affiliate
or related entity of Tenant. For purposes hereof, "affiliated or related entity"
shall  mean any  entity  in which  Tenant  owns  more  than  fifty  (50%) of the
interests  or any  entity  which  owns  more than  fifty  (50%)  percent  of the
interests in Tenant.

         11.(k)  Landlord  shall have no  liability  for  brokerage  commissions
incurred with respect to any  assignment of this Lease or any  subletting of all
or any part of the  Premises by or on behalf of Tenant.  Tenant  shall pay,  and
shall indemnify and hold Landlord  harmless from and against,  any and all cost,
expense (including,  without limitation,  reasonable  attorneys' fees, costs and
disbursements) and liability in connection with any compensation, commissions or
charges  claimed by any broker or agent with respect to any such  assignment  or
subletting.

         11.(k) The  listing  of any name other than that of Tenant,  whether on
the doors of the Premises or the Building  directory,  or  otherwise,  shall not
operate to vest any right or  interest  in this Lease or in the  Premises in the
person or entity  therein  named,  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
Premises or to the use or occupancy thereof by others.

                                   ARTICLE 12.

                                   ELECTRICITY

         12.(a) For the purposes of this Article, the term "Electric Rate" shall
mean the  prevailing  rate Service  Classification  SC-9 (or  successor  service
classification  rate), and not the time of day rate schedule (if any), including
all surcharges, taxes, fuel costs and adjustments,  taxes regularly passed on to
consumers by the public utility, and other sums payable in respect thereof.

         12.(b) (i) Landlord shall, upon request of Tenant,  furnish and install
all  replacement  lighting  tubes,  lamps,  bulbs and  ballasts  required in the
Premises,  and Tenant shall pay to Landlord or its  designated  contractor  upon
demand the then  established  charges  therefor of  Landlord  or its  designated
contractor,  as the case may be.  Landlord  shall  not be  liable  in any way to
Tenant for any failure or defect in the supply or character  of electric  energy
furnished to the Premises by reason of any  requirement,  act or omission of the
public utility serving the Building or for any other reason not  attributable to
Landlord.  Tenant  shall  pay  for  the  cost  of  electricity  consumed  by any
supplemental air-conditioning equipment only servicing the Premises irrespective
of whether any such equipment is located in the Premises or in any other portion
of the Building. The term "air-conditioning equipment" as used herein shall be


                                      -31-

<PAGE>   35

deemed to include,  without  limitation,  all components and auxiliary equipment
used in connection with air-conditioning equipment servicing the Premises.

         12.(c)  Landlord will furnish 576 amps, 3 phase, 4 wire,  120/208 volts
of electric energy per floor distributed  amongst four panel locations per floor
( exclusive of the Building's heating,  ventilating and air-conditioning system)
to Tenant through presently existing electric facilities for Tenant's reasonable
use of its lighting, and other electrical fixtures, appliances and equipment.

         12.(d) Tenant's use of electric energy in the Premises shall not at any
time, in the  reasonable  judgment of Landlord cause or result in any impairment
or  interference  with Building  systems,  annoyance or  inconvenience  to other
tenants or the overloading of the risers or feeders serving the Building.

         12.(e) If any tax is imposed upon Landlord's  receipts from the sale or
resale of electrical energy service to Tenant by any Federal, state or municipal
authority,  Tenant covenants and agrees that,  where permitted by law,  Tenant's
pro rata share of such taxes based on Tenant's actual  electrical usage shall be
passed on, and  included in the bill of, and paid by,  Tenant to  Landlord.  All
sums due and payable to Landlord or its contractor, consultant or designee under
this  Article  12 shall be  payable as  additional  rent.  If all or part of the
amounts  payable by Tenant under this Article 12 for  electrical  energy becomes
uncollectible  or  reduced  or  refundable  by  virtue  of  any  law,  order  or
regulation,  the parties agree that, at Landlord's option, in lieu of electrical
submetering  or direct  metering,  and in  consideration  of Tenant's use of the
Building's   electrical   distribution   system  and  receipt  of  redistributed
electricity  and  payment  by  Landlord  of  the  consultant's  fees  and  other
distribution  expenses,  the fixed annual rent payable under this Lease shall be
increased by an amount  equal to the actual cost to Landlord of Tenant's  usage,
subject to Tenant's  right to dispute  such charge in  accordance  with  Section
12(i) hereof.

         12.(f) Landlord reserves the right to discontinue furnishing electrical
energy to Tenant in the Premises at any time upon not less than 120 days' notice
to Tenant.  If Landlord  exercises such right, this Lease shall continue in full
force and effect and shall be unaffected thereby, except that from and after the
effective  date of such  termination  Landlord shall not be obligated to furnish
electric  energy to Tenant.  If Landlord  so  discontinues  furnishing  electric
energy to Tenant,  Tenant shall arrange to obtain  electric energy directly from
the public utility  company  furnishing  electric  energy to the Building.  Such
electric  energy  may be  furnished  to  Tenant  by means  of the then  existing
building system  feeders,  risers and wiring to the extent that the same are, in
Landlord's reasonable judgment,  available,  suitable and safe for such purpose.
All  meters and  additional  panel  boards,  feeders,  risers,  wiring and other
conductors and equipment  whatsoever,  which may be required to obtain  electric
energy directly from such public utility company whether currently available for
Tenant's use or


                                      -32-

<PAGE>   36

requiring  Landlord's  installation shall be furnished and installed by Landlord
at Landlord's sole cost and expense.

         12.(g) (i)  Notwithstanding  anything to the contrary contained in this
Article,  Tenant,  at any time  during the Term on not less than 30 days'  prior
written notice to Landlord,  may purchase electricity directly from Consolidated
Edison or any other  supplier  of  electric  energy.  If Tenant  shall  elect to
purchase  electricity directly from Consolidated Edison or any other supplier of
electric energy, then all meters and additional panel boards,  feeders,  risers,
wiring and other conductors and equipment  whatsoever,  which may be required to
obtain  electric  energy  directly from such public  utility  company,  shall be
furnished  and  installed by Tenant at Tenant's  sole cost and expense (but with
Landlord's reasonable cooperation).

                   (ii) If and so long as Landlord  provides  electricity to the
Premises on a submetering basis:

                         o Tenant covenants and agrees to purchase the same from
Landlord or  Landlord's  designated  agent at the Electric Rate plus an overhead
charge ("Overhead Charge") equal to four percent (4%) (collectively  "Electrical
Charge")  excluding the 4% Overhead Charge on any sales taxes,  representing the
Landlord's administrative costs.

         12.(h)     INTENTIONALLY OMITTED

         12.(i) In the event Landlord or Tenant shall dispute any findings under
this  Article,  either  party  may,  within 1 year of  receiving  notice of such
findings, dispute the findings by serving a notice in accordance with Article 31
hereof on the other party.  The right to dispute such  findings  shall be deemed
waived unless such a notice is served in accordance with this Lease within the 1
year  period.  In the case where a notice is timely  served in  accordance  with
Article 31 hereof the dispute  shall be resolved by  arbitration  in  accordance
with Article 3 of this Lease.

                                   ARTICLE 13.

                         ADJACENT EXCAVATION -- SHORING

         13.(a) If an excavation or other  substructure  work shall be made upon
land adjacent to 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 upon the Premises for the purpose of doing such work as shall be necessary
to  preserve  the wall of the  Building of which the  Premises  form a part from
injury or damage and to support the same by proper foundations.


                                      -33-

<PAGE>   37

                                   ARTICLE 14.

                                  CONDEMNATION

         14.(a) In the event that the whole of the  Premises  lawfully  shall be
condemned or taken in any manner for any public or quasi-public  use, this Lease
and the Term and estate hereby  granted shall cease and terminate as of the date
of vesting of title,  as if that were the Expiration  Date, and the fixed annual
rent and the additional rent payable  pursuant to Articles 1 and 4 of this Lease
shall be apportioned as of such date.

         14.(b)  In the  event  that  only a part of the  Premises  shall  be so
condemned  or taken,  then,  unless a greater  part of the Premises is no longer
useful,  effective as of the date of vesting of title, the fixed annual rent and
the additional rent payable  pursuant to Articles 1 and 4 hereof shall be abated
in an  amount  thereof  apportioned  according  to the area of the  Premises  so
condemned or taken. In the event that such  condemnation or taking shall be of a
substantial  part of the  Premises or  materially  affects  Tenant's  use of the
Premises or of a substantial part of the means of access thereto,  including use
of the  semi-exclusive  entrance on 37th Street,  Tenant, at Tenant's option, by
delivery of notice in writing to Landlord  within 30 days  following the date on
which Tenant shall have received notice of vesting of title,  may terminate this
Lease and the Term and estate hereby granted as of the date of vesting of title,
if neither  Landlord nor Tenant  elects to terminate  this Lease,  as aforesaid,
this Lease shall be and shall remain  unaffected by such condemnation or taking,
except that the fixed annual rent and the  additional  rent payable  pursuant to
Articles 1 and 4 shall be abated to the  extent  hereinbefore  provided  in this
Article 14. In the event that only a part of the Premises  shall be so condemned
or taken and this Lease and the Term and estate  hereby  granted with respect to
the  remaining  portion  of the  Premises  are not  terminated  as  hereinbefore
provided,  Landlord,  with reasonable diligence and at its expense, will restore
the  remaining  portion of the  Premises  as nearly as  practicable  to the same
condition as it was in prior to such condemnation or taking.

         14.(c)  In  the  event  of  any  condemnation  or  taking  hereinbefore
mentioned  of all or a part of the  Building,  Landlord  shall  be  entitled  to
receive the entire award in the  condemnation  proceeding,  including  any award
made for the value of the  estate  vested by this  Lease in  Tenant,  and Tenant
hereby  expressly  assigns to Landlord any and all right,  title and interest of
Tenant now or hereafter arising in or to any such award or any part thereof, and
Tenant  shall be  entitled  to receive no part of such  award.  Tenant  shall be
entitled to make a separate claim for the value of its trade  fixtures  actually
taken and for moving expenses.


                                      -34-

<PAGE>   38

         14.(d)  If the  temporary  use or  occupancy  of all or any part of the
Premises shall be taken by condemnation or in any other manner for any public or
quasi-public use or purpose 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 Premises,
for the taking of 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 Premises.  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 in full the fixed  annual rent and  additional
rent due. If the period of temporary  use or occupancy  shall extend  beyond the
Expiration  Date, that part of the award which  represents  compensation for the
use and occupancy of the Premises (or a part  thereof)  shall be given to Tenant
so that Tenant shall receive so much thereof as represents  the period up to and
including the Expiration Date.

