SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                                   (Mark One)

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 1997

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

             For the transition period from __________ to __________

                         Commission File Number O-27542

                             FUN TYME CONCEPTS, INC.
             (Exact Name of Registrant as Specified in its Charter)

New York                                   11-3157259
(State or Other Jurisdiction of 
Incorporation or Organization)             (I.R.S. Employer Identification No.)

                 290 Wild Avenue, Staten Island, New York 10314
                    (Address of Principal Executive Offices)

                                 (718) 761-6100
              (Registrant's Telephone Number, Including Area Code)

               Securities registered pursuant to Section 12(b) of
                                    the Act:

Title of Each Class                   Name of Each Exchange on Which Registered
                                      NONE

               Securities registered pursuant to Section 12(g) of
                                    the Act:

                          Common Stock, $.001 par value
                                (Title of Class)

                         Common Stock Purchase Warrants
                                (Title of Class)

     Check whether the Issuer (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 12
months (or for such  shorter  period that  Registrant  was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes [X] No [ ]

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the  best of  Registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X].

         The Registrant's revenues for its fiscal year ended March 31, 1997 were
$949,910.

         The  aggregate  market  value of the  voting  stock  on June  10,  1997
(consisting of Common Stock,  par value $.001 per share) held by  non-affiliates
was approximately $492,289, based upon the average bid and asked prices for such
Common Stock on said date ($.313),  as reported by a market maker. On such date,
there were 2,512,465 shares of Registrant's Common Stock outstanding.



<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

History

         Fun Tyme Concepts, Inc. ("the Company") is a New York corporation which
was  organized  in  April  1993.  The  Company  commenced  operations  with  the
construction  of its first Fun Bubble  play  center in October  1994,  in Staten
Island,  New York.  Two of the  Company's  wholly  owned  subsidiaries  recently
entered into lease  agreements and expect to open two additional Fun Bubble play
centers,  one in  Edmonton,  Canada and one in East  Brunswick,  New Jersey,  by
August 1, 1997 and  September  1, 1997,  respectively.  Each Fun Bubble shall be
designed based on a theme unique in comparison to the themes of the others:  the
Staten Island Fun Bubble  focuses on space;  the East  Brunswick Fun Bubble will
focus on the future; and the Edmonton Fun Bubble will emphasize the jungle.

         While the Company's business plan has focused,  thus far, on children's
educational and play facilities and has targeted  children ages twelve years old
and under,  the Company is currently in the preliminary and conceptual  stage of
research with respect to virtual  reality play facilities for older children and
for adults.  Since this latter idea is merely in the  conceptual  design  phase,
there can be no assurance that the Company will proceed beyond this stage and in
fact design such facilities geared to older children and adults.

Initial Public Offering

         On August 15, 1996,  through State Street Capital Markets Corp. ("State
Street"),  the  Company  consummated  an  initial  public  offering  ("IPO")  of
1,250,000  units,  each unit  comprising  one share of Common  Stock,  par value
$.001, and one redeemable Common Stock Purchase Warrant,  at a purchase price of
$6.25 per unit, inclusive of 800,000 shares of Common Stock sold by the Company,
200,000  shares of Common  Stock sold by certain  security  holders  and 250,000
shares of Common Stock and 1,250,000 warrants sold by a certain selling security
holder.

         Net proceeds to the Company from the IPO approximated $3,328,242.  Also
in  connection  with the IPO,  the  Company  sold to State  Street  warrants  to
purchase 125,000 units.  The  over-allotment  option was not exercised.  The net
proceeds of the IPO were apportioned as follows: (i) approximately  $205,000 has
been used to date for the costs  associated with the demolition and construction
associated  with the opening of the two new Fun Bubbles:  one in East Brunswick,
New Jersey and one in  Edmonton,  Canada;(ii)  $36,000 was used to purchase  the
assets of the Edmonton,  Canada facility and (iii) the balance is being used for
the Company's working capital needs.

         In August 1996,  State  Street  ceased  operations.  The lack of market
support by the  Company's  underwriter  and  principal  market maker limited the
liquidity of the Company's securities and decreased market quotations to a point
whereby the units were trading below




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$1.00.  As a result of this continued low trading,  though the Company strove to
keep its securities listed on the Nasdaq SmallCap Stock Market,  Nasdaq delisted
the  securities on April 7, 1997, at which time the Company's  securities  began
trading on the OTC Bulletin Board.

         In keeping  with its  attempt  to  increase  stockholder  value and the
liquidity of its securities,  the Company has actively sought,  and continues to
seek,  market makers for its  securities.  In October  1996,  by  correspondence
agreed to and  acknowledged in writing by State Street,  the Company  terminated
its underwriting agreement with same.

Background

         In 1993,  the founders of the Company began to research the  children's
entertainment industry and, in doing so, joined the International Association of
Amusement  Parks and  Attractions.  They  attended  trade shows and seminars and
visited many other children's entertainment  facilities.  They noticed that most
facilities  had limited floor space and low ceilings which limited the space for
the  larger  children's  toys and  which  gave  most of the  stores a  closed-in
feeling. After estimating the possibilities,  the founders decided that building
a facility in an air supported  dome with a 40 foot ceiling would create an airy
uncluttered  environment,  and, with the help of a manufacturer of pneumatically
inflated domes,  in 1993, the Company  designed a dome unit that would have a 40
foot ceiling. In October 1994, the Company opened its first Fun Bubble in Staten
Island, New York. See "Staten Island, New York Fun Bubble."

Outlook

         The Company plans to expand its business  operations by seeking to open
additional  Fun  Bubbles,  similar to the Staten  Island  Fun  Bubble,  in other
locations.  These  Fun  Bubbles  will be  either  under  pneumatic  domes  or in
traditional  building  structures.  In either  event,  the Company  will seek to
incorporate  high ceilings and large space in keeping with its initial  concept.
The  Company  intends to open Fun Bubbles in or near  locations  that are family
oriented,  in areas that have large populations of children under the age of 12,
and/or in areas with higher than average  disposable  income.  The proceeds from
the Company's IPO were earmarked to enable the Company to open three  additional
Fun  Bubbles,  each of  which is  expected  to  combine  various  elements  of a
children's  entertainment  center along with indoor recreational and educational
facilities and  specifically  designed  toddler  programs.  The Company has made
plans  to open  two new  Fun  Bubbles,  one in East  Brunswick  and  another  in
Edmonton,  Canada,  and intends to seek other  locations  at which it might open
additional Fun Bubbles.

