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                                                                   EXHIBIT 10.20

                  INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE NET

1. BASIC PROVISIONS ("BASIC PROVISIONS").

        1.1. PARTIES:

        This Lease ("Lease"), dated for reference purposes only, November 15,
        1999, is made by and between - CHAMPAGNE BUILDING GROUP, LP, a
        California limited partnership ("LESSOR") or ("LANDLORD") and SKECHERS
        USA, INC., a Delaware Corporation ("LESSEE" or "TENANT"), (collectively
        the "PARTIES," or individually a "PARTY").

        1.2. PREMISES:

        That certain real property, including the "BASE BUILDING" as defined in
        the Work Letter attached hereto as Exhibit A to be provided by Lessor
        under the terms of this Lease, plus those improvements to be separately
        constructed by Tenant pursuant to the Work Letter (the "TENANT
        IMPROVEMENTS") together with the land described in the legal description
        attached hereto as "LEGAL DESCRIPTION" and commonly known as 1670 S.
        Champagne Avenue, Ontario located in the County of San Bernardino, State
        of California and generally described as an approximate 263,670 square
        foot free standing distribution building (all of such real property,
        including, without limitation, such land, all improvements upon such
        land, the Base Building and Tenant Improvements are collectively
        referred to herein as the "PREMISES"). (See also Paragraph 2)

        1.3. TERM:

        Seven (7)years and Zero (0) months ("ORIGINAL TERM") commencing upon
        Substantial Completion (as defined in the Addendum) ("COMMENCEMENT
        DATE") and ending Seven years after the Commencement Date ("EXPIRATION
        DATE"). Landlord agrees that Substantial Completion, and therefore, the
        Commencement Date, shall be hot later than May 15, 2000 (the "SCHEDULED
        COMMENCEMENT DATE") subject to Force Majeure Delays (as defined in the
        Addendum) (See also Paragraph 3)

        1.4. EARLY POSSESSION:

        March 15, 2000 or as agreed subject to Force Majeure Delays ("EARLY
        POSSESSION DATE"). (See also Paragraphs 3.2 and 3.3)

        1.5. BASE RENT:

        $85,693.00 per month ("BASE RENT"), payable on the first day of each
        month commencing the first day following Substantial Completion (See
        also Paragraph 4)

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        [x] If this box Is checked, there are provisions in this Lease for the
        Base Rent to be adjusted (see Addendum Paragraph 50)

        1.6. BASE RENT PAID UPON EXECUTION:

        $85,693.00 as Base Rent for the period: first month's rent

        1.7. SECURITY DEPOSIT:

        $85,693.00 ("Security Deposit") in addition to the Base Rent Paid Upon
        Execution. (See also Paragraph 5)

        1.8. AGREED USE:

        Warehousing, distribution, office and showroom and uses reasonably
        related to the foregoing (See also Paragraph 6)

        1.9. INSURING PARTY:

        Lessor is the "Insuring Party" unless otherwise stated herein. (See also
        Paragraph 8)

        1.10. REAL ESTATE BROKERS:

        (See also Paragraph 15)

                (a) Representation: The following real estate brokers
        (collectively, the "Brokers") and brokerage relationships exist in this
        transaction (check applicable boxes):

        [x] The Seeley Company represents Lessor exclusively ("Lessor's
        Broker");

        [x] CB Richard Ellis represents Lessee exclusively ("Lessee's Broker")

                (b) Payment to Brokers: Upon execution and delivery of this
        Lease by both Parties, Lessor shall pay to the Broker the fee agreed to
        in their separate written agreement

        1.11. GUARANTOR.

        The obligations of the Lessee under this Lease are to be guaranteed by
        N/A ("Guarantor"). (See also Paragraph 37)

        1.12. ADDENDA AND EXHIBITS.

        Attached hereto is an Addendum or Addenda consisting of Paragraphs 50
        through 65, the Legal Description, and Exhibits A (Work Letter) and B
        (Protected Lessee Owned Alterations) all of which constitute a part of
        this Lease.

2. PREMISES.

        2.1. LETTING.

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        Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor,
        the Premises, for the term, at the rental, and upon all of the terms,
        covenants and conditions set forth in this Lease. Unless otherwise
        provided herein, any statement of size set forth in this Lease, or that
        may have been used in calculating rental, is an approximation which the
        Parties agree is reasonable and the rental based thereon is not subject
        to revision whether or not the actual size is more or less.

        2.2. CONDITION.

        Lessor shall deliver the Base Building (as defined in the Work Letter,
        and sometimes referred to herein as the "Building") to Lessee broom
        clean and free of debris (except dirt and debris caused by Tenant) on
        the Commencement Date, and, so long as the required service contracts
        described in Paragraph 7.1 (b) below are obtained by Lessee within
        thirty (30) days following the Commencement Date, Lessor warrants that
        the Base Building, including, without limitation, existing electrical,
        plumbing, fire sprinkler, lighting, heating, ventilating and air
        conditioning systems ("HVAC"), loading doors, if any, and all other such
        elements in the Premises, other than those constructed by Lessee, shall
        be in good operating condition on said date and shall be free of
        material defects. Notwithstanding Lessee's failure to obtain such
        required service contracts within thirty (30) days following the
        Commencement Date, the Lessor warranty described in the foregoing
        sentence shall nevertheless continue so long as Lessee has obtained all
        of such required service contracts within ten (10) days following notice
        from Lessor subsequent to such thirty (30) day period to the effect that
        Lessee has not obtained such required service contracts (the "Service
        Contract Deficiency Notice") and must do so within ten (10) days of such
        Service Contract Deficiency Notice or Lessor will be relieved of the
        Lessor warranty described in the first sentence of Paragraph 2.2 of the
        Lease. If a non-compliance with said warranty exists as of the
        Commencement Date, Lessor shall, as Lessor's sole obligation with
        respect to such matter, except as otherwise provided in this Lease,
        promptly after receipt of written notice from Lessee setting forth with
        specificity the nature and extent of such non-compliance, rectify same
        at Lessor's expense. If, after the Commencement Date, Lessee does not
        give Lessor written notice of any non-compliance with this warranty
        within: (i) five (5) years as to the roof and the structural portion of
        the roof, (ii) two (2) years as to the slab and concrete walls, and
        (iii) one (1) year as to the remaining systems and other elements of the
        Building, correction of such non-compliance shall be the obligation of
        Lessee at Lessee's sole cost and expense; provided, however, that
        Lessee's sole obligation with respect to the items specified in
        subsections (i)(iii) of this sentence shall not commence unless and
        until Lessor has given to Lessee notice that as to such applicable
        subsection Lessor's obligations are ending or have ended and Lessee's
        obligations are beginning or have begun. Lessor's obligations with
        respect to any warranties given to Lessee pursuant to this Section 2.2
        are conditioned upon the following: (a) Lessee shall have given notice
        to Lessor of any claims on such warranties promptly and in no event not
        later than twenty (20) days after the discovery of the condition giving
        rise to such claim and (b) except in connection with an emergency that
        threatens property or safety, if Lessee or any person other than a
        person selected by Lessor repairs or otherwise attempts to correct an
        conditions giving rise to the claim, Lessor shall be relieved of the
        warranty obligations related to such condition repaired or corrected by
        such other person.

        2.3. COMPLIANCE.

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        Lessor warrants that the improvements on the Premises comply with all
        applicable laws, covenants or restrictions of record, building codes,
        regulations and ordinances ("Applicable Requirements") in effect on the
        Commencement Date. Said warranty does not apply to the use to which
        Lessee will put the Premises or to any Alterations or Utility
        Installations (as defined in Paragraph 7.3(a)) made or to be made by
        Lessee. NOTE: Lessee is responsible for determining whether or not the
        zoning is appropriate for Lessee's intended use, and acknowledges that
        past uses of the Premises may no longer be allowed. If the Premises do
        not comply with said warranty, Lessor shall, except as otherwise
        provided, promptly after receipt of written notice from Lessee setting
        forth with specificity the nature and extent of such non-compliance,
        rectify the same at Lessor's expense. If Lessee does not give Lessor
        written notice of a non-compliance with this warranty within six (6)
        months following the Commencement Date, correction of that
        non-compliance shall be the obligation of Lessee at Lessee's sole cost
        and expense. If the Applicable Requirements are hereafter changed (as
        opposed to being in existence at the Commencement Date) so as to require
        during the term of this Lease the construction of an addition to or an
        alteration of the Building, the remediation of any Hazardous Substance,
        or the reinforcement or other physical modification of the Building
        ("Capital Expenditure"), Lessor and Lessee shall allocate the cost of
        such work as follows:

        (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are
            required as a result of the specific and unique use of the Premises
            by Lessee as compared with uses by tenants in general, Lessee shall
            be fully responsible for the cost thereof, provided, however, that
            if such Capital Expenditure is required during the last two (2)
            years of this Lease and the cost thereof exceeds six (6) months'
            Base Rent, Lessee may instead terminate this Lease unless Lessor
            notifies Lessee, in writing, within ten (10) days after receipt of
            Lessee's termination notice that Lessor has elected to pay the
            difference between the actual cost thereof and the amount equal to
            six (6) months' Base Rent. If Lessee elects termination, Lessee
            shall immediately cease the use of the Premises which requires such
            Capital Expenditure and deliver to Lessor written notice specifying
            a termination date at least ninety (90) days thereafter. Such
            termination date shall, however, in no event be earlier than the
            last day that Lessee could legally utilize the Premises without
            commencing such Capital Expenditure.

        (b) If such Capital Expenditure is not the result of the specific and
            unique use of the Premises by Lessee (such as, governmentally
            mandated seismic modifications), then Lessor and Lessee shall
            allocate the obligation to pay for such costs pursuant to the
            provisions of Paragraph 7.1 (c); provided, however, that if such
            Capital Expenditure is required during the last two years of this
            Lease or if Lessor reasonably determines that it is not economically
            feasible to pay its share thereof, Lessor shall have the option to
            terminate this Lease upon ninety (90) days prior written notice to
            Lessee unless Lessee notifies Lessor, in writing, within ten (10)
            days after receipt of Lessor's termination notice that Lessee will
            pay for such Capital Expenditure. It Lessor does not elect to
            terminate, and fails to tender its share of any such Capital
            Expenditure, Lessee may advance such funds and deduct same, with
            interest, from Rent until Lessors share of such costs have been
            fully paid. If Lessee is unable to finance Lessor's share, or if the
            balance of the Rent due and payable for the remainder of this Lease
            is not sufficient to fully reimburse Lessee on

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            an  offset basis, Lessee shall have the right to terminate this
            Lease upon thirty (30) days written notice to Lessor.

        (c) Notwithstanding the above, the provisions concerning Capital
            Expenditures are intended to apply only to non-voluntary,
            unexpected, and new Applicable Requirements. If the Capital
            Expenditures are instead triggered by Lessee as a result of an
            actual or proposed change in use, change in intensity of use, or
            modification to the Premises then, and in that event, Lessee shall
            be fully responsible for the cost thereof, and Lessee shall not have
            any right to terminate this Lease.

        2.4. ACKNOWLEDGEMENTS.

        [intentionally omitted]

        2.5. LESSEE AS PRIOR OWNER/OCCUPANT.

        [intentionally omitted]

3. TERM.

        3.1. TERM.

        The Commencement Date, Expiration Date and Original Term of this Lease
        are as specified in Paragraph 1.3.

        3.2. EARLY POSSESSION.

        If Lessee totally or partially occupies the Premises prior to the
        Commencement Date, the obligation to pay Base Rent shall be abated for
        the period of such early possession. All other terms of this Lease
        (including, but not limited to, the obligations to pay Real Property
        Taxes and insurance premiums and to maintain the Premises) shall,
        however, be in effect during such period. Any such early possession
        shall not affect the Expiration Date.

        3.3. DELAY IN POSSESSION.

        (See Addendum Paragraph 61)

        3.4. LESSEE COMPLIANCE.

        Lessor shall not be required to tender possession of the Premises to
        Lessee until Lessee complies with its obligation to provide evidence of
        insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee
        shall be required to perform all of its obligations under this Lease
        from and after the Commencement Date, including the payment of Rent,
        notwithstanding Lessor's election to withhold possession pending receipt
        of such evidence of insurance. Further, if Lessee is required to perform
        any other conditions prior to or concurrent with the Early Possession
        Date, the Early Possession Date shall occur but Lessor may elect to
        withhold possession until such conditions are satisfied.

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4. RENT.

        4.1. RENT DEFINED.

        All monetary obligations of Lessee to Lessor under the terms of this
        Lease (except for the Security Deposit) are deemed to be rent ("RENT").

        4.2. PAYMENT.

        Lessee shall cause payment of Rent to be received by Lessor in lawful
        money of the United States, without offset or deduction (except as
        specifically permitted in this Lease), on or before the day on which it
        is due. Rent for any period during the term hereof which is for less
        than one (1) full calendar month shall be prorated based upon the actual
        number of days of said month. Payment of Rent shall be made to Lessor at
        its address stated herein or to such other persons or place as Lessor
        may from time to time designate in writing. Acceptance of a payment
        which is less than the amount then due shall not be a waiver of Lessor's
        rights to the balance of such Rent, regardless of Lessors endorsement of
        any check so stating.

        5. SECURITY DEPOSIT.

        Lessee. shall deposit with Lessor upon execution hereof the Security
        Deposit as security for Lessee's faithful performance of its obligations
        under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
        under this Lease, Lessor may use, apply or retain all or any portion of
        said Security Deposit for the payment of any amount due Lessor or to
        reimburse or compensate Lessor for any liability, expense, loss or
        damage which Lessor may suffer or incur by reason thereof. If Lessor
        uses or applies all or any portion of said Security Deposit, Lessee
        shall within ten (10) days after written request therefor deposit monies
        with Lessor sufficient to restore said Security Deposit to the full
        amount required by this Lease. If the Base Rent increases during the
        term of this Lease, Lessee shall, upon written request from Lessor,
        deposit additional monies with Lessor so that the total amount of the
        Security Deposit shall at all times bear the same proportion to the
        increased Base Rent as the initial Security Deposit bore to the initial
        Base Rent. Should the Agreed Use be amended to accommodate a material
        change in the business of Lessee or to accommodate a sublessee or
        assignee, Lessor shall have the right to increase the Security Deposit
        to the extent necessary, In Lessor's reasonable judgment, to account for
        any increased wear and tear that the Premises may suffer as a result
        thereof. If a change in control of Lessee occurs during this Lease and
        following such change the financial condition of Lessee is, in Lessor's
        reasonable judgment, significantly reduced, Lessee shall deposit such
        additional monies with Lessor as shall be sufficient to cause the
        Security Deposit to be at a commercially reasonable level based on said
        change in financial condition. Lessor shall not be required to keep the
        Security Deposit separate from its general accounts. Within fourteen
        (14) days after the expiration or termination of this Lease, if Lessor
        elects to apply the Security Deposit only to unpaid Rent, and otherwise
        within thirty (30) days after the Premises have been vacated pursuant to
        Paragraph 7.4(c) below, Lessor shall return that portion of the Security
        Deposit not used or applied by Lessor. No part of the Security Deposit
        shall be considered to be held in trust, to bear interest (except as
        hereinafter set forth)

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        or to be prepayment for any monies to be paid by Lessee under this
        Lease. Upon the return of the unused amounts of the Security Deposit,
        Lessor shall pay to Lessee an amount equal to simple (not compounded)
        interest on the portions of the Security Deposit unused from time to
        time during the Term. Lessor shall make such interest calculations on a
        monthly basis (using a 30 day month) using a simple interest rate of
        five (5%).

6. USE.

        6.1. USE.

        Lessee shall use and occupy the Premises only for the Agreed Use, or any
        other legal use which is reasonably comparable thereto, and for no other
        purpose. Lessee shall not use or permit the use of the Premises in a
        manner that is unlawful, creates damage, waste or a nuisance, or that
        disturbs owners and/or occupants of, or causes damage to neighboring
        properties. Lessor shall not unreasonably withhold or delay its consent
        to any written request for a modification of the Agreed Use, so long as
        the same will not impair the structural integrity of the improvements on
        the Premises or the mechanical or electrical systems therein, is not
        significantly more burdensome to the Premises. If Lessor elects to
        withhold consent, Lessor shall within five (5) business days after such
        request give written notification of same, which notice shall include an
        explanation of Lessor's objections to the change in use.

        6.2. HAZARDOUS SUBSTANCES.

                (a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
        SUBSTANCE" as used in this Lease shall mean any product, substance, or
        waste whose presence, use, manufacture, disposal, transportation, or
        release, either by itself or in combination with other materials
        expected to be on the Premises, is either: (i) potentially injurious to
        the public health, safety or welfare, the environment or the Premises,
        (ii) regulated or monitored by any governmental authority, or (iii) a
        basis for potential liability of Lessor to any governmental agency or
        third party under any applicable statute or common law theory. Hazardous
        Substances shall include, but not be limited to, hydrocarbons,
        petroleum, gasoline, and/or crude oil or any products, by-products or
        fractions thereof. Lessee shall not engage in any activity in or on the
        Premises which constitutes a Reportable Use of Hazardous Substances
        without the express prior written consent of Lessor and timely
        compliance (at Lessee's expense) with all Applicable Requirements.
        "REPORTABLE USE" shall mean (1) the installation or use of any above or
        below ground storage tank, (2) the generation, possession, storage, use,
        transportation, or disposal of a Hazardous Substance that requires a
        permit from, or with respect to which a report, notice, registration or
        business plan is required to be filed with, any governmental authority,
        and/or (3) the presence at the Premises of a Hazardous Substance with
        respect to which any Applicable Requirements requires that a notice be
        given to persons entering or occupying the Premises or neighboring
        properties. Notwithstanding the foregoing, Lessee may use any ordinary
        and customary materials reasonably required to be used in the normal
        course of the Agreed Use, so long as such use is in compliance with, all
        Applicable Requirements, is not a Reportable Use, and does not expose
        the Premises or neighboring property to any meaningful risk of
        contamination or damage or expose Lessor to any liability therefor. In
        addition, Lessor may condition its consent to any Reportable Use upon
        receiving such additional assurances as Lessor reasonably deems
        necessary to protect

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        itself, the public, the Premises and/or the environment against damage,
        contamination, injury and/or liability, including, but not limited to,
        the installation (and removal on or before Lease expiration or
        termination) of protective modifications (such as concrete encasements)
        and/or increasing the Security Deposit.

                (b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
        cause to believe, that a Hazardous Substance has come to be located in,
        on, under or about the Premises, other than as previously consented to
        by Lessor, Lessee shall immediately give written notice of such fact to
        Lessor, and provide Lessor with a copy of any report, notice, claim or
        other documentation which it has concerning the presence of such
        Hazardous Substance.

                (c) LESSEE REMEDIATION. Lessee shall not cause or permit any
        Hazardous Substance to be spilled or released in, on, under, or about
        the Premises (including through the plumbing or sanitary sewer system)
        and shall promptly, at Lessee's expense, take all investigatory and/or
        remedial action reasonably recommended, whether or not formally ordered
        or required, for the cleanup of any contamination of, and for the
        maintenance, security and/or monitoring of the Premises or neighboring
        properties, that was caused or materially contributed to by Lessee, or
        pertaining to or involving any Hazardous Substance brought onto the
        Premises during the term of this Lease, by or for Lessee, or any third
        party. Notwithstanding the foregoing, Lessee shall have no liability
        under this Lease with respect to underground migration of any Hazardous
        Substance under the Premises from adjacent properties unless such
        adjacent properties are owned or occupied by Lessee, and then only to
        the extent caused by Lessee.

                (d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
        hold Lessor, its agents, employees, lenders and ground lessor, if any,
        harmless from and against any and all loss of rents and/or damages,
        liabilities, judgments, claims, expenses, penalties, and attorneys' and
        consultants' fees arising out of or involving any Hazardous Substance
        brought onto the Premises by or for Lessee, or any third party
        (provided, however, that Lessor shall have no liability under this Lease
        with respect to underground migration of any Hazardous Substance under
        the Premises from adjacent properties occurring after the Commencement
        Date). Lessee's obligations shall include, but not be limited to, the
        effects of any contamination or injury to person, property or the
        environment created or suffered by Lessee, and the cost of
        investigation, removal, remediation, restoration and/or abatement, and
        shall survive the expiration or termination of this Lease. No
        termination, cancellation or release agreement entered into by Lessor
        and Lessee shall release Lessee from its obligations under this Lease
        with respect to Hazardous Substances, unless specifically so agreed by
        Lessor in writing at the time of such agreement

                (e) LESSOR INDEMNIFICATION. Lessor and its successors and
        assigns shall indemnify, defend, reimburse and hold Lessee, its
        employees and lenders, harmless from and against any and all damages,
        liabilities, judgments, claims, expenses, penalties, and attorneys' and
        consultants' fees and all environmental damages, including the cost of
        remediation, arising out of or involving any Hazardous Substances on the
        Premises prior to the Commencement Date or which are caused by the
        gross negligence or willful misconduct of Lessor, its agents or
        employees. Lessor's obligations, as and when required by the Applicable
        Requirements, shall include, but not be limited to, the cost of
        investigation, removal, remediation, restoration and/or abatement, and
        shall survive the expiration or termination of this Lease. No
        termination, cancellation or release agreement entered into by Lessor
        and Lessee shall release Lessor from its obligations under this Lease
        with respect to Hazardous Substances, unless specifically so agreed by
        Lessee in writing at the time of such agreement.

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                (f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
        responsibility and pay for any investigations or remediation measures
        required by governmental entities having jurisdiction with respect to
        the existence of Hazardous Substances on the Premises prior to the
        Commencement Date, unless such remediation measure is required as a
        result of Lessee's use (including "Alterations", as defined in Paragraph
        7.3(a) below) of the Premises, in which event Lessee shall be
        responsible for such payment. Lessee shall cooperate fully in any such
        activities at the request of Lessor, including allowing Lessor and
        Lessor's agents to have reasonable access to the Premises at reasonable
        times in order to carry out Lessor's investigative and remedial
        responsibilities.

                (g) LESSOR TERMINATION OPTION. If a Hazardous Substance
        Condition occurs during the term of this Lease, unless Lessee is legally
        responsible therefor (in which case Lessee shall make the investigation
        and remediation thereof required by the Applicable Requirements and this
        Lease shall continue in full force and effect, but subject to Lessor's
        rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's
        option, either (i) investigate and remediate such Hazardous Substance
        Condition, if required, as soon as reasonably possible at Lessors
        expense, in which event this Lease shall continue in full force and
        effect, or (ii) if the estimated cost to remediate such condition
        exceeds twelve (12) times the then monthly Base Rent or $100,000,
        whichever is greater, give written notice to Lessee, within thirty (30)
        days after receipt by Lessor of knowledge of the occurrence of such
        Hazardous Substance Condition, of Lessor's desire to terminate this
        Lease as of the date sixty (60) days following the date of such notice.
        In the event Lessor elects to give a termination notice, Lessee may,
        within ten (10) days thereafter, give written notice to Lessor of
        Lessee's commitment to pay the amount by which the cost of the
        remediation of such Hazardous Substance Condition exceeds an amount
        equal to twelve (12) times the then monthly Base Rent or $100,000,
        whichever is greater, Lessee shall provide Lessor with said funds or
        satisfactory assurance thereof within thirty (30) days following such
        commitment. In such event, this Lease shall continue in full force and
        effect, and Lessor shall proceed to make such remediation as soon as
        reasonably possible after the required funds are available. If Lessee
        does not give such notice and provide the required funds or assurance
        thereof within the time provided, this Lease shall terminate as of the
        date specified in Lessor's notice of termination.

        6.3. LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS.

        Except as otherwise provided in this Lease (and, in particular,
        Paragraphs 2.2 and 2.3 hereof), Lessee shall, at Lessee's sole expense,
        fully, diligently and in a timely manner, materially comply with all
        Applicable Requirements, and the requirements of any applicable fire
        insurance underwriter or rating bureau, without regard to whether said
        requirements are now in effect or become effective after the Early
        Possession Date. Lessee shall, within ten (10) days after receipt of
        Lessor's written request, provide Lessor with copies of all permits and
        other documents, and other information evidencing Lessee's compliance
        with any Applicable Requirements specified by Lessor, and shall
        immediately upon receipt, notify Lessor in writing (with copies of any
        documents involved) of any threatened or actual claim, notice, citation,
        warning, complaint or report pertaining to or involving the failure of
        Lessee or the Premises to comply with any Applicable Requirements.

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        6.4. INSPECTION; COMPLIANCE.

        Lessor and Lessor's "Lender" (as defined in Paragraph 30 below) and
        consultants shall have the right to enter into Premises at any time, in
        the case of an emergency, and otherwise at reasonable times, for the
        purpose of inspecting the condition of the Premises and for verifying
        compliance by Lessee with this Lease. The cost of any such inspections
        shall be paid by Lessor, unless a violation of Applicable Requirements,
        or a contamination is found to exist or be imminent, or the inspection
        is requested or ordered by a governmental authority. In such case,
        Lessee shall upon request reimburse Lessor for the cost of such
        inspections, so long as such inspection is reasonably related to the
        violation or contamination.

7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND ALTERATIONS.

        7.1. LESSEE's OBLIGATIONS.

                (a) IN GENERAL. Subject to the provisions of Paragraph 2.2
        (Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
        Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), 14
        (Condemnation), and the Work Letter (which provisions shall control over
        any conflicting provisions in this Paragraph 7.1 (a)), Lessee shall, at
        Lessee's sole expense, keep the Premises, Utility Installations, and
        Alterations in good order, condition and repair (whether or not the
        portion of the Premises requiring repairs, or the means of repairing the
        same, are reasonably or readily accessible to Lessee, and whether or not
        the need for such repairs occurs as a result of Lessee's use, any prior
        use, the elements or the age of such portion of the Premises),
        including, but not limited to, all equipment or facilities, such as
        plumbing, heating, ventilating, air-conditioning, electrical, lighting
        facilities, boilers, pressure vessels, fire protection system, fixtures,
        walls (interior and exterior), foundations, ceilings, roofs, floors,
        windows, doors, plate glass, skylights, landscaping, driveways, parking
        lots, fences, retaining walls, signs, sidewalks and parkways located in,
        on, or adjacent to the Premises. Lessee, in keeping the Premises in good
        order, condition and repair, shall exercise and perform good,
        maintenance practices, specifically including the procurement and
        maintenance of the service contracts required by Paragraph 7.1 (b)
        below. Lessee's obligations shall include restorations, replacements or
        renewals when necessary to keep the Premises and all improvements
        thereon or a part thereof in good order, condition and state of repair.
        Lessee shall, during the term of this Lease, keep the exterior
        appearance of the Building in a first-class condition consistent with
        the exterior appearance of other similar facilities of comparable age
        and size in the vicinity, including, when necessary, the exterior
        repainting of the Building. Lessor shall non-exclusively assign to
        Lessee all warranties obtained by Lessor related to the Base Building.

                (b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
        procure and maintain contracts, with copies to Lessor, in customary form
        and substance for, and with contractors specializing and experienced in
        the maintenance of the following equipment and improvements, if any, if
        and when installed on the Premises (the "BASIC ELEMENTS"): (i) HVAC
        equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing
        systems, including fire alarm and/or smoke detection, (iv) landscaping
        and irrigation systems, (v) roof covering and drains, (vi) driveways and
        parking lots, (vii) clarifiers (viii) basic utility feed to the
        perimeter of the Building, and (ix) any other equipment, if reasonably
        required by Lessor.

                                       10
<PAGE>   11

                (c) REPLACEMENT. Subject to Lessee's indemnification of Lessor
        as set forth in Paragraph 8.7 below, and without relieving Lessee of
        liability resulting from Lessee's failure to exercise and perform good
        maintenance practices, if the Basic Elements described in Paragraph 7.1
        (b) cannot be repaired other than at a cost which is in excess of 50% of
        the cost of replacing such Basic Elements, then such Basic Elements
        shall be replaced by Lessor, and the cost thereof shall be prorated
        between the Parties and Lessee shall only be obligated to pay, each
        month during the remainder of the term of this Lease, on the date on
        which Base Rent is due, an amount equal to the product of multiplying
        the cost of such replacement by a fraction, the numerator of which is
        one, and the denominator of which is the number of months of the useful
        life of such replacement as such useful life is specified pursuant to
        Federal income tax regulations or guidelines for depreciation thereof
        (including interest on the unamortized balance as is then commercially
        reasonable in the judgment of Lessor's accountants), with Lessee
        reserving the right to prepay its obligation at any time.

        7.2. LESSOR's OBLIGATIONS.

        Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
        (Compliance), 9 (Damage or Destruction) and 14 (Condemnation), it is
        intended by the Parties hereto that Lessor have no obligation, in any
        manner whatsoever, to repair and maintain the Premises, or the equipment
        therein, all of which obligations are intended to be that of the Lessee.
        It is the intention of the Parties that the terms of this Lease govern
        the respective obligations of the Parties as to maintenance and repair
        of the Premises, and they expressly waive the benefit of any statute now
        or hereafter in effect to the extent it is inconsistent with the terms
        of this Lease.

        7.3. UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.

                (a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
        INSTALLATIONS" refers to all floor ad window coverings, air lines, power
        panels, electrical distribution, security and fire protection systems,
        communication systems, lighting fixtures, HVAC equipment, plumbing, and
        fencing in or on the Premises. The term "TRADE FIXTURES" shall mean
        Lessee's machinery and equipment that can be removed without doing
        material damage to the Premises. The term "ALTERATIONS" shall mean any
        modification of the improvements, other than Utility Installations or
        Trade Fixtures, whether by addition or deletion. "LESSEE OWNED
        ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as Alterations
        and/or Utility Installations made by Lessee that are not yet owned by
        Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any
        Alterations or Utility Installations to the Premises without Lessor's
        prior written consent. Lessee may, however, make non-structural Utility
        Installations to the interior of the Premises (excluding the roof)
        without such consent but upon notice to Lessor, as long as they are not
        visible from the outside, do not involve puncturing, relocating or
        removing the roof or any existing walls, and the cumulative cost thereof
        during this Lease as extended does not exceed $50,000 in the aggregate
        or $10,000 in any one year.

                (b) CONSENT. Any Alterations or Utility Installations that
        Lessee shall desire to make and which require the consent of the Lessor
        shall be presented to Lessor in written form with detailed plans.
        Consent shall be deemed conditioned upon Lessee's: (i) acquiring all
        applicable governmental permits, (ii) furnishing Lessor with copies of
        both the permits and the plans and specifications prior to commencement
        of the work, and (iii) compliance with all conditions of

                                       11
<PAGE>   12

        said permits and other Applicable Requirements in a prompt and
        expeditious manner. Any Alterations or Utility Installations shall be
        performed in a workmanlike manner with good and sufficient materials.
        Lessee shall promptly upon completion furnish Lessor with as-built plans
        and specifications. For work which costs an amount equal to the greater
        of one month's Base Rent, or $10,000, Lessor may condition its consent
        upon Lessee providing a lien and completion bond in an amount equal to
        one and one-half times the estimated cost of such Alteration or Utility
        Installation and/or upon Lessee's posting an additional Security Deposit
        with Lessor.

                (c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
        labor or materials furnished or alleged to have been furnished to or for
        Lessee at or for use on the Premises, which claims are or may be secured
        by any mechanic's or materialmen's lien against the Premises or any
        interest therein. Lessee shall give Lessor not less than ten (10) days'
        notice prior to the commencement of any work in, on or about the
        Premises, and Lessor shall have the right to post notices of
        non-responsibility. If Lessee shall contest the validity of any such
        lien, claim or demand, then Lessee shall, at its sole expense defend and
        protect itself, Lessor and the Premises against the same and shall pay
        and satisfy any such adverse judgment that may be rendered thereon
        before the enforcement thereof. If Lessor shall require, Lessee shall
        furnish a surety bond in an amount equal to one and one-half times the
        amount of such contested lien, claim or demand, indemnifying Lessor
        against liability for the same. If Lessor elects to participate in any
        such action, Lessee shall pay Lessor's attorneys' fees and costs.