         14.(e)  In the  event  of any  taking  of less  than  the  whole of the
Building that does not result in a termination of this Lease, or in the event of
a taking for a temporary  use or  occupancy  of all or any part of the  Premises
that does not result in a termination of this Lease,  Landlord,  at its expense,
and  whether or not any award or awards  shall be  sufficient  for the  purpose,
shall  proceed  with  reasonable  diligence  to repair,  alter and  restore  the
remaining parts of the Building and the Premises to  substantially  their former
condition to the extent that the same may be feasible and so as to  constitute a
tenantable Building and Premises.

         14.(f) In the  event  that any part of the  Premises  shall be taken to
effect  compliance with any law or requirement of public authority other than in
the manner hereinabove provided in this Article 14, then, (a) if such compliance
is the  obligation  of Tenant under this Lease,  Tenant shall not be entitled to
any  diminution  or  abatement  of  rent or  other  compensation  from  Landlord
therefor,  but (b) if such  compliance is the  obligation of Landlord under this
Lease,  the fixed  annual  rent  payable  under  Article 1 shall be reduced  and
additional  rent  payable  under  Articles 1 and 4 shall be adjusted in the same
manner as is provided in Section  14(a)  according to the  reduction in rentable
area of the Premises resulting from such taking.

                                   ARTICLE 15.

                           ACCESS TO PREMISES; CHANGES

         15.(a)  Tenant  shall permit  Landlord  (i) to erect,  use and maintain
pipes,  ducts and  conduits in and through the  Premises,  provided the same are
installed  and  concealed  behind  walls and  ceilings of the  Premises or in an
innocuous manner or in such manner as shall not unreasonably impair Tenant's use
of the Premises, and (ii) to use any air-conditioning rooms, telephone equipment
rooms, heating, ventilating,


                                      -35-

<PAGE>   39

air-conditioning,  electrical  and  mechanical  facilities  and service  closets
(collectively,  the "Building  Equipment") in the Premises in a manner so as not
to unreasonably  impair  Tenant's use of such rooms and facilities.  Landlord or
its agents or  designees  shall have the right:  (i) to enter the  Premises,  at
reasonable times on reasonable notice during Business Hours on Business Days, to
examine  such pipes,  ducts,  conduits  and  Building  Equipment  or to make any
repairs or alterations  in a reasonable  manner that Landlord may deem necessary
or reasonably  desirable for the Building or that Landlord  shall be required to
or shall  have the right to make by the  provisions  of this  Lease or any other
lease in the Building,  and (ii) to take all material into and upon the Premises
that may be required for the repairs or alterations  above mentioned as the same
is  required  for such  purpose,  without the same  constituting  an eviction of
Tenant in whole or in part,  and the rent  reserved  shall in no way abate while
said repairs or alterations  are being made by reason of loss or interruption of
the business of Tenant because of the  prosecution  of any such work;  provided,
however,  that  Landlord  shall  exercise  reasonable  diligence to minimize any
disturbance  to Tenant but nothing  contained  herein shall be deemed to require
Landlord to perform  the same on an  overtime  or premium  pay basis  unless the
inconvenience  or  annoyance to Tenant's  business  materially  interferes  with
Tenant's business operations.

         15.(b) Landlord  reserves the right,  without the same  constituting an
eviction  and without  incurring  liability  to Tenant  therefor,  to change the
arrangement and/or location of public entrances,  passageways,  doors, doorways,
corridors,  elevators  (except for the  semi-exclusive  elevator(s) and Building
entrance  located on 37th street  designated  for  Tenant's  use as set forth in
Article 21 of this  Lease),  stairways,  toilets and other  public  parts of the
Building;  provided,  however, that: (i) Tenant shall continue to have access to
the Building;  and (ii)  Landlord  does not  interfere  with Tenant's use of the
semi-exclusive entrance to the Building on 37th Street or Tenant's exclusive use
of one of two existing elevators in the Building on 37th Street.  Landlord shall
use reasonable efforts not to have any floors of the Premises designated as fire
"re-entry" floors.

         15.(c)  Landlord  may,  during  the last  year of the term  hereof,  on
reasonable prior notice to Tenant,  exhibit the Premises to prospective tenants;
provided,  however, that in the event of a default,  after applicable notice and
grace  periods,  by Tenant  hereunder,  Landlord  may  exhibit  the  Premises to
prospective  tenants at reasonable  times on reasonable  notice.  Landlord shall
also have the right to enter the  Premises  at  reasonable  times on  reasonable
notice for the purpose of exhibiting  them to prospective  purchasers or lessees
of the entire Building or to prospective  mortgagees or to prospective assignees
of any  such  mortgages  or to the  holder  of any  mortgage  on the  Landlord's
interest in the property, its agents or designees.

         15.(d) If Tenant shall not be present  personally to open and to permit
an entry  into the  Premises  at any time when for any  reason an entry  therein
urgently  shall be  necessary  in case of fire or other  emergency,  Landlord or
Landlord's agents may enter


                                      -36-

<PAGE>   40

the same forcibly without rendering  Landlord or such agents liable therefor (if
during such entry Landlord or Landlord's  agents shall accord reasonable care to
Tenant's  property)  and without in any manner  affecting  the  obligations  and
covenants of this Lease.

                                   ARTICLE 16.

                            CONDITIONS OF LIMITATION

         16.(a) This Lease and the Term and estate hereby granted are subject to
the limitation  that whenever  Tenant shall be unable to pay its debts generally
as they become due, or shall make an  assignment  of the  property of Tenant for
the benefit of creditors,  or shall consent to, or acquiesce in, the appointment
of a liquidator, receiver, trustee, or other custodian of itself or the whole or
any part of its  properties or assets,  or shall  commence a voluntary  case for
relief  under the  United  States  Bankruptcy  Code or file a  petition  or take
advantage of any  bankruptcy or insolvency act or applicable law of like import,
or whenever an involuntary case under the United States Bankruptcy Code shall be
commenced  against  Tenant or if a  petition  shall be filed  against it seeking
similar  relief under any  bankruptcy or insolvency or other  applicable  law of
like import, or whenever a receiver, liquidator,  trustee, or other custodian of
Tenant  or of or for  substantially  all of the  property  of  Tenant  shall  be
appointed without Tenant's consent or acquiescence,  then, (a) at any time after
receipt  of notice of the  occurrence  of any such  event,  or (b) if such event
occurs without the acquiescence of Tenant, at any time after the event continues
for 120 days,  Landlord may give Tenant a notice of intention to end the Term at
the  expiration  of five  days  from  the  date of  service  of such  notice  of
intention,  and upon the expiration of said five day period,  this Lease and the
Term and estate hereby granted,  whether or not the Term shall  theretofore have
commenced,  shall  terminate  with  the  same  effect  as if that  day  were the
Expiration  Date,  but Tenant  shall  remain  liable for  damages as provided in
Article 18.

                         16.(b)  This  Lease  and the  Term  and  estate  hereby
granted are subject to further limitation as follows:

                    (i) whenever  Tenant shall do or permit anything to be done,
whether  by  action  or  inaction,  contrary  to  any  of  Tenant's  obligations
hereunder,  other than the failure to pay fixed annual rent or additional  rent,
and if such situation  shall continue and shall not be remedied by Tenant within
twenty (20) days (within ten (10) days,  in the case of Tenant's  failure (A) to
keep in force  insurance  throughout  the Term and  furnish any  certificate  of
insurance  required  under  Article  6 or 9 or (B)  to  furnish  any  instrument
required  under Article 25 or 26),  after  Landlord shall have given to Tenant a
notice  specifying the same or in the case of a happening or default that cannot
with  due  diligence  be  cured  within a period  of  twenty  (20)  days and the
continuation of


                                      -37-

<PAGE>   41

which for the period required for cure will not subject  Landlord to the risk of
criminal  liability  (as more  particularly  described  in  Article 8 hereof) or
termination of any superior lease or  foreclosure of any superior  mortgage,  if
Tenant  shall not,  (i) within  said 20 day period  advise  Landlord of Tenant's
intention duly to institute all steps necessary to remedy such  situation,  (ii)
duly  institute  within  said  20 day  period,  and  thereafter  diligently  and
continuously  prosecute to completion all steps necessary to remedy the same and
(iii) complete such remedy within such time after the date of the giving of said
notice by Landlord as shall reasonably be necessary, or

                    (ii) whenever any event shall occur or any contingency shall
arise whereby this Lease or the estate hereby  granted or the unexpired  balance
of the Term hereof, by operation of law or otherwise, would devolve upon or pass
to any  person,  firm or  corporation  other than  Tenant,  except as  expressly
permitted by Article 11 and the same shall not be remedied  within five (5) days
after written notice by Landlord in accordance with Article 31 hereof, or

                    (iii)  whenever  Tenant shall abandon the Premises or vacate
the  Premises  without  paying the Fixed  Annual  Rent and the same shall not be
remedied  within five (5) days after  written  notice by Landlord in  accordance
with Article 31 hereof, or

                    (iv)  whenever  Tenant  shall  default  in the due  keeping,
observing or performance of any covenant,  agreement,  provision or condition of
Article 5 hereof on the part of Tenant to be kept,  observed  or  performed  and
such default shall  continue and shall not be remedied by Tenant within 72 hours
after Landlord shall have given to Tenant a notice specifying the same,

then in any of said  cases  set  forth  in the  foregoing  subsections  (i)-(iv)
Landlord  may give to Tenant a notice of intention to end the Term of this Lease
at the  expiration  of seven days from the date of the service of such notice of
intention,  and upon the  expiration  of said seven days this Lease and the Term
and  estate  hereby  granted,  whether or not the Term  shall  theretofore  have
commenced,  shall  terminate with the same effect as if that day were the end of
the Term, but Tenant shall remain liable for damages as provided in Article 18.

                                   ARTICLE 17.