         The Company  encourages the  participation  of parents and/or guardians
with  their  children  and to this end has  designed  a play maze and other play
equipment  which will allow children and their parents and/or  guardians to play
together.  Management  believes that the Staten Island Fun Bubble is designed to
provide a fun, safe, reliable, and interactive  environment whereby children can
exercise  their bodies and minds and acquire  certain  necessary  skills.  It is
Management's  intention that each Fun Bubble provide such an  environment.  Each
Fun Bubble will be geared toward  enhancing a child's (i) hand,  eye, and muscle
coordination;  (ii) motor skills; (iii) flexibility; and (iv) social skills. The
Company plans to continuously update its facilities to meet




<PAGE>

     children's  recreational and educational needs in a stimulating,  safe, and
fun arena. See "Toddler and Pre-School Programs."

Staten Island, New York Fun Bubble

         The  Staten  Island  Fun  Bubble,  which  opened in  October  1994,  is
constructed  under a pneumatic  translucent  dome with 40 foot ceiling  heights,
similar to those used for tennis  courts.  Although the Company  intends to open
additional Fun Bubbles under similar structures, it may also operate Fun Bubbles
in  traditional  building  structures.  The Staten Island Fun Bubble  charges an
admission  fee of  $6.95  per  child;  there  is no  admission  fee  for  adults
accompanying children.

         The Fun Bubble has (i) an environmentally controlled,  supervised "Open
Air Atmosphere" which is climate controlled throughout the seasons; (ii) a party
play center for kids twelve years old and under,  which includes  athletic games
and games of skill;  and (iii) a three level  soft-sculptured  modular foam play
maze.  All  activities  are  designed  with safety in mind and are  continuously
supervised by the Company's trained  employees.  The children purchase tokens to
play skill games and receive points at the end of each game. These points may be
redeemed  at any time to  receive  a prize  at the  merchandise  and  concession
counter. See "Safety and Arcade Redemption Systems."

         In addition to the foregoing,  the facility also includes private party
rooms, a snack bar, and a sound proof television  lounge for parents.  The party
rooms can be reserved for birthdays and other group events. The Company offers a
variety of party  packages  which  combine  all  aspects of a  celebration.  The
parents'  lounge  provides a quiet place for adults to retreat on occasion while
their  children  play:  it includes a  television  and a large clear  window for
viewing the play area.

         In fiscal  year 1997,  the Staten  Island Fun Bubble was  remodeled  in
keeping with the Company's  desire to effect an outer space theme.  Accordingly,
all equipment was redesigned with space and spaceships as the focus.

East Brunswick, New Jersey Fun Bubble

         In December  1996, the Company  formed a wholly owned  subsidiary,  Fun
Tyme of East  Brunswick,  Inc.  ("FTEB").  On January 21, 1997, FTEB it signed a
lease to open an  18,000  square  foot Fun  Bubble in the  Miracle  Mall in East
Brunswick,  New  Jersey.  The Company is in the  process of  renovating  a movie
theater  therein  to  bring  this  area  its  largest  children's  entertainment
facility. The Miracle Mall is a 120,000 square foot landmark center in the heart
of East  Brunswick's  most active regional  shopping area. This mall includes 18
centrally  anchored  stores and is adjacent to Tices Lane on which an additional
700,000 square feet of retail stores are situated.  The movie theater was chosen
because of its high ceilings and existing layout,  both of which will enable the
Company to retrofit the space into its "Fun Bubble"  concept.  The Company shall
create a theme  fantasy  playland for children  which shall include state of the
art soft-sculptured play equipment and high-tech interactive games.




<PAGE>
         While the  Company  initially  estimated  that the East  Brunswick  Fun
Bubble would open in the spring of 1997,  delays in obtaining  building  permits
and use variances  resulted in a  postponement  of the opening.  The Company now
expects to begin operating the facility in September 1997.

Edmonton, Canada Fun Bubble

         In February 1997, the Company  formed a  wholly-owned  subsidiary,  Fun
Tyme of Edmonton,  Inc.  ("FTE").  FTE  purchased  the assets of a  pre-existing
facility in Edmonton,  Canada.  This facility was in  bankruptcy,  and the asset
purchase  by the  Company  was  effected  on May 20, 1997 by and between FTE and
Browning Smith Inc., trustee of the estate in bankruptcy.

         On May 21,  1997,  upon  approval of Browning  Smith Inc.,  FTE and the
lessor of the former facility  executed a lease for the premises which FTE is in
the process of  renovating  to encompass  one of the  Company's  unique  themes.
Though the Company  estimated that the facility would open in April 1997, delays
caused by ongoing lease  negotiations  resulted in a postponement of the opening
of the Fun Bubble.  The Company now expects to begin  operating  the facility in
August 1997.

Marketing

         The  Company  has  incurred  marketing  expenses  in  purchasing  cable
television  and radio  advertising  time,  local  newspaper  and magazine  print
advertisements, and brochures which it has disseminated at its Staten Island Fun
Bubble.  As the  Company  expands  to add  additional  locations,  it intends to
increase its advertising and marketing  activities:  it expects to contact local
school  systems,  clubs,  and  religious  organizations  to organize  events for
children and attract target groups of children to its Fun Bubbles.

Suppliers

         Operation  of the Fun  Bubbles is  contingent  upon the  ability of the
Company to  purchase  and lease  equipment  from  suppliers.  Though the Company
intends to purchase most of the play equipment it requires for each facility, it
may lease certain pieces of equipment which are either (i) untested for consumer
acceptance;  (ii) unavailable by the manufacturer for sale; or (iii) believed by
the Company to be only a fad. The Company will purchase one play maze (discussed
above),  at an estimated  cost of $250,000  for each  facility.  Currently,  the
Company  has one  vendor  which  supplies  pneumatic  domes.  While loss of this
supplier might have a detrimental  effect on the Company since its Staten Island
Fun Bubble  utilizes a  pneumatic  dome,  the Company  believes  there are other
suppliers of such domes.  The Company also  believes that there are many vendors
and suppliers of the games and  equipment it purchases  and leases.  The Company
believes  it will  continue to be able to purchase  and lease  equipment  in the
future at prices and on terms similar to those at which it presently does so. If
conflicts  arise or there is a void of  vendors  and  suppliers,  the  Company's
operation will suffer to a degree.