7.4. OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.

                (a) OWNERSHIP. Subject to Lessor's right to require removal or
        elect ownership as hereinafter provided, all Alterations and Utility
        Installations made by Lessee shall be the property of Lessee, but
        considered a part of the Premises. Lessor may, at any time, elect in
        writing to be the owner of all or any specified part of the Lessee Owned
        Alterations and Utility Installations except for those items listed on
        Exhibit B ("Protected Lessee Owned Alterations"). Unless otherwise
        instructed per Paragraph 7.4(b) hereof, all Lessee Owned Alterations and
        Utility Installations (except for Protected Lessee Owned Alterations)
        shall, at the expiration or termination of this Lease, unless removed by
        Lessee pursuant to this Lease, become the property of Lessor and be
        surrendered by Lessee with the Premises.

                (b) REMOVAL. By delivery to Lessee of written notice from Lessor
        not earlier than ninety (90) and not later than thirty (30) days prior
        to the end of the term of this Lease, Lessor may require that any or all
        Lessee Owned Alterations or Utility Installations be removed by the
        expiration or termination of this Lease. Lessor may require the removal
        at any time of all or any part of any Lessee Owned Alterations or
        Utility Installations made without the required consent.

                (c) SURRENDER/RESTORATION. Lessee shall surrender the Premises
        by the Expiration Date or any earlier termination date, with all of the
        improvements, parts and surfaces thereof broom clean and free of debris,
        and in good operating order, condition and state of repair, ordinary
        wear and tear excepted. "Ordinary wear and tear" shall not include any
        damage or deterioration that would have been prevented by good
        maintenance practice. Lessee shall repair any damage occasioned by the
        installation, maintenance or removal of Trade Fixtures, Lessee Owned
        Alterations and/or Utility Installations, furnishings, and equipment as
        well as the removal of any storage tank installed by or for Lessee, and
        the removal, replacement, or remediation of any soil, material or
        groundwater contaminated by Lessee. Trade Fixtures shall remain the
        property of Lessee and shall be removed by Lessee. The failure by Lessee
        to timely vacate the Premises

                                       12
<PAGE>   13

pursuant to this Paragraph 7.4(c) without the express written consent of Lessor
shall constitute a holdover under the provisions of Paragraph 26 below.

8. INSURANCE; INDEMNITY.

        8.1. PAYMENT FOR INSURANCE.

        Lessee shall pay for all insurance required under Paragraph 8 except to
        the extent of the cost attributable to liability insurance carried by
        Lessor under Paragraph 8.2(b) in excess of $2,000,000 per occurrence.
        Premiums for policy periods commencing prior to or extending beyond the
        Lease term shall be prorated to correspond to the Lease term. Payment
        shall be made by Lessee to Lessor within ten (10) days following receipt
        of an invoice.

        8.2. LIABILITY INSURANCE.

                        (a) CARRIED BY LESSEE. Lessee shall obtain and keep in
                force a Commercial General Liability Policy of insurance
                protecting Lessee and Lessor against claims for bodily injury,
                personal injury and property damage based upon or arising out of
                the ownership, use, occupancy or maintenance of the Premises and
                all areas appurtenant thereto. Such insurance shall be on an
                occurrence basis providing single limit coverage in an amount
                not less than $2,000,000 per occurrence with an "ADDITIONAL
                INSURED-MANAGERS OR LESSORS OF PREMISES ENDORSEMENT" and contain
                the "AMENDMENT OF THE POLLUTION EXCLUSION ENDORSEMENT" for
                damage caused by heat, smoke or fumes from a hostile fire. The
                Policy shall not contain any intra-insured exclusions as between
                insured persons or organizations, but shall include coverage for
                liability assumed under this Lease as an "insured contract" for
                the performance of Lessee's indemnity obligations under this
                Lease. The limits of said insurance shall not, however, limit
                the liability of Lessee nor relieve Lessee of any obligation
                hereunder. All insurance carried by Lessee shall be primary to
                and not contributory with any similar insurance carried by
                Lessor, whose insurance shall be considered excess insurance
                only.

                        (b) CARRIED BY LESSOR. Lessor shall maintain liability
                insurance as described in Paragraph 8.2(a), in addition to, and
                not in lieu of, the insurance required to be maintained by
                Lessee. Lessee shall not be named as an additional insured
                therein.

        8.3. PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.

                (a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
        and keep in force a policy or policies in the name of Lessor, with loss
        payable to Lessor, any groundlessor, and to any Lender(s) insuring loss
        or damage to the Premises. The amount of such insurance shall be equal
        to the full replacement cost of the Premises, as the same shall exist
        from time to time, or the amount required by any Lenders, but in no
        event more than the commercially reasonable and available insurable
        value thereof. If Lessor is the Insuring Party, however, Lessee Owned
        Alterations and Utility Installations, Trade Fixtures, and Lessee's
        personal property shall be insured by Lessee under Paragraph 8.4 rather
        than by Lessor. If the coverage is available and commercially
        appropriate, such policy or policies shall insure against all risks of
        direct physical loss or damage (except the perils of flood and/or
        earthquake unless required by a Lender), including coverage for debris
        removal and the enforcement of any Applicable Requirements requiring the
        upgrading, demolition, reconstruction or replacement of any portion of
        the Premises

                                       13
<PAGE>   14

        as the result of a covered loss. Said policy or policies shall also
        contain an agreed valuation provision in lieu of any coinsurance clause,
        waiver of subrogation, and inflation guard protection causing an
        increase in the annual property insurance coverage amount by a factor of
        not less than the adjusted U.S. Department of Labor Consumer Price Index
        for All Urban Consumers for the city nearest to where the Premises are
        located. If such insurance coverage has a deductible clause, the
        deductible amount shall not exceed $10,000 per occurrence, and Lessee
        shall be liable for such deductible amount in the event of an insured
        Loss.

                (b) RENTAL VALUE. The Insuring Party shall obtain and keep in
        force a policy or policies in the name of Lessor with loss payable to
        Lessor and any Lender, insuring the loss of the full Rent for one (1)
        year. Said insurance shall provide that in the event the Lease is
        terminated by reason of an inured loss, the period of indemnity for such
        coverage shall be extended beyond the date of the completion of repairs
        or replacement of the Premises, to provide for one full year's loss of
        Rent from the date of any such loss. Said insurance shall contain an
        agreed valuation provision in lieu of any coinsurance clause, and the
        amount of coverage shall be adjusted annually to reflect the projected
        Rent otherwise payable by Lessee, for the next twelve (12) month period.
        Lessee shall be liable for any deductible amount in the event of such
        loss.

                (c) ADJACENT PREMISES. If the Premises are part of a larger
        building, or of a group of buildings owned by Lessor which are adjacent
        to the Premises, the Lessee shall pay for any increase in the premiums
        for the property insurance of such building or buildings if said
        increase is caused by Lessees acts, omissions, use or occupancy of the
        Premises.

        8.4. LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.

                (a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
        coverage on all of Lessee's personal property, Trade Fixtures, and
        Lessee Owned Alterations and Utility Installations. Such insurance shall
        be full replacement cost coverage with a deductible of not to exceed
        $5,000 per occurrence. The proceeds from any such insurance shall be
        used by Lessee for the replacement of personal property, Trade Fixtures
        and Lessee Owned Alterations and Utility Installations. Lessee shall
        provide Lessor with written evidence that such insurance is in force.

                (b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss
        of income and extra expense insurance in amounts as will reimburse
        Lessee for direct or indirect loss of earnings attributable to all
        perils commonly insured against by prudent lessees in the business of
        Lessee or attributable to prevention of access to the Premises as a
        result of such perils.

                (c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
        representation that the limits or forms of coverage of insurance
        specified herein are adequate to cover Lessee's property, business
        operations or obligations under this Lease.

        8.5. INSURANCE POLICIES.

        Insurance required herein shall be by companies duly licensed or
        admitted to transact business in the state where the Premises are
        located, and maintaining during the policy term a "General Policyholders
        Rating" of at least B+, V, as set forth in the most current issue of
        "Best's Insurance Guide", or such other rating as may be required by a
        Lender. Lessee shall not do or permit to be done anything which
        invalidates the required insurance policies. Lessee shall, prior to the
        Early Possession Date, deliver to Lessor certified copies of policies of
        such insurance or certificates evidencing the existence and amounts of
        the required insurance. No

                                       14
<PAGE>   15

        such policy shall be cancelable or subject to modification except after
        thirty (30) days prior written notice to Lessor. Lessee shall, at least
        thirty (30) days prior to the expiration of such policies, furnish
        Lessor with evidence of renewals or "insurance binders" evidencing
        renewal thereof, or Lessor may order such insurance and charge the cost
        thereof to Lessee, which amount shall be payable by Lessee to Lessor
        upon demand. Such policies shall be for a term of at least one year, or
        the length of the remaining term of this Lease, whichever is less. If
        either Party shall fail to procure and maintain the insurance required
        to be carried by it, the other Party may, but shall not be required to,
        procure and maintain the same.

        8.6. WAIVER OF SUBROGATION.

        Without affecting any other rights or remedies, Lessee and Lessor each
        hereby release and relieve the other, and waive their entire right to
        recover damages against the other, for loss of or damage to its property
        arising out of or incident to the perils required to be insured against
        herein. The effect of such releases and waivers is not limited by the
        amount of insurance carried or required, or by any deductibles
        applicable hereto. The Parties agree to have their respective property
        damage insurance carriers waive any right to subrogation that such
        companies may have against Lessor or Lessee, as the case may be, so long
        as the insurance is not invalidated thereby.

        8.7. INDEMNITY.

        Except for Lessor's gross negligence or willful misconduct, Lessee shall
        indemnify, protect, defend and hold harmless the Premises, Lessor and
        its agents, Lessor's master or ground lessor, partners and Lenders, from
        and against any and all claims, loss of rents and/or damages, liens,
        judgments, penalties, attorneys' and consultants' fees, expenses and/or
        liabilities arising out of, involving, or in connection with, the use
        and/or occupancy of the Premises by Lessee. If any action or proceeding
        is brought against Lessor by reason of any of the foregoing matters,
        Lessee shall upon notice defend the same at Lessee's expense by counsel
        reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee
        in such defense. Lessor need not have first paid any such claim in order
        to be defended or indemnified.

        8.8. EXEMPTION OF LESSOR FROM LIABILITY.

        Subject to the provisions of Section 6 of the Work Letter, Lessor shall
        not be liable for injury or damage to the person or goods, wares,
        merchandise or other property of Lessee, Lessee's employees,
        contractors, invitees, customers, or any other person in or about the
        Premises, whether such damage or injury is caused by or results from
        fire, steam, electricity, gas, water or rain, or from the breakage,
        leakage, obstruction or other defects of pipes, fire sprinklers, wires,
        appliances, plumbing, HVAC or lighting fixtures, or from any other
        cause, whether the said injury or damage results from conditions arising
        upon the Premises or upon other portions of the Building of which the
        Premises are a part, or from other sources or places. Lessor shall not
        be liable for any damages arising from any act or neglect of any other
        tenant of Lessor. Notwithstanding Lessor's negligence or breach of this
        Lease, Lessor shall under no

                                       15
<PAGE>   16

        circumstances be liable for injury to Lessee's business or for any loss
        of income or profit therefrom.

9. DAMAGE OR DESTRUCTION.

        9.1. DEFINITIONS.

                (a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
        to the improvements on the Premises, other than Lessee Owned Alterations
        and Utility Installations, which can reasonably be repaired in six (6)
        months or less from the date of the damage or destruction. Lessor shall
        notify Lessee in writing within thirty (30) days from the date of the
        damage or destruction as to whether or not the damage is Partial or
        Total.

                (b) "PREMISES TOTAL DESTRUCTION" See Addendum Paragraph 53

                (c) "INSURED LOSS" shall mean damage or destruction to
        improvements on the Premises' other than Lessee Owned Alterations and
        Utility Installations and Trade Fixtures, which was caused by an event
        required to be covered by the insurance described in Paragraph 8.3(a),
        irrespective of any deductible amounts or coverage limits involved.

                (d) "REPLACEMENT COST" shall mean the cost to repair or rebuild
        the improvements owned by Lessor at the time of the occurrence to their
        condition existing immediately prior thereto, including demolition,
        debris removal and upgrading required by the operation of Applicable
        Requirements, and without deduction for depreciation.

                (e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
        discovery of a condition involving the presence of, or a contamination
        by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or
        under the Premises.

        9.2. PARTIAL DAMAGE - INSURED LOSS.

        If a Premises Partial Damage that is an Insured Loss occurs, then Lessor
        shall, at Lessor's expense, repair such damage (but not Lessee's Trade
        Fixtures or Lessee Owned Alterations and Utility Installations) as soon
        as reasonably possible and this Lease shall continue in full force and
        effect; provided, however, that Lessee shall, at Lessor's election, make
        the repair of any damage or destruction the total cost to repair of
        which is $10,000 or less, and, in such event, Lessor shall make any
        applicable insurance proceeds available to Lessee on a reasonable basis
        for that purpose. Notwithstanding the foregoing, if the required
        insurance was not in force or the insurance proceeds are not sufficient
        to effect such repair, the Insuring Party shall promptly contribute the
        shortage in proceeds (except as to the deductible which is Lessee's
        responsibility) as and when required to complete said repairs. In the
        event, however, such shortage was due to the fact that, by reason of the
        unique nature of the improvements, full replacement cost insurance
        coverage was not commercially reasonable and available, Lessor shall
        have no obligation to pay for the shortage in insurance proceeds or to
        fully restore the unique aspects of the Premises unless Lessee provides
        Lessor with the funds to cover same, or adequate assurance thereof,
        within ten (10) days following receipt of written notice of such
        shortage and request therefor. If Lessor receives said funds or adequate
        assurance thereof within said ten (10) day period, the party
        responsible for making the repairs shall complete them as soon as
        reasonably possible and this Lease shall remain in full force and
        effect. If such funds or assurance are not received, Lessor may
        nevertheless elect by

                                       16
<PAGE>   17

        written notice to Lessee within ten (10) days thereafter to: (i) make
        such restoration and repair a is commercially reasonable with Lessor
        paying any shortage in proceeds, in which case this Lease shall remain
        in full force and effect, or (ii) have this Lease terminate thirty (30)
        days thereafter. Lessee shall not be entitled to reimbursement of any
        funds contributed by Lessee to repair any such damage or destruction.
        Premises Partial Damage due to flood or earthquake shall be subject to
        Paragraph 9.3, notwithstanding that there may be some insurance
        coverage, but the net proceeds of any such insurance shall be made
        available for the repairs if made by either Party.

        9.3. PARTIAL DAMAGE - UNINSURED LOSS.

        If a Premises Partial Damage that is not an Insured Loss occurs, unless
        caused by a negligent or willful act of Lessee (in which event Lessee
        shall make the repairs at Lessee's expense), Lessor may either: (i)
        repair such damage as soon as reasonably possible at Lessor's expense,
        in which event this Lease shall continue in full force and effect, or
        (ii) terminate this Lease by giving written notice to Lessee within
        thirty (30) days after receipt by Lessor of knowledge of be occurrence
        of such damage. Such termination shall be effective sixty (60) days
        following the date of such notice. In the event Lessor elects to
        terminate this Lease, Lessee shall have the right within ten (10) days
        after receipt of the termination notice to give written notice to Lessor
        of Lessee's commitment to pay for the repair of such damage without
        reimbursement from Lessor. Lessee shall provide Lessor with said funds
        or satisfactory assurance thereof within thirty (30) days after making
        such commitment. In such event this Lease shall continue in full force
        and effect, and Lessor shall proceed to make such repairs as soon as
        reasonably possible after the required funds are available. If Lessee
        does not make the required commitment, this Lease shall terminate as of
        the date specified in the termination notice. (See Addendum Paragraph
        54)

        9.4. TOTAL DESTRUCTION.

        Notwithstanding any other provision hereof, if a Premises Total
        Destruction occurs, this Lease shall terminate sixty (60) days
        following such Destruction. If the damage or destruction was caused by
        the gross negligence or willful misconduct of Lessee, Lessor shall have
        the right to recover Lessor's damages from Lessee, except as provided in
        Paragraph 8.6.

        9.5. DAMAGE NEAR END OF TERM.

        If at any time during the last six (6) months of this Lease there is
        damage for which the cost to repair exceeds one (1) month's Base Rent,
        whether or not an Insured Loss, Lessor may terminate this Lease
        effective sixty (60) days following the date of occurrence of such
        damage by giving a written termination notice to Lessee within thirty
        (30) days after the date of occurrence of such damage. Notwithstanding
        the foregoing, if Lessee at that time has an exercisable option to
        extend this Lease or to purchase the Premises, then Lessee may preserve
        this Lease by, (a) exercising such option and (b) subject to Lessor's
        obligation under Paragraph 9.3 as revised, providing Lessor with any
        shortage in insurance proceeds (or adequate assurance thereof) needed to
        make there pairs on or before the earlier of (i) the date which is ten
        days after Lessee's receipt of Lessor written notice purporting to
        terminate this Lease, or (ii) the day prior to the date upon which such
        option expires. If Lessee duly exercises such option during such period
        and provides

                                       17
<PAGE>   18

        Lessor with funds (or adequate assurance thereof to cover any shortage
        in insurance proceeds), Lessor shall, at Lessor's commercially
        reasonable expense, repair such damage as soon as reasonably possible
        and this Lease shall continue in full force and effect. If Lessee fails
        to exercise such option and provide such funds or assurance during such
        period, then this Lease shall terminate on the date specified in the
        termination notice and Lessee's option shall be extinguished. (See
        Addendum Paragraph 55)

        9.6. ABATEMENT OF RENT; LESSEE'S REMEDIES.

                (a) ABATEMENT. In the event of Premises Partial Damage or
        Premises Total Destruction or a Hazardous Substance Condition for which
        Lessee is not responsible under this Lease, the Rent payable by Lessee
        for the period required for the repair, remediation or restoration of
        such damage shall be abated in proportion to the degree to which
        Lessee's use of the Premises is impaired, but not to exceed the proceeds
        received from the Rental Value insurance. All other obligations of
        Lessee hereunder shall be performed by Lessee, and Lessor shall have no
        liability for any such damage, destruction, remediation, repair or
        restoration except as provided herein.

                (b) REMEDIES. If Lessor shall be obligated to repair or restore
        the Premises and does not commence, in a substantial and meaningful way,
        such repair or restoration within ninety (90) days after such obligation
        shall accrue, Lessee may, at any time prior to the commencement of such
        repair or restoration, give written notice to Lessor and to any Lenders
        of which Lessee has actual notice, of Lessee's election to terminate
        this Lease on a date not less than sixty (60) days following the giving
        of such notice. If Lessee gives such notice and such repair or
        restoration is not commenced within thirty (30) days thereafter, this
        Lease shall terminate as of the date specified in said notice. If the
        repair or restoration is commenced within said thirty (30) days, this
        Lease shall continue in full force and effect. "COMMENCE" shall mean
        either the unconditional authorization of the preparation of the
        required plans, or the beginning of the actual work on the Premises,
        whichever first occurs.

        9.7. TERMINATION - ADVANCE PAYMENTS.

        Upon termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph
        9, an equitable adjustment shall be made concerning advance Base Rent
        and any other advance payments made by Lessee to Lessor. Lessor shall,
        in addition, return to Lessee so much of Lessee's Security Deposit as
        has not been, or is not then required to be, used by Lessor.

        9.8. WAIVE STATUTES.

        Lessor and Lessee agree that the terms of this Lease shall govern the
        effect of any damage to or destruction of the Premises with respect to
        the termination of this Lease and hereby waive the provisions of any
        present or future statute to the extent inconsistent herewith.

10. REAL PROPERTY TAXES.

        10.1. DEFINITION OF "REAL PROPERTY TAXES."

        As used herein, the term "REAL PROPERTY TAXES" shall include any form of
        assessment; real estate, general, special, ordinary or extraordinary or
        ad valorem real estate taxes and assessments (other than inheritance,
        personal income or estate taxes); and/or improvement bond imposed upon
        or levied against any legal or equitable interest of Lessor in the
        Premises,

                                       18
<PAGE>   19

        by any authority having the direct or indirect power to tax and where
        the funds are generated with reference to the Building address and where
        the proceeds so generated are to be applied by the city, county or other
        local taxing authority of a jurisdiction within which the Premises are
        located. The term "REAL PROPERTY TAXES" shall also include any tax, fee,
        levy, assessment or charge, or any increase therein, imposed by reason
        of events occurring during the term of this Lease, including but not
        limited to, a change in the ownership of the Premises.

        10.2.

                (a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes
        applicable to the Premises during the term of this Lease. Subject to
        Paragraph 10.2(b), all such payments shall be made at least ten (10)
        days prior to any delinquency date. Lessee shall promptly furnish Lessor
        with satisfactory evidence that such taxes have been paid. If any such
        taxes shall cover any period of time prior to or after the expiration or
        termination of this Lease, Lessee's share of such taxes shall be
        prorated to cover only that portion of the tax bill applicable to the
        period that this Lease is in effect, and Lessor shall reimburse Lessee
        for any overpayment. if Lessee shall fail to pay any required Real
        Property Taxes, Lessor shall have the right to pay the same, and Lessee
        shall reimburse Lessor therefor upon demand.

                (b) ADVANCE PAYMENT. In the event Lessee incurs a late charge on
        any Rent payment, Lessor may, at Lessor's option, estimate the current
        Real Property Taxes, and require that such taxes be paid in advance to
        Lessor by Lessee, either: (i) in a lump sum amount equal to the
        installment due, at least twenty (20) days prior to the applicable
        delinquency date, or (ii) monthly in advance with the payment of the
        Base Rent. If Lessor elects to require payment monthly in advance, the
        monthly payment shall be an amount equal to the amount of the estimated
        installment of taxes divided by the number of months remaining before
        the month in which said installment becomes delinquent. When the actual
        amount of the applicable tax bill is known, the amount of such equal
        monthly advance payments shall be adjusted as required to provide the
        funds needed to pay the applicable taxes. If the amount collected by
        Lessor is insufficient to pay such Real Property Taxes when due, Lessee
        shall pay Lessor, upon demand, such additional sums as are necessary to
        pay such obligations. All monies paid to Lessor under this Paragraph may
        be intermingled with other monies of Lessor and shall not bear interest.
        In the event of a Breach by Lessee in the performance of its obligations
        under this Lease, then any balance of funds paid to Lessor under the
        provisions of this Paragraph may, at the option of Lessor, be treated as
        an additional Security Deposit.

        10.3. JOINT ASSESSMENT.

        If the Premises are not separately assessed, Lessee's liability shall be
        an equitable proportion of the Real Property Taxes for all of the land
        and improvements included within the tax parcel assessed, such
        proportion to be conclusively determined by Lessor from the respective
        valuations assigned in the assessor's work sheets or such other
        information as may be reasonably available.

        10.4. PERSONAL PROPERTY TAXES.

        Lessee shall pay, prior to delinquency, all taxes assessed against and
        levied upon Lessee Owned Alterations, Utility Installations, Trade
        Fixtures, furnishings, equipment and all personal property

                                       19
<PAGE>   20

        of Lessee. When possible, Lessee shall cause such property to be
        assessed and billed separately from the real property of Lessor. If any
        of Lessee's said personal property shall be assessed with Lessor's real
        property, Lessee shall pay Lessor the taxes attributable to Lessee's
        property within ten (10) days after receipt of a written statement.

11. UTILITIES.

        Lessee shall pay for all water, gas, heat, light, power, telephone,
        trash disposal and other utilities and services supplied to the
        Premises, together with any taxes thereon. If any such services are not
        separately metered to Lessee, Lessee shall pay a reasonable proportion,
        to be determined by Lessor, of all charges jointly metered.

12. ASSIGNMENT AND SUBLETTING.

        12.1. LESSOR'S CONSENT REQUIRED.

                (a) Lessee shall not voluntarily or by operation of law assign,
        transfer, mortgage or encumber (collectively, "ASSIGN OR ASSIGNMENT")
        or sublet all or any part of Lessee's interest in this Lease or in the
        Premises without Lessor's prior written consent which consent shall be
        deemed granted unless Lessor has refused its consent by notice to Lessee
        given within twenty (20) days following notice from Lessee requesting
        such consent and which consent shall not be unreasonably withheld or
        delayed.

                (b) See Addendum Paragraph 56

                (c) The involvement of Lessee or its assets in any transaction,
        or series of transactions (by way of merger, sale, acquisition,
        financing, transfer, leveraged buy-out or otherwise), whether or not a
        formal assignment or hypothecation of this Lease or Lessee's assets
        occurs, which results or will result in a reduction of the Net Worth of
        Lessee by an amount greater than twenty-five percent (25%) of such Net
        Worth as it was represented at the time of the execution of this Lease
        or at the time of the most recent assignment to which Lessor has
        consented, or as it exists immediately prior to said transaction or
        transactions constituting such reduction, whichever was or is greater,
        shall be considered an assignment of this Lease to which Lessor may
        withhold its consent. "NET WORTH OF LESSEE" shall mean the net worth of
        Lessee (excluding any guarantors) established under generally accepted
        accounting principles.

                (d) An assignment or subletting without consent shall, at
        Lessor's option, be a Default curable after notice per Paragraph 13.1
        (c), or a noncurable Breach without the necessity of any notice and
        grace period. If Lessor elects to treat such unapproved assignment or
        subletting as a noncurable Breach, Lessor may either: (i) terminate this
        Lease, or (ii) upon thirty (30) days written notice, increase the
        monthly Base Rent to one hundred ten percent (110%) of the Base Rent
        then in effect. Further, in the event of such Breach and rental
        adjustment, (i) the purchase price of any option to purchase the
        Premises held by Lessee shall be subject to similar adjustment to one
        hundred ten percent (110%) of the price previously in effect, and (ii)
        all fixed and non-fixed rental adjustments scheduled during the
        remainder of the Lease term shall be increased to One Hundred Ten
        Percent (110%) of the scheduled adjusted rent.

        12.2. TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.

                (a) Regardless of Lessors consent, any assignment or subletting
        shall not: (i) be effective without the express written assumption by
        such assignee or sublessee of the obligations of

                                       20
<PAGE>   21

        Lessee under this Lease; (ii) release Lessee of any obligations
        hereunder; or (iii) alter the primary liability of Lessee for the
        payment of Rent or for the performance of any other obligations to be
        performed by Lessee.

                (b) Lessor may accept Rent or performance of Lessee's
        obligations from any person other than Lessee pending approval or
        disapproval of an assignment. The acceptance of Rent or performance
        shall not constitute a waiver or estoppel of Lessor's right to exercise
        its remedies for Lessee's Default or Breach.

                (c) Lessor's consent to any assignment or subletting shall not
        constitute a consent to any subsequent assignment or subletting.

                (d) In the event of any Default or Breach by Lessee, Lessor may
        proceed directly against Lessee, any Guarantors or anyone else
        responsible for the performance of Lessee's obligations under this
        Lease, including any assignee or sublessee, without first exhausting
        Lessor's remedies against any other person or entity responsible
        therefore to Lessor, or any security held by Lessor.

                (e) Each request for consent to an assignment or subletting
        shall be in writing, accompanied by information relevant to Lessor's
        determination as to the financial and operational responsibility and
        appropriateness of the proposed assignee or sublessee, including but not
        limited to the intended use and/or required modification of the
        Premises, if any, together with a fee of $ 1,000, as consideration for
        Lessor's considering and processing said request. Lessee agrees to
        provide Lessor with such other or additional information and/or
        documentation as may be reasonably requested.

                (f) Any assignee of, or sublessee under, this Lease shall, by
        reason of accepting such assignment or entering into such sublease, be
        deemed to have assumed and agreed to conform and comply with each and
        every term in, covenant, condition and obligation herein to be observed
        or performed by Lessee during the term of said assignment or sublease,
        other than such obligations as are contrary to or inconsistent with
        provisions of an assignment or sublease to which Lessor has specifically
        consented to in writing.

        12.3. ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING.

        The following terms and conditions shall apply to any subletting by
        Lessee of all or any part of the Premises and shall be deemed included
        in all subleases under this Lease whether or not expressly incorporated
        therein:

                (a) Lessee hereby assigns and transfers to Lessor all of
        Lessee's interest in all Rent payable on any sublease, and Lessor may
        collect such Rent and apply same toward Lessee's obligations under this
        Lease; provided, however, that until a Breach shall occur in the
        performance of Lessee's obligations, Lessee may collect said Rent.
        Lessor shall not, by reason of the foregoing or any assignment of such
        sublease, nor by reason of the collection of Rent, be deemed liable to
        the sublessee for any failure of Lessee to perform and comply with any
        of Lessee's obligations to such sublessee. Lessee hereby irrevocably
        authorizes and directs any such sublessee, upon receipt of a written
        notice from Lessor stating that a Breach exists in the performance of
        Lessee's obligations under this Lease, to pay to Lessor all Rent due and
        to become due under the sublease, Sublessee shall rely upon any such
        notice from Lessor and shall pay all Rents to Lessor without any
        obligation or right to inquire as to whether such Breach exists,
        notwithstanding any claim from Lessee to the contrary. Any sublease rent
        in excess of the Rent and other payments due to Lessor from Lessee
        hereunder shall belong to Lessee.

                                       21
<PAGE>   22

                (b) In the event of a Breach by Lessee, Lessor may, at its
        option, require sublessee to attorn to Lessor, in which event Lessor
        shall undertake the obligations of the sublessor under such sublease
        from the time of the exercise of said option to the expiration of such
        sublease; provided, however, Lessor shall not be liable for any prepaid
        rents or security deposit paid by such sublessee to such sublessor or
        for any prior Defaults or Breaches of such sublessor.

                (c) Any matter requiring the consent of the sublessor under a
        sublease shall also require the consent of Lessor.

                (d) No sublessee shall further assign or sublet all or any part
        of the Premises without Lessor's prior written consent.

                (e) Lessor shall deliver a copy of any notice of Default or
        Breach by Lessee to the sublessee, who shall have the right to cure the
        Default of Lessee within the grace period, if any, specified in such
        notice. The sublessee shall have a right of reimbursement and offset
        from and against Lessee for any such Defaults cured by the sublessee.

        13. DEFAULT; BREACH; REMEDIES.

                13.1. DEFAULT; BREACH.

                A "DEFAULT" is defined as a failure by the Lessee to comply with
                or perform any of the terms, covenants, conditions or rules
                under this Lease. A "BREACH" is defined as the occurrence of one
                or more of the following Defaults, and the failure of Lessee to
                cure such Default within any applicable grace period:

                (a) The abandonment of the Premises; or the vacating of the
        Premises without providing a commercially reasonable level of security,
        or where the coverage of the property insurance described in Paragraph
        8.3 is jeopardized as a result thereof, or without providing reasonable
        assurances to minimize potential vandalism.

                (b) The failure of Lessee to make any payment of Rent or any
        Security Deposit required to be made by Lessee hereunder, whether to
        Lessor or to a third party, when due, to provide reasonable evidence of
        insurance or surety bond, or to fulfill any obligation under this Lease
        which endangers or threatens life or property, where such failure
        continues for a period of three (3) business days following written
        notice to Lessee.

                (c) The failure by Lessee to provide (i) reasonable written
        evidence of compliance with Applicable Requirements, (ii) the service
        contracts, (iii) the rescission of an unauthorized assignment or
        subletting, (iv) a Tenancy Statement, (v) a requested subordination,
        (vi) evidence concerning any guaranty and/or Guarantor, (vii) any
        document requested under Paragraph 42 (easements), or (viii) any other
        documentation or information which Lessor may reasonably require of
        Lessee under the terms of this Lease, where any such failure continues
        for a period of ten (10) days following written notice to Lessee.