                        RE-ENTRY BY LANDLORD; INJUNCTION

         17.(a) If Tenant  shall  default in the payment of any  installment  of
fixed annual rent, or of any additional  rent, on any date that the same becomes
due,  and such  default  shall  continue  uncured for ten days after  notice and
demand,  or if this Lease shall  expire as in Article 16  provided,  Landlord or
Landlord's  agents  and  employees  immediately  or at any time  thereafter  may
re-enter  the  Premises,  or any part  thereof,  either  by  summary  dispossess
proceedings or by any suitable action or proceeding at


                                      -38-

<PAGE>   42

law, without being liable to indictment, prosecution or damages therefor, to the
end that  Landlord  may have,  hold and enjoy the  Premises  again as and of its
first estate and interest  therein.  The word  re-enter,  as herein used, is not
restricted to its technical  legal meaning.  In the event of any  termination of
this Lease under the  provisions of Article 16 or if Landlord shall re-enter the
Premises  under  the  provisions  of  this  Article  17 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,  (a) Tenant thereupon shall pay to Landlord the
fixed  annual rent and  additional  rent payable by Tenant to Landlord up to the
time of such termination of this Lease, or of such recovery of possession of the
Premises  by  Landlord,  as the case may be,  and (b)  Tenant  also shall pay to
Landlord damages as provided in Article 18.

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

         17.(c) If this Lease shall  terminate  under the  provisions of Article
16, or if Landlord  shall  re-enter the Premises  under the  provisions  of this
Article 17, 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 moneys,  if any,  paid by Tenant to Landlord,  whether as
advance  rent,  security  or  otherwise,  but such  moneys  shall be credited by
Landlord against any fixed annual rent or additional 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 18 or pursuant to law.

         17.(d) Tenant expressly waives any and all rights of redemption granted
by or under any present or future laws in the event of Tenant  being  evicted or
dispossessed for any cause, or in the event of Landlord obtaining  possession of
the  Premises,  by reason of the violation by Tenant of any of the covenants and
conditions of this Lease or otherwise.

                                   ARTICLE 18.

                                     DAMAGES

         18.(a) If this Lease is terminated  under the provisions of Article 16,
or if Landlord  shall  re-enter the Premises under the provisions of Article 17,
or in the event of the  termination of this Lease,  or of re-entry,  by or under
any summary dispossess


                                      -39-

<PAGE>   43

or other  proceeding  or action  or any  provision  of law by reason of  default
hereunder on the part of Tenant, Tenant shall pay to Landlord as damages, at the
election of Landlord, either

                    (i) 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

                         (1) the  aggregate  of the  fixed  annual  rent and the
                    additional  rent  payable  hereunder  that  would  have been
                    payable by Tenant  (conclusively  presuming  the  additional
                    rent to be the same as was payable for the year  immediately
                    preceding such  termination  except that  additional rent on
                    account of  increases in Taxes shall be presumed to increase
                    at the average of the rates of increase  thereof  previously
                    experienced  by Landlord  during the period (not to exceed 3
                    years) prior to such  termination) 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,  had this Lease not so  terminated  or had
                    Landlord not so reentered the Premises, over

                         (2) the aggregate  rental value of the Premises for the
                    same  period  (each sum in  subparagraphs  (1) and (2) being
                    first  discounted  to  present  value at the rate then being
                    paid by new ten year U.S. Treasury Bonds); or

                    (ii) sums equal to the  aggregate  of the fixed  annual rent
and the additional  rent (as above presumed)  payable  hereunder that would have
been payable by Tenant had this Lease not so terminated,  or had Landlord not so
reentered the 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  re-let the  Premises  during said
period,  Landlord  shall credit  Tenant with the net rents  received by Landlord
from such  re-letting,  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 reentering
the  Premises  and in securing  possession  thereof,  as well as the expenses of
reletting,  including  altering  and  preparing  the  Premises  for new tenants,
brokers' commissions,  attorneys' fees and disbursements, and all other expenses
properly  chargeable  against  the  Premises  and the rental  thereof;  it being
understood  that any such  re-letting may be for a period shorter or longer than
the remaining Term and that Landlord may grant concessions and free rent; 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, or shall Tenant be entitled in
any suit for the collection of damages  pursuant to this  subsection to a credit
in respect of any net rents from a re-  letting,  except to the extent that such
net rents actually are received by Landlord. If


                                      -40-

<PAGE>   44

the  Premises or any part  thereof  should be re-let in  combination  with other
space,  then  proper  apportionment  on a square foot basis shall be made of the
rent received from such  re-letting and of the expenses of re-letting.  Landlord
in no event  shall be liable in any way  whatsoever  for  failure  to re-let the
Premises nor shall such failure affect Tenant's liability for damages.

         18.(b) If the Premises or any part thereof  shall be re-let by Landlord
for the unexpired portion of the Term, or any part thereof,  before presentation
of proof of such damages to any court,  commission  or  tribunal,  the amount of
rent  reserved  upon  such  re-letting,  prima  facie,  shall  be the  fair  and
reasonable rental value for the Premises,  or part thereof, so re-let during the
term of the re-letting.

         18.(c)  Suit  or  suits  for  the  recovery  of  such  damages,  or any
installments  thereof,  may be  brought  by  Landlord  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 16, or under any provision of law,
or had Landlord not reentered the Premises.

                                   ARTICLE 19.

                LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS

         If Tenant shall default in the observance or performance of any term or
covenant on Tenant's part to be observed or performed  under or by virtue of any
of the terms or  provisions  in any Article of this Lease beyond all  applicable
grace  and cure  periods  after  notice,  (a)  Landlord  may,  but  shall not be
obligated  to,  remedy such default for the account of Tenant,  immediately  and
without  notice in case of  emergency,  or in any other case only  provided that
Tenant  shall fail to remedy such  default with all  reasonable  dispatch  after
Landlord  shall  have  notified  Tenant  in  writing  of  such  default  and the
applicable  grace period for curing such default shall have expired;  and (b) if
Landlord makes any  expenditures  or incurs any  obligations  for the payment of
money in connection with such default (including, but not limited to, reasonable
attorneys'  fees  in  instituting,   prosecuting  or  defending  any  action  or
proceeding),  such  sums  paid or  obligations  incurred  shall be  deemed to be
additional rent hereunder and shall be paid by Tenant to Landlord within fifteen
days after rendition of a bill to Tenant therefor  together with interest at the
Interest Rate.

                                   ARTICLE 20.

                                 QUIET ENJOYMENT

         Landlord covenants and agrees that,  subject to the terms,  obligations
and provisions of this Lease, if, and so long as, Tenant keeps and performs each
and every


                                      -41-

<PAGE>   45

covenant,  agreement, term, provision and condition herein contained on the part
or on behalf of Tenant to be kept or  performed,  then Tenant may  peaceably and
quietly enjoy the Premises and Tenant's rights under this Lease shall not be cut
off or ended before the expiration of the Term of this Lease.

                                   ARTICLE 21.

                             SERVICES AND EQUIPMENT

         21.(a) Landlord shall throughout the Term,  provided that Tenant is not
in default of any of the terms or  conditions of this lease,  beyond  applicable
notice and grace periods:

                    (i)  provide  Tenant  with  a  separate  and  semi-exclusive
entrance to the Building on 37th Street  together with only the other tenants at
the Building for which the 37th street entrance is its sole means of egress. One
of the two existing elevators located in the 37th Street lobby shall be used for
the  sole  and  exclusive  use of  Tenant.  The  second  elevator  shall be made
available to all tenants at the  Building for which the 37th street  entrance is
its sole means of egress.  The  elevator  facilities  (excluding  the 5th Avenue
entrance which will be made available  during  Business Hours on Business Days),
will be  provided  to  Tenant 24 Hours per day,  7 days per week.  Landlord  has
advised Tenant that the three  elevators  servicing the Fifth Avenue entrance to
the Building may be upgraded and refurbished.

                    (ii)  maintain and keep in good order and repair the heating
and building- wide  air-conditioning  systems that serve the Premises.  Landlord
shall provide heat during  Business Hours on Business Days and  air-conditioning
supplied by the Building's system (and not by any supplemental  system servicing
the Premises)  during  Business  Hours on Business  Days,  maintaining  interior
conditions   of   72(degree)   -   77(degree)   in  the   cooling   season   and
66(degree)-74(degree)  in the  heating  season and will  provide  fresh air in a
quantity  not less than .14  (14/100)  cubic feet per minute per square  foot of
floor area provided that in any given room or area of the Premises the occupancy
does not exceed one (1) person for each 100 square feet.  Landlord shall have no
responsibility or liability for the ventilating conditions and/or temperature of
the Premises  during the hours or days  Landlord is not required to furnish heat
or air  conditioning  pursuant to this  Article.  Tenant  shall cause all of the
windows in the Premises to be kept closed and shall keep  entirely  unobstructed
all the vents,  intakes,  outlets and grilles whenever the  air-conditioning  or
heating  system is in operation and shall comply with and observe all reasonable
regulations and requirements  prescribed by Landlord for the proper  functioning
of  the  heating,  ventilating  and  air-conditioning  systems.  Notwithstanding
anything in this Lease to the contrary,  Tenant shall be solely  responsible for
all maintenance  costs of the  supplemental  air-conditioning  system  presently
servicing  the  Premises.  Nothing  contained  herein shall be deemed to require
Landlord to furnish at Landlord's expense such electric energy as is required to
operate the supplemental  air-


                                      -42-

<PAGE>   46

conditioning  and  ventilating  systems  serving  the  Premises.  Subject to the
provisions of Article 12 hereof all such  electric  energy shall be furnished by
Landlord to Tenant at Tenant's cost and expense  except for electric  energy for
the  building-wide  air-conditioning  systems  which  Landlord  shall furnish at
Landlord's cost. If Tenant shall require air conditioning at times when Landlord
is not required to furnish same,  Tenant shall give Landlord notice,  by noon of
the same day, of such requirement and, if same is furnished by Landlord,  Tenant
shall pay on demand Landlord's  reasonable charges not to exceed $90.00 per hour
for the entire Premises, as additional rent for air-conditioning  Monday through
Friday  after 6:00 P.M.,  Saturdays  after 1:00 P.M.  and  Sundays all day which
overtime charge may be increased by Landlord in direct  proportion to Landlord's
costs increase therefor.  If Tenant shall require heating at times when Landlord
is not required to furnish same,  Tenant shall give Landlord notice,  by noon of
the same day, of such requirement and, if same is furnished by Landlord,  Tenant
shall pay on demand Landlord's  reasonable charges not to exceed $90.00 per hour
for the entire  Premises as additional  rent for heating  Monday  through Friday
after 6:00 P.M.,  Saturdays  after 1:00 P.M. and Sundays all day, which overtime
charge may be increased by Landlord in direct  proportion  to  Landlord's  costs
increase therefor.  In the event another Tenant in the Building advises Landlord
that it requires overtime heating or air-conditioning  service from Landlord and
Tenant  subsequently  requests  overtime  heating or  air-conditioning  service,
Landlord  shall not charge Tenant for such overtime  service so long as Landlord
receives full compensation for such overtime service.