<PAGE>
Competition

         The children's  amusement industry is a highly competitive  industry in
which the  Company  competes  with  several  large  national  chains such as the
Discovery Zone and Chuck E. Cheese, both of which have multiple locations. While
the Discovery  Zone has filed for  bankruptcy  protection and has closed many of
its locations, it nonetheless remains a competitor to the Company.

         The Company also  competes with many other small  companies  which have
individual  amusement center locations  providing basically the same services as
the Company.  The Company  believes that many of its  competitors  have (i) more
extensive   research  and  development   and  marketing  and  customer   support
capabilities;  and (ii) greater  financial,  technological,  and other resources
than those of the Company.  Further,  the Company does not believe there are any
significant barriers to entry by new companies into this industry.

         The  Company's  Fun Bubbles will be directed at the highly  competitive
business of children's  indoor  recreation  and  educational  facilities.  Other
competitors operate single unit operations with facilities similar to the Staten
Island Fun Bubble in many  metropolitan  areas.  The Company expects  additional
entities  to enter  into the market in the near  future,  some of which may have
significantly  greater  resources than the Company has. The Company expects that
its Fun  Bubbles  will  naturally  compete  with other  ventures  similar to the
Company's with respect to location, availability of new and distinct product and
service offerings, and cost per visit.

         In  addition  to  competing  with other  companies  in the  business of
children's indoor amusement and educational facilities, the Company will compete
for  dollars  spent on  entertainment  for  children  involving  other  types of
amusement,  sports,  recreation,  and  fitness  services  such as park  district
programs, amusement parks, and specialty restaurants.

         The children's amusement industry is subject to rapid technological and
innovative change.  Competition from and among companies which provide amusement
centers and other  arenas for the  amusement  of children  is  characterized  by
continuous  technological and innovative  changes and advances.  There can be no
assurance that the Company will be able to keep pace with the  technological and
innovative  developments  in the industry or to implement  changes in accordance
with such  developments;  therefore,  competitors may develop products which may
make  the  Company's  Fun  Bubbles  obsolete.  Given  that  children's  consumer
preferences and tastes  continually  change,  and thus children's  entertainment
products  are often  limited  in life  cycle,  the  success  of the  Company  is
dependent on its ability to adapt to such fads.

Safety and Arcade Redemption Systems

         The Company is very concerned about the safety of the children entering
its Fun Bubbles.  Accordingly, it has designed the Staten Island Fun Bubble, and
intends to design all additional  Fun Bubbles,  to guard against (i) injuries to
children   using  the   facilities;   (ii)  children   leaving  the   facilities
unaccompanied;  and (iii)  children  leaving the  facilities  without the parent
and/or




<PAGE>
guardian with whom they entered.  As  additional  precautions,  the Company will
continue  to  purchase  only the type of play  equipment  it deems safe and will
provide  constant  supervision  over its  young  patrons  in  order to  minimize
injuries.

Electronic

         One  measure  the  Company  has taken to ensure the safety of  children
visiting its Fun Bubbles  involves the use of a child safety alarm  system.  The
goal of this system is to prevent a child from  leaving  the Fun Bubble  without
his supervising adult. To accomplish this goal, the Company provides  electronic
tags for each child entering the facility. These electronic tags are attached to
the child's  clothing.  When a child leaves the Fun Bubble with his  supervising
adult,  the  electronic  tag is  removed.  At each exit of the Fun  Bubble,  the
Company has  installed  electronic  arches which sound an alarm if a child whose
tag has not been removed attempts to leave the facility.

Wristband System

         An additional  safety concern of the Company is that a child only leave
with the adult who brought him to the Fun Bubble. To achieve this goal, no adult
is admitted to a Fun Bubble unless he is  accompanied  by a child.  In addition,
the Company provides individually numbered and bar coded wristbands which fasten
around the wrists of each adult and child who enter the  facility.  Each adult's
wristband number and bar code correspond with the wristband and bar code of each
child the adult is supervising.  When an adult leaves the facility with a child,
the adult will only be allowed to take the child whose wristband  number and bar
code correspond to the adult's.
(These bar coded  wrist  bands are also used for  children  to accrue  points in
order to receive  prizes  and  memorabilia  when  playing  the skill  games.) By
following this procedure,  the Company hopes to prevent a child from leaving the
facility without his supervising adult.

 Toddler and Pre-School Programs

Mommy & Me

         The Company,  as part of the services it makes available to the public,
has  developed  with its  consultants  a toddler  program  called  "Mommy & Me."
Parents with  children ages twelve to eighteen  months attend class  together at
the Fun Bubble on a weekly basis for nine weeks,  at a cost ranging from $168.00
to $250.00 per child, the cost depending on the number of hours per week parents
and children attend. In this program,  children  participate in activities which
focus  on  socializing,  singing,  exercising,  and  playing  in  the  Company's
specially  designed  toddler play area. As children reach eighteen  months,  the
classes include creative arts and crafts programs.  Children work with materials
such as paints,  glue,  and beads.  After class ends each week, the children are
invited to play at the Fun Bubble with their parents. The Company offers Mommy &
Me  programs  for  children  up to the age of 4 1/2 years  old.  Each  child who
enrolls  will  receive an  identification  card and during  class  hours will be
required to wear an  electronic  tag as part of the child safety  alarm  system.
These programs are designed and run primarily by two consultants to the Company,
pursuant to the terms of a consulting agreement. These consultants




<PAGE>
have been  designing and  instructing  the Mommy & Me class for several years at
other locations.

Separation Classes

         Another  program  the  Company  provides  is a  series  of  "Separation
Classes."  These classes have been designed,  and are run at the Fun Bubble,  by
the same  consultants  who designed and now teach the Mommy & Me classes.  These
classes are  designed for  children  who soon will be  experiencing  their first
separation  from their  parents.  The  classes  focus on topics such as sharing,
manners,  food  groups,  recognizing  letters  and  numbers,  shapes and colors,
worksheets,  play  stations,  creative arts and crafts  projects,  special theme
weeks, and holiday parties.  The classes meet from one to two times a week for 2
1/2 hours at a time for nine weeks,  at a cost  ranging  from $110.00 to $190.00
per child. The classes are open to children two to five years of age. Each child
who enrolls receives an identification card and, during class hours, is required
to wear an electronic tag as part of the child safety alarm system.  After class
ends each week, the children are invited to stay at the Fun Bubble and play.