                (d) A Default by Lessee as to the terms, covenants, conditions
        or provisions of this Lease, or of the rules adopted under Paragraph 40
        hereof, other than those described in subparagraphs 13.1 (a), (b) or
        (c), above, where such Default continues for a period of thirty (30)
        days after written notice; provided, however, that if the nature of
        Lessee's Default is such that more than thirty (30) days are reasonably
        required for its cure, then it shall not be deemed to be a Breach if
        Lessee commences such cure within said thirty (30) day period and
        thereafter diligently prosecutes such cure to completion.

                                       22
<PAGE>   23
                (e) The occurrence of any of the following events: (i) the
        making of any general arrangement or assignment for the benefit of
        creditors; (ii) becoming a "debtor" as defined in 11 U.S.C. Section 101
        or any successor statute thereto (unless, in the case of a petition
        filed against Lessee, the same is dismissed within sixty (60) days);
        (iii) the appointment of a trustee or receiver to take possession of
        substantially all of Lessee's assets located at the Premises or of
        Lessee's interest in this Lease, where possession is not restored to
        Lessee within thirty (30) days; or (iv) the attachment, execution or
        other judicial seizure of substantially all of Lessee's assets located
        at the Premises or of Lessee's interest in this Lease, where such
        seizure is not discharged within thirty (30) days; provided, however, in
        the event that any provision of this subparagraph 13.1 (e) is contrary
        to any applicable law, such provision shall be of no force or effect,
        and not affect the validity of the remaining provisions.

                (f) The discovery that any financial statement of Lessee or of
        any Guarantor given to Lessor was materially false.

                (g) If the performance of Lessee's obligations under this Lease
        is guaranteed: (i) the death of a Guarantor; (ii) the termination of a
        Guarantor's liability with respect to this Lease other than in
        accordance with the terms of such guaranty; (iii) a Guarantor's becoming
        insolvent or the subject of a bankruptcy filing; (iv) a Guarantor's
        refusal to honor the guaranty; or (v) a Guarantor's breach of its
        guaranty obligation on an anticipatory basis, and Lessee's failure,
        within sixty (60) days following written notice of any such event, to
        provide written alternative assurance or security, which, when coupled
        with the then existing resources of Lessee, equals or exceeds the
        combined financial resources of Lessee and the Guarantors that existed
        at the time of execution of this Lease.

                13.2. REMEDIES.

                If Lessee fails to perform any of its affirmative duties or
                obligations, within ten (10) days after written notice (or in
                case of any emergency, without notice), Lessor may, at its
                option, perform such duty or obligation on Lessee's behalf,
                including but not limited to the obtaining of reasonably
                required bonds, insurance policies, or governmental licenses,
                permits or approvals. The costs and expenses of any such
                performance by Lessor shall be due and payable by Lessee upon
                receipt of invoice therefor. In the event of a Breach, Lessor
                may, with or without further notice or demand, and without
                limiting Lessor in the exercise of any right or remedy which
                Lessor may have by reason of such Breach:

                (a) Terminate Lessee's right to possession of the Premises by
        any lawful means, in which case this Lease shall terminate and Lessee
        shall immediately surrender possession to Lessor. In such event Lessor
        shall be entitled to recover from Lessee: (i) the unpaid Rent which had
        been earned at the time of termination; (ii) the worth at the time of
        award of the amount by which the unpaid rent which would have been
        earned after termination until the time of award exceeds the amount of
        such rental loss that the Lessee proves could have been reasonably
        avoided; (iii) the worth at the time of award of the amount by which the
        unpaid rent for the balance of the term after the time of award exceeds
        the amount of such rental loss that the Lessee proves could be
        reasonably avoided; and (iv) any other amount necessary to compensate
        Lessor for all the detriment proximately caused by the Lessee's failure
        to perform its obligations under this Lease or which in the ordinary
        course of things would be likely to result therefrom, including but not
        limited to the cost of recovering possession of the Premises, expenses
        of relating, including

                                       23
<PAGE>   24
        necessary renovation and alteration of the Premises, reasonable
        attorneys' fees, and that portion of any leasing commission paid by
        Lessor in connection with this Lease applicable to the unexpired term of
        this Lease. The worth at the time of award of the amount referred to in
        provision (iii) of the immediately preceding sentence shall be computed
        by discounting such amount at the discount rate of the Federal Reserve
        Bank of the District within which the Premises are located at the time
        of award plus one percent (1%). Efforts by Lessor to mitigate damages
        caused by Lessee's Breach of this Lease shall not waive Lessor's right
        to recover the balance of damages owing under Paragraph 12. If
        termination of this Lease is obtained through the provisional remedy of
        unlawful detainer, Lessor shall have the right to recover in such
        proceeding any unpaid Rent and damages as are recoverable therein, or
        Lessor may reserve the right to recover all or any part thereof in a
        separate suit. If the notice and grace period required under Paragraph
        13.1 was not previously given, a notice to pay rent or quit, or to
        perform or quit given to Lessee under the unlawful detainer statute
        shall also constitute the notice required by Paragraph 13.1. In such
        case, the applicable grace period required by Paragraph 13.1 and the
        unlawful detainer statute shall run concurrently, and the failure of
        Lessee to cure the Default within the greater of the two such grace
        periods shall constitute both an unlawful detainer and a Breach of this
        Lease entitling Lessor to the remedies provided for in this Lease and/or
        by said statute.

                (b) Continue the Lease and Lessee's right to possession and
        recover the Rent as it becomes due, in which event Lessee may sublet or
        assign, subject only to reasonable limitations. Acts of maintenance,
        efforts to relet, and/or the appointment of a receiver to protect the
        Lessor's interests, shall not constitute a termination of the Lessee's
        right to possession.

                (c) Pursue any other remedy now or hereafter available under the
        laws or judicial decisions of the state wherein the Premises are
        located. The expiration or termination of this Lease and/or the
        termination of Lessee's right to possession shall not relieve Lessee
        from liability under any indemnity provisions of this Lease as to
        matters occurring or accruing during the term hereof or by reason of
        Lessee's occupancy of the Premises.

                (d) If the nature of Lessee's obligation is such that more than
        thirty (30) days are reasonably required for its performance, then
        Lessee, shall not be in breach if performance is commenced within such
        thirty (30) day period and thereafter diligently pursued to completion.

                13.3. INDUCEMENT RECAPTURE.

                Intentionally Omitted

                13.4. LATE CHARGES.

                Lessee hereby acknowledges that late payment by Lessee of Rent
                will cause Lessor to incur costs not contemplated by this Lease,
                the exact amount of which will be extremely difficult to
                ascertain. Such costs include, but are not limited to,
                processing and accounting charges, and late charges which may be
                imposed upon Lessor by any Lender. Accordingly, if any Rent
                shall not be received by Lessor within five (5) days after such
                amount shall be due, then, without any requirement for notice to
                Lessee, Lessee shall pay to Lessor a one-time late charge equal
                to three percent (3%) of each such overdue amount. The Parties
                hereby agree that such late charge represents a fair and
                reasonable estimate of the costs Lessor will incur by

                                       24
<PAGE>   25

        reason of such late payment. Acceptance of such late charge by Lessor
        shall in no event constitute a waiver of Lessee's Default or Breach with
        respect to such overdue amount nor prevent the exercise of any of the
        other rights and remedies granted hereunder. In the event that a late
        charge is payable hereunder, whether or not collected, for three (3)
        consecutive installments of Base Rent, then notwithstanding any
        provision of this Lease to the contrary, Base Rent shall, at Lessor's
        option, become due and payable quarterly in advance.

        13.5. INTEREST.

        Any monetary payment due Lessor hereunder, other than late charges and
        Rent received by Lessor within five (5) days after such amount shall be
        due, not received by Lessor, when due as to scheduled payments (such as
        Base Rent) or within thirty (30) days following the date on which it was
        due for non-scheduled payment, shall bear interest from the date when
        due, as to scheduled payments, or the thirty-first (31st) day after it
        was due as to non-scheduled payments. The interest ("Interest") charged
        shall be equal to the prime rate reported in the Wall Street Journal as
        published closest prior to the date when due plus four percent (4%), but
        shall not exceed the maximum rate allowed by law. Interest is payable in
        addition to the potential late charge provided for in Paragraph 13.4.

        13.6. BREACH BY LESSOR.

                (a) NOTICE OF BREACH. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and any Lender whose name and address shall have been furnished Lessee in
writing for such purpose, of written notice specifying wherein such obligation
of Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are reasonably
required for its performance, then Lessor shall not be in breach if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.

                (b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that
neither Lessor nor Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.

14. CONDEMNATION.

If the Premises or any portion thereof are taken under the power of eminent
domain or sold under the threat of the exercise of said power (collectively
"CONDEMNATION"), this Lease shall terminate as to the part taken as of the date
the condemning authority takes title or possession, whichever first occurs. If
more than ten percent (10%) of any building portion of the Premises, or more
than twenty-five percent (25%) of the land area portion of the Premises not
occupied by any building, is taken by Condemnation, Lessee may, at Lessee's
option, to be exercised in writing within ten (10) days after Lessor shall have
given Lessee written notice of such taking (or

                                       25
<PAGE>   26

in the absence of such notice, within ten (10) days after the condemning
authority shall have taken possession) terminate this Lease as of the date the
condemning authority takes such possession. If Lessee does not terminate this
Lease in accordance with the foregoing, this Lease shall remain in full force
and effect as to the portion of the Premises remaining, except that the Base
Rent shall be reduced in proportion to the reduction in utility of the Premises
caused by such Condemnation. See Addendum Paragraph 57. All Alterations and
Utility Installations made to the Premises by Lessee, for purposes of
Condemnation only, shall be considered the property of the Lessee and Lessee
shall be entitled to any and all compensation which is payable therefor. In the
event that this Lease is not terminated by reason of the Condemnation, Lessor
shall repair any damage to the Premises caused by such Condemnation.

15. BROKERS' FEE.

        15.1.

        [Intentionally omitted]

        15.2. ASSUMPTION OF OBLIGATIONS.

        [Intentionally omitted]

        15.3. REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS.

        Lessee and Lessor each represent and warrant to the other that it has
        had no dealings with any person, firm, broker or finder (other than the
        Brokers, if any) in connection with this Lease, and that no one other
        than said named Brokers it, entitled to any commission or finder's fee
        in connection herewith. Lessee and Lessor do each hereby agree to
        indemnify, protect, defend and hold the other harmless from and against
        liability for compensation or charges which may be claimed by any such
        unnamed broker, finder or other similar party by reason of any dealings
        or actions of the Indemnifying Party, including any costs, expenses,
        and/or attorneys' fees reasonably incurred with respect thereto.

16. ESTOPPEL CERTIFICATES.

                (a) Each Party (as "RESPONDING PARTY") shall within ten (10)
        days after written notice from the other Party (the "REQUESTING PARTY")
        execute, acknowledge and deliver to the Requesting Party a statement in
        writing in form similar to the then most current "ESTOPPEL CERTIFICATE"
        form published by the American Industrial Real Estate Association, plus
        such additional information, confirmation and/or statements as may be
        reasonably requested by the Requesting Party.

                (b) If the Responding Party shall fail to execute or deliver the
        Estoppel Certificate within such ten day period, the Requesting Party
        may execute an Estoppel Certificate stating that: (i) the Lease is in
        full force and effect without modification except as may be represented
        by the Requesting Party, (ii) there are no uncured defaults in the
        Requesting Party's performance, and (iii) if Lessor is the Requesting
        Party, not more than one month's Rent has been paid in advance.
        Prospective purchasers and encumbrancers may rely upon the Requesting
        Party's Estoppel

                                       26

<PAGE>   27

        Certificate, and the Responding Party shall be estopped from denying the
        truth of the facts contained in said Certificate.

                (c) If Lessor desires to finance, refinance, or sell the
        Premises, or any part thereof, Lessee and all Guarantors shall deliver
        to any potential lender or purchaser designated by Lessor such financial
        statements as may be reasonably required by such lender or purchaser,
        including, but not limited to, Lessees financial statements for the past
        three (3) years. All such financial statements shall be received by
        Lessor and such lender or purchaser in confidence and shall be used only
        for the purposes herein set forth.

17. DEFINITION OF LESSOR.

The term "Lessor" as used herein shall mean the owner or owners at the time in
question of the fee title to the Premises, or, if this is a sublease, of the
Lessee's interest in the prior lease. In the event of a transfer of Lessor's
title or interest in the Premises or this Lease, Lessor shall deliver to the
transferee or assignee (in cash or by credit) any unused Security Deposit held
by Lessor. Except as provided in Paragraph 15, upon such transfer or assignment
and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined. Notwithstanding
the above, and subject to the provisions of Paragraph 20 below, the original
Lessor under this Lease, and all subsequent holders of the Lessor's interest in
this Lease shall remain liable and responsible with regard to the potential
duties and liabilities of Lessor pertaining to Hazardous Substances as outlined
in Paragraph 6 above.

18. SEVERABILITY.

The invalidity of any provision of this Lease, as determined by a court of
competent jurisdiction, shall in no way affect the validity of any other
provision hereof.

19. DAYS.

Unless otherwise specifically indicated to the contrary, the word "days" as used
in this Lease shall mean and refer to calendar days.

20. LIMITATION ON LIABILITY.

Subject to the provisions of Paragraph 17 above, the obligations of Lessor under
this Lease shall not constitute personal obligations of the individual partners
of Lessor or its or their individual, partners, directors, officers or
shareholders, and Lessee shall look to the Premises, and to no other assets of
Lessor, for the satisfaction of any liability of Lessor with respect to this
Lease, and shall not seek recourse against the individual partners of Lessor, or
its or their individual partners, directors, officers or shareholders, or any of
their personal assets for such satisfaction.

21. TIME OF ESSENCE.

Time is of the essence with respect to the performance of all obligations to be
performed or observed by the Parties under this Lease.

                                       27
<PAGE>   28

22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER.

This Lease contains all agreements between the Parties with respect to any
matter mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective.

23. NOTICES.

        23.1. NOTICE REQUIREMENTS.

        All notices required or permitted by this Lease shall be in writing and
        may be delivered in person (by hand or by courier) or may be sent by
        regular, certified or registered mail or U.S. Postal Service Express
        Mail, with postage prepaid, or by facsimile transmission, and shall be
        deemed sufficiently given if served in a manner specified in this
        Paragraph 23. The addresses noted adjacent to a Party's signature on
        this Lease shall be that Party's address for delivery or mailing of
        notices. Either Party may by written notice to the other specify a
        different address for notice, except that upon Lessee's taking
        possession of the Premises, the Premises. Shall constitute Lessee's
        address for notice. A copy of all notices to Lessor shall be
        concurrently transmitted to such party or parties at such addresses as
        Lessor may from time to time hereafter designate in writing.

        23.2. DATE OF NOTICE.

        Any notice sent by registered or certified mail, return receipt
        requested, shall be deemed given on the date of delivery shown on the
        receipt card, or if no delivery date is shown, the postmark thereon. If
        sent by regular mail the notice shall be deemed given forty-eight (48)
        hours after the same is addressed as required herein and mailed with
        postage prepaid. Notices delivered by United States Express Mail or
        overnight courier that guarantee next day delivery shall be deemed given
        twenty-four (24) hours after delivery of the same to the Postal Service
        or courier. Notices transmitted by facsimile transmission or similar
        means shall be deemed delivered upon telephone confirmation of receipt,
        provided a copy is also delivered via delivery or mail. If notice is
        received on a Saturday, Sunday or legal holiday, it shall be deemed
        received on the next business day.

24. WAIVERS.

No waiver by either Lessor or Lessee of the Default or Breach of any term,
covenant or condition hereof by the other, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
the other of the same or of any other term, covenant or condition hereof.
Lessor's or Lessee's consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of the other's consent to, or approval of, any
subsequent or similar act by the other requiring approval of the other
hereunder, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. The acceptance of Rent by
Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by
Lessee may be accepted by Lessor on account of monies or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever

                                       28
<PAGE>   29

unless specifically agreed to in writing by Lessor at or before the time of
deposit of such payment.

25. RECORDING.

Either Lessor or Lessee shall, upon request of the other, execute, acknowledge
and deliver to the other a short form memorandum of this Lease for recording
purposes. The Party requesting recordation shall be responsible for payment of
any fees applicable thereto.

26. NO RIGHT TO HOLDOVER.

Lessee has no right to retain possession of the Premises or any part thereof
beyond the expiration or termination of this Lease. In the event that Lessee
holds over, then the Base Rent shall be increased to one hundred fifty percent
(150%) of the Base Rent applicable during the month immediately preceding the
expiration or termination. Nothing contained herein shall be construed as
consent by Lessor to any holding over by Lessee.

27. CUMULATIVE REMEDIES.

No remedy or election hereunder shall be deemed exclusive but shall, wherever
possible, be cumulative with all other remedies at law or in equity.

28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT.

All provisions of this Lease to be observed or performed by Lessee are both
covenants and conditions. In construing this Lease, all headings and titles are
for the convenience of the Parties only and shall not be considered a part of
this Lease. Whenever required by the context, the singular shall include the
plural and vice versa. This Lease shall not be construed as if prepared by one
of the Parties, but rather according to its fair meaning as a whole, as if both
Parties had prepared it.

29. BINDING EFFECT; CHOICE OF LAW.

This Lease shall be binding upon the parties, their successors and assigns and
be governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be initiated
in the county in which the Premises are located.

30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.

        30.1. SUBORDINATION.

        This Lease and any Option granted hereby shall be subject and
        subordinate to any ground lease, mortgage, deed of trust, or other
        hypothecation or security device (collectively, "Security Device"), now
        or hereafter placed upon the Premises, to any and all advances made on
        the security thereof, and to all renewals, modifications, and extensions
        thereof. Lessee agrees that the holders of any such Security Devices (in
        this Lease together referred to as "Lessor's Lender") shall have no
        liability or obligation to perform any of the obligations of Lessor
        under this Lease. Any Lender may elect to have this Lease and/or any
        Option granted hereby superior to the lien of its Security Device by
        giving written notice thereof to Lessee, whereupon this Lease and such
        Options shall be deemed prior to such Security Device, notwithstanding
        the relative dates of the documentation or recordation thereof.

                                       29
<PAGE>   30

        30.2. ATTORNMENT.

        Subject to the non-disturbance provisions of Paragraph 30.3, Lessee
        agrees to attorn to a Lender or any other party who acquires ownership
        of the Premises by reason of a foreclosure of a Security Device, and
        that in the event of such foreclosure, such new owner shall not: (1) be
        liable for any act or omission of any prior lessor or with respect to
        events occurring prior to acquisition of ownership; (ii) be subject to
        any offsets or defenses which Lessee might have against any prior
        lessor; or (iii) be bound by prepayment of more than one (1) month's
        rent.

        30.3. NON-DISTURBANCE.

        With respect to Security Devices entered into by Lessor after the
        execution of this Lease, Lessee's subordination of this Lease shall be
        subject to receiving a commercially reasonable non-disturbance agreement
        (a "NON-DISTURBANCE AGREEMENT") from the Lender which Non-Disturbance
        Agreement provides that Lessee's possession of the Premises, and this
        Lease, including any options to extend the term hereof, will not be
        disturbed so long as Lessee is not in Breach hereof and attorns to the
        record owner of the Premises. Further, within sixty (60) days after the
        execution of this Lease, Lessor shall use its commercially reasonable
        efforts to obtain a Non-Disturbance Agreement from the holder of any
        pre-existing Security Device which is secured by the Premises. In the
        event that Lessor is unable to provide the Non-Disturbance Agreement
        within said sixty (60) days, then Lessee may, at Lessee's option,
        terminate this Lease so long as notice of such election to terminate is
        given to Lessor within ten (10) days following the end of such sixty
        (60) day period.

        30.4. SELF-EXECUTING.

        The agreements contained in this Paragraph 30 shall be effective without
        the execution of any further documents; provided, however, that, upon
        written request from Lessor or a Lender in connection with a sale,
        financing or refinancing of the Premises, Lessee and Lessor shall
        execute such further writings as may be reasonably required to
        separately document any subordination, attornment and/or Non-Disturbance
        Agreement provided for herein.

31. ATTORNEYS' FEES.

If any Party brings an action or proceeding involving the Premises to enforce
the terms hereof or to declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term, "Prevailing Party" shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party of its claim or defense. The attorneys' fees
award shall not be computed in accordance with any court fee schedule, but shall
be such as to fully reimburse all attorneys' fees reasonably incurred. In
addition, Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in the preparation and service of notices of Default and consultations
in connection therewith, whether or not a legal action is subsequently commenced
in connection with such Default or resulting Breach.

                                       30
<PAGE>   31

32 LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS.

See Addendum Paragraph 58

33 AUCTIONS.

Lessee shall not conduct, nor permit to be conducted, any auction upon the
Premises without Lessor's prior written consent. Lessor shall not be obligated
to exercise any standard of reasonableness in determining whether to permit an
auction.

34. SIGNS.

Except for ordinary "For Sublease" signs, Lessee shall not place any sign upon
the Premises without Lessor's prior written consent. All signs must comply with
all Applicable Requirements.

35. TERMINATION; MERGER.

Unless specifically stated otherwise in writing by Lessor and except as provided
in a non-disturbance agreement between Lessor and any subtenant, the voluntary
or other surrender of this Lease by Lessee, the mutual termination or
cancellation hereof, or a termination hereof by Lessor for Breach by Lessee,
shall automatically terminate any sublease or lesser estate in the Premises;
provided, however, that Lessor may elect to continue any one or all existing
subtenancies. Lessor's failure within ten (10) days following any such event to
elect to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor's election to have such event constitute the
termination of such interest.

36. CONSENTS.

Except as otherwise provided herein, wherever in this Lease the consent of a
Party is required to an act by or for the other Party, such consent shall not be
unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses
(including, but not limited to, architects', attorneys', engineers' and other
consultants' fees) incurred in the consideration of, or response to, a request
by Lessee for any Lessor consent, including, but not limited to, consents to an
assignment, a subletting or the presence or use of a Hazardous Substance, shall
be paid by Lessee upon receipt of an invoice and supporting documentation
therefor. Lessor's consent to any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent. The failure to specify herein any particular
condition to Lessor's consent shall not preclude the imposition by Lessor at the
time of consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within ten (10) business days following such request.

37. GUARANTOR.

        37.1. EXECUTION.

                                       31
<PAGE>   32

        The Guarantors, if any, shall each execute a guaranty in the form most
        recently published by the American Industrial Real Estate Association,
        and each such Guarantor shall have the same obligations as Lessee under
        this Lease.

        37.2. DEFAULT.

        It shall constitute a Default of the Lessee if any Guarantor fails or
        refuses, upon request to provide: (a) evidence of the execution of the
        guaranty, including the authority of the party signing on Guarantor's
        behalf to obligate Guarantor, and in the case of a corporate Guarantor,
        a certified copy of a resolution of its board of directors authorizing
        the making of such guaranty, (b) current financial statements, (c) a
        Tenancy Statement, or (d) written confirmation that the guaranty is
        still in effect.

38. QUIET POSSESSION.

        Subject to payment by Lessee of the Rent and performance of all of the
        covenants, conditions and provisions on Lessee's part to be observed and
        performed under this Lease, Lessee shall have quiet possession and quiet
        enjoyment of the Premises during the term hereof.

39. OPTIONS.

        39.1. DEFINITION.

        "OPTION" shall mean: (a) the right to extend the term of or renew this
        Lease or to extend or renew any lease that Lessee has on other property
        of Lessor; (b) the right of first refusal or first offer to lease either
        the Premises or other property of Lessor; (c) the right to purchase or
        the right of first refusal to purchase the Premises or other property of
        Lessor.

        39.2. INTENTIONALLY OMITTED.

        39.3. MULTIPLE OPTIONS.

        In the event that Lessee has any multiple Options to extend or renew
        this Lease, a later Option cannot be exercised unless the prior Options
        have been validly exercised.

        39.4. EFFECT OF DEFAULT ON OPTIONS.

                (a) Lessee shall have no right to exercise an Option: (i) during
        the period commencing with the giving of any notice of Default and
        continuing until said Default is cured, (ii) during the period of time
        any Rent is unpaid (without regard to whether notice thereof is given
        Lessee), (iii) during the time Lessee is in Breach of this Lease which
        Breach has not been cured, or (iv) in the event that Lessee has been
        given three (3) or more notices of separate Default, whether or not the
        Defaults are cured, during the six (6) month period immediately
        preceding the exercise of the Option.

                (b) The period of time within which an Option may be exercised
        shall not be extended or enlarged by reason of Lessee's inability to
        exercise an Option because of the provisions of Paragraph 39.4(a).

                                       32
<PAGE>   33

                (c) An Option shall terminate and be of no further force or
        effect, notwithstanding Lessee's due and timely exercise of the Option,
        if, after such exercise and prior to the commencement of the extended
        term, (1) Lessee fails to pay Rent for a period of thirty (30) days
        after such Rent becomes due (without any necessity of Lessor to give
        notice thereof), (ii) Lessor gives to Lessee three (3) or more notices
        of separate Default, whether or not the Defaults are cured, or (iii) if
        Lessee commits a Breach of this Lease which Breach has not been cured.

40. MULTIPLE BUILDINGS.

If the Premises are a part of a group of buildings controlled by Lessor, Lessee
agrees that it will observe all reasonable rules and regulations which Lessor
may make from time to time for the management, safety, and care of said
properties, including the care and cleanliness of the grounds and including the
parking, loading and unloading of vehicles, and that Lessee will pay its fair
share of common expenses incurred in connection therewith.

41. SECURITY MEASURES.

Lessee hereby acknowledges that the rental payable to Lessor hereunder does not
include the cost of guard service or other security measures, and that Lessor
shall have no obligation whatsoever to provide same. Lessee assumes all
responsibility for the protection of the Premises, Lessee, its agents and
invitees and their property from the acts of third parties.

42. RESERVATIONS.

Lessor reserves to itself the right, from time to time, to grant, without the
consent or joinder of Lessee, such easements, rights and dedications that Lessor
deems necessary, and to cause the recordation of parcel maps and restrictions,
so long as such easements, rights, dedications, maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee, or the
interconnection of the Premises with adjacent premises, as contemplated by
Addendum Paragraph 60. Lessee agrees to sign any documents reasonably requested
by Lessor to effectuate any such easement rights, dedication, map or
restrictions.

43. PERFORMANCE UNDER PROTEST

If at any time a dispute shall arise as to any amount or sum, of money to be
paid by one Party to the other under the provisions hereof, the Party against
whom the obligation to pay the money is asserted shall have the right to make
payment "under protest" and such payment shall not be regarded as a voluntary
payment and there shall survive the right on the part of said Party to institute
suit for recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said Party to pay such sum or any part thereof, said
Party shall be entitled to recover such sum or so much thereof as it was not
legally required to pay.

44. AUTHORITY.

If either Party hereto is a corporation, trust, limited liability company,
partnership, or similar entity, each individual executing this Lease on behalf
of such entity represents and warrants that he or she is duly authorized to
execute and deliver this Lease on its behalf. Each Party shall, within thirty
(30) days after request, deliver to the other Party satisfactory evidence of
such authority.

                                       33
<PAGE>   34

45. CONFLICT.

Any conflict between the printed provisions of this Lease and the typewritten or
handwritten provisions shall be controlled by the typewritten or handwritten
provisions.

46. OFFER.

Preparation of this Lease by either Party or their agent and submission of same
to the other Party shall not be deemed an offer to lease to the other Party.
This Lease is not intended to be binding until executed and delivered by all
Parties hereto.

47. AMENDMENTS.

This Lease may be modified only in writing, signed by the Parties in interest at
the time of the modification. As long as they do not materially change Lessee's
obligations hereunder, Lessee agrees to make such reasonable non-monetary
modifications to this, Lease as may be reasonably required by a Lender in
connection with the obtaining of normal financing or refinancing of the
Premises.

48. MULTIPLE PARTIES.

If more than one person or entity is named herein as either Lessor or Lessee,
such multiple Parties shall have joint and several responsibility to comply with
the terms of this Lease.

49. MEDIATION AND ARBITRATION OF DISPUTES.

An Addendum requiring the Mediation of all disputes between the Parties and/or
Brokers arising out of this Lease  x  is     is not attached to this Lease.
                                  ---    ---

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

[SIGNATURES APPEAR ON THE FOLLOWING PAGE]

                                       34
<PAGE>   35

[THIS IS THE SIGNATURE PAGE FOR THAT CERTAIN LEASE DATED OCTOBER 15, 1999 BY AND
BETWEEN CHAMPAGNE BUILDING GROUP, LP AS LESSOR AND SKECHERS USA, INC. AS LESSEE
WITH RESPECT TO PROPERTY LOCATED AT 1670 S. CHAMPAGNE AVENUE, ONTARIO]

The parties hereto have executed this Lease at the place and on (the dates
specified above their respective signatures.

<TABLE>
<S>                                                   <C>
Executed at: Manhattan Beach, Calif.                  Executed at: Manhattan Beach, CA

On: 11/16/99                                          On: November 15, 1999

By LESSOR:                                            By LESSEE:

Champagne Building Group, LP, a California            Skechers USA, Inc., a Delaware
limited partnership                                   corporation
D and D Champagne, LLC, California limited
liability company, General Partner

By: DONALD W. GILMOUR                                 By: DAVID WEINBERG

Name Printed: DONALD W. GILMOUR                       Name Printed: David Weinberg

Title:     Managing Member                            Title: Chief Financial Officer

By: [SIGNATURE ILLEGIBLE]                             By: Philip Paccione

Name Printed: [ILLEGIBLE]                             Name Printed: Philip Paccione

Address: 2240 University Drive, Suite 100             Address: 228 Manhattan Beach Blvd.
         Newport Beach, CA 92660                               Manhattan Beach, CA 90266

Telephone:     949-722-7058                           Telephone: 310-318-2082

Facsimile:     949-722-8565                           Fascimile: 310-798-7961
</TABLE>

                                       35
<PAGE>   36

                                LEGAL DESCRIPTION

THE LAND REFERRED TO HEREIN IS SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF
SAN BERNARDINO, AND IS DESCRIBED AS FOLLOWS:

PARCELS 18 AND 23 OF PARCEL MAP NO. 9252, AS SHOWN BY MAP ON FILE IN BOOK 107
PAGE(S) 75 THROUGH 82, INCLUSIVE, OF PARCEL MAPS, RECORDS OF SAN BERNARDINO
COUNTY, CALIFORNIA;

ALSO EXCEPTING THEREFROM ALL MINERAL AND ALL MINERAL RIGHTS, OIL AND GAS AND
RIGHTS THERETO TOGETHER WITH SOLE, EXCLUSIVE AND PERPETUAL RIGHT TO EXPLORE FOR,
REMOVE AND DISPOSE OF, SAID MINERALS BY ANY MEANS OR METHODS SUITABLE, BUT
WITHOUT ENTERING UPON OR USING THE SURFACE OF SAID LANDS AND IN SUCH A MANNER AS
NOT TO DAMAGE SURFACE OF SAID LANDS OR TO INTERFERE WITH THE USE THEREOF, AS
CONVEYED TO UNION PACIFIC LAND RESOURCES CORPORATION BY DEED RECORDED NOVEMBER
23, 1982 AS INSTRUMENT NO. 82-234011 OF OFFICIAL RECORDS.