                    (iii) Tenant shall maintain the Premises in a neat and clean
manner.  Tenant  shall  provide,  at its sole  cost and  expense,  all  cleaning
supplies  and  materials  as Tenant  deems  necessary,  Landlord  shall  have no
obligation to provide any cleaning  services  whatsoever or furnish any cleaning
supplies or materials to the Premises, except that Landlord shall be responsible
for  the  carting  and  disposal  of all of  Tenant's  refuse  and  rubbish.  In
consideration  thereof,  the Fixed Annual Rent due hereunder  shall be decreased
("Decrease") by Seventy-Eight  Thousand Dollars  ($78,000.00) per annum from the
date Tenant takes physical occupancy of the Premises through the day immediately
preceding the second  anniversary of the Commencement Date, which Decrease shall
be increased on each  anniversary of the  Commencement  Date by multiplying  the
Decrease for the  immediately  preceding  year by a fraction,  the  numerator of
which shall be the CPI in effect on the immediately preceding anniversary of the
Commencement  Date and the  denominator  of which  shall be the CPI in effect on
such anniversary of the Commencement Date. The amount of the Decrease,  for each
year of the Term,  (including the first year of the Term) shall be credited,  in
equal monthly  installments,  against the next installments of fixed annual rent
payable  hereunder.  For  example,  if Tenant  takes  physical  occupancy of the
Premises on March 1, 1997 and the Commencement Date of this Lease is December 1,
1996,  the total  Decrease for the period  through the date preceding the second
anniversary of the Commencement Date would be equal to $136,500.00 ($78,000.00 /
12 =$6,500.00 x 21 months) which will be credited against fixed annual rent from
the


                                      -43-

<PAGE>   47

first anniversary of the Commencement Date through the second anniversary of the
Commencement Date in equal monthly installments of $11,375.00.

                    (iv)  Furnish  hot and cold  water for  lavatory,  drinking,
plant watering and office  cleaning  purposes.  If Tenant uses or consumes water
for any other  purposes in unusual  quantities,  Landlord may install a meter or
meters or other means to measure  Tenant's water  consumption,  and Tenant shall
reimburse  Landlord  for the cost of the  meter or meters  and the  installation
thereof,  and shall pay for the maintenance of said meter equipment and/or shall
pay  Landlord's  costs of other means of  measuring  such water  consumption  by
Tenant.  Tenant shall  reimburse  Landlord for the cost of all water consumed in
unusual  quantities,  including sewer rents, as measured by said meter or meters
or as otherwise measured, and the cost to heat such water.


         21.(b) Landlord  reserves the right,  without any liability  whatsoever
and without  abatement  of fixed  annual rent or  additional  rent,  to stop the
heating,  air-conditioning,  elevator,  plumbing,  sanitary,  electric and other
systems  when  necessary  by reason of accident  or  emergency  or for  repairs,
alterations,  replacements  or  improvements,  provided  that  except in case of
emergency,  Landlord  will notify  Tenant in advance,  if possible,  of any such
stoppage  and,  if  ascertainable,  its  estimated  duration,  and will  proceed
diligently  with the work  necessary  to resume  such  service  as  promptly  as
possible and in a manner so as to minimize  interference  with  Tenant's use and
enjoyment of the Premises. Landlord shall not be liable in any way to Tenant for
any failure of the  heating,  air-conditioning,  elevator,  plumbing,  sanitary,
electric  and other  systems by reason of any failure or defect in the supply or
character  of electric  energy  furnished to the Building or the Premises by the
public utility serving the Building.

         21.(c) Landlord,  at Tenant's  request,  shall maintain listings on the
Building  directory of the names of Tenant,  permitted  assignees or subtenants,
and the names of any of Tenant's officers and employees, provided, however, that
the aggregate number of names so listed shall not exceed  sixty-seven  (67). The
reasonable  charge of Landlord  for any changes in such  listings  requested  by
Tenant shall be paid by Tenant to Landlord on demand.

         21.(d)  Landlord  shall not be required to furnish any other  services,
except as otherwise provided in this Lease. However,  Landlord agrees to provide
Tenant,  throughout the Term, services similar to those of comparable  buildings
in the borough of Manhattan.

         21. (e) Landlord  upon  reasonable  notice from Tenant,  shall  provide
Tenant with access to building  risers,  shafts and  conduits for the purpose of
running  cabling  or  wiring  in  connection  with  Tenant's  installation  of a
communication system.


                                      -44-

<PAGE>   48

         21. (f) Landlord  shall  maintain the  sprinkler  system  servicing the
Premises.  However,  Landlord  shall not be  obligated  to repair the  sprinkler
system  servicing  the  Premises  if  damage to the  sprinkler  system is due to
Tenant's negligence or wilful conduct.

                                   ARTICLE 22.

                               HAZARDOUS MATERIALS


         22.(a) Tenant shall not, without the prior written consent of Landlord,
cause or knowingly permit,  any Hazardous Material  (hereinafter  defined) to be
brought or remain upon,  kept or used in or about the Premises or the  Building.
As used in this Lease, "Hazardous  Material(s)" shall mean any hazardous,  toxic
or  radioactive  substance,  material,  matter  or  waste  which  is or  becomes
regulated by any federal,  state or local law, rule regulation,  code, ordinance
or any  other  governmental  restriction  or  requirement.  However,  "Hazardous
Materials"  shall  not  include  asbestos  or  substances  which are used in the
ordinary  course of a business  similar to  Tenant's  as  permitted  pursuant to
Article 5 of this  Lease,  provided,  however,  that such  substances  are used,
handled,  transported or stored in strict  compliance with any applicable  Legal
Requirement. If such substances are not so used, handled,  transported or stored
then they shall be deemed  "Hazardous  Materials"  for  purposes  of this Lease.
Should  Landlord  consent in writing to Tenant  bringing,  using or storing  any
Hazardous  Material  in or upon  the  Premises  or the  Building,  Tenant  shall
strictly  obey and  adhere  to any and all Legal  Requirements  which in any way
regulates,  governs or impacts Tenant's possession,  use, storage or disposal of
said  Hazardous  Material.   Upon  Landlord's  written  request,  prior  to  the
Commencement  Date of this  Lease,  and on  January 1 of each  year  thereafter,
Tenant  shall  disclose  in writing  to  Landlord  the names and  amounts of all
Hazardous Material which Tenant is then currently or is intending to bring, use,
or store in or upon the  Premises or the  Building,  or which  Tenant has in the
past brought, used or stored in or upon the Premises or the Building.

         22.(b) In addition  to, and in no way  limiting  Landlord's  duties and
obligations  as set  forth  in  this  Lease,  should  Tenant  breach  any of its
respective  duties  and  obligations  as set  forth  in this  Article  or if the
presence of any Hazardous  Material in or upon the Premises or the Building that
Tenant causes or knowingly permits to brought upon, used,  remained upon or kept
at the Premises  (excluding  those Hazardous  Materials that were present in the
Premises prior to Tenant's occupancy and those Hazardous  Materials brought upon
the Premises by Landlord after Tenant's  occupancy)  results in contamination of
the Premises,  the Building,  any land or the Building,  the atmosphere,  or any
water or waterway (including groundwater),  or if contamination of the Premises,
or the Building by any Hazardous  Material  otherwise occurs for which Tenant is
otherwise legally liable to Landlord for damage resulting


                                      -45-

<PAGE>   49

therefrom,  Tenant shall indemnify, save harmless, and, at Landlord's option and
with  attorneys  approved in writing by Landlord  (which  approval  shall not be
unreasonably  withheld or  delayed),  defend  Landlord,  its agents,  employees,
partners, officers,  directors, and mortgagees, if any, from any and all claims,
demands, damages,  expenses, fees, costs, fines, penalties,  suits, proceedings,
actions,  causes  of  action,  and  losses  of any and  every  kind and  nature,
including,  without  limitation,  diminution  in  value of the  Premises  or the
Building,  damages for the loss or  restriction on use of the rentable or usable
space or of any amenity of the Premises or the  Building,  damages  arising from
any  adverse  impact  on  marketing  space in the  Building,  and  sums  paid in
settlement of claims and for reasonable  attorneys'  fees,  consultant  fees and
expert  fees,  which may arise  during or after the Lease Term or any  extension
thereof as a result of such  contamination.  This includes,  without limitation,
reasonable costs and expenses  incurred in connection with any  investigation of
site conditions or any cleanup,  remedial,  removal or restoration work required
by any federal,  state or local  governmental  agency or  political  subdivision
because of Hazardous Material present on or about the Premises  (excluding those
Hazardous  Materials  that  were  present  in the  Premises  prior  to  Tenant's
occupancy and those  Hazardous  Materials  brought upon the Premises by Landlord
after Tenant's occupancy,  that Tenant causes or permits knowingly to be brought
upon, used, remained upon or kept at the Premises) or because of the presence of
Hazardous Material anywhere else which came or otherwise emanated from Tenant or
the  Premises  (excluding  those  Hazardous  Materials  that were present in the
Premises prior to Tenant's occupancy and those Hazardous  Materials brought upon
the Premises by Landlord after Tenant's occupancy, that Tenant causes or permits
knowingly to be brought  upon,  used,  remained  upon or kept at the  Premises).
Without limiting the foregoing,  if the presence of any Hazardous Material on or
about the Premises, or the Building caused or permitted by Tenant results in any
contamination  of the  Premises  or the  Building,  Tenant  shall,  at its  sole
expense,  promptly  take all actions as are necessary to return the Premises and
the Building to the condition  existing  prior to the  introduction  or any such
Hazardous  Material to the Premises and the Building;  provided,  however,  that
Landlord's approval of such actions shall first be obtained.

                                   ARTICLE 23.

                           INVALIDITY OF ANY PROVISION

         If any term,  covenant,  condition  or  provision  of this Lease or the
application  thereof to any  circumstance or to any person,  firm or corporation
shall be invalid or unenforceable to any extent, the remaining terms, covenants,
conditions  and  provisions  of this  Lease or the  application  thereof  to any
circumstances or to any person, firm or corporation other than those as to which
any term,  covenant,  condition or  provision is held invalid or  unenforceable,
shall not be affected thereby and each


                                      -46-

<PAGE>   50

remaining term,  covenant,  condition and provision of this Lease shall be valid
and shall be enforceable to the fullest extent permitted by law.

                                   ARTICLE 24.