Theme Parties/Dances

         The Company has begun a weekend  program of holding  theme  parties and
dances at the Staten Island Fun Bubble for children ages nine to thirteen  years
old. These events require  advance ticket purchase and age  identification.  The
Fun Bubble  provides early evening  entertainment  including live or disc jockey
music, dancing,  refreshments, and various games and activities for which prizes
may be awarded.  The parties and/or dances  typically  begin at the close of the
Company's general operating hours and continue until approximately 10:00 p.m.

Day Camp

         The Company  also has  developed  a day camp  called  "Camp Fun Bubble"
which  provides four  different day camp programs for different age groups.  The
program for children two to three years old is called the "playfull summer" camp
and is a two hour on premise  program offered either two or three times per week
during  either a four,  six, or eight week period.  This camp is an extension of
the Mommy and Me  program,  except  that the  parents  choose  whether or not to
participate. The camp is headed by the Mommy and Me program consultants.

     The "junior  camp" is for children  three to four years old and provides on
premises  activities from either 9 a.m. to 12 p.m. or 1 p.m. to 4 p.m., three to
five days per week, for a four, six, or eight week period.

         The "day  camp" is for  children  four to ten  years  old and  provides
activities,  on and off premises,  from 9 a.m. to 4 p.m., three to five days per
week,  during either a four,  six, or eight week period.  The day camp is run by
board of education  certified teachers and includes bus  transportation,  lunch,
and regular camp type activities including sports and crafts.

         The "traveling  camp" is for children ages eleven to fourteen years old
and  provides  off-site  activities  three to five  times per week for a four or
eight week period. These activities are




<PAGE>
also chaperoned by school teachers.

Air Structure

         The  Company's  Staten  Island  Fun  Bubble  is  constructed  of a high
strength membrane which achieves its structural integrity and stability in space
by  pretensioning  with  internal air  pressure.  The air structure is shaped to
provide an even distribution of load and stress.  This system basically consists
of an inflated fabric envelope, an air supply system, controlled means of access
and egress, and an appropriate anchorage system.

Seasonality

         The Company  believes that its business may be considered  seasonal and
that a large portion of its revenues and profits will be derived during the fall
and winter months. The Company believes that outdoor amusement centers and theme
parks will take  business  away from the  inside  amusement  centers  during the
spring and summer months. In the  approximately  twenty months since the Company
has been  operating  (since  October  1994),  the Company has observed  that the
busier  months  have been in the fall and winter:  the spring and summer  months
have shown a decline in revenues. See "Day Camp."

Insurance

         In view of the  nature  of the  activities  conducted  in an  amusement
center,  there  are  inherent  risks of  exposure  to  certain  personal  injury
liabilities  including  product  liability and negligence  claims resulting from
injury caused by the use of, or items purchased in, the facilities. Accordingly,
with  respect to the Staten  Island Fun Bubble,  the Company  currently  carries
general  liability  insurance  in the  amount of  $1,000,000  and  maintains  an
additional  $1,000,000 umbrella policy. For the Edmonton,  Canada facility,  the
Company carries a $5,000,000  general liability policy.  For the East Brunswick,
New Jersey facility, the Company maintains a $2,000,000 general liability policy
and carries an additional  $1,000,000  umbrella policy. The Company believes its
insurance coverage is sufficient.

Government Regulations

         The Company is subject to the  provisions  of,  among  other laws,  the
Federal  Hazardous  Substances Act and the Federal  Consumer Product Safety Act,
the latter of which  empowers  the Consumer  Products  Safety  Commission  ("the
Consumer Commission") to protect children from hazardous toys and other articles
used by children. Any determination by the Consumer Commission outlawing the use
of the  type of  soft-sculpted  modular  foam or  other  toys  provided  for the
children by the Company in its facilities  would adversely  affect the Company's
ability to sustain its operations.  Presently,  the Company does not know of any
alternative  products  to the  soft-sculpted  modular  foam it  currently  uses;
therefore,  any restrictions on its use would significantly adversely affect the
Company and its  operations.  The Company also is required to comply with a wide
range of other state and local rules and regulations applicable to its business.
The ability of the Company to comply  with the  current  and  anticipated  broad
federal, state, and




<PAGE>
local regulatory  network is essential and may be costly.  The failure to comply
with such regulations would have an adverse effect on the Company's operations.

Service Mark

         The Company relies on common law service marks for use of its name "Fun
Bubble" at the Staten  Island  facility.  The Company  filed to register the Fun
Bubble service mark in the United States,  and its  application  was approved on
April 3, 1996.

Research and Development

         During  the  last  two  fiscal  years,  the  Company's  President,  Mr.
Catalfumo,  and its Vice  President,  Secretary,  and Treasurer,  Mr. Rosso have
spent  approximately   seventy-five  percent  of  their  time  on  research  and
development of the indoor play facility market,  the equipment utilized therein,
possibilities for new play equipment,  and new locations at which additional Fun
Bubbles may be opened.

Employees

         As of March 31,  1997,  the  Company  had two  executive  Officers  and
employed  approximately  ten full  time  employees  and  twenty-five  part  time
employees.  The Company has hired two  managers  for its Edmonton Fun Bubble and
shall  relocate  two of its four Staten  Island Fun Bubble  managers to the East
Brunswick  facility.  None of the employees of the Company is  represented  by a
union.  The Company  considers  relations  with its  employees to be good.  With
respect to payroll,  the Company is under  agreement  with Employee  Management,
Inc.  ("EMI"),  a payroll  service,  whereby  EMI  issues all  Company  employee
paychecks and provides  medical  coverage to Company  employees at a cost to the
Company which is less than the cost which the Company otherwise would incur were
it to provide  medical  coverage on its own.  The Company  continues  to utilize
LaborChex  Companies,  a  company  located  in  Jackson,  Missouri,  to  provide
screening of each applicant prior to employment.  The screening  process informs
the Company of the applicants' prior criminal histories, if any, their addresses
for the past five years, and their social security numbers.

ITEM 2.           DESCRIPTION OF PROPERTY

         The Company leases approximately 31,000 square feet at 290 Wild Avenue,
Staten  Island,  New York 10314,  where the Staten Island Fun Bubble is located.
The  Company  utilizes  approximately  500  square  feet of such  space  for its
executive offices. The lease extends for a period of seven years, until June 30,
2000, at approximately  $95,000 per annum,  with annual scheduled rent increases
of 4%. The lease term may be extended  for two five year  renewal  terms,  until
June 30, 2010.