<PAGE>   37

                                    EXHIBIT A
                                   WORK LETTER

<PAGE>   38

                                    EXHIBIT A

                                   WORK LETTER
                       1670 CHAMPAGNE AVENUE, ONTARIO, CA

        SKECHERS USA, INC as Tenant and CHAMPAGNE BUILDING GROUP LP as Landlord
        are executing, simultaneously with this Work Letter, a Standard
        Industrial/Commercial Single-Tenant Lease-Net (the "Lease"), covering
        certain Premises at 1670 S. Champagne Avenue, Ontario, California as
        more particularly described in the Lease. This Work Letter is hereby
        incorporated into such Lease as an Exhibit thereto. In consideration of
        the mutual covenants contained in the Lease, Tenant and Landlord hereby
        agree that the Premises shall be improved in accordance with the
        provisions of this Work Letter. To the extent that this Work Letter
        conflicts with any provision in the Lease, the provision of this Work
        Letter shall govern.

        1.1 BASE BUILDING AND RENT.

        Landlord and Tenant understand and acknowledge that Landlord has agreed
        to construct and deliver the "Base Building" to Tenant in exchange for
        Tenant's agreement to pay the Rent and comply with the other terms and
        conditions of the Lease.

                1.1.1 BASE BUILDING BY LANDLORD.

                The "Base Building" shall be constructed by Landlord's
                contractor at Landlord's sole cost and expense, except for
                Tenant's responsibilities for portions of the Base Building as
                set forth in Section 1.1.1.2, in accordance with the "Building
                Plans and Specifications" identified on the List of Building
                Plans and Specifications attached as Schedule 2 to this Work
                Letter, and as closely as reasonably possible substantially in
                accordance with the Preliminary Construction Schedule attached
                as Schedule 3 to this Work Letter. The "Base Building" is
                defined as and is described with particularity in the Building
                Plans and Specifications and includes, among other things, the
                items described in Section 1.1.1.1. If there is any conflict
                between the items described as included in Section 1.1.1.1
                and the items of work included in the Building Plans and
                Specifications, the Building Plans and Specifications shall
                govern. The Base Building shall be constructed in a good and
                workmanlike manner and shall comply with all applicable laws,
                ordinances and codes, and the rules and regulations of all
                governmental authorities having jurisdiction and shall comply
                with all applicable insurance regulations.

                        1.1.1.1 INCLUDED IN BASE BUILDING.

                        The "Base Building" shall include, among other things,
                        the following elements of the Building:

                                1.1.1.1. DESIGN, ARCH, ENGINEERING AND CITY
                                PROCESSING.

                                For building modification to raise the clear
                                height from 30' clear to 39'6" clear;

                                        1
<PAGE>   39

                                1.1.1.2. OFFICE.

                                Office space at the north side of the warehouse
                                of approximately 2,800 square feet to include
                                three private offices approximately 12 feet x 15
                                feet. Restrooms to include: one men's with 3
                                stalls, 3 sinks, 3 urinals, one women's with 5
                                stalls, 3 sinks. Lunchroom of approximately
                                1,125 square feet and shall be accessible to the
                                warehouse. Lunchroom and restrooms are per
                                Architect specifications;

                                1.1.1.3. LIGHTING.

                                Metal halide warehouse lighting for 20-foot
                                candles (assuming 7 fixtures per aisle for 38
                                aisles at racking area and on fixture at 30 foot
                                x 32 foot on center in the balance of the
                                building to achieve the 20 foot candles).
                                Racking and aisle alignment information obtained
                                from W.E.I., Skechers' consultant;

                                1.1.1.4. TRUCK LOADING.

                                Forty dock high (8'6" x 10") door with dock seal
                                and light package. W.E.I. spec for 40 doors.
                                Blue giant edge of dock levelers Model MD72255M
                                with seal and light package.

                                1.1.1.1.1 Electrical for lighting and fans
                                between every other door. 20 4-plex 20 amp
                                plugs.

                                1.1.1.1.2 12'xl4' ground level doors at the
                                north and south end of the building.

                                1.1.1.1.3 Ramp in back of the building at the
                                rail door. Enlarge door. (12x14).

                                1.1.1.1.4 Provide two (2) dock high doors on the
                                back of the north side (on the curve) of the
                                building.

                                1.1.1.1.5 Provide two (2) paved pathways in back
                                of the facility to allow forklift access between
                                the new and existing facilities.

                                1.1.1.5. CLEAR HEIGHT

                                39'6" (except for the 1st 6' in front of the
                                loading area by truck doors). This area will be
                                38';

                                1.1.1.6. FOIL INSULATED CEILING.

                                Upgrade the foil to multi-layer over the mezz
                                area room grid 13 to 19. Approximately 60,000
                                square feet at 30 cents per foot;

                                1.1.1.7. SKYLIGHT.

                                       2
<PAGE>   40

                                Two and one-half percent (2 1/2%);

                                1.1.1.8. FANS.

                                Code-1/2 air change per hour. One additional air
                                changes in total building. Two air changes in
                                north 60,000 square feet in mezz area;

                                1.1.1.9. SPRINKLERS.

                                ESFR Specification using K-25 high capacity head
                                increasing pipe size and flow rate so not to
                                need pump;

                                1.1.1.10 FLOOR.

                                Floor spec 6" thick with 4000 P.S.I. tensile
                                strength;

                                1.1.1.11 POWER.

                                2000 amp, 480/227 Volts, 3 Phase Sub panel to
                                battery charging forklifts, 20 stations;

                                1.1.1.12 OUTSIDE LIGHTING.

                                Per Building Plans and specifications.

                        1.1.1.2 TENANT BASE BUILDING RESPONSIBILITIES.

                        Tenant has agreed to accept the responsibility to
                        separately pay for the following items of Base Building
                        work ("Tenant Base Building Responsibilities") even
                        though such items are included within the Building Plans
                        and Specifications:

                                1.1.1.2.1 ROOF TRUSSES.

                                Roof trusses have been modified and reengineered
                                to carry additional loads to support Tenant's
                                conveyor system per W.E.L spec and Tenant shall
                                separately pay for the increased costs due to
                                such modifications, which costs are agreed to be
                                $17,300;

                                1.1.1.2.2 PAYMENT BY TENANT.

                                Upon execution of the Lease, Tenant shall pay to
                                Landlord in cash an amount equal to the
                                estimated cost of the item described in Section
                                1.1.1.2.1 as such amount is set forth in such
                                Section.

                        1.1.1.3 TENANT REVIEW OF BUILDING PLANS AND
                        SPECIFICATIONS.

                                       3
<PAGE>   41

                        Tenant has reviewed and approved the plans and
                        specifications for the Base Building including, without
                        limitation, the Base Building design, Base Building
                        systems, parking structure, and floor plans referred to
                        on Schedule 2 (collectively, the "Building Plans").
                        Landlord may make changes to Building Plans without
                        Tenant's consent provided that such changes do not
                        change the size or the exterior dimensions of the
                        Premises, do not cause changes to the Tenant
                        Improvements, do not delay Tenant's construction of the
                        Tenant Improvements, and provided further that the Base
                        Building, when constructed in accordance with such
                        revised Building Plans and Specifications, shall be
                        comparable to, or better than, the Base Building
                        described in the Building Plans and Specifications
                        approved by Tenant.

        1.2. TENANT IMPROVEMENTS.

        The provisions of this Work Letter pertaining to the construction of
        Tenant Improvements shall apply only to the extent that Tenant elects to
        construct improvements within the Premises. Such provisions shall not be
        interpreted to "require" Tenant to build any Tenant Improvements. The
        provisions of this Work Letter relating to Tenant Improvements shall
        apply to the installation by Tenant of Tenant's contemplated "material
        handling system".

                1.2.1. TENANT'S GENERAL CONTRACTOR.

                Tenant, through Tenant's general contractor (who shall first be
                approved by Landlord, which approval shall not be unreasonably
                withheld or delayed), shall construct within the Premises those
                improvements (the "Tenant Improvements") shown on the Tenant's
                Final Space Plans (including, without limitation, the Tenant
                Base Building Responsibilities), as approved by the Landlord and
                Tenant pursuant to Section 2 below. Landlord hereby approves WEI
                as Tenant's general contractor. All Tenant Improvements shall be
                constructed pursuant to this Work Letter and shall be performed
                only by Tenant's general contractor pursuant to a construction
                contract approved by Landlord as set forth in Section 4.1.1.
                Tenant shall be responsible for the coordination and supervision
                of the construction of the Tenant Improvements by Tenant's
                general contractor. Tenant agrees that Tenant's general
                contractor shall be licensed and fully insured in the
                construction of the Tenant Improvements.

                1.2.2. TENANT FACILITIES.

                Tenant shall have the opportunity to incorporate special Tenant
                facilities ("Tenant Facilities") into the Premises as part of
                the Tenant Improvements including, without limitation, a
                material handling system, facilities for computers, telephone
                equipment rooms, file rooms, and other special facilities
                incidental to Tenants operations; provided, however, as follows:

                        1.2.2.1. COMPLIANCE WITH LAWS.

                                       4
<PAGE>   42

                        All such Tenant Facilities shall comply with all
                        applicable laws, ordinances and codes, and the rules and
                        regulations of all governmental authorities having
                        jurisdiction;

                        1.2.2.2. FLOOR LOAD WEIGHTS.

                        The projected load weights per square foot for such
                        areas shall be within the limits set forth in the
                        Building Plans (unless such floors are capable of being
                        reinforced, and Tenant, at Tenant's sole expense,
                        reinforces the floors as, necessary);

                        1.2.2.3. COMPLIANCE WITH INSURANCE.

                        All such Tenant Facilities shall comply with all
                        applicable insurance regulations;

                        1.2.2.4. LANDLORD APPROVAL OF SPECIFICATIONS.

                        The specifications for such Tenant Facilities have been
                        reasonably approved by Landlord as consistent with the
                        design and engineering specifications for the Base
                        Building;

                        1.2.2.5. REQUIRED CHANGES TO BASE BUILDING WORK.

                        To the extent such Tenant Facilities require changes to
                        the Base Building, such changes shall be made by
                        Landlord, at Tenant's cost (all such work shall be
                        charged to Tenant at competitive rates which would be
                        charged by qualified third party contractors of similar
                        quality and reputation as Landlord's contractor if such
                        work were bid out);

                        1.2.2.6. DELAYS CAUSED BY TENANT FACILITIES.

                        To the extent the inclusion of such Tenant Facilities or
                        the construction of the Tenant Improvements causes
                        delays of the Substantial Completion of the Base
                        Building by Landlord, the date on which the Landlord
                        shall be deemed to have delivered the Base Building for
                        all purposes with respect to this Work Letter and the
                        Lease shall be the date upon which Landlord would have
                        delivered the Base Building but for the delays
                        attributable to Tenant Facilities requested by Tenant
                        hereunder.

2. PLANS AND SPECIFICATIONS FOR TENANT IMPROVEMENTS

        2.1. TENANT CONSULTANTS.

        Tenant shall retain an architect of its choice and, at Tenant's
        election, a space planner, each subject to Landlord's approval (which
        shall not be unreasonably withheld or delayed) to prepare the plans and
        specifications described hereinafter for the Tenant Improvements.

                                       5
<PAGE>   43

        2.2. TENANT SCHEMATIC SPACE PLANS.

        Tenant shall cause its architect (or space planner) to furnish to
        Landlord for Landlord's approval (which shall not be unreasonably
        withheld) space plans sufficient to convey the architectural design of
        the Premises, including without limitation, the location of doors,
        partitions, electrical and telephone outlets, plumbing fixtures, heavy
        floor loads and other special requirements, together with reflective
        ceiling plans, and plans for any improvements to be constructed outside
        of the Base Building ("Tenant's Schematic Space Plans"). Landlord's
        approval or disapproval shall be given within ten (10) days of receipt
        of such plans. If Landlord shall reasonably disapprove of any portion of
        Tenant's Schematic Space Plans, Landlord shall advise Tenant of
        Landlord's required revisions, and the reasons therefor. Tenant shall
        then submit to Landlord, for Landlord's approval, a redesign of Tenant's
        Schematic Space Plans, incorporating the revisions required by Landlord,
        as modified by Tenant, which modifications must be approved by Landlord
        prior to Tenant's submission of the "Tenant's Final Space Plans" (as
        such term is defined below).

        2.3. TENANT'S FINAL SPACE PLANS.

        Tenant shall cause its architect (or space planner) to prepare from
        Tenant's approved Tenant's Schematic Space Plans complete architectural
        plans, drawings and specifications and, utilizing Landlord's mechanical,
        electrical, life safety and structural engineers, complete engineered
        mechanical, electrical, life safety, sprinkler, plumbing and structural
        working drawings for (a) all of the Premises, showing the subdivision,
        and layout desired by Tenant therefor, and (b) any internal or external
        communications or special utility facilities which will require
        conduiting, or other improvements within the Base Building, all in such
        form and in such detail as may be reasonably required by Landlord
        (collectively, "Tenant's Final Space Plans"). Tenant's Final Space Plans
        shall (i) be compatible with the Base Building and with the design and
        construction of and the equipment and systems within the Base Building
        including, without limitation, the heating, ventilating and air
        conditioning, life safety, sprinkler, plumbing and electrical systems;
        (ii) comply with all applicable laws, ordinances and codes, and the
        rules and regulations of all governmental authorities having
        jurisdiction; and (iii) comply with all applicable insurance
        regulations. Tenant shall submit the Tenant's Final Space Plans for the
        approval (which shall not be unreasonably withheld or delayed) of
        Landlord and otherwise in the same manner as provided in Section 2.2
        above for approval by Landlord of Tenant's Schematic Space Plans.

        2.4. QUALITY OF TENANT IMPROVEMENTS.

        The Tenant Improvements shall not require extraordinary building
        services (unless Tenant agrees to pay the excess actual costs associated
        therewith) or overload the floors. Any required floor reinforcements
        above the floor load levels set forth in Building Plans shall be at
        Tenant's cost.

        2.5. RESPONSIBILITY FOR GOVERNMENTAL APPROVALS.

                                       6
<PAGE>   44

               2.5.1. TENANT IMPROVEMENTS.

               Tenant (or its architect or space planner) shall be responsible,
               at Tenant's sole cost, for obtaining approval of the Tenant's
               Final Space Plans by all governmental agencies having
               jurisdiction of the Premises, together with all other
               governmental approvals with respect to the installation of the
               Tenant Improvements, including any necessary building permits and
               all other necessary permits and the temporary and permanent
               Certificates of Occupancy for the Premises.

               2.5.2. BASE BUILDING WORK.

               Landlord or Landlord's engineers, at Landlord's cost, shall
               obtain all necessary approvals, permits and licenses specifically
               required for the Base Building, including without limitation,
               electrical, mechanical and structural engineering of the Base
               Building. Landlord shall reasonably cooperate with Tenant in
               obtaining all other necessary approvals and permits.

        2.6. INSPECTION BY LANDLORD.

        From time to time during Tenant's construction of the Tenant
        Improvements, Landlord may inspect the work in place upon the Premises
        for compliance with the Tenant's Final Space Plans.

3. ALLOWANCE FOR WORK AND WORK COST.

        3.1. TENANT IMPROVEMENT ALLOWANCE.

        Tenant shall receive NO allowance from Landlord for the construction of
        the Tenant Improvements. All Tenant Improvement work shall be contracted
        by Tenant and the entire Work Cost for any Tenant Improvements shall be
        paid directly by Tenant.

        3.2. CHANGES TO BASE BUILDING WORK.

        If the Tenant's Final Space Plans or any amendment thereof or supplement
        thereto shall require changes in the Base Building including any change
        to accommodate Tenant's Tenant Facilities or the Tenant Improvements
        pursuant to Section 1.2.2 above, and such proposed changes are
        acceptable to Landlord, in its reasonable discretion, the cost of such
        changes shall be paid directly by Tenant. The cost of such changes to
        the Base Building shall include all direct architectural and/or
        engineering fees and expenses in connection therewith, including plan
        check and inspection fees. Landlord shall notify Tenant within ten (10)
        days following Landlord's receipt of Tenant's Final Space Plans whether
        or not and, if so, to the estimated extent, shall require changes in the
        Base Building.

        3.3. PAYMENT OF TENANT IMPROVEMENT WORK COSTS.

                                       7
<PAGE>   45

        Tenant shall be responsible for and shall pay directly all costs of the
        Tenant Improvements and Landlord shall have no responsibility therefor.

        3.4. CHANGES TO PLANS.

        In the event that changes to the Tenant's Schematic Space Plans or
        Tenant's Final Space Plans are requested by Tenant or required by any
        governmental agency subsequent to Landlord's approval thereof, except
        for non-material changes, such changes and the costs thereof shall be
        forwarded to Landlord for approval (which approval shall not be
        unreasonably withheld) prior to incorporation into the work, provided,
        however, that Landlord shall be obligated to approve any changes
        required by any governmental agency. After Landlord's approval of the
        changes and the costs thereof, the changes shall be incorporated into
        the work by means of a change order.

4. CONSTRUCTION.

        4.1. CONSTRUCTION OF TENANT IMPROVEMENTS.

        Upon written notice from Landlord that the Base Building has been
        sufficiently completed and/or the Premises are reasonably available for
        the construction of the Tenant Improvements hereunder and the Tenant
        make now take Early Possession (as defined in Paragraph 3.2 of the
        Lease), Tenant shall have the right, but not the obligation, to take
        Early Possession and to direct Tenant's contractor to immediately
        commence and diligently complete construction of the Tenant
        Improvements.

                4.1.1. LANDLORD APPROVAL OF CONSTRUCTION CONTRACT.

                Such construction shall be carried out pursuant to a
                construction contract approved in writing by Landlord, which
                approval shall not be unreasonably withheld or delayed. Such
                construction contract shall provide for retention of ten percent
                (10%) of the monthly progress payments. Landlord shall have the
                right, but not the obligation, to demand that Tenant promptly
                cause its contractor(s) to correct any or the following or, if
                so ordered by Landlord, to stop the work upon the occurrence of
                any of the following:

                        4.1.1.1. LIENS.

                        In the event any materialmen's, mechanic's or other lien
                        is filed against the Premises and not promptly removed,
                        or in the event all subcontractors are not compensated
                        in due course for work performed with respect to the
                        construction of the Tenant Improvements;

                        4.1.1.2. POOR WORKMANSHIP.

                        If any portion of the Tenant Improvements constructed
                        under Tenant's direction is of inadequate or inferior
                        quality or workmanship and Tenant does not diligently
                        proceed to replace or repair such inadequate or inferior
                        work upon written notice from Landlord;

                                       8
<PAGE>   46
                        4.1.1.3. TENANT VIOLATION.

                        If the contractor fails in any material way to adhere to
                        the provisions of the Lease, including, without
                        limitation, the provisions of this Work Letter, and such
                        violation has not been remedied within five (5) business
                        days of Tenant's receipt of written notice from
                        Landlord, or if such violation is of a nature such that
                        it can not be reasonably cured within a five (5)
                        business days period, if Tenant or its contractor has
                        not commenced to cure within such period and diligently
                        proceeded to cure thereafter;

        4.2. TENANT IMPROVEMENT SCHEDULE.

        Prior to commencement of any Tenant Improvement work in the Premises,
        Tenant shall furnish for approval to Landlord in writing a schedule
        setting forth projected completion dates and showing the deadlines for
        any actions required to be taken by Landlord and Tenant during such
        construction.

        4.3. LANDLORD APPROVAL OF TENANT SUBCONTRACTORS.

        Landlord shall have the right to approve all subcontractors designated
        by Tenant or Tenant's agents or contractor for work on the Premises with
        respect to construction of the Tenant Improvements which subcontractors
        work is material to the construction of the Tenant Improvements or
        material in relation to the Base Building, which approval shall not be
        unreasonably withheld or delayed, and which approval or disapproval
        shall be given by Landlord within ten (10) days after Tenant submits a
        list of subcontractors for Landlord's approval. Landlord hereby approves
        WEI as a subcontractor for Tenant.

        4.4. REQUIREMENTS FOR CARRYING OUT LANDLORD'S AND TENANT'S WORK.

        Landlord and Tenant agree that all construction work shall be carried
        out at such times as Landlord directs, in accordance with reasonable
        rules and regulations, promulgated by Landlord and in such a manner as
        to minimize as much as reasonably possible interference with the work of
        either Landlord or Tenant, and, without limiting the generality of the
        foregoing, in accordance with the following:

                4.4.1. QUALITY WORK.

                Such work shall be performed in a good and workmanlike manner
                and in accordance with all applicable laws.

                4.4.2. BONDS, LICENSE AND INSURANCE.

                Prior to Tenant commencing work on the Premises, Tenant shall
                cause Tenant's contractor to furnish to Landlord, at Tenant or
                Tenant's contractor's cost, and Landlord shall cause Landlord's
                contractor to furnish to Tenant, at Landlord or Landlord's
                contractor's cost, (i) evidence satisfactory to the other that
                such party's contractor has a valid and appropriate license; and
                (ii) sufficient evidence that such

                                       9
<PAGE>   47

                contractor is carrying workmen's compensation insurance in
                statutorily required amounts, together with general liability
                insurance naming Landlord or Tenant, as the case may be, its
                lender and its managing agent as additional insureds in such
                limits and with such insurers as are reasonably appropriate
                under the circumstances.

                4.4.3. LANDLORD RIGHT TO INSPECT.

                Landlord shall have the right to enter the Premises at all times
                to inspect the work and to post notices of nonresponsibility.

                4.4.4. NO LIENS.

                Tenant shall ensure lien free completion of the Tenant
                Improvement Work and Landlord shall ensure lien free completion
                of the Base Building. If a lien is filed and is attributable to
                the work of the other, the party responsible shall within thirty
                (30) days of receiving written notice thereof either discharge
                such lien or, if such party determines to contest such lien,
                post a bond in accordance with Section 3143 of the California
                Civil Code releasing the Building and Premises from such lien.
                If such party fails to discharge such lien or to post such bond
                to discharge such lien, the other party shall have the right to
                discharge such lien and to bill the other party for the cost
                thereof, which cost shall be reimbursed to the party posting
                such bond within five (5) business days.

                4.4.5 CONCURRENT WORK.

                It is Landlord's intention to permit Tenant to take Early
                Possession of the Premises on or before March 1, 2000. When
                Landlord permits Tenant to take Early Possession, it is likely
                that Landlord's work on the Base Building will not be complete.
                Landlord and Tenant agree that if Tenant takes Early Possession
                before Substantial Completion of the Base Building has occurred
                that both Landlord and Tenant will cooperate with the other and
                instruct their respective contractors and subcontractors to
                cooperate with those of the other and to minimize the
                interference with the work of the other.

                4.4.6 UNION LABOR.

                Each of Landlord and Tenant has indicated to the other that they
                intend to use only non-union labor for work on the Premises.
                Each party agrees that prior to Landlord or Tenant or their
                respective contractors or subcontractors permitting union trades
                to perform work on the Premises, the party so permitting union
                trades will first notify the other party and shall obtain and
                deliver to the other party a certificate of non-interference so
                that injunctive relief would be available should the union
                trades attempt to interfere with the activities of the non-union
                trades.

                If either Landlord or Tenant or their respective contractors or
                subcontractors invite or acquiesce in union trades performing
                work on the Premises and if union

                                       10
<PAGE>   48

                interference should arise during the course of construction as a
                result of such union trades performing work on the Premises, the
                party responsible for such union trades performing work on the
                Premises shall be responsible for promptly resolving such
                interference and as to such responsible party, such interference
                shall NOT constitute a Force Majeure event. On the other hand,
                such interference SHALL constitute a Force Majeure event as to
                the party not so responsible for such interference.

                In the event of union interference that is not the
                responsibility of either Landlord or Tenant as described in the
                preceding paragraph, then the party targeted by such union
                interference shall be responsible for resolving such
                interference as expeditiously as possible. To the extent any
                such interference occurs, such interference shall constitute a
                Force Majeure event for both Landlord and Tenant.

5. TENANT ACCESS.

        5.1. LANDLORD TO PROVIDE ACCESS.

        Landlord shall upon and after the Early Possession Date, during
        the hours set for in Schedule 1 to this Work Letter ("Access
        Hours"), provide Tenant and Tenant's employees, space planners,
        architects, contractors and subcontractors, reasonable access to
        the Premises, along with adequate electricity and lighting
        available to the Premises for the purpose of constructing the
        Tenant Improvements and installing Tenant's furniture, fixtures,
        equipment (including telephone, communications and computer
        equipment) and personal property for use in the Premises.

        5.2. STOCKING OF MATERIALS.

        All stocking of major materials for use in the Tenant Improvements shall
        be performed after regular business hours.

        5.3. SUBJECT TO LANDLORD'S RULES & REGULATIONS.

        Subject to Section 5.1 above, Tenant's rights of access, construction
        and installation hereunder shall be subject to the reasonable rules and
        the direction of Landlord.

        5.4. FREE OF LANDLORD MATERIALS.

        Tenant's Lease space shall be free of any debris, and any material or
        inventory stored by Landlord, prior to Tenant's move-in to the Premises.

6. INDEMNIFICATION.

Tenant hereby indemnifies Landlord and agrees to protect, defend and hold
Landlord, its constituent members, affiliates, partners, and their respective
agents, officers and employees, harmless from and against any and all losses,
costs, liabilities, damages,

                                       11
<PAGE>   49

demands, claims, causes of action and expenses (including attorneys' fees and
court costs) by reason of damage to the Base Building, Premises or the property
of others and/or personal injury, including death, which may arise from the
Tenant Improvement work in the Premises, whether caused by Tenant, Tenant's
contractor or any subcontractor, or anyone directly or indirectly employed by
any of them.

Landlord hereby indemnifies Tenant and agrees to protect, defend and hold
Tenant, its constituent members, affiliates, partners, and their respective
agents, officers and employees, harmless from and against any and all losses,
costs, liabilities, damages, demands, claims, causes of action and expenses
(including attorneys' fees and court costs) by reason of damage to the Base
Building, Premises or the property of others and/or personal injury, including
death, which may arise during the construction of the Base Building, whether
caused by Landlord, Landlord's contractor or any subcontractor, or anyone
directly or indirectly employed by any of them.

7. MISCELLANEOUS.

        7.1. TENANT'S ENTRY INTO THE PREMISES PRIOR TO SUBSTANTIAL COMPLETION.

        Contractor shall allow Tenant and/or Tenant's agents access to the
        Premises as of the Early Possession Date prior to the Substantial
        Completion of the Base Building for the purpose of Tenant and/or
        Tenant's agents constructing the Tenant Improvements and installing
        equipment or fixtures (including Tenant's data and telephone equipment
        and related cabling) in the Premises.

        7.2. TENANT'S REPRESENTATIVE.

        Tenant has designated Paul Galliher as its sole representative with
        respect to the matters set forth in this Tenant Work Letter, who, until
        further notice to Landlord, shall have full authority and responsibility
        to act on behalf of the Tenant as required in this Tenant Work Letter.

        7.3. LANDLORD'S REPRESENTATIVE.

        Landlord has designated Donald Gilmour as its sole representative with
        respect to the matters set forth in this Tenant Work Letter, who, until
        further notice to Tenant, shall have full authority and responsibility
        to act on behalf of the Landlord as required in this Tenant Work Letter.

        7.4. PUNCH LIST ITEMS.

        Within thirty (30) days of the Substantial Completion of the Premises,
        Tenant shall provide Landlord a punch list (latent and hidden defects
        excepted), which punch list shall consist of those decorative and minor
        mechanical type adjustments which do not materially interfere with
        Tenant's use of the Premises. Upon receipt of the punch list,

                                       12
<PAGE>   50

        Landlord shall, at Landlord's sole cost and expense, proceed to
        diligently remedy all such items within forty-five (45) days of such
        receipt.

        7.5. MISCELLANEOUS CHARGES.

        During the period of construction of the Tenant Improvements and
        Tenant's move into the Premises, neither Tenant nor Tenant's agents
        shall not be charged for, directly or indirectly, parking, restrooms,
        HVAC usage, electricity, water, elevator usage, loading dock usage,
        freight elevator usage, or security.

        7.6. STAGING AREA STORAGE SPACE.

        During the period commencing on the date of this Lease and prior to the
        Commencement Date, Tenant shall have the right, without the obligation
        to pay rent, to use such portion of the Premises designated by Landlord
        for the purposes of storing and staging Tenant's property. With respect
        to this free storage space, Tenant shall provide all insurance and any
        necessary fencing or other protective facilities. Tenant shall hold
        Landlord harmless and indemnify Landlord from and against any and all
        loss, liability or cost arising out of or in connection with use of this
        storage space by Tenant, except to the extent caused by the negligence
        or willful misconduct of Landlord.

        7.7. SECOND STORY OFFICE.

        Landlord acknowledges that Tenant may elect to add a second story to the
        "office" portion of the Premises. The first floor of such "office" is
        included as part of the Base Building. If Tenant elects to add the
        second story at any time, such work will be treated as a Tenant
        Improvement and shall be processed and constructed in accordance with
        the terms and conditions therefor set forth in this Work Letter.
        Landlord hereby consents to Tenant's adding such second floor so long as
        Tenant otherwise complies with this Work Letter as to the construction
        of such second story addition. Landlord agrees that if Tenant adds such
        second floor, such second floor will become part of the Premises, and
        Tenant will not be required to remove it at the expiration of Lease.

INITIALS OF LANDLORD                         INITIALS OF TENANT

/s/ [Signature Illegible]                    /s/ [Signature Illegible]
-----------------------------------          -----------------------------------

                                       13
<PAGE>   51

                            SCHEDULE 1 TO WORK LETTER
                        CONTRACTOR RULES AND REGULATIONS
                      1670 S. CHAMPAGNE AVENUE, ONTARIO, CA

      The following are the Rules and Regulations for construction personnel
      performing work as contractors or suppliers of Tenant at 1670 S. Champagne
      Avenue, Ontario, California.

        1.1 BUILDING ACCESS

                1.1.1 PARKING

                All personnel shall park on the portion of the Premises
                designated for such purpose by Landlord from time to time.

                1.1.2 STOCKING OF MATERIALS-LARGE QUANTITIES

                Stocking of large amounts of materials to be done between 7:00
                p.m. and 7:00 a.m.

                1.1.1. STOCKING OF MATERIALS-SMALL QUANTITIES

                Stocking of small amounts of materials may be done between 7:00
                a.m. and 7:00 p.m.

                1.1.2. NO STAGING ON SIDEWALKS OR STREET

                No materials may be staged (for ANY length of time) on sidewalks
                or the street.

        1.2 JOBSITE

                1.2.1 TRASH

                Food and debris shall be disposed of in trash receptacles. Each
                subcontractor shall remove DAILY its construction debris and
                trash.

                1.2.2 FOOD AND DRINK

                No food and drink is allowed in areas where finishes have been
                installed; i.e., carpet, paint, wall coverings, etc.

                1.2.3 WORK NEAR DEMISING WALLS

                When performing work near the demising wall of an adjacent
                occupied suite, noisy tasks (screw guns, etc.) must be performed
                before 7:30 a.m.

                1.2.4 NO DRAGGING ACROSS FLOORS

                Ladders, other equipment and materials must not be dragged
                across floors.

                1.2.5 USE OF RESTROOMS

                Restrooms will not be used to fill buckets, make pastes, wash
                buckets, etc.

                                       14
<PAGE>   52

        1.3 SECURITY/PASS DOWNS

        Normal working hours are from 7:00 a.m. to 5 p.m.

        All work which occurs after normal working hours (between 5 p.m. and
        7 a.m.) must be coordinated with the Building Manager.

        1.4 FIRE, LIFE SAFETY

        Landlord will be notified of all work that affects the various Fire Life
        Safety systems in the Building. The electrical subcontractors, sprinkler
        subcontractors, and perhaps other subs must contact Landlord's
        representative or Landlord's general contractor (via Tenant's general
        contractor) to arrange for the Building Engineer to disable smoke
        detectors, bring the Building off-line, drain the sprinkler system,
        etc., and coordinate inspections with the Ontario Fire Department.