                                    BROKERAGE

         Tenant  covenants,  represents  and  warrants  that  Tenant  has had no
dealings  or  negotiations  with any broker or agent  other than the  Brokers in
connection  with  the  consummation  of  this  Lease,  and  Landlord  covenants,
represents and warrants that Landlord has had no dealings or  negotiations  with
any broker or agent other than the Brokers in connection  with the  consummation
of this Lease.  Tenant and Landlord covenant and agree to pay, hold harmless and
indemnify  each  other from and  against  any and all cost,  expense  (including
reasonable  attorneys' fees) and liability in connection with any  compensation,
commissions  or charges  claimed by any broker or agent,  claiming to have dealt
with it, other than the Brokers,  with respect to this Lease or the  negotiation
thereof.  Landlord  agrees to pay S.L. Green Real Estate in connection  with the
consummation  of this Lease and Tenant agrees to pay Jenel  Management  Corp. in
connection  with the  consummation of this Lease a commission in accordance with
the terms of separate brokerage  agreements between Landlord and S.L. Green Real
Estate and Tenant and Jenel  Management Corp.  respectively.  Landlord shall not
bear any  responsibility  whatsoever for the payment of Jenel Management Corp.'s
brokerage commission and Tenant shall not bear any responsibility whatsoever for
the payment of S.L. Green Real Estate's brokerage commission.  The provisions of
this Article shall survive the expiration or sooner termination of this Lease.

                                   ARTICLE 25.

                                  SUBORDINATION

         25.(a) Subject to the provisions of Section 25(e) hereof, this Lease is
and shall be  subject  and  subordinate  to all  present  and  future  ground or
underlying  leases and to all mortgages,  options,  and building loan agreements
that may now or hereafter  affect such leases or the real  property of which the
Premises  are  a  part  and  to  all  renewals,  modifications,  consolidations,
replacements  and extensions of any such ground or underlying  leases,  options,
building loan  agreements  and  mortgages.  The provisions of this Section 25(a)
shall be  self-operative  and no further  instrument of  subordination  shall be
required.  In  confirmation  of such  subordination,  Tenant  shall  execute and
deliver promptly at its own cost and expense any instrument,  in recordable form
if required,  that Landlord, the lessor of the ground or underlying lease or the
holder of any such  mortgage or any of their  respective  successors in interest
may reasonably request to evidence such subordination.


                                      -47-

<PAGE>   51

         25.(b) In the event of a termination of any ground or underlying lease,
or if the interests of Landlord  under this Lease are  transferred by reason of,
or assigned in lieu of,  foreclosure or other proceedings for enforcement of any
mortgage,  or if the holder of any  mortgage  acquires  a lease in  substitution
therefor, then Tenant under this Lease, at the option to be exercised in writing
by the  lessor  under  such  ground or  underlying  lease or such  mortgagee  or
purchaser,  assignee or lessee, as the case may be, either (a) will attorn to it
and will perform for its benefit all the terms, covenants and conditions of this
Lease on Tenant's part to be performed with the same force and effect as if said
lessor,  such  mortgagee  or  purchaser,  assignee or lessee,  were the landlord
originally  named in this  Lease,  or (b) will  enter into a new lease with said
lessor or such mortgagee or purchaser,  assignee or lessee, as landlord, for the
remaining  Term and otherwise on the same terms and conditions and with the same
options, if any, then remaining.  The foregoing provisions of clause (a) of this
Section 25(b) shall enure to the benefit of such lessor,  mortgagee,  purchaser,
assignee or lessee,  shall be  self-operative  upon the exercise of such option,
and no further  instrument  shall be required to give effect to said provisions.
Tenant, however, upon demand of any such lessor, mortgagee,  purchaser, assignee
or lessee, shall execute, from time to time,  instruments in confirmation of the
foregoing  provisions of this Section 25(b) reasonably  satisfactory to any such
lessor, mortgagee,  purchaser, assignee or lessee, acknowledging such attornment
and setting forth the terms and conditions of its tenancy.

         25.(c) Anything herein contained to the contrary notwithstanding, under
no  circumstances  shall any  lessor  under any  ground  lease or  mortgagee  or
purchaser,  assignee or lessee, as the case may be, whether or not it shall have
succeeded to the interests of the landlord under this Lease, be:

                    (i)  liable  for any act,  omission  or default of any prior
landlord or for the return of any security  deposit or part thereof not actually
received by such lessor, mortgagee,  purchaser, assignee, or lessee, as the case
may be; or

                    (ii) subject to any offsets,  claims or defenses that Tenant
might have against any prior landlord: or

                    (iii)bound by any rent or additional  rent that Tenant might
have paid to any prior  landlord  for more than one month in advance or for more
than three months in advance  where such rent  payments are payable at intervals
of more than one month (other than payments for Tenant's Tax Payment which shall
be paid in accordance with the terms and conditions of Article 4 of this Lease);
or

                    (iv) bound by any  modification,  amendment or abridgment of
this Lease, or any cancellation or surrender of the same, made without its prior
written approval.


                                      -48-

<PAGE>   52

         25.(d) If, in  connection  with the  financing  of the Land  and/or the
Building,  the  holder or  prospective  holder  of any  mortgage  shall  request
reasonable  modifications  in this Lease as a  condition  of  approval  thereof,
Tenant will not unreasonably withhold, delay or defer making such modifications.

         25.(e) As a  condition  to this lease being  subordinate  to any future
mortgage  or  ground   lease,   anything   herein   contained  to  the  contrary
notwithstanding, Landlord shall provide Tenant with a non-disturbance agreement,
in the form annexed hereto as Exhibit C, in recordable form executed by all such
future mortgagees or ground lessors .

                                   ARTICLE 26.

                         CERTIFICATE OF TENANT/LANDLORD

         26.(a) Landlord or Tenant, without charge, at any time and from time to
time,  within ten days after request by the party requesting it, shall deliver a
written  instrument  to  Landlord  or  Tenant  or  any  other  person,  firm  or
corporation  specified by Landlord or Tenant,  duly  executed and  acknowledged,
certifying

                    (i) that  this  Lease is  unmodified  and in full  force and
effect  or, if there has been any  modification,  that the same is in full force
and effect as  modified  and  stating  any such  modification,  that there is no
existing  basis to cancel or terminate  this Lease,  and to the best of Tenant's
knowledge,  Landlord is not in default thereunder and if requested by Tenant, to
the best of Landlord's knowledge, Tenant is not in default thereunder;

                    (ii) whether the Term has commenced and rent become  payable
under this Lease,  and whether  Tenant is in  possession  of all of the Premises
except for such portions of the Premises that have been sublet or being held for
sublet pursuant to the provisions of this Lease;

                    (iii)whether  or not there are then existing any defenses or
offsets that are not claims under  paragraph (v) of this Section  26.(a) against
the enforcement of any of the  agreements,  terms,  covenants,  or conditions of
this Lease and any modification  thereof upon the part of Tenant to be performed
or complied with, and, if so, specifying the same;

                    (iv) the amount of the fixed annual rent payable  under this
Lease and the dates to which the fixed annual rent and additional rent and other
charges hereunder have been paid;

                    (v)  whether  or not  Tenant  has  made  any  claim  against
Landlord under this Lease and, if so, the nature and the dollar amount,  if any,
of such claim.


                                      -49-

<PAGE>   53

         26.(b) Tenant agrees that, except for the first month's rent hereunder,
it will pay no rent  under  this Lease more than one month in advance of its due
date. In the event of any act or omission by Landlord,  Tenant will not exercise
any right to  terminate  this Lease or to remedy the default and deduct the cost
thereof from rent due hereunder  until Tenant shall have given written notice of
such act or omission to the ground  lessor and to the holder of any  mortgage on
the fee or the ground lease who shall have  furnished  such lessor's or holder's
last address to Tenant and until a reasonable  period for remedying  such act or
omission shall have elapsed  following the giving of such notices,  during which
time such lessor or holder shall have the right, but shall not be obligated,  to
remedy or cause to be remedied  such act or omission.  Tenant shall not exercise
any right  pursuant to this Section  26(b) if the holder of any mortgage or such
aforesaid  lessor  commences  to cure such  aforesaid  act or omission  within a
reasonable time and diligently prosecutes such cure thereafter.

         26.(c) At Landlord's or Tenant's request, the other party shall deliver
promptly to the requesting party and to the holder of any mortgage on the fee or
ground  lease and the lessor  under any ground or  underlying  lease,  after the
occurrence of the  Commencement  Date, a letter signed by Tenant or Landlord and
acknowledged, in substantially the form annexed hereto as Schedule 3.

                                   ARTICLE 27.

                              LEGAL PROCEEDINGS AND
                              WAIVER OF JURY TRIAL

         27.(a)  Landlord  and Tenant  hereby waive trial by jury in any action,
proceeding or  counterclaim  brought by either of the parties hereto against the
other on any matters whatsoever arising out of or in any way connected with this
Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the
Premises, and/or any other claims (except claims for personal injury or property
damage),  and any emergency statutory or any other statutory remedy. If Landlord
commences any summary  proceeding,  Tenant shall not interpose and hereby waives
the right to interpose any counterclaim of whatever nature or description in any
such proceeding.

                                   ARTICLE 28.

                              SURRENDER OF PREMISES

         28.(a) Upon the  expiration or other  termination  of the Term,  Tenant
shall quit and  surrender the Premises to Landlord,  broom clean,  in good order
and condition,  ordinary wear and tear and damage by fire, the elements or other
casualty  excepted,  and Tenant  shall  remove all of its  moveable  property as
herein provided. Tenant's


                                      -50-

<PAGE>   54

obligation  to observe or perform the covenants in this Article 28 shall survive
the expiration or other termination of the Term.

         28.(b) If  possession  of the Premises is not  surrendered  to Landlord
within 24 hours after the date of the  expiration or sooner  termination  of the
Term then,  notwithstanding  anything to the  contrary  contained in this Lease,
Tenant  shall pay to  Landlord  for each  month and the pro rata  portion of any
month during which Tenant  holds over in the Premises  after the  expiration  or
sooner  termination of the Term of this Lease, rent at the greater of (a) a rate
equal to one and a half times the  aggregate of that portion of the fixed annual
rent and additional rent that was payable under this Lease for the last month of
the Initial Term or the last month of Option 1 or Option 2, if exercised, or (b)
the then market rent for the Premises; provided, however, that in no event shall
Landlord  be  entitled  to  receive  an amount in excess of the  maximum  amount
permitted by Legal  Requirements.  Nothing herein  contained  shall be deemed to
permit  Tenant to retain  possession  of the Premises  after the  expiration  or
sooner  termination  of the Term.  The  provisions of this Section  28.(b) shall
survive the expiration or other termination of the Term.

                                   ARTICLE 29.