         In the event the first renewal term option is exercised by the Company,
the rental payment shall be the greater of the fair market value and 104% of the
prior year's  rental  payment (a 4% increase  over such  previous  year's rental
payment). In each year of the first renewal




<PAGE>
period,  commencing  on the second  year of the five year  renewal  period,  the
yearly rental payment shall increase by 4% over the previous year's rent. In the
event the second renewal term is exercised,  the Company will be required to pay
the fair market value of leasing the property for such renewal term.

         On December 31,  1996,  FTEB  entered  into a lease  agreement  for the
rental of approximately  18,000 square feet at the Miracle Mall located at Route
18 in East  Brunswick,  New Jersey,  for the location of its East  Brunswick Fun
Bubble.  The East Brunswick lease extends for an initial term of ten years, said
term commencing one hundred twenty days after issuance of the required  building
permits for the work, improvements,  and alterations required for the Company to
open for business and expiring February 28, 2007 unless renewed at the Company's
option.  The annual  rent due under the lease is as  follows:  $183,240  for the
first five years of the lease;  $206,145 for the second five years of the lease;
$231,951  for the eleventh  year,  $230,888  for the twelfth  through  fifteenth
years; and $260,964 for the final five years of the renewed lease.

         Another wholly owned subsidiary of the Company,  FTE, also entered into
a lease agreement, this one for the rental of approximately 4,063 square feet of
space for the location of its Edmonton Fun Bubble.  The lease term extends for a
period of ten years,  commencing  April 1, 1997 and expiring March 31, 2007. The
space is leased at an annual rent of $52,704 for the first thirty  months of the
lease term, $57,093 for the subsequent thirty months, $61,490 for the succeeding
thirty months,  and $65,880 for the final thirty months.  The Company expects to
open the Edmonton facility in August 1997.

ITEM 3.  LEGAL PROCEEDINGS

         In or about October 1996, the First Richmond Bank,  S.B.  ("plaintiff")
commenced suit against the Company and its principals and their wives.  The only
parties served were the Company,  Mr. Rosso, and Gemina Rosso. Mr. Catalfumo and
Maria Catalfumo were never served.  Plaintiff  alleges in its complaint that the
Company  breached an equipment lease agreement with plaintiff  (assignee of said
lease  agreement)  and seeks (i)  $162,753.96 in damages,  in toto,  against all
parties;  (ii) an order directing the Company to return the leased  equipment to
plaintiff;  and (iii)  attorneys'  fees,  interests,  and costs. The Company has
denied all allegations and has asserted a counterclaim against the plaintiff, in
which it seeks damages,  attorneys' fees, and costs.  The  counterclaim  alleges
that plaintiff  committed acts of bad faith against the Company.  The lawsuit is
in the "discovery" phase,  meaning that demands for documents and information in
support of each  party's  claims have been made.  Though  compliance  with these
demands is required to the extent that such documents and information  exist, as
of  this  date,  all  discovery  is  stayed  pending  the  court's  decision  on
plaintiff's recent motion for summary judgment and the Company's cross-motion to
dismiss plaintiff's complaint.




<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         During its annual meeting on April 24, 1997, shareholders voted for the
reelection of Daniel Catalfumo,  Richard Rosso, and Daniel Buchanan as Directors
of the Company to serve until the next annual  meeting or until the  election of
their respective  successors.  Votes were cast as follows:  2,186,457 votes were
cast for each of the aforesaid nominees; 28,534 votes were withheld.

         Also during the annual meeting, 1,059,137 shares were voted in favor of
a reverse split of the Company's outstanding shares on a 1 for 3 basis; however,
1,144,854  shares were voted against the split, and 11,000 shares abstained from
voting; thus, the proposal to reverse split the shares was not approved.

                                     PART II

ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS

         The  Company's  Units were quoted on the SmallCap  Market of the Nasdaq
Stock Market until April 7, 1997,  at which time Nasdaq  delisted the  Company's
securities.  The Company's Units are currently quoted on the OTC Bulletin Board.
The following table sets forth representative high and low closing bid quotes as
reported by a market maker for the  Company's  Units during the period August 1,
1996 through June 10, 1997. Bid quotations  reflect prices between  dealers,  do
not include resale mark-ups,  mark-downs,  or other fees or commissions,  and do
not necessarily represent actual transactions.
<TABLE>
<CAPTION>

                                                                      Units
Calendar Period                                                        Low      High

<S>                                                                    <C>      <C>
08/01/96 - 09/30/96                                                    1        11 3/4
10/01/96 - 12/31/96                                                      1/4    2
01/01/97 - 03/31/97                                                      3/16   7/8
04/01/97 - 04/07/97(1)                                                  11/16   11/16
04/08/97 - 06/10/97(1)                                                   1/4    3/8
</TABLE>


(1)  Effective  April  7,  1997,  Nasdaq  delisted  the  Company's   securities;
therefore,  same have not been traded on Nasdaq since said date.  As of April 8,
1997, the Company's securities have been traded on the OTC Bulletin Board.

         Each Warrant entitles the registered holder thereof to purchase, at any
time during the period commencing on the separation date of the units, one share
of Common Stock at a price of $5.25 per share,  for a period of five years.  The
Warrants are redeemable by the Company at any time, commencing on the separation
date, upon 30 days' notice at a redemption  price of $.05 per Warrant,  provided
that the closing bid  quotation of the Common Stock for at least 30  consecutive
trading  days  ending on the  third  day prior to the date on which the  Company
gives notice has been at least 170% of the exercise  price of the Warrants being
redeemed.






<PAGE>
         As of June 9, 1997,  there  were 83 holders of record of the  Company's
Common Stock,  although the Company  believes that there are  approximately  500
additional  beneficial  owners of shares of Common Stock held in street name. As
of June 10, 1997, the number of outstanding shares of the Company's Common Stock
was 2,512,465.