                                       15
<PAGE>   53

                            SCHEDULE 2 TO WORK LETTER
                    LIST OF BUILDING PLANS AND SPECIFICATIONS
                      1670 S. CHAMPAGNE AVENUE, ONTARIO, CA

SOILS REPORT:

Geotechnical Engineering Investigation, Project Number 8104-99 dated May 12,
1999 by NorCal Engineering.

CIVILS:

Sheets 1 of 5 through 5 of 5, Grading, Sewer and Water Plans red stamped BID SET
SEP 22 1999 by Walden & Associates.

ARCHITECTURAL:

Project Manual dated September 27, 1999 and Sheets A0.1, A0.2, A0.2-1 through
A0.2-3, A1.1, A2.1, A2.1-R1, A2.1-R2, A2.2, A2.3, A3.1 through A3.6, A4.1
through A4.5, A5.1 and AD.1 through AD.6 red stamped BID SET SEP 22 1999 by Hill
Pinckert Architects.

STRUCTURAL:

Sheets S-1 through S-4, PNL1 through PNL4, SD1 through SD9, SS1 and SW-1
through SW-3 red stamped BID SET SEP 22 1999 by Mark Dale Associates.

ELECTRICAL:

Sheets ElA, E2A and SL1 red stamped BID SET SEP 22 1999 by Gregg Electric.

PLUMBING:

Sheet P-1 red stamped BID SET SEP 22 1999 by C W Plumbing & Design, Inc.

MECHANICAL:

Sheet M1 red stamped BID SET SEP 22 1999 by Air Control Systems Inc.

LANDSCAPE:

Sheets T-1 and L-1 through L-9 red stamped BID SET SEP 22 1999 by Hunter
Landscape Services.

FIRE SPRINKLER:

Sheets 1 of 9 through 9 of 9 red stamped BID SET SEP 22 1999 by J.M. Carden
Sprinkler Co., Inc.

                                       16
<PAGE>   54

                            Schedule 3 To Work Letter
                        Preliminary Construction Schedule
                                [To be Attached]

                                       17
<PAGE>   55
                         CHAMPAGNE PRELIMINARY SCHEDULE
                        FULLMER CONSTRUCTION.....11/4/99

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<CAPTION>
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                                                          NOVEMBER    DECEMBER       JANUARY            FEBRUARY           MARCH
                                                        ---------------------------------------------------------------------------
                                                            11/14   11/29   12/12   12/26   1/9   1/23   2/4   2/20   3/5   3/19
-----------------------------------------------------------------------------------------------------------------------------------
<S>  <C>       <C>      <C>         <C>
NO.  DURATION  START     FINISH     TASK NAME
--------------------------------------------------------
1    6 days   11/15/99   11/24/99   GRADING
--------------------------------------------------------
2   40 days   11/26/99    1/29/00   BLDG CONCRETE
--------------------------------------------------------
3   17 days   11/30/99   12/29/99   SEWER & STORM DRAIN
--------------------------------------------------------
4   10 days   12/21/99     1/2/00   FIRE AND WATER LINES
--------------------------------------------------------
5   10 days     1/4/00    1/17/00   EDISON & PHONE
--------------------------------------------------------
6    3 days    1/18/00    1/20/00   SLEEVES RIGHT OF WAY
--------------------------------------------------------
7   10 days    1/21/00     2/3/00   FOUR APPROACHES
--------------------------------------------------------
8    6 days    1/28/00     2/4/00   LIFT BUILDING &
                                    SCAN WALLS
--------------------------------------------------------
10   4 days    1/31/00     2/5/00   WELD
--------------------------------------------------------
11   4 days    1/31/00     2/3/00   SET COLUMNS
--------------------------------------------------------
13   4 days    2/2/00      2/7/00   WATER BLAST
--------------------------------------------------------
17  20 days    2/3/00      3/1/00   SACK-TRKWELL-GLASS-
                                    REST
--------------------------------------------------------
12  16 days    2/4/00     2/24/00   K-BRACE WORK
--------------------------------------------------------
14  20 days    2/4/00      3/2/00   ROOF STRUCTURE
--------------------------------------------------------
9   2 days     2/7/00      2/9/00   GROUT PANELS
--------------------------------------------------------
16  20 days    2/8/00      3/7/00   SITE CONCRETE
--------------------------------------------------------
??  25 days   2/11/00     3/18/00   O.H. FIRE SPRINKLERS
--------------------------------------------------------
18  ? days    2/18/00     2/28/00   PERIMETER CONDS/
                                    DRAINS/B.FILL
--------------------------------------------------------
20  8 days    2/23/00      3/1/00   BUILD & LITE CURBS
--------------------------------------------------------
23  2 days    3/2/00       3/3/00   H2O RINSE
                                    BUILDING
--------------------------------------------------------
26  3 days    3/2/00      3/6/00    ROOF SHEET METAL
--------------------------------------------------------
16  3 days    3/3/00      3/6/99    FULL BRACES
--------------------------------------------------------
2? 10 days    3/6/00      3/7/00    FOURSTRIP
--------------------------------------------------------
??  2 days    3/5/00      3/7/00    CAULK PANEL JOINTS
--------------------------------------------------------
??  2 days    3/7/00      3/8/00    ROOF INSPECTION &
                                    CORRECT
--------------------------------------------------------
?? 10 days    3/8/00     3/21/00    PRIME PAINT BLDG.
                                    EXT.
--------------------------------------------------------
40  2 days    3/8/00      3/?/00    STAKE C&G
--------------------------------------------------------
31 16 days    3/9/00     3/27/00    ROOFING
--------------------------------------------------------
42  2 DAYS   3/10/00     3/13/00    GRADE C&G
--------------------------------------------------------

---------------------------------------------------------------------------------------------------------
                                                               APRIL          MAY           JUNE
                                                        --------------------------------------------------
                                                            4/2    4/16    4/30   5/14    5/29    6/11
----------------------------------------------------------------------------------------------------------
NO.  DURATION  START     FINISH     TASK NAME
--------------------------------------------------------
1    6 days   11/15/99   11/24/99   GRADING
--------------------------------------------------------
2   40 days   11/26/99    1/29/00   BLDG CONCRETE
--------------------------------------------------------
3   17 days   11/30/99   12/29/99   SEWER & STORM DRAIN
--------------------------------------------------------
4   10 days   12/21/99     1/2/00   FIRE AND WATER LINES
--------------------------------------------------------
5   10 days     1/4/00    1/17/00   EDISON & PHONE
--------------------------------------------------------
6    3 days    1/18/00    1/20/00   SLEEVES RIGHT OF WAY
--------------------------------------------------------
7   10 days    1/21/00     2/3/00   FOUR APPROACHES
--------------------------------------------------------
8    6 days    1/28/00     2/4/00   LIFT BUILDING &
                                    SCAN WALLS
--------------------------------------------------------
10   4 days    1/31/00     2/5/00   WELD
--------------------------------------------------------
11   4 days    1/31/00     2/3/00   SET COLUMNS
--------------------------------------------------------
13   4 days    2/2/00      2/7/00   WATER BLAST
--------------------------------------------------------
17  20 days    2/3/00      3/1/00   SACK-TRKWELL-GLASS-
                                    REST
--------------------------------------------------------
12  16 days    2/4/00     2/24/00   K-BRACE WORK
--------------------------------------------------------
14  20 days    2/4/00      3/2/00   ROOF STRUCTURE
--------------------------------------------------------
9   2 days     2/7/00      2/9/00   GROUT PANELS
--------------------------------------------------------
16  20 days    2/8/00      3/2/00   SITE CONCRETE
--------------------------------------------------------
??  25 days   2/11/00     3/18/00   O.H. FIRE SPRINKLERS
--------------------------------------------------------
18  ? days    2/18/00     2/28/00   PERIMETER CONDS/
                                    DRAINS/B.FILL
--------------------------------------------------------
20  8 days    2/23/00      3/1/00   BUILD & LITE CURBS
--------------------------------------------------------
23  2 days    3/2/00       3/3/00   H2O RINSE
                                    BUILDING
--------------------------------------------------------
26  3 days    3/2/00      3/6/00    ROOF SHEET METAL
--------------------------------------------------------
16  3 days    3/3/00      3/6/99    FULL BRACES
--------------------------------------------------------
2? 10 days    3/6/00      3/7/00    FOURSTRIP
--------------------------------------------------------
??  2 days    3/5/00      3/7/00    CAULK PANEL JOINTS
--------------------------------------------------------
??  2 days    3/7/00      3/8/00    ROOF INSPECTION &
                                    CORRECT
--------------------------------------------------------
?? 10 days    3/8/00     3/21/00    PRIME PAINT BLDG.
                                    EXT.
--------------------------------------------------------
40  2 days    3/8/00      3/?/00    STAKE C&G
--------------------------------------------------------
31 16 days    3/9/00     3/27/00    ROOFING
--------------------------------------------------------
42  2 DAYS   3/10/00     3/13/00    GRADE C&G
--------------------------------------------------------
</TABLE>

<PAGE>   56
                         CHAMPAGNE PRELIMINARY SCHEDULE
                       FULLMER CONSTRUCTION . . . 11/4/99

<TABLE>
<CAPTION>
                                          NOVEMBER    DECEMBER   JANUARY FEBRUARY   MARCH      APRIL        MAY    JUNE
                                          --------    --------   ------- --------   -----      -----        ---    ----
ID DURATION  START  FINISH   TASK NAME  11/14 11/28 12/12 12/26 1/9 1/23 2/8 2/20 3/6 3/18 4/2 4/16 4/30 5/14 5/28 6/11
-- --------  -----  ------   ---------  ----- ----- ----- ----- --- ---- --- ---- --- ---- --- ---- ---- ---- ---- ----
<S><C>      <C>     <C>     <C>         <C>   <C>   <C>   <C>   <C> <C>  <C> <C>  <C> <C>  <C> <C>  <C>  <C>  <C>  <C>
34 16 days  3/13/00 3/31/00 FOIL AT ROOF

64  4 days  3/13/00 3/16/00 CURB AND
                              GUTTER

37 11 days  3/14/00 3/30/00 GLAZING

38  2 days  3/18/00 3/18/00 SET ELECT
                              GEAR

38 11 days  3/18/00 3/30/00 BUILD ELECT
                              ROOM

46  2 days  3/17/00 3/28/00 FINAL GRADE
                              WALKS 1ST

22 10 days  3/20/00 3/31/00 DOCK
                              EQUIPMENT

27 18 days  3/20/00  4/7/00 ROLL-UP
                              DOORS

28  4 days  3/20/00 3/23/00 EXT. MAN
                              DOORS

44  6 days  3/20/00 3/27/00 WALKS & MAN
                              DR. PADS

60  2 days  3/24/00 3/23/00 CLEAN & REAL
                              FLOOR

36 12 days  3/24/00 4/10/00 HI-BAY LITES

83  2 days  3/24/00 3/31/00 BASE & PAVE
                              P.LOT

32  7 days  3/30/00  4/7/00 SKYLITES

33  8 days  3/30/00  4/8/00 ROOF EXHAUST
                              UNITS

41   1 day  3/30/00 3/30/00 CAULK
                              SCUPPERS

43  3 days  3/31/00  4/4/00 DOWNSPOUTS

47   1 day  3/31/00 3/31/00 EDISON/GTE
                              ENERGIZED

38  8 days  3/31/00 3/31/00 RACKS BEGIN
                               IF CITY
                               "OK"(S)

49  8 days   4/2/00 4/12/00 FENCE &
                              GATES

51  2 days   4/3/00 4/12/00 STRIPE P.LOT

88 20 days   4/4/00  6/1/00 LANDSCAPE

38  2 days   4/5/00  4/8/00 HAND RAILS &
                              TRASH
                              GATES

64  8 days  4/16/00 4/17/00 FINISH EXT.
                              BLDG.
                              PAINT

65 10 days   5/2/00 5/15/00 BLDG. FINALS

29  0 days  5/16/00 5/16/00 JOB COMPLETE
</TABLE>
<PAGE>   57
                                    EXHIBIT B
                       PROTECTED LESSEE OWNED ALTERATIONS
                     [TO BE LISTED BY LESSEE AND ATTACHED]

<PAGE>   58

                                    EXHIBIT B
                       PROTECTED LESSEE OWNED ALTERATIONS

Material Handling system whose components include, but are not limited to, the
following:

A tilt tray sorter, conveyor (consisting of, among other things, certain
mechanical equipment, spiral chutes, spiral declines and truck loaders),
platforms and pick modules (which platforms and pick modules consist of, among
other things, a main platform, induction platforms, level modules, shelving,
fire protection, lighting and footings), case sealers, in-line scales and
auto-tie bailers

<PAGE>   59

                                    ADDENDUM
                                [TO BE ATTACHED]

<PAGE>   60

                        ADDENDUM TO INDUSTRIAL/COMMERCIAL
                            SINGLE-TENANT LEASE - NET
     LESSOR: Champagne Building Group, LP, a California limited partnership
              LESSEE: Skechers USA, Inc., a California Corporation
                          LEASE DATED: October 15, 1999

The following provisions are added to that certain Standard
Industrial/Commercial Single-Tenant Lease-Net dated for reference purposes as of
October 15, 1999, by and between Champagne Building Group LP, a California
limited partnership, as Lessor, and Skechers, USA, Inc., a California
Corporation, as Lessee. In the event of any conflict between the terms of the
Printed Lease and this Addendum, the terms of this Addendum shall control.

50. Rent: For the first sixty (60) months of the original term of the lease the
Base Rent is $85,693.00 net per month. Beginning on the sixty-first (61st) month
and continuing until the eighty-fourth (84th) month, the Base Rent shall be
$92,285.00 net per month.

51. [intentionally omitted]

52. Option to Extend Term: Lessee shall have one option (the "Option") to extend
the Term of the Lease for a period of five (5) years (hereafter the "Option
Period"), provided that all of the following conditions are satisfied: (a)
Lessee shall provide Lessor with written notice (the "Option Exercise Notice")
of Lessee's election to exercise the Option not less than one hundred eighty
(180) nor more than three hundred sixty (360) days prior to the expiration of
the Original Term of the Lease, and (b) no default by Lessee of its obligations
under this Lease shall have occurred and be continuing, either at the time
Lessee delivers the Option Exercise Notice to Lessor or at the commencement of
the Option Period. The Base Rent for Option Period shall be equal to ninety-five
percent (95%) of the Fair market Rental Value (as defined below) for comparable
industrial buildings in the City of Ontario, but in no event shall the monthly
Base Rent for Option Period be less than the monthly Base Rent for the last
month of the Original Term.

52.1 Upon receipt by Lessor of an Option Exercise Notice, Lessor and Lessee
shall confer and attempt to agree upon the initial monthly Base Rent for the
Option Period. If such an agreement is not reached within thirty (30) days
following the receipt of such notice by Lessor, then Fair Market Rental Value
("FMRV") for the Premises shall be determined as provided in Paragraph 52.2
below.

52.2 To determine FMRV, Lessor shall engage at its sole cost and expense a MAI
certified appraiser ("Lessor's Appraiser") who shall render a written opinion of
the FMRV for the Premises ("Lessor's FMRV"). Lessee shall have five (5) business
days to accept or reject Lessor's FMRV. If Lessee accepts Lessor's FMRV, Lessee
shall reimburse Lessor for one-half of the fees and expenses of Lessor's
Appraiser. If Lessee rejects such determination of FMRV, Lessee shall engage at
its sole cost and expense a second Independent MAI certified appraiser
("Lessee's Appraiser") who shall also render a written opinion of the FMRV for
the Premises ("Lessee's FMRV"). If Lessor's FMRV is less than 10% greater or
less than Lessee's FMRV, then the FMRV for the Premises shall be the average of
Lessor's FMRV and Lessee's FMRV. If the difference

                                       1
<PAGE>   61

between Lessor's FMRV and Lessee's FMRV is 10% or more, and Lessor and Lessee
cannot agree between themselves as to the FMRV for the Premises, then FMRV shall
be determined by a third independent MAI certified appraiser (the "Third
Appraiser") mutually selected by Lessor's Appraiser and Lessee's Appraiser;
provided, however, in no event will the FMRV be less than the lowest of Lessor's
FMRV and Lessee's FMRV nor higher than the highest of Lessor's FMRV and Lessee's
FMRV. The Third Appraiser shall render a written opinion of the FMRV for the
Premises, which shall be binding and conclusive upon Lessor and Lessee. The
costs of the Third Appraiser shall be shared equally by Lessor and Lessee.

Except for the option to extend the term of the Lease for one (1), five (5) year
period as provided in this Paragraph 52, Lessee shall have no other option to
extend the term of the Lease, or option to purchase, option to lease or right of
first refusal.

53.   Premises Total Destruction. The following language replaces the language
      contained in Paragraph 9.1(b) of the Lease:

      "(b) "Premises Total Destruction" shall mean damage or destruction to
      improvements on the Premises, other than Lessee Owned Alterations and
      Utility Installations and Trade Fixtures, which cannot reasonably be
      repaired within six (6) months or less from the date of the damage or
      destruction. Within thirty (30) days following the date of the damage or
      destruction, Lessor shall select a general contractor ("Lessor's
      Contractor") who shall, by written notice to Lessor and Lessee (a
      "Determination Notice"), determine whether or not the repair of such
      damage or destruction can be completed within six (6) months from the date
      of the damage or destruction. If Lessee elects not to accept such
      determination by Lessor's Contractor, Lessee shall, at Lessee's sole
      expense, select another general contractor ("Lessee's Contractor") who
      shall, within ten (10) days after receipt by Lessee of such Determination
      Notice, by written notice to Lessor and Lessee, determine whether or not
      the repair of such damage or destruction can be completed within six (6)
      months from the date of the damage or destruction. Should Lessor's
      Contractor and Lessee's Contractor fail to agree upon whether such damage
      or destruction can be repaired within six (6) months from the date of the
      damage or destruction, then the matter shall be resolved by binding
      arbitration in accordance with the Rules of the American Arbitration
      Association."

54.   Partial Damage-Uninsured Loss. The following language replaces the first
      two sentences of Paragraph 9.3 of the Lease:

      "If a Premises Partial Damage occurs that is not an Insured Loss, unless
      caused by a negligent or willful act of Lessee (in which event Lessee
      shall make the repairs at Lessee's expense), (i) if the total cost of
      repairing such damage is reasonably determined by an impartial general
      contractor selected by Lessor to be equal to or less than $250,000, then
      Lessor shall repair such damage (but not Lessee's Trade Fixtures or Lessee
      Owned Alterations and/or Utility Installations), and (ii) if the total
      cost of repairing such damage is reasonably determined by an impartial
      general contractor selected by Lessor to be greater than $250,000, then
      Lessor may either (A) repair such damage (but not Lessee's Trade Fixtures
      or Lessee Owned Alterations and/or Utility Installations) as soon as is
      reasonably possible at Lessor's expense, in which event the Lease shall
      remain in full force and effect, or (B) terminate the Lease by giving
      written notice to Lessee (a

                                       2
<PAGE>   62

      "Termination Notice") within thirty (30) days after the date that Lessor
      becomes aware of the occurrence of such damage, such termination to be
      effective one hundred twenty (120) days after the date of such notice;
      provided, however, that the Lease shall not so terminate if Lessee, by
      written notice to Lessor within thirty (30) days after receipt of such
      Termination Notice, elects to repair such damage (after Lessor's payment
      of the foregoing $250,000 sum) at Lessee's sole expense."

55.   Damage Near End of Term. The following language replaces the language
      contained in the first sentence of Paragraph 9.5 of the Lease:

      "If at any time during the last six (6) months of the Original Term (as
      the same may be extended) there is damage to the Premises for which the
      cost of repairs is reasonably estimated by an impartial general contractor
      selected by Lessor to exceed one-month's then Base Rent, whether or not an
      Insured Loss, Lessor or Lessee may, by written notice to the other party
      within thirty (30) days after the date of occurrence of such damage,
      terminate this Lease effective sixty (60) days following the date of
      occurrence of such damage."

56.   Assignment and Subletting-Lessor's Consent Required. The following
      language is added as a new Paragraph 12.1(b) of the Lease:

      "(b) Lessee shall have the right, without Lessor's consent but after prior
      notice to Lessor including the name, address and contact information of
      such assignee, to assign the Lease to an entity (an "Affiliate")
      controlling, under common control with, or controlled by Lessee, including
      an entity resulting from a merger or consolidation by Lessee, provided
      that the Affiliate assumes in writing Lessee's obligations under this
      Lease in the proportion that the number of square feet of the Premises
      transferred to the Affiliate of Lessee bears to the total number of square
      feet in the Premises, without relieving Lessee of any liability under the
      Lease. Any such Affiliate assignee shall be deemed to have assumed all
      liabilities of Lessee hereunder. Lessee or such Affiliate assignee shall
      provide such additional information relating to such Affiliate assigned as
      Lessor shall request from time to time."

57.   Condemnation. The following language is inserted after the third sentence
      of Paragraph 14 of the Lease:

      "Condemnation awards and/or payments shall be the property of Lessor,
      whether such award shall be compensation for diminution in value of the
      Premises, the value of the part taken, or for severance damages; provided,
      however, that Lessee shall be entitled to any portion of such condemnation
      award specifically attributable to (i) Lessee's loss of business goodwill
      and/or Trade Fixtures, and (ii) if this Lease is terminated pursuant to
      the provisions of Paragraph 14 of the Lease, Lessee's reasonable
      relocation expenses and any excess of the market value of the Premises for
      the remainder of the Original Term (as the same may be extended) over the
      present value as of the date of such termination of the Base Rent payable
      for the remainder of the Original Term (as the same may be extended)."

58.   Lessor's Access; Showing Premises; Repairs. The following language
      replaces the language contained in Paragraph 32 of the Lease:

                                       3
<PAGE>   63

      "Lessor and Lessor's agents shall have the right to enter the Premises at
      any time, in the case of an emergency, and otherwise, upon 24 hours' prior
      notice to Lessee, for the purpose of showing same to prospective
      purchasers, lenders, or lessees, and making alterations, repairs,
      improvements and additions to the Premises as Lessor may deem necessary.
      All such activities shall be without abatement of rent or liability to
      Lessor. Lessor may at any time place one commercially standard,
      free-standing "For Sale" sign at a location to be selected by mutual
      agreement of Lessor and Lessee near the perimeter of the Premises. Lessor
      may at any time during the last six (6) months of the Original Term (as
      the same may be extended) place one commercially standard, free-standing
      "For Lease" sign at a location to be selected by Lessor near the perimeter
      of the Premises. Lessee may at any time place one commercially standard,
      free-standing "For Sublease" sign at a location to be selected by Lessee
      near the perimeter of the Premises."

59.   Substantial Completion. For purposes of determining the Commencement Date
      under Paragraph 1.3 of the Lease, "Substantial Completion" shall mean and
      refer to the following:

"Substantial Completion" shall mean that point in time when Landlord's architect
certifies that construction of the Base Building is substantially complete in
accordance with the Work Letter so that Tenant can legally occupy and utilize
the Premises in accordance with City laws and regulations. Tenant acknowledges
that Tenant will be constructing Tenant Improvements, including without
limitation, racking and material handling system pursuant to a separate permit
from the City and in accordance with the Work Letter. "Substantial Completion"
shall have occurred upon the satisfaction of the conditions of the first
sentence of this Section whether or not Tenant shall have completed its Tenant
Improvements."

60    Connection to Neighboring Property. Tenant currently occupies, itself or
      through one or more Affiliates, facilities on properties that are adjacent
      to the Premises. Tenant has expressed its desire to connect its material
      handling system from the Premises to such adjacent facilities. Landlord
      consents to the connection of such systems, and will cooperate with Tenant
      in establishing such connection (including, without limitation, the
      performance of any reasonable acts or the execution of any reasonable
      documents acknowledging such Landlord consent), provided, however, that
      Tenant is solely responsible (i) for any and all expenses related to and
      (ii) for obtaining all permissions and consents, from governmental
      entities as well as adjacent property owners, necessary to permit such
      connections to be lawfully made. Tenant agrees to indemnify and hold
      Landlord harmless from and against any and all liability, loss, cost or
      damage arising out of the construction, installation and maintenance of
      any facilities for the connection of such systems. THIS LEASE IS NOT
      CONDITIONED IN ANY WAY UPON TENANT OBTAINING SUCH PERMISSIONS AND
      CONSENTS.

61    Delay in Commencement Date. Landlord agrees to use its best commercially
      reasonable efforts to cause Substantial Completion to have occurred on or
      before the Scheduled Commencement Date. If, despite said efforts, and
      subject to extension of the Scheduled Completion Date on account of Delays
      Caused by Tenant and Force Majeure Delays (both as hereinafter defined)
      and subject to Tenant's obligation to mitigate its damages,

                                       4
<PAGE>   64

      Substantial Completion has not occurred prior to the Scheduled
      Commencement Date, Landlord shall indemnify and hold Tenant harmless for
      Tenant's actual expenses and damages incurred as a result of Substantial
      Completion being delayed beyond the Scheduled Commencement Date; PROVIDED,
      HOWEVER, IN NO EVENT SHALL THE TOTAL OF DAMAGES PAYABLE FROM LANDLORD TO
      TENANT EXCEED $2,600 FOR EACH DAY SUBSTANTIAL COMPLETION IS DELAYED BEYOND
      THE SCHEDULED COMPLETION DATE (AS EXTENDED) OR $156,000 IN TOTAL. In the
      event Landlord fails to reimburse Tenant as herein set forth, then among
      the other remedies available to Tenant, Tenant shall have the right to
      offset its expenses, damages, losses and liabilities against Base Rent.

62.   Delays Caused by Tenant. "Delays Caused by Tenant" shall mean any actual
      delay in the Substantial Completion of the Base Building, caused by an act
      or omission of Tenant, its agents or contractors in performing Tenant's
      obligations under the Lease, including, without limitation, the following:

      -     Interference by Tenant. Delays due to interference by Tenant, its
            agents or contractors with the completion of the Base Building; or

      -     Delays in Permits or Approvals. Delays in Landlord obtaining
            governmental approvals or permits due to the acts or omissions of
            Tenant, its agents or contractors, whether relating to the Tenant
            Improvements or otherwise.

63.   Force Majeure Delays. "Force Majeure Delay(s)" shall mean any actual delay
      due to: fire, earthquake, abnormal rains or other acts of God; acts of
      public enemy, war, rioting, insurrection, or other civil commotion; and
      strikes or boycotts or the unavailability or critical materials or
      workmen, which is or are beyond the reasonable control of Landlord or its
      contractors.

64.   Extension of Scheduled Commencement Date. The Scheduled Commencement Date
      shall be extended one (1) day for each day in which there is either a
      Delay Caused by Tenant or a Force Majeure Delay; provided, however, if the
      Scheduled Commencement Date is so extended by more than sixty (60) days,
      then Tenant may elect to terminate this Lease upon ten (10) days notice to
      Landlord unless the Scheduled Commencement Date occurs prior to the end of
      such ten (10) day period, in which latter event the Lease shall not
      terminate.

65.   Tenant Obligation to Mitigate. In the event that the Commencement Date has
      not occurred on or before the Scheduled Commencement Date, as extended,
      Tenant shall make a good faith effort to reasonably mitigate its damages.
      Tenants reasonable costs of mitigation shall be included within the actual
      expenses and damages for which Landlord has agreed to indemnify Tenant
      pursuant to Paragraph 61 of this Addendum. Without limiting the generality
      of the obligation to mitigate its damages, at a minimum, Tenant agrees to
      use commercially reasonable efforts: (i) to attempt to extend its current
      rights to remain in its current premises at 5725 East Jurupa Street, City
      of Ontario, California (the "Current Premises"); (ii) to holdover in the
      Current Premises under the provisions, if any, of the current lease
      therefor; and/or (iii) to delay its subtenant in taking occupancy of the

                                       5
<PAGE>   65

Current Premises. Under no circumstances shall Tenant be required to commence
any legal proceedings in connection with such mitigation efforts.

                                       6
<PAGE>   66

                               Mediation Addendum

MEDIATION OF DISPUTES: LANDLORD AND TENANT AGREE TO MEDIATE ANY DISPUTE OR CLAIM
BETWEEN THEM ARISING OUT OF THIS LEASE (AND WORK LETTER) BEFORE RESORTING TO
ARBITRATION OR COURT ACTION. Mediation is a process in which parties attempt to
resolve a dispute by submitting it to an impartial, neutral mediator who is
authorized to facilitate the resolution of the dispute but who is not empowered
to impose a settlement on the parties. Mediation fees, if any, shall be divided
equally among the parties involved. Before the mediation begins, the parties
agree to sign a document limiting the admissibility in arbitration or any civil
action of anything said, any admission made, and any documents prepared, in the
course of the mediation, consistent with Evidence Code Section 1119. IF ANY
PARTY COMMENCES AN ARBITRATION OR COURT ACTION BASED ON A DISPUTE OR CLAIM TO
WHICH THIS PARAGRAPH APPLIES WITHOUT FIRST ATTEMPTING TO RESOLVE THE MATTER
THROUGH MEDIATION, THEN IN THE DISCRETION OF THE ARBITRATOR(S) OR JUDGE, THAT
PARTY SHALL NOT BE ENTITLED TO RECOVER ATTORNEY'S FEES EVEN IF THEY WOULD
OTHERWISE BE AVAILABLE TO THAT PARTY IN ANY SUCH ARBITRATION OR COURT ACTION.
However, the filing of a judicial action to enable the recording of a notice of
pending action, for order of attachment, receivership, injunction, or other
provisional remedies, shall not in itself constitute a loss of the right to
recover attorney's fees under this provision. The following matters are excluded
from the requirement of mediation hereunder: (a) an unlawful detainer action,
(b) the filing or enforcement of a mechanic's lien, and (c) any matter which is
within the jurisdiction of a probate court.

/s/ [Signature Illegible]                    /s/ [Signature Illegible]
-----------------------------------          -----------------------------------
Lessor's Initial                             Lessee's Initials<PAGE>   1

                                                                   EXHIBIT 10.21

                         STANDARD OFFICE LEASE -- GROSS

                  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

     Basic Lease Provisions ("Basic Lease Provisions")

     1.1  PARTIES: This Lease, dated, for reference purposes only, November 18,
1999, is made by and between Pacifica California/Apollo, LLC (herein called
"Lessor") and Skechers USA, Inc., doing business under the name of Skechers
USA, Inc., (herein called "Lessee").

     1.2  PREMISES: Suite Numbers(s) 125, 300, 320 floors, consisting of
approximately 15,013 feet more or less, as defined, in paragraph 2 and shown on
Exhibit "A" hereto (the "Premises").

     1.3  BUILDING: Commonly described as being located at 225 S. Sepulveda
Boulevard in the City of Manhattan Beach, County of Los Angeles, State of
California, as more particularly described in Exhibit A hereto, and as defined
in paragraph 2.

     1.4  USE: General Office, subject to paragraph 6.

     1.5  TERM: Sixty-four (64) months commencing March 1, 2000. See addendum
("Commencement Date") and ending May 1, 2005 as defined in paragraph 3. See
addendum.

     1.6  BASE RENT: $36,031.20 per month, payable on the 1st day of each
month, per paragraph 1.

     1.7  BASE RENT INCREASE: On January 2, 2001 the monthly Base Rent payable
under paragraph 1.6 above shall be adjusted as provided in paragraph 4.3 below.

     1.8  RENT PAID UPON EXECUTION: $36,031.20 for 1st months rent.

     1.9  SECURITY DEPOSIT: $5000.00.

     1.10 LESSEE'S SHARE OF OPERATING EXPENSE INCREASE: 23.7% as defined in
paragraph 4.2.

2.   PREMISES, PARKING AND COMMON AREAS.

     2.1  PREMISES: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and
improvements thereon or thereunder, are herein collectively referred to as the
"Office Building Project." Lessor hereby leases to Lessee and Lessee leases
from Lessor for the term, at the rental, and upon all of the conditions set
forth herein, the real property referred to in the Basic Lease Provisions,
paragraph 1.2, as the "Premises", including rights to the Common Areas as
hereinafter specified.