                              RULES AND REGULATIONS

         29.(a) Tenant and Tenant's servants, employees and agents shall observe
faithfully  and  comply  strictly  with the Rules and  Regulations  set forth in
Schedule 4 annexed hereto and made part hereof entitled "Rules and  Regulations"
and such other and  further  reasonable  Rules and  Regulations  as  Landlord or
Landlord's  agents may adopt from time to time.  In the event of any conflict or
inconsistency  between the  provisions of this Lease and of any of the Rules and
Regulations as originally or as hereafter adopted,  the provisions of this Lease
shall control. Reasonable written notice of any additional Rules and Regulations
shall be given to Tenant.  Landlord shall not enforce the Rules and  Regulations
against Tenant in a discriminatory manner.

         29.(b)  Nothing in this Lease  contained  shall be  construed to impose
upon Landlord any duty or obligation to enforce the Rules and Regulations or the
terms,  covenants or conditions in any other lease,  against any other tenant of
the  Building,  and Landlord  shall not be liable to Tenant for violation of the
same  by  any  other  tenant,  its  servants,  employees,  agents,  visitors  or
licensees.

                                   ARTICLE 30.

                             CONSENTS AND APPROVALS

         30.(a)  Wherever  in this  Lease  Landlord's  consent  or  approval  is
required, if Landlord shall delay or refuse such consent or approval,  Tenant in
no event shall be


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<PAGE>   55

entitled to make, nor shall Tenant make, any claim, and Tenant hereby waives any
claim,  for money  damages (nor shall  Tenant claim any money  damages by way of
set-off,  counterclaim  or defense)  based upon any claim or assertion by Tenant
that  Landlord  unreasonably  withheld  or  unreasonably  delayed its consent or
approval.  Tenant's sole remedies,  except as otherwise set forth in this Lease,
shall be: (i) an action or  proceeding  to enforce any such  provision,  or (ii)
arbitration as set forth in Article 3 herein, in each such instance for specific
performance, injunction or declaratory judgment.

                                   ARTICLE 31.

                                     NOTICES

         Any  notice,  demand,  consent,  approval,  disapproval,  or  statement
(collectively,  "Notices")  from  Landlord  to Tenant or from Tenant to Landlord
shall be in writing and shall be deemed  duly given (a) if mailed by  registered
or certified mail, postage prepaid,  return receipt requested,  (b) if delivered
by recognized national overnight delivery service with receipt acknowledged,  or
(c) only in the case of  Notices  that are  Escalation  Statements  or bills for
rent, if mailed by first class mail,  postage  prepaid,  to the  address(es) for
Notices set forth in this Article 31.  Notices to Tenant shall be sent to Tenant
at the Premises with a copy of default  notices only to Kramer Levin  Naftalis &
Frankel attention: Larry Loeb, Esq. Notices to Landlord shall be sent (i) to the
address  of  Landlord  set forth on page 1 of this  Lease or (ii) to such  other
address as Landlord  shall have last  designated by notice in writing to Tenant,
with a copy of  default  notices  only to Belkin  Burden  Wenig &  Goldman,  LLP
attention:  Daniel T.  Altman,  Esq.  Notice  shall be deemed given on the third
business  day after  depositing  same in an  official  depository  of the United
States Postal Service,  Return Receipt Requested (or successor organization) or,
if given by overnight delivery, upon delivery to Landlord or Tenant, as the case
may be.

                                   ARTICLE 32.

                                    NO WAIVER

         No  agreement to accept a surrender of this Lease shall be valid unless
in writing signed by Landlord.  No employee of Landlord or of Landlord's  agents
shall have any power to accept the keys to the Premises prior to the termination
of this Lease. The delivery of keys to any employee of Landlord or of Landlord's
agent shall not  operate as a  termination  of this Lease or a surrender  of the
Premises. If Tenant at any time desires to have Landlord sublet the Premises for
Tenant's  account,  Landlord or Landlord's agents are authorized to receive said
keys for such purpose without releasing Tenant from any of the obligations under
this Lease.  The failure of Landlord  to seek  redress for  violation  of, or to
insist upon the strict  performance  of, any covenant or condition of this Lease
or any of the Rules and Regulations set forth


                                      -52-

<PAGE>   56

herein,  or hereafter  adopted by Landlord,  shall not prevent a subsequent act,
which would have originally  constituted a violation,  from having all the force
and  effect of an  original  violation.  The  receipt by  Landlord  of rent with
knowledge  of the breach of any  covenant  of this  Lease  shall not be deemed a
waiver of such  breach.  The failure of Landlord to enforce any of the Rules and
Regulations set forth herein,  or hereafter  adopted,  against Tenant and/or any
other tenant in the Building  shall not be deemed a waiver of any such Rules and
Regulations.  No  provision of this Lease shall be deemed to have been waived by
Landlord,  unless such waiver be in writing  signed by  Landlord.  No payment by
Tenant or receipt by  Landlord of a lesser  amount than the monthly  rent herein
stipulated  shall be  deemed to be other  than on the  account  of the  earliest
stipulated  rent,  nor shall any  endorsement  or  statement on any check or any
letter  accompanying  any check or  payment  of rent be  deemed  an  accord  and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's  right to recover the balance of such rent or pursue any other remedy
in this Lease provided.

                                  ARTICLE 33.

                              INABILITY TO PERFORM

                    If, for any reason within Landlord's control,  Tenant is not
provided with: (i)  electricity  in accordance  with Article 12 hereof;  or (ii)
heating and  air-conditioning  in  accordance  with Article 21 hereof;  or (iii)
elevator service; or (iv) water; and such condition is not remedied within three
(3)  business  days  following  notice to Landlord  of any such event,  Tenant's
obligation  to pay  fixed  annual  rent  and  additional  rent  hereunder  shall
proportionately  abate in relation to the rentable square footage of the portion
of the Premises Tenant is unable to reasonably use and which Tenant in fact does
not use and has vacated,  provided that Tenant shall not be entitled to any such
abatement if the rentable square footage of the portion of the Premises affected
by such condition is less than 1,200  rentable  square feet.  However,  if it is
finally  determined  by a  court  of  competent  jurisdiction  that  Tenant  has
unreasonably  withheld payment of fixed annual rent and additional rent and that
Tenant was able to  reasonably  use the  Premises so affected,  Tenant,  for the
purposes of this Article 33 only, shall reimburse  Landlord,  on demand, for all
costs and expenses,  including  reasonable legal fees, incurred by Landlord as a
result of Tenant withholding any such fixed annual rent and additional rent.


                                      -53-

<PAGE>   57

                                   ARTICLE 34.

                                ENTIRE AGREEMENT;
                    NO REPRESENTATIONS; NO ORAL MODIFICATION

         34.(a) This Lease and the  Schedules  attached  hereto set forth all of
the covenants, promises, assurances,  agreements,  representations,  conditions,
warranties,  statements and understandings (collectively, the "Representations")
between Landlord and Tenant concerning the Premises and the Building,  and there
are no  Representations,  either oral or written,  between  Landlord  and Tenant
other than those set forth in this Lease.

         34.(b) This Lease  supersedes  and revokes all  previous  negotiations,
arrangements,  letters of intent,  offers to lease, lease proposals,  brochures,
Representations,  and information conveyed,  whether oral or in writing, between
Landlord  and Tenant or their  respective  representatives  or any other  person
purporting to represent Landlord or Tenant. Landlord and Tenant acknowledge that
they have not been induced to enter into this Lease by any  representations  not
set forth in this  Lease,  they have not relied on any such  representation,  no
such representations  shall be used in the interpretation or construction of the
Lease,  and Landlord and Tenant  shall have no  liability  for any  consequences
arising as a result of any such representations.

         34.(c)  Except as  otherwise  provided  in this  Lease,  no  subsequent
alteration,  amendment,  change or addition to this Lease shall be binding  upon
Landlord  or Tenant  unless in  writing  and  signed by the party  against  whom
enforcement of the alteration, amendment, change or addition is sought.

                                   ARTICLE 35.

                                    SECURITY

         35.(a)  Simultaneous  with the  execution  of this Lease,  Tenant shall
deliver to Landlord a clean, unconditional, irrevocable standby Letter of Credit
(the  "LC")  having a one (1) year term,  automatically  renewable  through  and
including the third anniversary after the Commencement  Date, naming Landlord as
beneficiary,  in a form  and  substance  reasonably  satisfactory  to  Landlord,
initially in an amount equal to One Million Six Hundred and  Sixty-Six  Thousand
Six Hundred  Sixty-Six Dollars and Sixty- Six cents  ($1,666,666.66)  as and for
the security deposit (the "Security  Deposit") for the faithful  performance and
observance by Tenant of the terms, provisions,  covenants and conditions of this
Lease including the terms and conditions of the Work


                                      -54-

<PAGE>   58

Letter  annexed as Exhibit A.  Provided that Tenant is not in default in respect
of any of the terms,  provisions,  covenants and conditions of this Lease beyond
applicable  notice  and  grace  periods,  including,  but not  limited  to,  the
provisions  of the Work  Letter  annexed as Exhibit A, the LC may be replaced by
Tenant with an amendment  reducing the amount of LC to Six Hundred and Sixty-Six
Thousand Six Hundred Sixty- Six Dollars and Sixty-Six cents ($666,666.66) on the
second anniversary after the Commencement Date.  Landlord shall return the LC to
Tenant on the third anniversary after the Commencement  Date. If Tenant defaults
in respect of any of the terms,  provisions,  covenants  and  conditions of this
Lease beyond applicable notice and grace periods, including, but not limited to,
the payment of fixed annual rent and additional rent, Landlord may use, apply or
retain the whole or any part of the Security  Deposit to the extent required for
the payment of any fixed annual rent and additional  rent or any other sum as to
which  Tenant  is in  default  or for any sum that  Tenant is  obligated  to pay
Landlord or that  Landlord  may expend or may be required to expend by reason of
Tenant's  default  in respect of any of the  terms,  provisions,  covenants  and
conditions  of this  Lease  beyond  any  applicable  notice  and  grace  period,
including but not limited to any damages  payable by Tenant  pursuant to Article
18 hereof. To the extent that Landlord,  during the Term, so uses,  applies,  or
retains all or any part of the Security Deposit, Tenant, on demand, shall pay to
Landlord as additional rent a sum sufficient to restore the Security  Deposit to
the amount then  required to be  deposited.  If Tenant  shall  comply  fully and
faithfully with all of the terms,  provisions,  covenants and conditions of this
Lease,  the  Security  Deposit  shall be returned to Tenant  within a reasonable
number of days  after the date  fixed as the end of the Lease  (not to exceed 14
days) and after delivery of entire possession of the Premises to Landlord.