ITEM 6.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS

Results of Operations

         During the year ended March 31,  1997,  revenues  of the  Company  were
$949,910 as compared  with $897,522  during the year ended March 31, 1996.  This
increase of $52,388  (or 5.8%) can be  attributed  to an  increase in  operating
revenues which resulted from the introduction of new attractions and programs at
the Staten  Island Fun  Bubble.  This  increase  was the result of a $66,525 (or
9.8%)  increase  in  operating  revenues  and a $14,137  (or 6.4%)  decrease  in
merchandise  revenues from the same period ended March 31, 1996. The increase in
operating  revenues is due to the  introduction of three new Fun Bubble programs
(Summer Day Camp,  After School  Program,  and Little Miss Fun Bubble  Pageant).
These  programs  started in the second  quarter of fiscal 1996 and brought  more
children  into the facility on a daily  basis.  The  programs  provided  further
exposure to the Company's already established  programs and generated additional
revenue on their own.  The  decrease  in  merchandise  revenues  was caused by a
decrease in goods sold and the costs  associated with the Company's  giving away
of merchandise as prizes.

         Operating expenses for the twelve months ended March 31, 1997 increased
by $52,258 (or 5.8%) as compared to the same period ended March 31,  1996.  This
increase was primarily caused by increased costs including new staffing salaries
for those employed at the new locations and additional  costs resulting from the
implementation of the three aforementioned new programs.

         Selling,   general,  and  administrative  expenses  also  increased  to
$436,693  (or by 134.2%) for the twelve  months ended March 31, 1997 as compared
to the same  period  ended  March 31,  1996.  This  increase  is due to  certain
marketing  expenses and professional  fees incurred by the Company in its search
for potential new sites in the Tri-State  area, in Canada,  and in China,  which
expenses and fees  aggregated  approximately  $130,000.  The Company now has the
corporate  overhead  in  place  which  will  enable  it  to  support  additional
facilities.

         Cost of  merchandise  sold  amounted to 67.5% of  merchandise  revenues
during the twelve  months ended March 31, 1997 as compared to 61.8% for the same
period ended March 31, 1996.  Cost of  merchandise  sold varies based on product
mix and value discounts earned.

         During the twelve months ended March 31, 1997,  the Company  incurred a
net loss of  $509,693  (or $0.21 per  share)  as  compared  with the net loss of
$344,077 (or $0.19 per share) during the comparable period ended March 31, 1996.
The primary  reason for the  increase in the net loss and net loss per share was
an increase in operating expenses resulting from the




<PAGE>
Company's  search for potential new sites, its  implementation  of new programs,
and an increase in  corporate  expenses  for the twelve month period ended March
31,  1997,  as compared to the  comparable  twelve  month period ended March 31,
1996.

Financial Condition

         At March 31, 1997,  the Company had working  capital of $2,141,599  and
shareholders' equity of $3,186,284.

         During the  twelve  months  ended  March 31,  1997,  the  Company  used
$564,777 in cash used for  operating  activities  as compared  with $92,654 cash
used for operating  activities  during the comparable  twelve month period ended
March 31,1996. The increase of $472,123 is primarily due to expenses incurred in
connection  with the Company's  search for new sites in the  Tri-State  area, in
Canada,  and in China,  a decrease in accounts  payable,  and accrued  officers'
compensation.  The Company  acquired fixed assets of $303,328 and $87,191 during
the twelve months ended March 31, 1997 and 1996, respectively. Cash was provided
by financing  activities  of $226,032  during the twelve  months ended March 31,
1996 and $3,015,717 during the twelve months ended March 31, 1997.

New Accounting Pronouncement:

         In February  1997,  the  Financial  Accounting  Standards  Board issued
Statement of Financial  Accounting Standards ("SFAS") No. 128 Earnings Per Share
("EPS"). SFAS No. 128 requires all companies to present "basic" EPS and, if they
have a complex capital structure, "diluted" EPS. Under SFAS No. 128, "basic" EPS
is computed by dividing income  (adjusted for any preferred stock  dividends) by
the weighted  average  number of common  shares  outstanding  during the period.
"Diluted" EPS is computed by dividing  income  (adjusted for any preferred stock
or convertible stock dividends and any potential income or loss from convertible
securities) by the weighted average number of common shares  outstanding  during
the period  plus the number of  additional  common  shares  that would have been
outstanding if any dilutive potential common stock had been issued. The issuance
of  antidilutive  potential  common  stock  should  not  be  considered  in  the
calculation.  In addition,  SFAS No. 128 requires certain additional disclosures
relating to EPS. SFAS No. 128 is effective for financial  statements  issued for
periods ending after December 15, 1997.  Thus, the Company  expects to adopt the
provisions of this statement in fiscal year 1998. Management does not expect the
adoption of this  pronouncement  to have a  significant  impact on the Company's
financial statements.

ITEM 7.           FINANCIAL STATEMENTS

         See attached financial statements.




<PAGE>
ITEM 8.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                  ON ACCOUNTING AND FINANCIAL DISCLOSURE

         Not Applicable

                                    PART III

ITEM 9.           DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
                  CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
                  OF THE EXCHANGE ACT

Executive Officers and Directors

         The executive Officers and Directors of the Company are as follows:
<TABLE>
<CAPTION>

         NAME                               AGE      POSITION

<S>                                         <C>      <C>                                            
         Daniel Catalfumo                   40       President, Chief Executive Officer,
                                                     and Director

         Richard Rosso                      40       Vice President, Secretary,
                                                     Treasurer, and Director

         Daniel Buchanan                    51       Director
</TABLE>


     All Directors hold office until the next annual meeting of  stockholders or
until their  successors are duly elected and qualified.  The Executive  Officers
are elected  annually by the Board of Directors,  serve at the discretion of the
Board of Directors,  and hold office until their successors are duly elected and
qualified.  Vacancies on the Board of Directors  may be filled by the  remaining
Directors.

     Daniel Catalfumo has been the President and a Director of the Company since
its inception in 1993.  From 1982 to November 1994,  Mr.  Catalfumo was the sole
shareholder,  Officer, and Director of Professional Tile Contracting Co., a tile
contracting company located in Brooklyn, New York.

     Richard  Rosso  is Mr.  Catalfumo's  uncle.  He  has  been  the  Secretary,
Treasurer,  and a Director of the Company since its inception in 1993. He became
the Vice President of the Company in April 1997. From 1983 to November 1994, Mr.
Rosso was the owner of Dynamic  Dental Labs located in Brooklyn,  New York.  Mr.
Rosso operated Dynamic Dental Labs, which serviced over 1,000 area dentists, for
over ten years.