     2.2  VEHICLE PARKING: So long as Lessee is not in default, and subject to
the rules and regulations attached hereto, and as established by Lessor from
time to time, Lessee shall be entitled to rent and use See Addendum _______
parking spaces in the Office Building Project at the monthly rate applicable
from time to time for monthly parking as set by Lessor and/or its licensee.

          2.2.1  If Lessee commits, permits or allows any of the prohibited
activities described in the Lease or the rules then in effect, then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove or tow away the vehicle involved and
charge the cost to Lessee, which cost shall be immediately payable upon demand
by Lessor.

          2.2.2  The monthly parking rate per parking space will be $ See
Addendum ________ per month at the commencement of the term of this Lease, and
is subject to change upon five (5) days prior written notice to Lessee. Monthly
parking fees shall be payable one month in advance prior to the first day of
each calendar month.

     2.3  COMMON AREAS -- DEFINITION. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Office Building Project that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other lessees of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including but not limited to common
entrances, lobbies, corridors, stairways and stairwells, public restrooms,
elevators, escalators, parking areas to the extent not otherwise prohibited by
the Lease, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, ramps, driveways, landscaped areas and decorative walls.

     2.4  COMMON AREAS -- RULES AND REGULATIONS. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit B with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.

     2.5  COMMON AREAS -- CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:

          (a)  To make changes to the Building interior and exterior and Common
Areas, including, without limitation, changes in the location, size shape,
number, and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide the parking facilities
required by applicable law; [Illegible]

          (b)[Illegible]

          (c)[Illegible] that such other and improvements have
a reasonable and functional relationship to the Office Building Project;

          (d)  To add additional buildings and improvements to the Common Areas;

          (e)  To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion thereof;

          (f)  To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Office Building Project as
Lessor may, in the exercise of sound business judgment deem to be appropriate.

3.  TERM.

    3.1  TERM. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.

    3.2  DELAY POSSESSION. Notwithstanding said Commencement Date, if for any
reason Lessor cannot deliver possession of the Premises to Lessee on said date
and subject to paragraph 3.2.2, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease or the
obligations of Lessee hereunder or extend the term hereof; but in such case,
Lessee shall not be obligated to pay rent or perform any other obligation or

(c)1984 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

                               FULL SERVICE-GROSS
                                    REVISED
                                  PAGE 1 OF 11

<PAGE>   2

Lease under the terms of this Lease, except as may be otherwise provided in
this Lease, until possession of the Premises is tendered to Lessee as
hereinafter defined; provided, however, that if Lessor shall not have delivered
possession of the Premises within sixty (60) days following said Commencement
Date as the same may be extended under the terms of a Work Letter executed by
Lessor and Lessee. Lessee may, at Lessee's option, by notice in writing to
Lessor within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder, provided, however,
that, as to Lessee's obligations, Lessee first reimburses Lessor for all costs
incurred for Non-Standard Improvements and, as to Lessor's obligations, Lessor
shall return any money previously deposited by Lessee (less any offsets due
Lessor for Non-Standard Improvements), and provides further, that if such
written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease hereunder shall terminate and be of
no further force or effect.

      3.2.1 POSSESSION TENDERED - DEFINED. Possession of the Premises shall be
deemed tendered to Lessee ("Tender of Possession") when (1) the improvements to
be provided by Lessor under this Lease are substantially completed, (2) the
Building utilities are ready to use in the Premises, (3) Leases reasonable
access to the Premises, and (4) ten (10) days shall have expired following
advance written notice to Lessee of the occurrence of the matters described in
(1), (2) and (3), above of this paragraph 3.2.1.

      3.2.2 DELAY CAUSED BY LESSEE. There shall be no abatement of rent, and the
sixty (60) day period following the Commencement Date before which Lessee's
right to cancel this Lease accrues under paragraph 3.2, shall be deemed extended
to the extent of any delays caused by acts or omissions of Lessee, Lessee's
agents, employees and contractors.

   3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.

   3.4 UNCERTAIN COMMENCEMENT. In the event commencement of the Lease term is
defined as the completion of the improvements, Lessee and Lessor shall execute
an amendment to this Lease establishing the date of Tender of Possession (as
defined in paragraph 3.2.1) or the actual taking of possession by Lessee
whichever first occurs, as the Commencement Date.

4. RENT.

   4.1 BASE RENT. Subject to adjustment as hereinafter provided in paragraph
4.3, and except as may be otherwise expressly provided in this Lease, Lessee
shall pay to Lessor the Base Rent for the Premises set forth in paragraph 1.6
of the Basic Lease Provisions, without offset or deduction. Lessee shall pay
Lessor upon execution hereof the advance Base Rent described in paragraph 1.8
of the Basic Lease Provisions. Rent for any period during the term hereof which
is for less than one month shall be prorated based upon the actual number of
days of the calendar month involved. Rent shall be payable in lawful money of
the United States to Lessor at the address stated herein or to such other
persons or at such other places as Lessor may designate in writing.

   4.2 OPERATING EXPENSE INCREASE. Lessee shall pay to Lessor during the term
hereof, in addition to the Base Rent, Lessee's Share, as hereinafter defined, of
the amount by which all Operating Expenses, as hereinafter defined, for each
Comparison Year exceeds the amount of all Operating Expenses for the Base Year,
such access being hereinafter referred to as the "Operating Expense Increase",
in accordance with the following provisions:

       (a) "Lessee's Share" is defined, for purposes of this Lease, as the
percentage set forth in paragraph 1.10 of the Basic Lease Provisions, which
percentage has been determined by dividing the approximate square footage of
the Premises by the total approximate square footage of the rentable space
contained in the Office Building Project. It is understood and agreed that the
square footage figures set forth in the Basic Lease Provisions are
approximations which Lessor and Lessee agree are reasonable and shall not be
subject to revision except in connection with an actual change in the size of
the Premises or a change in the space available for lease in the Office
Building Project.

       (b) "Base Year" is defined as the calendar year in which the Lease term
commences.

       (c) "Comparison Year" is defined as each calendar year during the term
of this Lease subsequent to the Base Year; provided, however, Lessee shall have
no obligation to pay a share of the Operating Expense Increase applicable to
the first twelve (12) months of the Lease Term (other than such as are mandated
by a governmental authority, as to which government mandated expenses Lessee
shall pay Lessee's Share, notwithstanding they occur during the first twelve
(12) months). Lessee's Share of the Operating Expense Increase for the first and
last Comparison Years of the Lease Term shall be prorated according to that
portion of such Comparison Year as to which Lessee is responsible for a share
of such increase. Operating expenses shall be adjusted to reflect a ninety-five
(95%) level of occupancy.

       (d) "Operating Expenses" is defined, for purposes of this Lease, to
include all costs, if any, incurred by Lessor in the exercise of its reasonable
discretion, for:

          (i)  The operation, repair, maintenance, and replacement, in neat,
clean, safe, good order and condition, of the Office Building Project including
but not limited to, the following:

               (a) The Common Areas, including their surfaces, coverings,
decorative items, carpets, drapes and window coverings, and including parking
areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways,
stairways, parkways, driveways, landscaped areas, striping bumpers, irrigation
systems, Common Area lighting facilities, building exteriors and roofs, fences
and gates;

               (b) All heating, air conditioning, plumbing, electrical systems,
life safety equipment, telecommunication and other equipment used in common by,
or for the benefit of, lessees or occupants of the Office Building Project,
including elevators and escalators, tenant directories, fire detection systems
including sprinkler system maintenance and repair.

          (ii) Trash disposal, janitorial and security services;

         (iii) Any other service to be provided by Lessor that is elsewhere
in this Lease stated to be an "Operating Expense";

          (iv) The cost of the premiums for the liability and property
insurance policies to be maintained by Lessor under paragraph 8 hereof;

           (v) The amount of the real property taxes to be paid by Lessor under
paragraph 10.1 hereof;

          (vi) The cost of water, sewer, gas, electricity, and other publicly
mandated services to the Office Building Project;

         (vii) Labor, salaries, and applicable fringe benefits and costs,
materials, supplies and tools, used in maintaining and/or cleaning the Office
Building Project and accounting and a management fee attributable to the
operation of the Office Building Project;

        (viii) Replacing and/or adding improvements mandated by any
governmental agency and any repairs or removals necessitated thereby amortized
over its useful life according to Federal income tax regulations or guidelines
for depreciation thereof (including interest on the unamortized balance as is
then reasonable in the judgment of Lessor's accountants);

          (ix) Replacement of equipment or improvements that have a useful life
for depreciation purposes according to Federal income tax guidelines of five
(5) years or less as amortized over such life;

       (e) Operating Expenses shall not include the costs of replacements of
equipment or improvements that have a useful life for Federal income tax
purposes in excess of five (5) years unless it is of the type described in
paragraph 4.2(d)(viii), in which case their cost shall be included as above
provided.

       (f) Operating Expenses shall not include any expenses paid by any lessee
directly to third parties, or as to which Lessor is otherwise reimbursed by any
third party, other tenant, or by insurance proceeds.

       (g) Lessee's Share of Operating Expense Increase shall be payable by
Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time in advance of Lessee's
Share of ??????? ?????? Expense Increase for any Commission Year, and the same
shall be payable monthly [Illegible]

Year a reasonably detailed statement showing Lessee's Share of the actual
Operating Expense Increase incurred during such year. If Lessee's payments
under this paragraph 4.2(g) during said Comparison Year exceed Lessee's Share
as indicated on said statement, Lessee shall be entitled to credit the amount
of such overpayment against Lessee's Share of Operating Expense Increase next
falling due. If Lessee's payments under this paragraph during said Comparison
Year were less than Lessee's Share as indicated on said statement, Lessee shall
pay to Lessor the amount of the deficiency within ten (10) days after delivery
by Lessor to Lessee of said statement. Lessor and Lessee shall forthwith adjust
between them by cash payment any balance determined to exist with respect to
that portion of the last Comparison Year for which Lessee is responsible as to
Operating Expense Increases, notwithstanding that the Lease term may have
terminated before the end of such Comparison Year.

                                  Page 2 of 11
<PAGE>   3
5.   SECURITY DEPOSIT.  Lessee shall deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease Provisions as
security for Lessee's faithful performance of Lessee's obligations hereunder.
If Lessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may use, apply or
retain all or any portion of said deposit for the payment of any rent or other
charge in default for the payment of any other sum to which Lessor may become
obligated by reason of Lessee's default, or to compensate Lessor for any loss
or damage which Lessor may suffer hereby. If Lessor so uses or applies all or
any portion of said deposit, Lessee shall within ten (10) days after written
demand therefor deposit cash with Lessor in an amount sufficient to restore
said deposit to the full amount then required of Lessee. If the monthly Base
Rent shall, from time to time, increase during the term of this Lease, Lessee
shall, at the time of such increase, deposit with Lessor additional money as a
security deposit so that the total amount of the security deposit held by
Lessor shall at all times bear the same proportion to the then current Base
Rent as the initial security deposit bears to the initial Base Rent set forth
in paragraph 1.6 of the Basic Lease Provisions. Lessor shall not be required to
keep said security deposit separate from its general accounts. If Lessee
performs all of Lessee's obligations hereunder, said deposit, or so much thereof
as has not heretofore been applied by Lessor, shall be returned, without payment
of interest or other increment for its use, to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest hereunder) at the expiration
of the term hereof, and after Lessee has vacated the Premises. No trust
relationship is created herein between Lessor and Lessee with respect to said
Security Deposit.

6.   USE.

     6.1  USE.  The Premises shall be used and occupied only for the purpose
set forth in paragraph 1.4 of the Basic Lease Provisions or any other use which
is reasonably comparable to that use and for no other purpose.

     6.2  COMPLIANCE WITH LAW.

          (a)  Lessor warrants to Lessee that the Premises, in the state
existing on the date that the Lease term commences, but without regard to
alterations or improvements made by Lessee or the use for which Lessee will
occupy the Premises, does not violate any covenants or restrictions of record,
or any applicable building code, regulation or ordinance in effect on such Lease
term Commencement Date. In the event it is determined that this warranty has
been violated, then it shall be the obligation of the Lessor, after written
notice from Lessee, to promptly, at Lessor's sole cost and expense, rectify any
such violation.

          (b)  Except as provided in paragraph 6.2(a) Lessee shall, at Lessee's
expense, promptly comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements of
any fire insurance underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part of the term hereof, relating in
any manner to the Premises and the occupation and use by Lessee of the
Premises. Lessee shall conduct its business in a lawful manner and shall not
use or permit the use of the Premises or the Common Areas in any manner that
will tend to create waste or a nuisance or shall tend to disturb other
occupants of the Office Building Project.

     6.3  CONDITION OF PREMISES.

          (a)  Lessor shall deliver the Premises to Lessee in a clean condition
on the Lease Commencement Date (unless Lessee is already in possession) and
Lessor warrants to Lessee that the plumbing, lighting, air conditioning, and
hearing system in the Premises shall be in good operating condition. In the
event that it is determined that this warranty has been violated, then it shall
be the obligation of Lessor, after receipt of written notice from Lessee
setting forth with specificity the nature of the violation, to promptly, at
Lessor's sole cost, rectify such violation.

          (b)  Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises and the Office Building Project in their condition
existing as of the Lease Commencement Date or the date that Lessee takes
possession of the Premises, whichever is earlier, subject to all applicable
zoning, municipal, county and state laws, ordinances and regulations governing
and regulating the use of the Premises, and any easements, covenants or
restrictions of record, and accepts this Lease subject thereto and to all
matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that it has satisfied itself by its own independent investigation
that the Premises are suitable for its intended use, and that neither Lessor
nor Lessor's agent or agents has made any representation or warranty as to the
present or future suitability of the Premises, Common Areas, or Office Building
Project for the conduct of Lessee's business.

7.   MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.

     7.1  LESSOR'S OBLIGATIONS.  Lessor also keeps the Office Building Project,
including the Premises, interior and exterior walls, roof, and common areas,
and the equipment whether used exclusively for the Premises or in common with
other premises, in good condition and repair; provided, however, Lessor shall
not be obligated to paint, repair or replace wall coverings, or to repair or
replace any improvements that are not ordinarily a part of the Building or are
above the Building standards. Except as provided in paragraph 9.5, there shall
no abatement of rent or liability of Lessee on account of any injury or
interference with Lessee's business with respect to any improvements,
alterations or repairs made by Lessor to the Office Building Project or any
part thereof. Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition or repair.

     7.2  LESSEE'S OBLIGATIONS.

          (a)  Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located)
that serves only Lessee or the Premises, to the extent such cost is
attributable to causes beyond normal wear and tear. Lessee shall be responsible
for the cost of painting, repairing or replacing wall coverings, and to repair
or replace any Premises improvements that are not ordinarily a part of the
Building or that ?? above than Building ?? Lessor may, at its option, upon
reasonable notice, elect to have Lessee perform ?? such maintenance or ??
[CLIENT COPY ILLEGIBLE]
received, ordinary wear and tear excepted, clean and free of debris. Any damage
or deterioration of the Premises shall not be deemed ordinary wear and tear if
the same could have been prevented by good maintenance practices by
Lessee. Lessee shall repair any damage to the Premises occasioned by the
installation or removal of Lessee's trade fixtures, alterations, furnishings
and equipment. Except as otherwise stated in this Lease, Lessee shall leave the
air lines, power panels, electrical distribution systems, lighting fixtures,
air conditioning, window coverings, wall coverings, carpets, wall panelling,
ceilings and plumbing on the Premises and in good operating condition.

     7.3  ALTERATIONS AND ADDITIONS.

          (a) Lessee shall not, without Lessor's prior written consent make any
alterations, improvements, additions, Utility Installations or repairs in, on
or about the Premises, or the Office Building Project. As used in this
paragraph 7.3 the term "Utility Installation" shall mean carpeting, window and
wall coverings, power panels, electrical distribution systems, lighting
fixtures, air conditioning, plumbing, and telephone and telecommunication
wiring and equipment. At the expiration of the term, Lessor may require the
removal of any or all of said alterations, improvements, additions or Utility
Installations, and the restoration of the Premises and the Office Building
Project to their prior condition, at Lessee's expense. Should Lessor permit
Lessee to make its own alterations, improvements, additions, or Utility
Installations, Lessee shall use only such contractor as has been previously
approved by Lessor, and Lessor may

                                  Page 3 of 11
<PAGE>   4
acquire Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and
completion bond in an amount equal to one and one-half times the estimated asset
of such improvements, to insure Lessor against any liability for mechanic's and
materialmen's liens and to insure completion of the work. Should Lessee make any
alterations, improvements, additions or Utility Installations without the prior
approval of Lessor, or use a contractor not expressly approved by Lessor, Lessor
may, at any time during the term of this Lease, require that Lessee remove any
part or all of the same.

          (b)  Any alterations, improvements, additions or Utility installations
in or about the Premises or the Office Building Project that Lessee shall desire
to make shall be presented to Lessor in written form, with proposed detailed
plans. If Lessor shall give its consent to Lessee's making such alteration
improvement, addition or Utility Installation, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from the applicable
governmental agencies, furnishing a copy thereof to Lessor prior to the
commencement of the work, and compliance by Lessee with all conditions of said
permit in a prompt and expeditious manner.

          (c)  Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.

          (d)  Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises by Lessee, and Lessor
shall have the right to post notices of non-responsibility in or on the Premises
or the Building as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premise, the Building or the Office Building
Project, upon the condition that if Lessor shall require, Lessee shall furnish
to Lessor a surety bond satisfactory to Lessor in an amount equal to such
contested lien claim or demand indemnifying Lessor against liability for the
same and holding the Premises, the Building and the Office Building Project free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's reasonable attorneys fees and costs in participating in such action
if Lessor shall decide it is to Lessor's interest so to do.

          (e)  All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made to the Premises by Lessee, including but
not limited to, floor coverings, panelings, doors, drapes, built-ins, moldings,
sound attenuation and lighting and telephone or communication systems, conduit,
wiring and outlets, shall be made and done in a good and workmanlike manner and
of good and sufficient quality and materials and shall be the property of Lessor
and remain upon and be surrendered with the Premises at the expiration of the
Lease term, unless Lessor requires their removal pursuant to paragraph 7.3(a).
Provided Lessee is not in default, notwithstanding the provisions of this
paragraph 7.3(e). Lessee's personal property and equipment, other than that
which is affixed to the Premises so that it cannot be removed without material
damage to the Premises or the Building, and other than Utility Installations,
shall remain the property of Lessee and may be removed by Lessee subject to the
provisions in paragraph 7.2.

          (f)  Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or Utility
Installations.

     7.4  Utility Additions. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, communication systems, and fire protection and detection systems, so
long as such installations do not unreasonably interfere with Lessee's use of
the Premises.

     Insurance; Indemnity

     8.1  Liability Insurance - Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of
Comprehensive General Liability insurance utilizing an Insurance Service Office
standard form with Broad Form General Liability Endorsement (GL0404), or
equivalent, in an amount of not less than $1,000,000 per occurrence of bodily
injury and property damage combined or in a greater amount as reasonably
determined by Lessor and shall insure Lessee with Lessor as an additional
insured against liability arising out of the use, occupancy or maintenance of
the Premises. Compliance with the above requirement shall not, however, limit
the liability of Lessee hereunder.

     8.2  Liability Insurance - Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy of Combined Single Limit Bodily injury
and Broad Form Property Damage Insurance, plus coverage against such other
risks Lessor deems advisable from time to time, insuring Lessor, but not
Lessee, against liability arising out of the ownership, use, occupancy or
maintenance of the Office Building Project in an amount not less than
$5,000,000.00 per occurrence.

     8.3  Property Insurance - Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost fire and extended coverage insurance, with vandalism
and malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.

     8.4  Property Insurance - Lessor. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss
or damage to the Office Building Project improvements, but not Lessee's
personal property, fixtures, equipment or tenant improvements, in the amount of
the full replacement cost thereof, as the same may exist from time to time,
utilizing Insurance Services Office standard form, or equivalent, providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, plate glass, and such other
perils as Lessor deems advisable or may be required by a lender having a lien
on the Office Building Project. In addition, Lessor shall obtain and keep in
force, during the term of this Lease, a policy of rental value insurance
covering a period of one year, with loss payable to Lessor, which insurance
shall also cover all Operating Expenses for said period. Lessee will not be
named in any such policies carried by Lessor and shall have no right to any
proceeds therefrom. The policies required by these paragraphs 8.2 and 8.4 shall
contain such deductibles as Lessor or the aforesaid lender may determine. In
the event that the Premises shall suffer an insured loss as defined in
paragraph 9.1(f) hereof, the deductible amounts under the applicable insurance
policies shall be deemed an __ rating Expense. Lessee shall not do or permit to
be done anything which shall invalidate the insurance policies carried by
Lessor. Lessee shall pay the entirety of any increase in the property insurance
premium for the Office Building Project over what it was immediately prior to
the commencement of the term at this Lease if the increase is specified by
Lessor's insurance carrier as being caused by the nature of Lessee's occupancy
or any act or omission of Lessee.

     8.5   Insurance Policies. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be cancelable
or subject to reduction of coverage or other modification except after thirty
(30) days prior written notice to Lessor. Lessee shall, at least thirty (30)
days prior to the expiration of such policies, furnish Lessor with renewals
thereof.

     8.6  Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
the direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this
Lease shall be endorsed to so provide.

     8.7  Indemnity. Lessee shall indemnify and hold harmless Lessor and its
agents, Lessor's master or ground lessor, partners and lenders, from and
against any and all claims for damage to the person or property of anyone or
any entity arising from Lessee's use of the Office Building Project or from the
conduct of Lessee's
[ILLEGIBLE]
contractors, employees or invitees, and from and against all costs, attorney's
fees, expenses and liabilities incurred by Lessor as the result of any such use,
conduct, activity, work, things done, permitted or suffered, breach, default or
negligence, and in dealing reasonably therewith, including but not limited to
the defense or pursuit of any claim or any action or proceeding involved
therein; and in case any action or proceeding be brought against Lessor by
reason of any such matter, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified. Lessee, as a material part of the
consideration to Lessor, hereby assumes all risk of damage to property of Lessee
or injury to persons, in, upon or about the Office Building Project arising from
any cause and Lessee hereby waives all claims in respect thereof against Lessor.

     8.8  Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from theft,
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
construction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said

                                  Page 4 of 11
<PAGE>   5
damage or injury results from conditions arising upon the Premises or upon
other portions of the Office Building Project, or from other sources or places,
or from new construction or the repair, alteration or improvement of any part
of the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or
injury or the means of repairing the same is inaccessible. Lessor shall not be
liable for any damages arising from any act or neglect of any other lessee,
occupant or user of the Office Building Project, nor from the failure of Lessor
to enforce the provisions of any other lease of any other lessee of the Office
Building Project.

     8.9  NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no representation
that the limits or forms of coverage of insurance specified in this paragraph 8
are adequate to cover Lessee's property or obligations under this Lease.

9.   DAMAGE OR DESTRUCTION.

     9.1  DEFINITIONS.

          (a)  "Premises Damage" shall mean if the Premises are damaged or
destroyed to any extent.

          (b)  "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is less than fifty percent (50%) of the then Replacement Cost of
the Building.

          (c)  "Premises Building Total Destruction" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is fifty percent (50%) or more of the then Replacement Cost of
the Building.

          (d)  "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.

          (e)  "Office Building Project Buildings Total Destruction" shall mean
if the Office Building Project Buildings are damaged or destroyed to the extent
that the cost to repair is fifty percent (50%) or more of the then Replacement
Cost of the Office Building Project Buildings.

          (f)  "Insured Loss" shall mean damage or destruction which was caused
by an event required to be covered by the insurance described in paragraph 8.
The fact that an Insured Loss has a deductible amount shall not make the loss
an uninsured loss.

          (g)  "Replacement Cost" shall mean the amount of money necessary to
be spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other than those installed by Lessor at Lessee's expense.

     9.2  PREMISES DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.

          (a)  Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is an
Insured Loss and which falls into the classification of either Premises Damage
or Premises Building Partial Damage, then Lessor shall, as soon as reasonably
possible and to the extent the required materials and labor are readily
available through usual commercial channels, at Lessor's expense, repair such
damage (but not Lessee's fixtures, equipment or tenant improvements originally
paid for by Lessee) to its condition existing at the time of the damage, and
this Lease shall continue in full force and effect.

          (b)  Uninsured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the term of this Lease there is damage which is not
an Insured Loss and which falls within the classification of Premises Damage or
Premises Building Partial Damage, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense), which
damage prevents Lessee from making any substantial use of the Premises, Lessor
may at lessor's option either (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee within thirty (30) days
after the date of the occurrence of such damage of Lessor's intention to cancel
and terminate this Lease as of the date of the occurrence of such damage, in
which event this Lease shall terminate as of the date of the occurrence of such
damage.

     9.3  PREMISES BUILDING TOTAL DESTRUCTION; OFFICE BUILDING PROJECT TOTAL
DESTRUCTION. Subject to the provisions of paragraphs 9.4 and 9.5, if any
time during the term of this Lease there is damage, whether or not it is an
Insured Loss, which falls into the classifications of either (i) Premises
Building Total Destruction, or (ii) Office Building Project Total Destruction,
then Lessor may at Lessor's option either (i) repair such damage or destruction
as soon as reasonably possible at Lessor's expense (to the extent the required
materials are readily available through usual commercial channels) to its
condition existing at the time of the damage, but not Lessee's fixtures,
equipment or tenant improvements, and this Lease shall continue in full force
and effect, or (ii) give written notice to Lessee within thirty (30) days after
the date of occurrence of such damage of Lessor's intention to cancel and
terminate this Lease, in which case this Lease shall terminate as of the date
of the occurrence of such damage.

     9.4  DAMAGE NEAR END OF TERM.

          (a)  Subject to paragraph 9.4(b), if at any time during the last
twelve (12) months of the term of this Lease there is substantial damage to the
Premises, Lessor may at Lessor's option cancel and terminate this Lease as of
the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.

          (b)  Notwithstanding paragraph 9.4(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which said option may
be exercised has not yet expired, Lessee shall exercise such option, if it is to
be exercised at all, no later than twenty (20) days after the occurrence of an
Insured Loss falling within the classification of Premises Damage during the
last twelve (12) months of the term of this Lease. If Lessee duly exercises such
option during said twenty (20) day period, Lessor shall, at Lessor's expense,
repair such damage, but not Lessee's fixtures, equipment or tenant improvements,
as soon as reasonably possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option during said twenty (20) day
period, then Lessee may at Lessor's option terminate and cancel this Lease as of
the expiration of said twenty (20) day period by giving written notice to Lessee
of Lessor's election to do so within ten (10) days after the expiration of said
twenty (20) day period, notwithstanding any term or provision in the grant of
option to the contrary.

     9.5  ABATEMENT OF RENT; LESSEE'S REMEDIES.

          (a)  In the event Lessor repairs or restores the Building or Premises
pursuant to the provisions of this paragraph 9, and any part of the Premises
??? not usable (including loss of use due to loss of access or essential
services), the rent payable hereunder (including Lessee's Share of Operating
Expense Increase) for the period during which such damage, repair or
restoration continues shall be abated, provided (1) the damage was not result
of the negligence of Lessee, and (2) such abatement shall only be to the extent
the operation and profitability of Lessee's business as operated from the
Premises is adversely affected. Except for said abatement of rent, if any,
Lessee shall have no claim against Lessor for any damage suffered by reason of
any such damage, destruction, repair or restoration.

          (b)  If Lessor shall be obligated to repair or restore the Premises
or the Building under the provisions of this Paragraph 9 and shall not commence
such repair or restoration within ninety (90) days after such occurrence, or if
Lessor shall not complete the restoration and repair within six (6) months
after such occurrence, Lessee may at Lessee's option cancel and terminate this
Lease by giving Lessor written notice of Lessee's election to do so at any time
prior to the commencement or completion, respectively, of such repair or
restoration. In such event this Lease shall terminate as of the date of such
notice.

          (c)  Lessee agrees to cooperate with Lessor in connection with any
such restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.

     9.6  TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall,
in addition, return to Lessee so much of Lessee's security deposit as has not
??? applied by Lessor.

     9.7  ?????

10.  REAL PROPERTY TAXES.

     10.1 PAYMENT OF TAXES. Lessor shall pay the real property tax, as defined
in paragraph 10.3, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.

     10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for paying
any increase in real property tax specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.2(c) the entirety of ???
increase in real property tax if assessed solely by reason of additional
improvements placed upon the Premises by Lessee or at Lessee's request.

     10.3 DEFINITION OF "REAL PROPERTY TAX". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Office Building Project or any portion thereof
by any authority having the direct or indirect power to tax, including any

                                  Page 5 of 11

<PAGE>   6
city, county, state or federal government, or any school, agricultural,
sanitary, fire, street, drainage or other improvement district thereof, as
against any legal or equitable interest of Lessor in the Office Building
Project or in any portion thereof, as against Lessor's right to rent or other
income therefrom, and as against Lessor's business of leasing the Office
Building Project. The term "real property tax" shall also include any tax, fee,
levy, assessment or charge (i) in substitution of, partially or totally, any
tax, fee, levy, assessment or charge hereinabove included within the definition
of "real property tax", or (ii) the nature which was herebefore included within
the definition of "real property tax", or (iii) which is imposed for a service
or right not charged prior to June 1, 1978 or if previously charged, has been
increased since June 1, 1978, or (iv) which is imposed as a result of a change
in ownership, as defined by applicable local statutes for property tax
purposes, of the Office Building Project or which is added to a tax or charge
hereinbefore included within the definition of real property tax by reason of
such change of ownership, or (v) which is imposed by reason of this
transaction, any modifications or changes hereto, or any transfers hereof.

     10.4  JOINT ASSESSMENT.  If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.5 are
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may
be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.

     10.5  PERSONAL PROPERTY TAXES.

           (a)  Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere.

           (b)  If any of Lessee's said personal property shall be assessed
with Lessor's real property, Lessee shall pay to Lessor the taxes attributable
to Lessee within ten (10) days after receipt of a written statement setting
forth the taxes applicable to Lessee's property.

11.  UTILITIES.

     11.1  SERVICES PROVIDED BY LESSOR.  Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines,
water for reasonable and normal drinking and lavatory use, and replacement
light bulbs and/or fluorescent tubes and ballasts for standard overhead
fixtures.

     11.2  SERVICES EXCLUSIVE TO LESSEE.  Lessee shall pay for all water, gas,
heat, light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately
metered to the premises, Lessee shall pay at Lessor's option, either Lessee's
Share or a reasonable proportion to be determined by Lessor of all charges
jointly metered with other premises in the Building.

     11.3  HOURS OF SERVICE.  Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours
as may hereafter be set forth. Utilities and services required at other times
shall be subject to advance request and reimbursement by Lessee to Lessor of
the cost thereof.

     11.4  EXCESS USAGE BY LESSEE.  Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water,
lighting or power, or suffer or permit any act that causes extra burden upon
the utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Lessor shall require
Lessee to reimburse Lessor for any excess expenses or costs that may arise out
of a breach of this subparagraph by Lessee. Lessor may, in its sole discretion,
install at Lessee's expense supplemental equipment and/or separate metering
applicable to Lessee's excess usage or loading.

     11.5  INTERRUPTIONS.  There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.

12.  ASSIGNMENT AND SUBLETTING.

     12.1  LESSOR'S CONSENT REQUIRED.  Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a material
default and breach of this Lease without the need for notice to Lessee under
paragraph 13.1. "Transfer" within the meaning of this paragraph 12 shall
include the transfer or transfers aggregating: (a) if Lessee is a corporation,
more than twenty-five percent (25%) of the voting stock of such corporation, or
(b) if Lessee is a partnership, more than twenty-five percent (25%) of the
profit and loss participation in such partnership.