         35.(b)  In the  event  of a sale of the Land  and the  Building  or the
leasing or  transfer of the  Building,  Landlord  shall  transfer  the  Security
Deposit to the vendee or lessee or transferee  and Landlord  thereupon  shall be
released by Tenant from all liability  for the return of such Security  Deposit.
Tenant  shall look  solely to the new  landlord  for the return of the  Security
Deposit.  The provisions hereof shall apply to every transfer or assignment made
of the Security Deposit to a new landlord.

         35.(c) Tenant  covenants that it will not assign,  transfer or encumber
or attempt to assign,  transfer or encumber the money  deposited as the Security
Deposit under this Lease (except in connection  with an assignment of this Lease
in  accordance  with  the  terms  hereof)  and  that  neither  Landlord  nor its
successors  or  assigns  shall  be  bound  by  any  such  assignment,  transfer,
encumbrance,  attempted assignment,  transfer or attempted  encumbrance.  In the
event that any bankruptcy,  insolvency,  reorganization or other debtor-creditor
proceedings shall be instituted by or against Tenant, its successors or assigns,
or any guarantor of Tenant hereunder, the Security Deposit shall be deemed to be
applied to the  payment of the fixed  annual  rent and for  additional  rent due
Landlord  for  periods  prior to the  institution  of such  proceedings  and the
balance,  if any,  may be  retained  by  Landlord  in  partial  satisfaction  of
Landlord's damages.


                                      -55-

<PAGE>   59



         35.(d)  Landlord  shall  deposit  a  cash  Security   Deposit  into  an
interest-bearing  account at a banking  organization  selected by Landlord.  All
interest and/or dividends,  if any, accruing on the Security Deposit,  less a 1%
per  annum  charge  for  administrative  expense,  shall be added  to,  held and
included  within the term Security  Deposit and,  provided that Tenant is not in
default in the performance of the terms, provisions, covenants and conditions of
this Lease beyond any applicable  notice and grace,  shall accrue to the account
of  Tenant  and paid to  Tenant  on a  quarterly  basis.  Landlord  shall not be
required to credit Tenant with any interest for any period during which Landlord
does not receive interest on the Security Deposit.

                                   ARTICLE 36.

                              INTENTIONALLY OMITTED

                                   ARTICLE 37.

                          NON-LIABILITY INDEMNIFICATION

         37.(a)  No  partner,  member,  director,  officer,  agent,  servant  or
employee of  Landlord  shall be liable to Tenant for any loss,  injury,  damage,
except to the  extent the same are caused by or result  from the  negligence  of
Landlord, its agents, partners, members,  directors,  officers, agents, servants
or employees.  Further, neither Landlord nor Tenant, nor any respective partner,
member,  director,  officer,  agent,  servant or  employee of Landlord or Tenant
shall be liable (a) for any damage  caused by other  tenants or persons in, upon
or about the  Building  or  caused  by the  operations  in  construction  of any
private,   public  or  quasi-public   work;  or  (b)  even  if  negligent,   for
consequential damages in any action relating to this Lease.

         37.(b) Except as otherwise provided for in this Lease,  including,  the
provisions  of  Sections  9(h)(i),  9(h)(iii)  and 37(a)  hereof,  Tenant  shall
indemnify and hold harmless  Landlord and all lessors under  underlying  leases,
of, and mortgagees under mortgages  affecting,  the Land and/or the Building and
its and their respective  partners,  members,  directors,  officers,  agents and
employees from and against any and all claims arising from or in connection with
(a) the use or  occupation  of the  Premises by Tenant or anyone in the Premises
with Tenant's permission, or the conduct or management of the Premises or of any
business therein,  or any work or thing whatsoever done (other than by Landlord,
its agents,  servants or  employees),  or any condition  created in the 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  Premises;  (b) any act,
omission or negligence of Tenant or any of its sublessees or licensees or its or
their partners, members, directors,  officers, agents, employees or contractors;
(c) any accident,  injury or damage  whatsoever  (except to the extent caused by
the negligence of Landlord, its agents,  servants or employees) occurring in, at
or upon the  Premises;  and (d) any  breach or default by Tenant in the full and
prompt payment and


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<PAGE>   60

performance of Tenant's  obligations under this Lease.  Tenant's indemnity shall
include  the  payment  to  Landlord  of  all  reasonable  costs,   expenses  and
liabilities  incurred  in or in  connection  with each  such  claim or action or
proceeding  brought  thereon,   including  without  limitation,  all  reasonable
attorneys' fees,  costs and expenses.  In case any action or proceeding shall be
brought against Landlord and/or any such lessor or mortgagee and/or its or their
partners, directors,  officers, agents and/or employees by reason of such claim,
Tenant,  upon notice from  Landlord or such lessor or mortgagee (as the case may
be),  shall resist and defend such action or  proceeding  (by Tenant's  counsel,
Kramer Levin, Naftalis & Frankel or Tenant's assigned insurance counsel).

                                   ARTICLE 38.

                              INTENTIONALLY OMITTED

                                   ARTICLE 39.

                              RIGHT OF FIRST OFFER

         Each time that the entire  sixth  (6th),  ninth  (9th) or tenth  (10th)
floors or any portion of such floors  ("Contiguous  Space")  becomes  vacant and
available  to  lease  in the  Building,  Landlord  shall  promptly  give  notice
("Notice")  to  Tenant  in  accordance  with  Article  31 of  this  Lease,  that
Contiguous  Space is  available.  The Notice  shall  include the location of the
Contiguous  Space,  the  approximate  square  footage,  the term for  which  the
Landlord  would  lease the  Contiguous  Space to Tenant and such other  business
terms (the "Terms") as Landlord deems relevant  including,  without  limitation,
the fair market rent per square foot of the  Contiguous  Space and the  proposed
fair market  escalations.  If the  Contiguous  Space is less than Five  Thousand
square feet, within thirty (30) days after the giving of such Notice, Tenant may
elect to lease the Contiguous Space, by notifying Landlord ("Acceptance Notice")
that the Terms contained in the Notice are acceptable.  If the Contiguous  Space
is more than Five Thousand  square feet,  within  forty-five (45) days after the
giving  of such  Notice,  Tenant  may elect to lease the  Contiguous  Space,  by
notifying  Landlord  in an  Acceptance  Notice that the Terms  contained  in the
Notice are  acceptable.  In the event that Tenant wishes to lease the Contiguous
Space contained in the Notice, but Landlord and Tenant cannot agree on the Terms
for the Contiguous Space, Tenant shall notify Landlord,  within the above stated
time  frames  (within  30 days for less than 5000 sq. ft. and within 45 days for
5000 sq.  ft.  and over)  that it wishes  to lease the  Contiguous  Space but it
disputes  that the Terms  contained  in the Notice are the fair market terms for
the  Contiguous  Space.  The right to dispute the Terms  contained in the Notice
shall be deemed waived unless the Acceptance Notice is served in accordance with
this  Article.  In the case  where an  Acceptance  Notice  is  timely  served in
accordance with this Article, the dispute as to the Terms of the Premises, shall
be resolved by binding arbitration in accordance with Article 3 of this


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<PAGE>   61

Lease. In determining each of the Terms for the Contiguous Space, the arbitrator
shall make his/her  decision  based upon what the fair market value would be for
the  Contiguous  Space at the time the Notice is sent to Tenant.  In  connection
with such  arbitration,  Landlord shall submit a Submission to the arbitrator in
accordance  with  Article  3  containing  the  Terms  in  its  Notice.  However,
notwithstanding  the  foregoing,  Tenant  agrees  to pay  during  the  period of
arbitration the Fixed Annual Rent in effect for the  immediately  preceding year
without prejudice to any of Landlord's or Tenant's rights until there has been a
determination of the arbitration.

                                   ARTICLE 40.

                                  MISCELLANEOUS

         40.(a)  Irrespective  of the place of  execution or  performance,  this
Lease shall be governed and construed in  accordance  with the laws of the State
of New York.

         40.(b) This Lease shall be construed  without regard to any presumption
or other rule requiring  construction against the party causing this Lease to be
drafted.

         40.(c)   Intentionally Omitted.

         40.(d) 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 other gender as the context may require.

         40.(e) Time shall be of the essence with respect to the exercise of any
option granted under this Lease.

         40.(f) Except as otherwise provided in this Lease, whenever the payment
of interest is required to be made by Tenant to Landlord by the terms  hereof it
shall be at the Interest Rate.

         40.(g) In the event that  Tenant is in arrears in the  payment of fixed
annual rent or additional rent hereunder,  Tenant waives Tenant's right, if any,
to  designate  the items  against  which any  payments  made by Tenant are to be
credited,  and Tenant agrees that Landlord may apply any payments made by Tenant
to any items it sees fit, irrespective of and notwithstanding any designation or
request  by Tenant  as to the items  against  which any such  payments  shall be
credited.

         40.(h)  The  submission  of this  document  for  examination  does  not
constitute  an option or an offer to lease  space in the  Building.  This  Lease
shall have no binding  effect on the parties  unless  executed  by Landlord  and
Tenant and a fully executed copy is delivered to Landlord and Tenant.


                                      -58-

<PAGE>   62

         40.(i) The captions are inserted  only as a matter of  convenience  and
for reference,  and in no way define,  limit or describe the scope of this Lease
or the intent of any provision hereof.

         40.(j) Landlord,  upon reasonable notice to Tenant, shall have the full
right at any time to name and change the name of the  Building and to change the
designated address of the Building.  The Building may be named after any person,
firm,  or otherwise,  whether or not such name is, or  resembles,  the name of a
tenant of the Building  (except that the building  shall not be named for one of
Tenant's  direct  competitors).  The cost or expense  associated  with  changing
Tenant's address, not to exceed $5,000.00, shall be borne by Landlord.

         40.(k) Tenant shall be permitted to install  signage in the Premises so
long as such signage  complies  with the terms and  conditions of this Lease and
has  been  approved  in  advance  by  Landlord,  which  approval  shall  not  be
unreasonably  withheld or delayed.  Under no circumstances  shall any signage in
the Premises (and visible  outside of the Premises) be  illuminated  (including,
without limitation, a "light box" or any sign with neon). Signs and canopies are
permitted at the exclusive entrance,  lobby and elevator of the Building and are
to be  installed  at  Tenant's  expense,  subject to  Landlord's  prior  written
approval which approval shall not be  unreasonably  withheld or delayed.  Tenant
may use the name of an affiliate  or division of Tenant on  entrance,  lobby and
elevator  of  Building,  subject to  Landlord's  prior  written  approval  which
approval shall not be unreasonably withheld or delayed. In addition,  Tenant, at
its sole cost and  expense,  shall be  permitted,  subject  to Article 6 of this
Lease, to make  Alterations or improvements to the  semi-exclusive  lobby of the
Building located at the 37th Street entrance to the Building.