     Daniel Buchanan was engaged as a consultant to the Company and elected as a
Director in December 1995.  Since 1990,  Mr.  Buchanan has been the President of
Delta Play Ltd., a




<PAGE>
Canadian Corporation which manufactures children's play equipment, including the
soft-sculptured modular foam play mazes used by the Company.

         As  permitted  under  the  New  York  Business  Corporations  Law,  the
Company's Certificate of Incorporation  eliminates the personal liability of the
Directors to the Company or any of its  shareholders for damages for breaches of
their  fiduciary  duties  as  Directors.  As a result of the  inclusion  of such
provision,  stockholders may be unable to recover damages against  Directors for
negligent  or  grossly  negligent  actions  which  Directors  may  take  or  for
Directors'  actions which violate their fiduciary duties.  The inclusion of this
provision  in  the  Company's   Certificate  of  Incorporation  may  reduce  the
likelihood  of  derivative  litigation  against  Directors  and  other  types of
shareholder litigation.

Compliance with Section 16(a) of the Exchange Act

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires the Company's Officers, Directors, and any persons who beneficially own
more  than ten (10%)  percent  of a  registered  class of the  Company's  equity
securities to file reports of securities ownership and changes in such ownership
with the Securities and Exchange Commission ("SEC").  Officers,  Directors,  and
greater  than  ten  percent   beneficial  owners  also  are  required  by  rules
promulgated  by the SEC to furnish the Company with copies of all Section  16(a)
forms they file.  No person  who,  during the year ended March 31,  1997,  was a
Director, Officer, or beneficial owner of more than ten percent of the Company's
Common Stock (which is the only class of  securities  of the Company  registered
under  Section 12 of the  Securities  Exchange Act of 1934 ("the Act") failed to
file on a timely basis reports required by Section 16 of the Act during the most
recent  fiscal  year or prior  years.  The  foregoing  is based  solely upon the
Company's  review,  during the most recent  fiscal year, of (i) Forms 3 and 4 as
furnished to the Company  under Rule  16a-3(d)  under the Act;  (ii) Forms 5 and
amendments  thereto  furnished  to the Company  with  respect to its most recent
fiscal  year;  and (iii) any  representation  received by the  Company  from any
reporting person that no Form 5 is required, except as described herein.

ITEM 10.  EXECUTIVE COMPENSATION

Summary of Cash and Certain Other Compensation

         The following  provides  certain  information  concerning  all Plan and
Non-Plan (as defined in Item 402 (a)(6) of Regulation S-B) compensation  awarded
or paid by the Company during the years ended March 31, 1997,  1996, and 1995 to
each of the named Executive Officers of the Company.



<PAGE>
<TABLE>
<CAPTION>


                           Summary Compensation Table
                               Annual Compensation

                                                                                               Shares
Name and Principal           Year End                                         Other Annual     Underlying
Position                     March 31         Salary($)       Bonus($)        Compensation     Options
-----------------------      --------         ---------       --------        ------------     -------

<S>                          <C>              <C>             <C>             <C>              <C>      
Daniel Catalfumo             1997             110,000         $1,000 (1)      $12,000 (2)      30,000(3)
 President and               1996             75,489
 Director                    1995             15,235

Richard Rosso                1997             110,000         $1,000 (1)      $12,000 (2)      30,000(3)
 Vice President, Sec.,       1996             86,553
  Treas., and Director       1995             15,235
--------------------------
</TABLE>

(1)      In  December  1996,  the  Company  issued a $1,000  cash  bonus to each
         Officer.  The  Company  did not meet  the  financial  requirements  for
         bonuses to be issued under their employment agreements.

(2)      The Company leases automobiles, at approximately $1,000 per month for 
         Messrs. Catalfumo and Rosso.

(3)      In December  1996,  the Company  granted  Messrs.  Catalfumo  and Rosso
         options each to purchase 5,000 shares of the Company's  Common Stock at
         an  exercise  price of $0.62 per  share.  In March  1997,  the  Company
         granted  Messrs.  Catalfumo and Rosso  options each to purchase  25,000
         shares of the Company's  Common Stock at an exercise price of $0.69 per
         share.
<TABLE>
<CAPTION>

                                    OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                                (Individual Grants)

====================================================================================================================================

                                            Individual Grants
------------------------------------------------------------------------------------------------------------------------------------

(a)                              (b)                           (c)                      (d)                     (e)

                                                               % of Total
                                 # of Securities               Options/SAR'
                                 underlying                    s Granted to             Exercise or
                                 Options/SAR's                 Employees in             Base
                                 Granted (1)                    Fiscal Year             Price ($/SH)
Name                                                                                                            Expiration
                                                                                                                Date
------------------------------------------------------------------------------------------------------------------------------------

<S>                               <C>                          <C>                      <C>                      <C>   
Richard Rosso                     25,000                       50%                      $.69                     03/31/02
                                  5,000                                                 $.62                     12/30/01
===================================================================================================================================

Daniel Catalfumo                  25,000                       50%                      $.69                     03/31/02
                                  5,000                                                 $.62                     12/30/01
====================================================================================================================================
</TABLE>


         The following table contains  information  with respect to employees of
the Corporation concerning options held as of March 31, 1997.
<PAGE>
<TABLE>
<CAPTION>

               AGGREGATED OPTION/SAR EXERCISE IN LAST FISCAL YEAR
                          AND FY-END OPTION/SAR VALUES

====================================================================================================================================

(a)                              (b)                    (c)                      (d)                       (e)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                           Value of
                                                                                 Number of                 Unexercised
                                                                                 Unexercised               In-The-Money
                                                                                 Options/SAR's             Options/SAR's
                                 Shares                                          at FY-End (#)             at FY-End ($)
                                 Acquired on            Value                    Exerciseable/             Exerciseable/
Name                             Exercise (#)           Realized ($)             Unexerciseable            Unexerciseable (1)
----                             ------------           ------------             --------------            ------------------

------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                     <C>    
                                                                                 25,000/0                  0/0
Richard Rosso                          -                        -                  5,000/0                 350/0
====================================================================================================================================
------------------------------------------------------------------------------------------------------------------------------------
                                                                                 25,000/0                  0/0
Daniel Catalfumo                       -                        -                  5,000/0                 350/0
====================================================================================================================================
</TABLE>


     (1) Based upon the  closing  price for the Common  Stock on March 31,  1997
($.69), as reported by a market maker.