     12.2  LESSEE AFFILIATE.  Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by
or is under common control with Lessee, or to any corporation resulting from
the merger or consolidation with Lessee, or to any person or entity which
acquires all the assets of Lessee as a going concern of the business that is
being conducted on the Premises, all of which are referred to as "Lessee
Affiliate"; provided that before such assignment shall be effective, (a) said
assignee shall assume, in full, the obligations of Lessee under this Lease and
(b) Lessor shall be given written notice of such assignment and assumption. Any
such assignment shall not, in any way, affect or limit the liability of Lessee
under the terms of this Lease even if after such assignment or subletting the
terms of this Lease are materially changed or altered without the consent of
Lessee, the consent of whom shall not be necessary.

     12.3  TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.

           (a)  Regardless of Lessor's consent, no assignment or subletting
shall release Lessee of Lessee's obligation hereunder or alter the primary
liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expense Increase, and to perform all
other obligations to be performed by Lessee hereunder.

           (b)  Lessor may accept rent from any person other than Lessee
pending approval or disapproval of such assignment.

           (c)  Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a waiver
or estoppel of Lessor's right to exercise its remedies for the breach of any of
the terms or conditions or this paragraph 12 or this Lease.

           (d)  Lessee's obligation under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to
such sublease and the terms thereof.

           (e)  The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining their consent
and such action shall not relieve such persons from liability under this Lease
or said sublease; however, such persons shall not be responsible to the extent
any such amendment or modification enlarges or increases the obligations of the
Lessee or sublessee under this Lease or such sublease.

           (f)  In the event of any default under this Lease, Lessor may
proceed directly against Lessee, any guarantors or anyone else responsible for
the performance of this Lease, including the sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefor to Lessor, or any

                            [CLIENT COPY ILLEGIBLE]

           (h)  The discovery of the fact that any financial statement relied
upon by Lessor in giving its consent to an assignment or subletting was
materially false shall, at Lessor's election, render Lessor's said consent null
and void.

     12.4  ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING.
Regardless of Lessor's consent, the following terms and conditions shall apply
to any subletting by Lessee of all or any part of the Premises and shall be
deemed included in all subleases under this Lease whether or not expressly
incorporated therein:

           (a)  Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and apply
same toward Lessee's obligations under this Lease; provided, however, ??? until
a default shall occur in the performance of Lessee's obligations under this
Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under
such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a default
exists in

                                  Page 6 of 11
<PAGE>   7
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without an
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary Lessee
shall have no right or claim against said sublessee or Lessor for any such
rents so paid by said sublessee to Lessor.

           (b)  No sublease entered into by Lessee shall be effective unless
and until it has been approved in writing by Lessor. In entering into any
sublease, Lessee shall use only such form of sublease as is satisfactory to
Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublease shall, by reason
of entering into a sublease under this Lease, be deemed for the benefit of
Lessor, to have assumed and agreed to conform and comply with each and every
obligation herein to be performed by Lessee other than such obligations as are
contrary to or inconsistent with provisions contained in a sublease to which
Lessor has expressly consented in writing.

           (c)  In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any obligation
to do may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such sublease from the time of
the exercise of said option to the termination of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to Lessee or for any other prior defaults of Lessee
under such sublease.

           (d)  No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.

           (e)  With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within three (3) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.

     12.5  LESSOR'S EXPENSES.  In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including attorneys', architects', engineers' or other
consultants' fees.

     12.6  CONDITIONS TO CONSENT.  Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the proposed
assignee or sublessee shall conduct a business on the Premises of a quality
substantially equal to that of Lessee and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other tenants, and (b) the proposed
assignee or sublessee be at least as financially responsible as Lessee was
expected to be at the time of the execution of this Lease or of such assignment
or subletting, whichever is greater. See addendum paragraphs 54 and 55.

13.  DEFAULT; REMEDIES.

     13.1  Default.  The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:

           (a)  The vacation or abandonment of the Premises by Lessee. Vacation
of the Premises shall include the failure to occupy the Premises for a
continuous period of sixty (60) days or more, whether or not the rent is paid.

           (b)  The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b) (subordination), 33
(auctions), or 411 (easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by Lessor to Lessee
thereof.

           (c)  The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of three (3) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statues such
Notice to Pay Rent or Quit shall also constitute the notice required by this
subparagraph.

           (d)  The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by Lessee, other than those referenced in subparagraphs (b) and (c), above,
where such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor to Lessee; provided, however, that if the
nature of Lessee's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commenced such cure within said thirty (30) day period and
thereafter diligently pursues such cure to completion. To the extent permitted
by law, such thirty (30) day notice shall constitute the sole and exclusive
notice required to be given to Lessee under applicable Unlawful Detainer
statutes.

           (e)  (i)  The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii)  Lessee becoming a
"debtor" as defined in 11 U.S.C. Section 101 or any successor statute thereto
(unless, in the case of a petition filed against Lessee, the same is dismissed
within sixty (60) days; (iii)  the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the Premises or
of Lessee's interest in this Lease where possession is not restored to Lessee
within thirty (30) days; or (iv)  the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days. In the event that any provision of this paragraph 13.1(e) is
contrary to any applicable law, such provision shall be of no force or effect.

           (f)  The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was materially false.

     13.2  REMEDIES.  In the event of any material default or breach of this
Lease by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default:

           (a)  Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee all damages incurred
by Lessor by reason of Lessee's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys'
fees, and any real estate commission actually paid; the worth at the time ???
by the court having jurisdiction thereof of the amount by which the unpaid rent
for the balance of the term after the time of such award exceeds the amount of
such rental loss for the same period that Lessee proves could be reasonably
avoided; that portion of the leasing commission paid by Lessor pursuant to
paragraph 15 applicable to the unexpired term of this Lease.

           (b)  Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have vacated or abandoned
the Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent
as it becomes due hereunder.

           (c)  Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from the date due at
the minimum rate then allowable by law.

     13.3  DEFAULT BY LESSOR.  Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but
in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Lessee
in writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and
thereafter diligently pursues the same to completion.

                            [CLIENT COPY ILLEGIBLE]

ascertain. Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed on Lessor by the terms of any
mortgage or trust deed covering the Office Building Project. Accordingly, if
any installment of Base Rent, Operating Expense Increase, or any other sum due
from Lessee shall not be received by Lessor or Lessor's designee within ten
(10) days after such amount shall be due, then, without any requirement for
notice for Lessee, Lessee shall pay to Lessor a late charge equal to 6% of such
overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's default with respect to such overdue amount,
nor prevent Lessor from exercising any of the other rights and remedies granted
hereunder.

     Condemnation.  If the Premises or any portion thereof or the Office
Building Project are taken under the power of eminent domain, or sold under the
threat at the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first occurs;
provided that is so much of the Premises or the Office Building Project are
taken by such condemnation as would substantially and adversely affect the
operation and profitability of Lessee's business conducted from Premises, Lessee

                                  Page 7 of 11
<PAGE>   8
shall have the option, to be exercised only in writing within thirty (30) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within thirty (30) days after the condemning authority
shall have taken possession), to terminate this Lease as of the date the
condemning authority takes such possession. If Lessee does not terminate this
Lease in accordance with the foregoing, this Lease shall remain in full force
and effect as to the portion of the Premises remaining, expect that the rent
and Lessee's Share of Operating Expense Increase shall be reduced in the
proportion that the floor area of the Premises taken bears to the total floor
area of the Premises. Common Areas taken shall be excluded from the Common
Areas usable by Lessee and no reduction of rent shall occur with respect
thereto or by reason thereof. Lessor shall have the option in its sole
discretion to terminate this Lease as of the taking of possession by the
condemning authority, by giving written notice to Lessee of such election
within thirty (30) days after receipts of notice of a taking by condemnation of
any part of the Premises or the Office Building Project. Any award for the
taking of all or any part of the Premises or the Office Building Project under
the power of eminent domain or any payment made under threat of the exercise of
such power shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any separate award for loss of or damage to Lessee's trade fixtures,
removable personal property and unamortized tenant improvements that have been
paid for by Lessee. For that purpose the cost of such improvements shall be
amortized over the original term of this Lease excluding any options. In the
event that this Lease is not terminated by reason of such condemnation, Lessor
shall to the extent of severance damages received by Lessor in connection with
such condemnation, repair any damage to the Premises caused by such
condemnation except to the extent that Lessee has been reimbursed therefor by
the condemning authority. Lessee shall pay any amount in excess of such
severance damages required to complete such repair.

15.  BROKER'S FEE.

     (a)  The brokers involved in this transaction are Leonard & Ohren as
"listing broker" and Grubb & Ellis/Beach Real Estate as "cooperating broker,"
licensed real estate broker(s). A "cooperating broker" is defined as any broker
other than the listing broker entitled to a share of any commission arising
under this Lease. Upon execution of this Lease by both parties, Lessor shall pay
to said brokers jointly, or in such separate shares as they may mutually
designate in writing, a fee as set forth in a separate agreement between Lessor
and said broker(s), or in the event there is no separate agreement between
Lessor and said broker(s), the sum of $______________  per separate agreement,
for brokerage services rendered by said broker(s) to Lessor in this transaction.

     (b)  Lessor agrees to pay said fee not only on behalf of Lessor but also
on behalf of any person, corporation, association, or other entity having an
ownership interest in said real property or any part thereof, when such fee is
due hereunder. Any transferee of Lessor's interest in this Lease, whether such
transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this paragraph 15. Each listing and
cooperating broker shall be a third party beneficiary of the provisions of this
paragraph 15 to the extent of their interest in any commission arising under
this Lease and may enforce that right directly against Lessor, provided,
however, that all brokers having a right to any part of such total commission
shall be a necessary party to any suit with respect thereto.

     (c)  Lessee and Lessor each represent and warrant to the other that
neither has had any dealings with any person, firm, broker or finder (other
than the person(s), if any, whose names are set forth in paragraph 15(a),
above) in connection with the negotiation of this Lease and/or the consummation
of the transaction contemplated hereby, and no other broker or other person,
firm or entity is entitled to any commission or finder's fee in connection with
said transaction and Lessee and Lessor do each hereby indemnify and hold the
other harmless from and against any costs, expenses, attorneys' fees or
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying party.

16.  ESTOPPEL CERTIFICATE.

     (a)  Each party (as "responding party") shall at any time upon not less
than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i)  certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Office Building Project or
of the business of Lessee.

     (b)  At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i)  this Lease is in full force and effect,
without modification except as may be represented by the requesting party, (ii)
there are no incurred defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one month's rent has been paid
in advance.

     (c)  If Lessor desires to finance, refinance, or sell the Office Building
Project, or any part thereof, Lessee hereby agrees to deliver to any lender or
purchaser designated by Lessor such financial statements of Lessee as may be
reasonably required by such lender or purchaser. Such statements shall include
the past three (3) years' financial statements of Lessee. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.

17.  LESSOR'S LIABILITY.  The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event of any transfer of such
title or interest, Lessor herein named (and in case of any subsequent transfers
then the grantor) shall be relieved from and after the date of such transfer of
all liability as respects Lessor's obligations thereafter to be performed,
provided that any funds in the hands of Lessor or the then grantor at the time
of such transfer, in which Lessee has an interest, shall be delivered to the
grantee. The obligations contained in this Lease to be performed by Lessor
shall, subject as aforesaid, be binding on Lessor's successors and assigns,
only during their respective periods of ownership.

18.  SEVERABILITY.  The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.

                            [CLIENT COPY ILLEGIBLE]

Except as expressly herein provided, any amount due to Lessor not paid when due
shall bear interest at maximum rate then allowable by law or judgments from the
date due. Payment of such interest shall not excuse or cure any default by
Lessee under this Lease; provided, however, that interest shall not be payable
on late charges incurred by Lessee nor on any amounts upon which late charges
are paid by Lessee.

20.  TIME OF ESSENCE.  Time is of the essence with respect to the obligations
to be performed under this Lease.

21.  ADDITIONAL RENT.  All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expense Increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent.

22.  INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS.  This Lease contains all
agreements of the parties with respect to any matter mention herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by

                                  Page 8 of 11
<PAGE>   9
the parties in interest at the time of the modification. Except as otherwise
stated in this Lease, Lessee hereby acknowledges that neither the real estate
broker listed in paragraph 15 hereof nor any cooperating broker on this
transaction nor the Lessor or any employee or agents of any said persons has
made any oral or written warranties or representations to Lessee relative to
the condition or use by Lessee of the Premises or the Office Building Project
and Lessee acknowledges that Lessee assumes all responsibility regarding the
Occupational Safety Health Act, the legal use and adaptability of the Premises
and the compliance thereof with all applicable laws and regulations in effect
during the term of this Lease.

23.  NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to
Lessee or to Lessor at the address noted below or adjacent to the signature of
the respective parties, as the case may be. Mailed notices shall be deemed
given upon actual receipt at the address required, or forty-eight hours
following deposit in the mail, postage prepaid, whichever first occurs. Either
party may by notice to the other specify a different address for notice
purposes except that ?? Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for notice purposes. A copy of all
notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by notice to Lessee.

24.  WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent
so accepted, regardless of Lessor's knowledge of such preceding breach at the
time of acceptance of such rent.

25.  RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.

26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of
this Lease pertaining to the obligations of Lessee, except that the rent
payable shall be two hundred percent (200%) of the rent payable immediately
preceding the termination date of this Lease, and all Options, if any, granted
under the terms of this Lease shall be deemed terminated and be of no further
effect during said month to month tenancy.

27.  CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.

28.  COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.

29.  BINDING EFFECT; CHOICE OF LAW. Subject to any provision hereof restricting
assignment or subletting by Lessee and subject to the provision of paragraph
17, this Lease shall bind the parties, their personal representatives,
successors and assign. This Lease shall be governed by the laws of the State
where the Office Building Project is located and any litigation concerning this
Lease between the parties hereto shall be initiated in the county in which the
Office Building Project is located.

30.  SUBORDINATION.

     (a)  This Lease, and any Option or right of first refusal granted hereby,
at Lessor's option, shall be subordinate to any ground lease, mortgage, deed of
trust, or any other hypothecation or security now or hereafter placed upon the
Office Building Project and to any and all advances made on the security
thereof and to all renewals, modifications, consolidations, replacements and
extensions thereof. Notwithstanding such subordination, Lessee's right to quiet
possession of the Premises shall not be disturbed if Lessee is not in default
and so long as Lessee shall pay the rent and observe and perform all of the
provisions of this Lease, unless this Lease is otherwise terminated pursuant to
its terms. If any mortgagee, trustee or ground lessor shall elect to have this
Lease and any Options granted hereby prior to the lien of its mortgage, deed of
trust or ground lease, and shall give written notice thereof to Lessee, this
Lease and such Option shall be deemed prior to such mortgage, deed of trust or
ground lease, whether this Lease or such Options are dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.

     (b)  Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be. Lessee's failure to execute such documents within ten (10) days after
written demand shall constitute a material default by Lessee hereunder without
further notice to Lessee or, at Lessor's option, Lessor shall execute such
documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby
make, constitute and irrevocably appoint Lessor as Lessee's attorney-in-fact
and in Lessee's name, place and stead, to execute such documents in accordance
with this paragraph 30(b).

31.  ATTORNEY'S FEES.

     31.1 If either party or the broker(s) named herein bring an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, trial, or appeal thereon, shall be entitled to his reasonable
attorneys' fees to be paid by the losing party as fixed by the court in the
same or separate suit, and whether or not such action is pursued to decision or
judgment. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.

     31.2 The attorneys' fee award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred in good faith.

     31.3 Lessor shall be entitled to reasonable attorneys' fees and all other
costs and expenses incurred in the preparation and service of notices of
default and consultations in connection therewith, whether or not a legal
transaction is subsequently commenced in connection with such default.

32.  LESSOR'S ACCESS.

     32.1 Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspecting the same, performing any
service required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and Lessor may at any time during the last 120
days of the term hereof place on or about the Premises any ordinary "For Lease"
signs. [Illegible]

     32.3 Lessor shall [Illegible] in the case of emergency to enter the
Premises by any reasonably appropriate means, and any such entry shall not be
deemed a forceable or unlawful entry or detainer of the Premises or an
eviction. Lessee waives any charges for damages or injuries or interference
with Lessee's property or business in connection therewith.

33.  AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent. The holding of any auction on the Premises or Common Areas in violation
of this paragraph shall constitute a material default of this Lease.

34.  SIGNS. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no circumstances
shall Lessee place a sign on any roof of the Office Building Project.

(c)1984 - AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

                                  Page 9 of 11
<PAGE>   10
and shall, at the option of Lessor, terminate all or any existing subtenancies
or may, at the option of Lessor, operate as an assignment to Lessor or any or
all of such subtenancies.

36.  CONSENTS.  Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.

37.  GUARANTOR.  In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.

38.  QUIET POSSESSION.  Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Office Building Project.

39.  OPTIONS.

     39.1  DEFINITION.  As used in this paragraph the word "Option" has the
following meaning: (1) the right or option to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (2) the option of right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of
first refusal to lease other space within the Office Building Project or other
property of Lessor or the right of first offer to lease other space within the
Office Building Project or other property of Lessor; (3) the right or option to
purchase the Premises or the Office Building Project, or the right of first
refusal to purchase the Premises or the Office Building Project or the right of
first offer to purchase the Premises or the Office Building Project, or the
right or option to purchase other property of Lessor, or the right of first
refusal to purchase other property of Lessor or the right of first offer to
purchase other property of Lessor.

     39.2  OPTIONS PERSONAL.  Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original
Lessee while occupying the Premises who does so without the intent of
thereafter assigning this Lease or subletting the Premises or any portion
thereof, and may not be exercised or be assigned, voluntarily or involuntarily,
by or to any person or entity other than Lessee; provided, however, that an
Option may be exercised by or assigned to any Lessee Affiliate as defined in
paragraph 12.2 of this Lease. The Options, if any, herein granted to Lessee are
not assignable separate and apart from this Lease, nor may any Option be
separated from this Lease in any manner, either by reservation or otherwise.

     39.3  MULTIPLE OPTIONS.  In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.

     39.4  EFFECT OF DEFAULT ON OPTIONS.

           (a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary, (i) during the time
commencing from the date Lessor gives to Lessee a notice of default pursuant to
paragraph 13.1(c) or 13.3(d) and continuing until the noncompliance alleged in
said notice of default is cured, or (ii) during the period of time commencing on
the day after a monetary obligation to Lessor is due from Lessee and unpaid
(without any necessity for notice thereof to Lessee) and continuing until the
obligation is paid, or (iii) in the event that Lessor has given to Lessee three
or more notices of default under paragraph 13.1(c), or paragraph 13.1(d),
whether or not the defaults are cured, during the 12 month period of time
immediately prior to the time that Lessee attempts to exercise the subject
Option, (iv) if Lessee has committed any non-curable breach, including without
limitation those described in paragraph 13.1(b), or is otherwise in default of
any of the terms, covenants or conditions of this Lease.

           (b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).

           (c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1(d) within thirty (30)
days after the date that Lessor gives notice to Lessee of such default and/or
Lessee fails thereafter to diligently prosecute said cure to completion, or
(iii) Lessor gives to Lessee three or more notices of default under paragraph
13.1(c), or paragraph 13.1(d), whether or not the defaults are cured, or (iv)
if Lessee has committed any non-curable breach, including without limitation
those described in paragraph 13.1(b), or is otherwise in default of any of the
terms, covenants and conditions of this Lease.

40.  SECURITY MEASURES - LESSOR'S RESERVATIONS.

     40.1  Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the benefit
of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole
option, from providing security protection for the Office Building Project or
any part thereof, in which event the cost thereof shall be included within the
definition of Operating Expenses, as set forth in paragraph 4.2(b).

     40.2  Lessor shall have the following rights:

           (a) To change the name, address or title of the Office Building
Project or building in which the Premises are located upon not less than 90
days prior written notice;

           (b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;

           (c) To permit any lessee the exclusive right to conduct any business
as long as such exclusive does not conflict with any rights expressly given
herein;

           (d) To place such signs, notices or displays as Lessor reasonably
deems necessary or advisable upon the roof, exterior of the buildings or the
Office Building Project or on pole signs in the Common Areas;

     40.3  Lessee shall not:

           (a) Use a representation (photographic or otherwise) of the Building
or the Office Building Project or their name(s) in connection with Lessee's
business;

           (b) Suffer or permit anyone, except in emergency, to go upon the roof
of the Building.

41.  EASEMENTS.

     41.1  Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or desirable, and
to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Property by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall ??
[ILLEGIBLE COPY] way affect this Lease or impose any liability upon Lessor.

42.  PERFORMANCE UNDER PROTEST.  If at any time a dispute shall arise as to any
amount or sum to be paid by one party to the other under the provisions hereof,
the party against whom the obligation to pay the money is asserted shall have
the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to institute suit for recovery of such sum. If it shall be
adjudged that there was no legal obligation on the part of said party to pay
such sum or any part thereof, said party shall be entitled to recover such sum
or so much thereof as it was not legally required to pay under the provisions
of this Lease.

43.  AUTHORITY.  If Lessee is a corporation, trust, or general or limited
partnership, Lessee, and such individual executing this Lease on behalf of such
entity represent and warrant that such individual is duly authorized to execute
and deliver this Lease on behalf of said entity. If Lessee is a corporation,
trust or partnership, Lessee shall, without thirty (30) days after execution of
this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.

                                 PAGE 10 OF 11

<PAGE>   11

44.  CONFLICT. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or handwritten provisions.

45.  NO OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.

46.  LENDER MODIFICATION. Lessee agrees to make such reasonable modifications
to this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the Office
Building Project.

47.  MULTIPLE PARTIES. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee, respectively.

48.  WORK LETTER. This Lease is supplemented by that certain Work Letter of
even date executed by Lessor and Lessee, attached hereto as Exhibit C, and
incorporated herein by this reference.

49.  ATTACHMENTS. Attached hereto are the following documents which constitute
a part of this Lease:

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKER OR ITS
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO; THE PARTIES
SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL
AND TAX CONSEQUENCES OF THIS LEASE.

<TABLE>
<S>                                                     <C>
               LESSOR                                                  LESSEE

Pacifica California/Apollo, Inc.                        Skechers USA, Inc.
--------------------------------------------            ----------------------------------------

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

By  /s/ STEVEN OHREN                                    By  /s/ DAVID WEINBERG
  ------------------------------------------              --------------------------------------
Its  Manager, Steven Ohren                              Its  CFO, David Weinberg
   -----------------------------------------               -------------------------------------
By                                                      By  /s/ PHILIP G. PACCIONE
  ------------------------------------------              --------------------------------------
Its                                                     Its  General Counsel, Philip G. Paccione
   -----------------------------------------               -------------------------------------

Executed at  330 Washington Blvd., Suite 300            Executed at
           ---------------------------------                       -----------------------------
on                                                      on
  ------------------------------------------              --------------------------------------
Address  330 Washington Blvd.                           Address
       -------------------------------------                   ---------------------------------
</TABLE>

NOTE: These forms are often modified to meet changing requirements of law
       and needs of the industry. Always write or call to make sure you are
       utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE
       ASSOCIATION, 700 South Flower Street, Suite 600, Los Angeles, CA 90017,
       (213) 687-8777.

(c) 1984 - American Industrial Real Estate Association

                               FULL SERVICE-GROSS
                                    REVISED
                                 PAGE 11 OF 11
<PAGE>   12

                             STANDARD OFFICE LEASE
                                   FLOOR PLAN

                            [DIAGRAM OF FLOOR PLAN]

                                   EXHIBIT A

<PAGE>   13

                            RULES AND REGULATIONS FOR
                              STANDARD OFFICE LEASE

                                 [A.I.R. LOGO]

Dated: November 18, 1999

By and Between Pacific California/Apollo, LLC and Skechers USA, Inc.

        GENERAL RULES

        1. Lessee shall not suffer or permit the obstruction of any Common
Areas, including driveways, walkways and stairways.

        2. Lessor reserves the right to refuse access to any persons Lessor in
good faith judges to be a threat to the safety and reputation of the Office
Building Project and its occupants.

        3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Office
Building Project.

        4. Lessee shall not keep animals or birds within the Office Building
Project, and shall not bring bicycles, motorcycles or other vehicles into areas
not designated as authorized for same.

        5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.

        6. Lessee shall not alter any lock or install new or additional locks or
bolts.

        7. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.

        8. Lessee shall not deface the walls, partitions or other surfaces of
the Office Building Project.

        9. Lessee shall not suffer or permit anything in or around the Premises
or Building that causes excessive vibration or floor loading in any part of the
Office Building Project.

        10. Furniture, significant freight and equipment shall be moved into or
out of the building only with the Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
Lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.

        11. Lessee shall not employ any service or contractor for services or
work to be performed in the Building, except as approved by Lessor.

        12. Lessor reserves the right to close and lock the Building on
Saturdays, Sundays and legal holidays, and on other days between the hours of
7 P.M. and 7 A.M. of the following day. If Lessee uses the Premises during such
periods, Lessee shall be responsible for securely locking any doors it may have
opened for entry.

        13. Lessee shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.

        14. No window coverings, shades or awnings shall be installed or used by
Lessee.

        15. No Lessee, employee or invitee shall go upon the roof of the
Building.

        16. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.

        17. Lessee shall not use any method of heating or air conditioning other
than as provided by Lessor.

        18. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent.

        19. The Premises shall not be used for lodging or manufacturing, cooking
or food preparation.

        20. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.

        21. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.

        22. Lessee assumes all risks from theft or vandalism and agrees to keep
its Premises locked as may be required.

        23. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants. Lessee
agrees to abide by these and such rules and regulations.

                                  PARKING RULES

        1. Parking areas shall be used only for parking by vehicles no longer
than full size, passenger automobiles herein called "Permitted Size Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized
Vehicles."

        2. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.

        3. Parking stickers or identification devices shall be the property of
Lessor and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor for the loss of such devices.

        4. Lessor reserves the right to refuse the sale of monthly
identification devices to any person or entity that willfully refuses to comply
with the applicable rules, regulations, laws and/or agreements.

        5. Lessor reserves the right to relocate all or a part of parking spaces
from floor to floor, within one floor, and/or to reasonably adjacent offsite
location(s), and to reasonably allocate them between compact and standard size
spaces, as long as the same complies with applicable laws, ordinances and
regulations.

        6. Users of the parking area will obey all posted signs and park only in
the areas designated for vehicle parking.

        7. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be responsible for
any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party using the parking area.

        8. Validation, if established, will be permissible only by such method
or methods as Lessor and/or its licensee may establish at rates generally
applicable to visitor parking.

        9. The maintenance, washing, waxing or cleaning of vehicles in the
parking structure or Common Areas is prohibited.

        10. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules, regulations, laws
and agreements.

        11. Lessor reserves the right to modify these rules and/or adopt such
other reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.

        12. Such parking use as is herein provided is intended merely as a
license only and no bailment is intended or shall be created hereby.

                                   EXHIBIT B

                                   Page 1 of 1

                                    REVISED

(C)1984 - American Industrial Real Estate Association           FORM OFG-1-9/99E

<PAGE>   14

                                 [A.I.R. LOGO]
                               RENT ADJUSTMENT(S)
                             STANDARD LEASE ADDENDUM

Dated  November 17, 1999

By and Between (Lessor) Pacifica California/Apollo, LLC

               (Lessee) Skechers USA, Inc.

Address of Premises:    225 S. Sepulveda Boulevard

Paragraph 50

A. RENT ADJUSTMENTS:

        The monthly rent for each month of the adjustment period(s) specified
below shall be increased using the method(s) indicated below:

(Check Method(s) to be Used and Fill in Appropriately)

[X] I. Cost of Living Adjustment(s) (COLA)

        a. On (Fill in COLA Dates): January 2, 2001, January 2, 2002, January 2,
2003, January 2, 2004 the Base Rent shall be adjusted by the change, if any,
from the Base Month specified below, in the Consumer Price Index of the Bureau
of Labor Statistics of the U.S. Department of Labor for (select one): [ ] CPI W
(Urban Wage Earners and Clerical Workers) or [X] CPI U (All Urban Consumers),
for (Fill in Urban Area): Los Angeles/Long Beach, All Items (1982-1984 = 100),
herein referred to as "CPI". A minimum increase of three percent (3%) and a
maximum increase of five percent (5%) per annum shall be applied.

        b. The monthly rent payable in accordance with paragraph A.I.a. of this
Addendum shall be calculated as follows: the Base Rent set forth in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the CPI of the calendar month two months prior to the month(s)
specified in paragraph A.I.a. above during which the adjustment is to take
effect, and the denominator of which shall be the CPI of the calendar month
which is two months prior to (select one): [X] the first month of the term of
this Lease as set forth in paragraph 1.3 ("Base Month") or [ ] (Fill in Other
"Base Month"): _________________________ . The sum so calculated shall
constitute the new monthly rent hereunder, but in no event, shall any such new
monthly rent be less than the rent payable for the month immediately preceding
the rent adjustment.

        c. In the event the compilation and/or publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the CPI shall be used to
make such calculation. In the event that the Parties cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
Association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitration shall be paid equally by the Parties.

                                RENT ADJUSTMENTS
                                   Page 1 of 2

        For this form, write: American Industrial Real Estate Association,
700 S. Flower Street, Suite 600, Los Angeles, Calif. 90017
(C)1997 - American Industrial Real Estate Association

                                     REVISED                     FORM RA-2-3/97E

<PAGE>   15

B. NOTICE:

        Unless specified otherwise herein, notice of any such adjustments, other
than Fixed Rental Adjustments, shall be made as specified in paragraph 23 of the
Lease.

C. BROKER'S FEE:

        The Brokers specified in paragraph 1.10 shall be paid a Brokerage Fee
for each adjustment specified above in accordance with paragraph 15 of the
Lease.

                                RENT ADJUSTMENTS
                                   Page 2 of 2

        For this form, write: American Industrial Real Estate Association,
700 S. Flower Street, Suite 600, Los Angeles, Calif. 90017
(C)1997 - American Industrial Real Estate Association

                                     REVISED                     FORM RA-2-3/97E

<PAGE>   16

                                 [A.I.R. LOGO]

                               OPTION(S) TO EXTEND
                             STANDARD LEASE ADDENDUM

Dated November 18, 1999

By and Between (Lessor) Pacifica California/Apollo, LLC

               (Lessee) Skechers USA, Inc.

Address of Premises:    225 S. Sepulveda Boulevard, Manhattan Beach

Paragraph 51

A. OPTION(S) TO EXTEND:

Lessor hereby grants to Lessee the option to extend the term of this Lease for
two (2) additional sixty (60) month period(s) commencing when the prior term
expires upon each and all of the following terms and conditions:

        (i) In order to exercise an option to extend, Lessee must give written
notice of such election to Lessor and Lessor must receive the same at least 6
but not more than 12 months prior to the date that the option period would
commence, time being of the essence. If proper notification of the exercise of
an option is not given and/or received, such option shall automatically expire.
Options (if there are more than one) may only be exercised consecutively.

        (ii) The provisions of paragraph 39, including those relating to
Lessee's Default set forth in paragraph 39.4 of this Lease, are conditions of
this Option.

        (iii) Except for the provisions of this Lease granting an option or
options to extend the term, all of the terms and conditions of this Lease except
where specifically modified by this option shall apply.

        (iv) This Option is personal to the original Lessee, and cannot be
assigned or exercised by anyone other than said original Lessee and only while
the original Lessee is in full possession of the Premises and without the
intention of thereafter assigning or subletting.