         40.(l) This Lease may be executed in several counterparts each of which
shall be deemed an original,  and such counterparts shall constitute but one and
the same instrument.

                                   ARTICLE 41

                                   ROOF SPACE

         41. (a) Landlord hereby leases to Tenant,  without charge,  one hundred
(100) square feet of space on the rooftop of the Building as shown on Schedule 6
annexed hereto and made a part hereof (the "Roof Premises"). Tenant may elect to
relocate the Roof  Premises at its sole cost and expenses so long as it does not
interfere with the penthouse  tenant's use and occupancy of its premises and the
Building systems.

         (b) Tenant shall use the Roof Premises for the installation,  operation
and  maintenance  of  telecommunication  equipment,   associated  antenna,  base
stations,  dishes,  switches,  power supplies,  batteries and  accessories  (the
"Installation"). The


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<PAGE>   63

Installation  or other property  attached to or otherwise  brought onto the Roof
Premises  shall at all  times  remain  Tenant's  personal  property  and are not
considered fixtures.  Tenant, at its sole cost and expense, shall be responsible
for obtaining  electrical service for the Roof Premises from the utility company
servicing  the  Building  and shall pay for such  electricity,  on a  submetered
basis,  in accordance  with the  provisions of Article 12 of this Lease.  Tenant
shall be responsible,  at its own cost and expense,  to install and maintain any
submeters  necessary  for  the  metering  of  the  electric  consumption  of the
Installation.  Landlord, at Tenant's sole cost and expense, shall make available
to Tenant the panel boards, feeders,  conduits and risers in the Building as may
be necessary in order to bring electric energy to the Roof Premises.

         (c) The placement of the  Installation  on the Roof  Premises  shall be
deemed to be an Alteration  and shall be subject to the  provisions of Article 6
hereof and to any other applicable  provisions of this Lease. Landlord agrees to
cooperate  with Tenant,  at Tenant's  expense,  in making  application  for, and
obtaining,  any  local,  state,  and  federal  licenses,  permits  and any other
approvals which may be required to allow Tenant to use the Roof Premises. Tenant
shall employ due diligence to obtain said approvals within a timely manner.

         (d)  Landlord  agrees  to  provide  Tenant,   Tenant's   employees  and
authorized  agents,  at reasonable times and on reasonable  notice (which may be
oral), access to the Roof Premises.

         (e) The  Installation  may be removed by Tenant at any time  during the
Term,  and, in such event,  Tenant  shall be  responsible,  at its sole cost and
expense,  to repair  any damage to the Roof  Premises  resulting  from  Tenant's
removal of the Installation.  Furthermore, Tenant shall repair any damage to the
Roof  Premises  caused by Tenant  during  the Term,  ordinary  wear and tear and
damage  from the  elements  excepted,  and said  obligation  shall  survive  the
expiration or sooner termination of the Lease.

         (f) In the event  that  Landlord  elects,  in its sole  discretion,  to
construct  additional  floors to the Building above the Roof Premises,  Landlord
shall provide Tenant with comparable  space on the new roof of the Building (the
"New Roof Premises")  promptly following the completion of any such addition and
Tenant may, at its sole cost and expense,  move the Installation to the New Roof
Premises.  Landlord shall not be responsible or liable in any manner whatsoever,
for any costs, damages, abatements and/or set-offs due to an interruption in the
use and occupancy of the Roof Premises during such construction period.

         (g) Tenant  agrees not to cause any  unreasonable  interference  to the
telecommunication  operation of Landlord or any other  tenants in the  Building.
Tenant shall operate the Installation in compliance with all applicable  Federal
Communications Commission (FCC) regulations.


                                      -60-

<PAGE>   64

         (h) Notwithstanding any provision in this Lease to the contrary, Tenant
may not sublet or assign any portion of the Roof Premises  (except in connection
with an assignment of this Lease in  accordance  with the terms hereof)  without
the prior written consent of Landlord, which consent may be withheld by Landlord
in its sole discretion.

                                   ARTICLE 42

                                     OPTION

         42. (a) Tenant  shall have the right,  exercisable  by sending  written
notice (the "Notice") to Landlord on or before  January 26, 1997,  time being of
the essence,  to lease the entire ninth (9th) floor of the Building effective on
the date (the  "Effective  Date") set forth in the Notice,  which Effective Date
shall not be later than five (5) business days following the date of the Notice.
In the event that Tenant  timely sends the Notice to  Landlord,  the ninth (9th)
floor of the  Building  shall be,  and be  deemed to be, a part of the  Premises
subject to all of the terms and  conditions of this Lease,  except that from and
after the Effective Date:

                    (i) The phrase "One  Million Two  Hundred  Thousand  Dollars
($1,200,000.00)" in the definition of "Fixed Annual Rent" contained on page 3 of
this Lease shall be replaced with "One Million Eight  Hundred  Thousand  Dollars
($1,800,000.00);

                    (ii) "Tenant's Proportionate Share" shall mean 27.3%;

                    (iia) The following changes shall be made to Article 11(b)
of this Lease: the phrase "One Hundred Million Dollars ($100,000,000.00)" on the
twelfth and  seventeenth  lines shall be replaced with "One Hundred  Twenty-Five
Million   Dollars   ($125,000,000.00),"   the  number  "Forty  Million   Dollars
($40,000,000.00)" on the fifteenth and twenty-fifth lines shall be replaced with
"Fifty Million Dollars  ($50,000,000.00)," the number "One Million Three Hundred
Thirty Three Thousand Dollars  ($1,333,000.00)," on the nineteenth line shall be
replaced with "Two Million Dollars  ($2,000,000.00),"  the number "Sixty Hundred
Sixty Seven Thousand Dollars ($667,000.00)" on lines twenty-two and twenty seven
shall be replaced with "One Million Dollars ($1,000,000.00)."

                    (iii)  The  following  changes  shall  be made to  paragraph
21(a)(iii)  of  this  Lease:   the  phrase   "Seventy-Eight   Thousand   Dollars
($78,000.00)"  on the seventh  (7th) line  thereof  shall be replaced  with "One
Hundred  Seventeen-Thousand  Dollars ($117,000.00)," the number "$136,500.00" on
the  twentieth  (20th) line thereof  shall be replaced  with  "$204,750.00"  the
number  "$78,000.00" on the twentieth (20th) line thereof shall be replaced with
"$117,000.00",  the number  "$6,500.00" on the twenty-first  (21st) line thereof
shall be replaced with "$9,725.00" and the number

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<PAGE>   65

"$11,375.00"  on the  twenty-third  (23rd) line thereof  shall be replaced  with
"$17,062.50";

                    (iv) The number  "sixty-seven" (67) on the fourth (4th) line
of paragraph 21(c) of this Lease shall be replaced with "one hundred (100)";

                    (v) The  following  changes  shall be made to  Article 35 of
this Lease:  the phrase "One  Million Six  Hundred and  Sixty-Six  Thousand  Six
Hundred  Sixty-Six and 66/100  Dollars  ($1,666,666.66)"  beginning on the fifth
(5th) line thereof  shall be replaced  with "Two  Million Five Hundred  Thousand
Dollars  ($2,500,000.00",  the phrase "Six  Hundred and  Sixty-Six  Thousand Six
Hundred Sixty Six and 66/100 Dollars ($666,666.66)"  beginning on the thirteenth
(13th)   line   thereof   shall  be   replaced   with   "One   Million   Dollars
($1,000,000.00)";

         (vi) the phrase  "ninth" (9th) on the first (1st) line of Article 39 of
this Lease shall be deleted in its entirety; and

         (vii) the  following  changes shall be made to Exhibit A of this Lease:
the number  "$2,700,000.00"  on the third  (3rd) line of  paragraph  4A shall be
replaced  with  "$4,050,000.00,"  the phrase "Two  Hundred and Seventy  Thousand
Dollars ($270,000.00)"  beginning on the seventh (7th) line of such paragraph 4A
shall be replaced with "Four Hundred Five Thousand Dollars  ($405,000.00),"  the
number  "$2,550,000.00"  on the tenth (10th) line of such  paragraph 4A shall be
replaced  with  "$3,900,000.00,"  the phrase  "Eight  Hundred  Thousand  Dollars
($800,000.00)" on the fifth (5th) line of paragraph 4C thereof shall be replaced
with "One  Million Two Hundred  Thousand  Dollars  ($1,200,000.00),"  the number
"$1,900,000.00"  on the first (1st) line of the second  (2nd)  paragraph of such
paragraph 4C shall be replaced with "$2,850,000.00" and the number "$800,000.00"
on the fourth (4th) line of the second  (2nd)  paragraph of such Exhibit A shall
be replaced with "$1,200,000.00."

                    (b)  On or before the Effective Date:

                    (i) Tenant shall  deliver to Landlord an amendment to the LC
required to be delivered by Tenant  pursuant to the  provisions of Article 35 of
this Lease  increasing  the amount thereof to  $2,500,000.00;  and (ii) Landlord
shall deliver to Tenant:  (x) an amendment to the LC required to be delivered by
Landlord  pursuant to the  provisions of Exhibit A of this Lease  increasing the
amount thereof to  $1,200,000.00;  and (y) a check,  in the amount of $8,333.33,
representing the payment to Tenant for Tenant's installation of submeters on the
ninth (9th) floor of the Building.

                    (c) In the  event  that  Tenant  does  not  timely  send the
Notice,  Tenant's right to exercise its option pursuant to this Article 42 shall
be of no further force and effect. Nothing contained herein shall limit Tenant's
rights with respect to the sixth (6th),  ninth (9th) and tenth (10th)  floors of
the Building pursuant to the terms of Article 39 of this Lease.


                                      -62-

<PAGE>   66


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

                                            LANDLORD:

                                F.S. Realty Corp.



                                By: /s/ Joseph Chetrit
                                   -------------------------------------
                                   Name:   Joseph Chetrit
                                   Title:


                                TENANT:

                                GT INTERACTIVE SOFTWARE CORP.



                                By: /s/ Joseph Cayre
                                   -------------------------------------
                                   Name:   Joseph Cayre
                                   Title:  Chairman of the Board


                                      -63-