        (v) The monthly rent for each month of the option period shall be
calculated as follows, using the method(s) indicated below: (Check Method(s) to
be Used and Fill in Appropriately)

[ ] II. Market Rental Value Adjustment(s) (MRV)

        a. On (Fill in MRV Adjustment Date(s)) May 2, 2005 and May 2, 2010 the
Base Rent shall be adjusted to the "Market Rental Value" of the property as
follows:

        1) Four months prior to each Market Rental Value Adjustment Date
described above, the Parties shall attempt to agree upon what the new MRV will
be on the adjustment date. If agreement cannot be reached, within thirty days,
then:

                (a) Lessor and Lessee shall immediately appoint a mutually
acceptable appraiser or broker to establish the new MRV within the next thirty
days. Any associated costs will be split equally between the Parties, or

                (b) Both Lessor and Lessee shall each immediately make a
reasonable determination of the MRV and submit such determination, in writing,
to arbitration in accordance with the following provisions:

                                   Page 1 of 2

(C)1997 - American Industrial Real Estate Association            FORM OE-2-3/97E

                                     REVISED

<PAGE>   17
                        (i) Within fifteen days thereafter, Lessor and Lessee
shall each select an [  ] appraiser or [X] broker ("Consultant" - check one) of
their choice to act as an arbitrator. The two arbitrators so appointed shall
immediately select a third mutually acceptable Consultant to act as a third
arbitrator.

                        (ii) The three arbitrators shall within thirty days of
the appointment of the third arbitrator reach a decision as to what the actual
MRV for the Premises is, and whether Lessor's or Lessee's submitted MRV is the
closest thereto. The decision of a majority of the arbitrators shall be binding
on the Parties. The submitted MRV which is determined to be the closest to the
actual MRV shall thereafter be used by the Parties.

                        (iii) If either of the Parties fails to appoint an
arbitrator within the specified fifteen days, the arbitrator timely appointed by
one of them shall reach a decision on his or her own, and said decision shall be
binding on the Parties.

                        (iv) The entire cost of such arbitration shall be paid
by the party whose submitted MRV is not selected, ie. the one that is NOT the
closest to the actual MRV.

                2) Notwithstanding the foregoing, the new MRV shall not be less
than the rent payable for the month immediately preceding the rent adjustment.

        b. Upon the establishment of each New Market Rental Value:

                1) the new MRV will become the new "Base Rent" for the purpose
of calculating any further Adjustments, and

                2) the first month of each Market Rental Value term shall become
the new "Base Month" for the purpose of calculating any further Adjustments.

B. NOTICE:

        Unless specified otherwise herein, notice of any rental adjustments,
other than Fixed Rental Adjustments, shall be made as specified in paragraph 23
of the Lease.

C. BROKER'S FEE:

        The Brokers specified in paragraph 1.10 shall be paid a Brokerage Fee
for each adjustment specified above in accordance with paragraph 15 of the
Lease.

                                   Page 2 of 2

(C)1997 - American Industrial Real Estate Association            FORM OE-2-3/97E

                                     REVISED
<PAGE>   18

ADDENDUM TO STANDARD OFFICE LEASE-GROSS DATED NOVEMBER 18, 1999, BY AND BETWEEN
PACIFICA CALIFORNIA/APOLLO, LLC, LESSOR, AND SKECHERS, INC., LESSEE FOR THE
PREMISES LOCATED AT 225 S. SEPULVEDA BOULEVARD, MANHATTAN BEACH, CALIFORNIA.

This Addendum ("Addendum") is executed contemporaneously with that certain
Standard Office Lease - ("Lease") by and between Lessor and Lessee, of even
date herewith, respecting the Premises. Any conflict or ambiguity between this
Addendum and the Lease shall be resolved in favor of this Addendum. Terms not
otherwise defined herein shall have the meaning assigned to such terms in the
Lease.

52.  The Premises shall be deemed "Ready for Occupancy", and the Commencement
Date shall be deemed the first (1st) business day after the Substantial
Completion of the Tenant Improvements. The following dates in the Lease shall
be extended by the number of days from and after the actual Commencement Date:

          52.1 The "Expiration Date" in Paragraph 1.5 of the Lease, and wherever
     else in the Lease such term shall occur;

          52.2 The "FRA Adjustment Date" in Paragraph 50 AIII of the Lease, and
     wherever else in the Lease such term shall occur;

          52.3 The "MRV Adjustment Date" in Paragraph 51 AII of the Lease, and
     wherever else in the Lease such term shall occur;

53.  INDEMNIFICATION: This Lease has been prepared by Leonard & Ohren, a
California Corporation, at the request of Lessor and Lessee who are herein
referred to as "the Parties" without regard to number or gender. The Parties
have been advised to have this document reviewed by their own independent
counsel, and confirm that in signing this document, they have not relied on any
acts or conduct of Leonard & Ohren, and its agents, with regard to the
interpretation or meaning of this document. The Parties jointly and severally
waive any and all claims, actions, demands, and loss against Leonard & Ohren,
its agents, employees, and each of them, that a party may incur by reason of
any act, error, or omission in the preparation of this document and in its
interpretation and meaning, whether or not the interpretation or meaning is the
result of compromise and settlement among Parties, or the result of
determination by a court or arbitration panel of competent jurisdiction. The
preceding waiver provisions have been negotiated by and between the Parties on
the one part, and Leonard & Ohren on the other part.

54. ASSIGNMENT AND SUBLETTING - RECAPTURE OF PREMISES: At any time within
thirty (30) days after Landlord's receipt of Tenant's proposed sublease,
Landlord may by written notice to Tenant elect to (a) notify Tenant that it
will not consent to the proposed subletting or assignment; (b) sublease the
Premises or the portion thereof so proposed to be subleased by Tenant upon the
same terms as those offered to the proposed subtenant; or (c) terminate this
Lease as to the portion (including all) of the premises so proposed to be
subleased or assigned, with a proportionate abatement in the rent payable
hereunder. If Landlord does not exercise any option set forth in this Section
54 within said thirty (30) day period, Tenant may thereafter within ninety (90)
days after the expiration of said thirty (30) day period enter into a valid
assignment or sublease of the Premises or portion thereof, upon the terms and
conditions set forth in the information [TEXT ILLEGIBLE] by Tenant to Landlord
pursuant to Section  [TEXT ILLEGIBLE]

55.  LANDLORD'S SHARE OF PROFITS: If Tenant assigns or subleases, Tenant shall
pay to Landlord as Additional Rent under the Lease the Landlord's fifty percent
(50%) share of the Profit (defined below) on such transaction as and when
received by Tenant, unless Landlord gives written notice to Tenant and the
assignee or subtenant that Landlord's Share shall be paid by the assignee or
subtenant to Landlord directly. The "Profit" means (A) all amounts paid to
Tenant for such assignment or sublease, including "key" money, monthly rent in
excess of the monthly rent payable under the Lease, and all fees and other
consideration paid for the assignment or sublease, including fees under any
collateral agreements, less (B) costs and expenses directly

<PAGE>   19
incurred by Tenant in connection with the execution and performance of such
assignment or sublease for real estate broker's commissions and costs of
renovation or construction of tenant improvements required under such assignment
or sublease. Tenant is entitled to recover such costs and expenses before
tenant is obligated to pay the Landlord's Share to Landlord.

56.  RENTAL ABATEMENT: Landlord shall grant Tenant a rental abatement equal to
     the amount of four (4) month's rent for the first (1st) four (4) months of
     the term.

57.  PARKING: Tenant shall be entitled to rent three (3) parking spaces per one
     thousand (1,000) square feet for the term of the Lease and any extension
     thereto at the building's prevailing rate. Tenant shall have the right to
     rent any additional spaces on an as-available month to month basis at the
     prevailing rate. The current prevailing rate is $35 per car, per month.
     Included in the three (3) parking spaces per one thousand (1,000) square
     feet ratio, Tenant shall be entitled to rent nine (9) reserved parking
     spaces at building's unreserved prevailing rate which is currently $35 per
     car, per month. Landlord shall grant Tenant four (4) months free rent for
     all parking.

58.  RIGHT OF FIRST NEGOTIATION: Subject to availability, Tenant shall have the
     Right of First Negotiation to lease any additional forthcoming available
     space in the Building during the duration of the lease, including any
     option period. Landlord shall grant Tenant an opportunity to negotiate with
     Landlord ten (10) days prior to Landlord placing Premises on the market for
     lease.

59.  SIGNAGE. Tenant shall be allowed to install building signage on the north
     end of the east facing side of the building. The size and design of the
     signage shall be subject to Landlord's approval and city or agency codes
     and restrictions.
<PAGE>   20
                                  Exhibit "C"

                               TENANT WORK LETTER

     This Tenant Work Letter, dated this 26th day of November, 1999, is entered
into by and between Pacifica California/Apollo, LLC, a California limited
liability company (hereinafter "Landlord") and Sketchers USA, Inc., a Delaware
corporation (hereinafter "Tenant"). This Tenant Work Letter shall set forth the
terms and conditions relating to the construction of Suites 125, 300 and 330 at
Pacifica Manhattan Beach Office Plaza (hereinafter collectively, the
"Premises"). This Tenant Work Letter is essentially organized chronologically
and addresses the issues of the construction of the Premises, in sequence, as
such issues will arise during the actual construction of the Premises. All
references in this Tenant Work Letter to Articles or Sections of "this Lease"
shall mean the relevant portions of Articles 1 through 49 of this Lease to
which this Tenant Work Letter is attached as Exhibit "C", and all references in
this Tenant Work Letter to Sections of "this Tenant Work Letter" shall mean the
relevant portions of Sections 1 through 6 of this Tenant Work Letter.

                                   SECTION 1

                   DELIVERY OF THE PREMISES AND BASE BUILDING

     1.1  Base Building as Constructed by Landlord. Upon the full execution and
delivery of this Lease by Landlord and Tenant, Landlord shall deliver the
Premises to Tenant, and Tenant shall accept the Premises from Landlord in their
presently existing, "as-is" condition. Tenant hereby warrants and represents
that Tenant has inspected the Premises, is fully aware of the condition of the
Premises, including demolition to be completed by Tenant, at Tenant's expense,
prior to the construction of the Tenant Improvements by Tenant, and Tenant
accepts such Premises in their present "as is" condition.

                                   SECTION 2

                              TENANT IMPROVEMENTS

     2.1  Tenant Improvement Allowance. Tenant shall be entitled to a one-time
tenant improvement allowance (the "Tenant Improvement Allowance") in the amount
of $133,450.00 for the costs relating to the initial design and construction of
Tenant's improvements, which are permanently affixed to the Premises (the
"Tenant Improvements"). In no event shall Landlord be obligated to make
disbursements pursuant to this Tenant Work Letter in a total amount which
exceeds the Tenant Improvement Allowance, nor shall Landlord be obligated to
expend the Tenant Improvement Allowance until such time as (i) all other sums
required for the Tenant Improvements have been paid by or on behalf of Tenant,
(ii) until Landlord shall receive, from all contractors,

                                Page of 1 of 11
<PAGE>   21

subcontractors, architects, designers, engineers and other individuals and
entities employed by or on behalf of Tenant, involved in the design,
development or construction of the Tenant Improvements, or in the delivery of
materials utilized in the construction of the Tenant Improvements, lien
releases on behalf of themselves, their employees and materialmen, conditional
solely upon the payment of funds in the amount of the Tenant Improvement
Allowance, and (iii), Landlord has previously deducted, from the Tenant
Improvement Allowance a fee (the "Landlord Supervision Fee") in an amount equal
to three percent (3%) of the total cost of the Tenant Improvements, including
the Tenant Improvement Allowance.

     2.2 Final Retention. Subject to the provisions of this Tenant Work
Letter, a check for the Final Retention payable jointly to Tenant and Contractor
shall be delivered by Landlord to Tenant following the completion of
construction of the Premises, provided that (i) Tenant delivers to Landlord
properly executed mechanics lien releases in compliance with both California
Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or Section
3262(d)(4), (ii) Landlord has determined that no substandard work exists which
adversely affects the mechanical, electrical, plumbing, heating, ventilating
and air conditioning, life-safety or other systems of the Building, the curtain
wall of the Building, the structure or exterior appearance of the Building, or
any other tenant's use of such other tenant's leased premises in the Building
and (iii) Architect delivers to Landlord a certificate, in a form reasonably
acceptable to Landlord, certifying that the construction of the Tenant
Improvements in the Premises has been substantially completed.

     2.3  Standard Tenant Improvement Package. Landlord has established
specifications (the "Specifications") for the Building standard components to
be used in the construction of the Tenant Improvements in the Premises
(collectively, the "Standard Improvement Package"). The quality of Tenant
Improvements shall be equal to or of greater quality than the quality of the
Specifications, provided that the Tenant Improvements shall comply with certain
Specifications as designated by Landlord. Landlord may make changes to the
Specifications for the Standard Improvement Package from time to time.

                                   SECTION 3

                             CONSTRUCTION DRAWINGS

     3.1  Selection of Drawings. Tenant shall retain an architect/space planner
approved by Landlord (the "Architect") to prepare the Construction Drawings.
Tenant shall retain the engineering consultants approved by Landlord (the
"Engineers") to prepare all plans and engineering working drawings relating to
the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and
sprinkler work in the Premises, which work is not part of the Base Building.
The plans and drawings to be prepared by Architect and the Engineers hereunder
shall be known collectively as the "Construction Drawings." All Construction
Drawings shall comply with the drawing format and specifications determined by
Landlord, and shall be subject to Landlord's approval, which Construction
Drawings shall contain the information listed on Schedule 1, attached hereto.
Tenant and Architect shall verify, in the field, the dimensions and conditions
as shown on the relevant portions of the base building

                                  Page 2 of 11
<PAGE>   22
plans, and Tenant and Architect shall be solely responsible for the same, and
Landlord shall have no responsibility in connection therewith. Landlord's
review of the Construction Drawings as set forth in this Section 3, shall be
for its sole purpose and shall not imply Landlord's review of the same, or
obligate Landlord to review the same, for quality, design, Code compliance or
other like matters. Accordingly, notwithstanding that any Construction Drawings
are reviewed by Landlord or its space planner, architect, engineers and
consultants, and notwithstanding any advice or assistance which may be rendered
to Tenant by Landlord or Landlord's space planner, architect, engineers, and
consultants, Landlord shall have no liability whatsoever in connection therewith
and shall not be responsible for any omissions or errors contained in the
Construction Drawings, and Tenant's waiver and indemnity set forth in Sections
8.7 and 8.8 of this Lease shall specifically apply to the Construction Drawings.

     3.2  Final Space Plan. Tenant shall supply Landlord with four (4) copies
signed by Tenant of its final space plan for the Premises before any
architectural working drawings or engineering drawings have been commenced. The
final space plan (the "Final Space Plan") shall include a layout and
designation of all offices, rooms and other partitioning, their intended use,
and equipment to be contained therein. Landlord may request clarification or
more specific drawings for special use items not included in the Final Space
Plan. Landlord shall advise Tenant within five (5) business days after
Landlord's receipt of the Final Space Plan for the Premises if the same is
unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant
shall promptly cause the Final Space Plan to be revised to correct any
deficiencies or other matters Landlord may reasonably require.

     3.3  Final Working Drawings. After the Final Space Plan has been approved
by Landlord, Tenant shall supply the Engineers with a complete listing of
standard and non-standard equipment and specifications, including, without
limitation, B.T.U. calculations, electrical requirements and special electrical
receptacle requirements for the Premises, to enable the Engineers and the
Architect to complete the "Final Working Drawings" (as that term is defined
below) in the manner as set forth below. Upon the approval of the Final Space
Plan by Landlord and Tenant, Tenant shall promptly cause the Architect and the
Engineers to complete the architectural and engineering drawings for the
Premises, and Architect shall compile a fully coordinated set of architectural,
structural, mechanical, electrical and plumbing working drawings in a form
which is complete to allow subcontractor to bid on the work and to obtain all
applicable permits (collectively, the "Final Working Drawings") and shall
submit the same to Landlord for Landlord's approval. Tenant shall supply
Landlord with four (4) copies signed by Tenant of such Final Working Drawings.
Landlord shall advise Tenant within ten (10) business days after Landlord's
receipt of the Final Working Drawings for the Premises if the same is
unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant
shall immediately revise the Final Working Drawings in accordance with such
review and any disapproval of Landlord in connection therewith.

     3.4  Approved Working Drawings. The Final Working Drawings shall be
approved by Landlord (the "Approved Working Drawings") prior to the
commencement of construction of the Premises by Tenant. After approval by
Landlord of the Final Working Drawings, Tenant may submit the same to the  City
of Manhattan Beach for all applicable building permits. Tenant hereby agrees
that neither Landlord nor Landlord's consultants shall be responsible for
obtaining any building permit or certificate of occupancy for the Premises and
that obtaining the same shall be Tenant's

(11/29/99)                     Page 3 of 11

<PAGE>   23
responsibility; provided, however, that Landlord shall cooperate with Tenant
in executing permit applications and performing other ministerial acts
reasonably necessary to enable Tenant to obtain any such permit or certificate
of occupancy. No changes, modifications or alterations in the Approved Working
Drawings may be made without the prior written consent of Landlord, which
consent may not be unreasonably withheld.

                                   SECTION 4

                    CONSTRUCTION OF THE TENANT IMPROVEMENTS

        4.1     Tenant's Selection of Contractors.

                4.1.1   The Contractor. A general contractor shall be retained
by Tenant to construct the Tenant Improvements. Such general contractor
("Contractor") shall be selected by Tenant and approved by Landlord, and Tenant
shall deliver to Landlord notice of its selection of the Contractor upon such
selection.

                4.1.2   Tenant's Agents. All subcontractors, laborers,
materialmen, and suppliers used by Tenant (such subcontractors, laborers,
materialmen, and suppliers, and the Contractor to be known collectively as
"Tenant's Agents") must be approved in writing by Landlord, which approval
shall not be unreasonably withheld or delayed. If Landlord does not approve any
of Tenant's proposed subcontractors, laborers, materialmen or suppliers, Tenant
shall submit other proposed subcontractors, laborers, materialmen or suppliers
for Landlord's written approval. Notwithstanding the foregoing, Tenant shall
retain subcontractors designated by Landlord in connection with any structural,
mechanical, electrical, plumbing or heating, air-conditioning or ventilation
work to be performed in the Premises.

        4.2     Construction of Tenant Improvements by Tenant's Agents.

                4.2.1   Construction Contract; Cost Budget. Prior to Tenant's
execution of the construction contract and general conditions with Contractor
(the "Contract"), Tenant shall submit the Contract to Landlord for its
approval, which approval shall not be unreasonably withheld or delayed. Prior
to the commencement of the construction of the Tenant Improvements, and after
Tenant has accepted all bids for the Tenant Improvements, Tenant shall provide
Landlord with a detailed breakdown, by trade, of the final costs to be incurred
or which have been incurred in connection with the design and construction of
the Tenant Improvements to be performed by or at the direction of Tenant or the
Contractor, which costs form a basis for the amount of the Contract (the "Final
Costs"). Prior to the commencement of construction of the Tenant Improvements,
Tenant shall deliver to Landlord, evidence reasonably satisfactory to Landlord
that Tenant has available funds, in the form of cash or commitments to lend by a
third party lender, in an amount (the "Over-Allowance Amount") equal to the
difference between the amount of the Final Costs and the amount of the Tenant
Improvement Allowance. In the event that, after the Final Costs have been
determined, the costs relating to the design and construction of the Tenant
Improvements shall change, any

                                  Page 4 of 11
<PAGE>   24
additional costs necessary to such design and construction in excess of the
Final Costs, shall be paid by Tenant.

     4.2.2  Tenant's Agents.

            4.2.2.1  Landlord's General Conditions for Tenant's Agents and
Tenant Improvement Work. Tenant's and Tenant's Agent's construction of the
Tenant Improvements shall comply with the following: (i) the Tenant
Improvements shall be constructed in strict accordance with the Approved
Working Drawings; (ii) Tenant's Agents shall submit schedules of all work
relating to the Tenant's Improvements to Contractor and Contractor shall,
within five (5) business days of receipt thereof, inform Tenant's Agents of any
changes which are necessary thereto, and Tenant's Agents shall adhere to such
corrected schedule; and (iii) Tenant shall abide by all rules made by
Landlord's Building manager with respect to the use of elevators, storage of
materials, coordination of work with the contractors of other tenants, and any
other matter in connection with this Tenant Work Letter, including, without
limitation, the construction of the Tenant Improvements.

            4.2.2.2  Indemnity. Tenant's indemnity of Landlord as set forth in
Sections 8.7 and 8.8 of this Lease shall also apply with respect to any and all
costs, losses, damages, injuries and liabilities related in any way to any act
or omission of Tenant or Tenant's Agents, or anyone directly or indirectly
employed by any of them, or in connection with Tenant's non-payment of any
amount arising out of the Tenant Improvements and/or Tenant's disapproval of all
or any portion of any request for payment. Such indemnity by Tenant, as set
forth in Sections 8.7 and 8.8 of this Lease, shall also apply with respect to
any and all costs, losses, damages, injuries and liabilities related in any way
to Landlord's performance of any ministerial acts reasonably necessary (i) to
permit Tenant to complete the Tenant Improvements, and (ii) to enable Tenant to
obtain any building permit or certificate of occupancy for the Premises.

            4.2.2.3  Requirements of Tenant's Agents. Each of Tenant's Agents
shall guarantee to Tenant and for the benefit of Landlord that the portion of
the Tenant Improvements for which it is responsible shall be free from any
defects in workmanship and materials for a period of not less than one (1) year
from the date of completion thereof. Each of Tenant's Agents shall be
responsible for the replacement or repair, without additional charge, of all
work done or furnished in accordance with its contract that shall become
defective within one (1) year after the later to occur of (i) completion of the
work performed by such contractor or subcontractors and (ii) the Lease
Commencement Date. The correction of such work shall include, without additional
charge, all additional expenses and damages incurred in connection with such
removal or replacement of all or any part of the Tenant Improvements, and/or the
Building and/or common areas that may be damaged or disturbed thereby. All such
warranties or guarantees as to materials or workmanship of or with respect to
the Tenant Improvements shall be contained in the Contract or subcontract and
shall be written such that such guarantees or warranties shall inure to the
benefit of both Landlord and Tenant, as their respective interests may appear,
and can be directly enforced by either. Tenant covenants to give to Landlord any
assignment or other assurances which may be necessary to effect such right of
direct enforcement.

                                  Page 5 of 11
(11/29/99)
<PAGE>   25
          4.2.2.4  Insurance Requirements.

               4.2.2.4.1  General Coverages. All of Tenant's Agents shall
carry worker's compensation insurance covering all of their respective
employees, and shall also carry public liability insurance, including property
damage, all with limits, in form and with companies as are required to be
carried by Tenant as set forth in Article 8 of this Lease.

               4.2.2.4.2  Special Coverages. Tenant shall carry insurance in an
amount, with terms reasonably approved by Landlord, either as an endorsement of
Tenant's premises insurance or as a separate policy, at Tenant's election,
covering the construction of the Tenant Improvements, and such other insurance
as Landlord may require, it being understood and agreed that the Tenant
Improvements shall be insured by Tenant pursuant to Article 8 of this Lease
immediately upon completion thereof. Such insurance shall be in amounts and
shall include such extended coverage endorsements as may be reasonably required
by Landlord, each in amounts not less than $500,000 per incident, $1,000,000 in
aggregate, and in form and with companies as are required to be carried by
Tenant as set forth in Article 8 of this Lease.

               4.2.2.4.3  General Terms. Certificates for all insurance carried
pursuant to this Section 4.2.2.4 shall be delivered to Landlord before the
commencement of construction of the Tenant Improvements and before the
Contractor's equipment is moved onto the site. All such policies of insurance
must contain a provision that the company writing said policy will give
Landlord thirty (30) days' prior written notice of any cancellation or lapse of
the effective date or any reduction in the amounts of such insurance. In the
event that the Tenant Improvements are damaged by any cause during the course
of the construction thereof, Tenant shall immediately repair the same at
Tenant's sole cost and expense. Tenant's Agents shall maintain all of the
foregoing insurance coverage in force until the Tenant Improvements are fully
completed and accepted by Landlord. All policies carried under this Section
4.2.2.4 shall insure Landlord and Tenant, as their interests may appear, as
well as Contractor and Tenant's Agents. All insurance, except Workers'
Compensation, maintained by Tenant's Agents shall preclude subrogation claims
by the insurer against anyone insured thereunder. Such insurance shall provide
that it is primary insurance as respects the Landlord and that any other
insurance maintained by Landlord is excess and noncontributing with the
insurance required hereunder. The requirements for the foregoing insurance
shall not derogate from the provisions for indemnification of Landlord by Tenant
under Section 4.2.2.2 of this Tenant Work Letter.

     4.2.3  Governmental Compliance. The Tenant Improvements shall comply in
all respects with the following: (i) the Code and other state, federal, city or
quasi-governmental laws, codes, ordinances and regulations, as each may apply
according to the rulings of the controlling public official, agent or other
person; (ii) applicable standards of the American Insurance Association
(formerly, the National Board of Fire Underwriters) and the National Electrical
Code; and (iii) building material manufacturer's specifications.

     4.2.4  Inspection by Landlord. Landlord shall have the right to inspect
the Tenant Improvements at all times, provided however, that Landlord's failure
to inspect the Tenant

(11/29/99)                        Page 6 of 11

<PAGE>   26
Improvements shall in no event constitute a waiver of any of Landlord's rights
hereunder nor shall Landlord's inspection of the Tenant Improvements constitute
Landlord's approval of the same. Should Landlord disapprove any portion of the
Tenant's Improvements, Landlord shall notify Tenant in writing of such
disapproval and shall specify the items disapproved. Any defects or deviations
in, and/or disapproval by Landlord of, the Tenant Improvements shall be
rectified by Tenant at no expense to Landlord, provided however, that in the
event Landlord determines that a defect or deviation exists or disapproves of
any matter in connection with any portion of the Tenant Improvements and such
defect, deviation or matter might adversely affect the mechanical, electrical,
plumbing, heating, ventilating and air-conditioning or life-safety systems of
the Building, the structure or exterior appearance of the Building or any other
tenant's use of such other tenant's leased premises, Landlord may take such
action as Landlord deems necessary, at Tenant's expense and without incurring
any liability on Landlord's part, to correct any such defect, deviation and/or
matter, including, without limitation, causing the cessation of performance of
the construction of the Tenant Improvements until such time as the defect,
deviation and/or matter is corrected to Landlord's satisfaction.

     4.3  Notice of Completion; Copy of Record Set of Plans. Within ten (10)
days after completion of construction of the Tenant Improvements, Tenant shall
cause a Notice of Completion to be recorded in the office of the Recorder of the
County of Los Angeles in accordance with Section 3093 of the Civil Code of the
State of California or any successor statute, and shall furnish a copy thereof
to Landlord upon such recordation. If Tenant fails to do so, Landlord may
execute and file the same on behalf of Tenant as Tenant's agent for such
purpose, at Tenant's sole cost and expense. At the conclusion of construction,
(i) Tenant shall cause the Architect and Contractor (A) to update the Approved
Working Drawings as necessary to reflect all changes made to the Approved
Working Drawings during the course of construction, (B) to certify to the best
of their knowledge that the "record-set" of mylar as-built drawings are true and
correct, which certification shall survive the expiration or termination of this
Lease, and (C) to deliver to Landlord two (2) sets of copies of such record set
of drawings within ninety (90) days following issuance of a certificate of
occupancy for the Premises, and (ii) Tenant shall deliver to Landlord a copy of
all warranties, guaranties, and operating manuals and information relating to
the improvements, equipment, and systems in the Premises.

                                   SECTION 5

                     COMPLETION OF THE TENANT IMPROVEMENTS:
                            LEASE COMMENCEMENT DATE

                                  Page 7 of 11

<PAGE>   27

      5.1   Except as provided in this Section 5, the Lease Commencement Date
shall occur as set forth in the Amendment to Lease. The Lease Commencement Date
shall be the earlier of (i) March 1, 2000, and (ii) the date Lessee first
occupies the Premises for the purpose of conducting Leasee's business therein.

                                   SECTION 6

                                 MISCELLANEOUS

      6.1   Tenant's Representative. Tenant shall designate an individual as
its sole representative with respect to the matters set forth in this Tenant
Work Letter, who shall have full authority and responsibility to act on behalf
of the Tenant as required in this Tenant Work Letter. Upon such designation,
Tenant shall identify such individual to Landlord, including such individual's
address and telephone number.

      6.2   Landlord's Representative. Landlord has designated both Clifford W.
Lord, Jr. and Andy Carpiac, either one acting alone, as its representatives
with respect to the matters set forth in this Tenant Work Letter, who, until
further notice to Tenant, shall have full authority and responsibility to act
on behalf of the Landlord as required in this Tenant Work Letter.

      6.3   Time of the Essence in This Tenant Work Letter. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. If any item requiring approval is timely disapproved by
Landlord, the procedure for preparation of the document and approval thereof
shall be repeated until the document is approved by Landlord. Landlord and
Tenant expressly understand that time is of the essence and that any aspect of
this Work Letter requiring Landlord's or Tenant's review and/or approval
requires prompt review and/or approval.

      6.4   Tenant's Lease Default. Notwithstanding any provision to the
contrary contained in this Lease, if an event of default as described in
Section 13 of Lease or this Tenant Work Letter has occurred at any time on or
before the Substantial Completion of the Premises, then (i) in addition to all
other rights and remedies granted to Landlord pursuant to this Lease, Landlord
shall have the right to withhold payment of all or any portion of the Tenant
Improvement Allowance until such time as the default is cured (provided such
default is curable pursuant to the terms of the Lease) and/or Landlord may
cause Contractor to cause the construction of the Premises (in which case,
Tenant shall be responsible for any delay in the substantial completion of the
Premises caused by such work stoppage), and (ii) all other obligations of
Landlord under the terms of this Tenant Work Letter shall be forgiven until
such time as such default is cured pursuant to the terms of this Lease (in
which case, Tenant shall be responsible for any delay in the substantial
completion of the Premises caused by such inaction by Landlord).

      6.5   Tenant's Agents. All subcontractors, laborers, materialmen, and
suppliers retained directly by Tenant shall conduct their activities in and
around the Premises, Building and the Real Property in a harmonious
relationship with all other subcontractors, laborers, materialmen and

(11/29/99)                        Page 8 of 11
<PAGE>   28
suppliers at the Premises, Building and Real Property, and, if necessary, Tenant
shall employ union labor to achieve such harmonious relations.

     6.6 Hazardous Materials. If the construction of the Tenant Improvements or
Tenant's move into the Premises will involve the use of or disturb hazardous
materials or substances existing in the Premises, Tenant shall comply with
Landlord's rules and regulations concerning such hazardous materials or
substances.

(11/29/99)                        Page 9 of 11
<PAGE>   29
                                   SCHEDULE 1

Construction Drawings Showing

     1.   Location and type of all partitions.

     2.   Location and type of all doors. Indicate hardware and provide keying
          schedule.

     3.   Location and type of glass partitions, windows, and doors. Indicate
          framing and reference full-height partitions.

     4.   Locations of telephone equipment room.

     5.   Critical dimensions necessary for construction, with indication of
          required clearances.

     6.   Location and types of all electrical items: outlets, switches,
          telephone outlets and lighting.

     7.   Location and type of equipment that will require special electrical
          requirements. Provide manufacturers' specifications for use and
          operation, including heat output.

     8.   Location, weight per square foot, and description of any heavy
          equipment or filing system.

     9.   Requirements for special air-conditioning or ventilation.

     10.  Location and type of plumbing.

     11.  Location and type of kitchen equipment.

     12.  Location, type and color of floor covering, wall covering, paint and
          finishes. Details Showing:

          1.   All millwork with verified dimensions of all equipment to be
               built in.

          2.   Corridor entrance.

          3.   Bracing or support of special walls, glass partitions, etc., if
               desired. If not included with the plans, Tenant's engineer will
               design all support or bracing required at Tenant's expense.

(11/29/99)                       Page 10 of 11
<PAGE>   30

        Additional Information

                1.      Provide Landlord with Title 24 energy calculations.

(11/29/99)                       Page 11 of 11

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