Employment and Consulting Agreements

         In April 1995, the Company entered into employment agreements with both
of its Officers,  Mr.  Catalfumo and Mr. Rosso.  Such Officers are employed full
time by the Company and pursuant to the terms of their agreements, shall receive
compensation at a rate of $100,000 annually,  with yearly escalations during the
term of the  agreement.  The  agreements are of five year duration and expire in
April 2000. Pursuant to the terms of the agreements, Messrs. Catalfumo and Rosso
are to receive yearly bonuses in an amount equal to (i) five percent (5%) of the
Company's first $200,000 of after-tax profit; (ii) seven and one half percent (7
1/2%) of the Company's next $200,000 to $400,000 of after-tax profit;  and (iii)
ten percent (10%) of any after-tax profit over $400,000.

         In  December  1995,  the  Company  entered  into a two year  consulting
agreement with Mr. Buchanan pursuant to which Mr. Buchanan agreed to provide the
Company with  consulting  and  advisory  services in  locating,  designing,  and
building  additional  Fun Bubble  facilities  and in informing the Company as to
changes and innovations in the children's  entertainment  industry.  Pursuant to
the terms of the consulting  agreement,  the Company issued Mr.  Buchanan 15,000
restricted  shares of Common  Stock under its 1995 Senior  Management  Incentive
Plan. As of June 30, 1997, all shares are fully vested.

1995 Senior Management Incentive Plan

         In February 1995, the Board of Directors  adopted the Senior Management
Incentive  Plan  ("the  Management  Plan"),  which was  adopted  by  shareholder
consent.  The Management  Plan provides for the issuance of up to 150,000 shares
of the Corporation's Common Stock in




<PAGE>
connection with the issuance of stock options and other stock purchase rights to
executive Officers and other key employees of the Company.

         The  adoption of the  Management  Plan was  prompted  by the  Company's
desire (i) to attract  and retain  qualified  personnel,  whose  performance  is
expected to have a  substantial  impact on the  Company's  long-term  profit and
growth  potential,  by  encouraging  those  persons  to  acquire  equity  in the
Corporation; and (ii) to provide the Board with sufficient flexibility regarding
the forms of incentive  compensation which the Company will have at its disposal
in  rewarding  executive  Officers,  key  employees,   and  consultants  without
unnecessarily  depleting the Company's  cash reserves.  The  Management  Plan is
designed to augment the Company's existing compensation programs and is intended
to enable the Company to offer  executives,  key  employees,  and  consultants a
personal interest in the Company's growth and success through the grant of stock
options and/or other rights pursuant to the Management  Plan. It is contemplated
that only those executive  management  employees  (generally the Chairman of the
Board,  Vice  Chairman,   Chief  Executive  Officer,  Chief  Operating  Officer,
President,  and Vice President of the Company),  key employees,  and consultants
who perform  services of special  importance  to the Company will be eligible to
receive  compensation  under the  Management  Plan.  As of the date hereof,  the
Company's Officers and Directors number only three:  Messrs.  Catalfumo,  Rosso,
and Buchanan.

         A total of  150,000  shares of Common  Stock  have  been  reserved  for
issuance  under the  Management  Plan.  Pursuant to the terms of his  consulting
agreement with the Company, Mr. Buchanan received 15,000 restricted shares under
the  Management  Plan,  all of which  shares have vested.  Also  pursuant to the
Management Plan,  options to purchase an aggregate of 30,000 shares were granted
to each of Messrs. Catalfumo and Rosso. It is anticipated that awards made under
the Management Plan will be subject to three year vesting periods,  although the
vesting periods are subject to the discretion of the Administrator.

         Unless otherwise  indicated,  the Management Plan is to be administered
by the Board of Directors  or a committee  of the Board,  if such a committee is
appointed  for this  purpose (the Board or such  committee,  as the case may be,
shall be  referred  to in the  following  description  as "the  Administrator").
Subject to the specific  provisions of the Management  Plan,  the  Administrator
will have the discretion to determine (i) the recipients of the awards; (ii) the
nature of the awards to be granted; (iii) the dates such awards will be granted;
(iv) the terms and conditions of the awards;  and (v) the  interpretation of the
Management  Plan,  except that any award  granted to any employee of the Company
who is also a Director of the  Company  shall also be subject - in the event the
persons  serving as members of the  Administrator  of the Management Plan at the
time such  award is  proposed  to be  granted do not  satisfy  the  requirements
regarding the participation of  "disinterested  persons" set forth in Rule 16b-3
("Rule  16b-3")  promulgated  under the  Exchange  Act - to the  approval  of an
auxiliary  committee  consisting  of not  less  than  two  individuals  who  are
considered  "disinterested  persons" as defined under Rule 16b-3. As of the date
hereof,  the Company  has not yet  determined  who will serve on such  auxiliary
committee, if one is required.

     The Management  Plan  generally  provides  that,  unless the  Administrator
determines




<PAGE>
otherwise,  each option or right granted shall become  exerciseable in full upon
certain  "change of control"  events as described  in the  Management  Plan,  or
subject  to any  right or option  granted  under the  Management  Plan  (through
merger,  consolidation,   reorganization,   recapitalization,   stock  dividend,
dividend  in  property  other  than cash,  stock  split,  liquidating  dividend,
combination of shares,  exchange of shares,  change in corporate  structure,  or
otherwise),  the Administrator  will make appropriate  adjustments to such plans
and the  classes,  number of  shares,  and price per share of stock  subject  to
outstanding rights or options.  Generally, the Management Plan may be amended by
action of the Board of  Directors,  except  that any  amendment  which (i) would
increase  the total  number of shares  subject  to such  plan;  (ii)  extend the
duration  of such plan;  (iii)  materially  increase  the  benefits  accruing to
participants  under such plan; or (iv) change the category of persons who can be
eligible for awards under such plan, must be approved by the affirmative vote of
a majority of the  shareholders  entitled to vote. The  Management  Plan permits
awards to be made thereunder until November 2004.

         Directors  who are not  otherwise  employed by the Company  will not be
eligible for  participation in the Management Plan. The Management Plan provides
for  four  types  of  awards:  stock  options,  incentive  stock  rights,  stock
appreciation   rights  (including  limited  stock  appreciation   rights),   and
restricted stock purchase agreements.
<PAGE>
ITEM 11.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT

         The  following  table sets forth certain  information  at June 10, 1997
with respect to the beneficial ownership of Common Stock held by (i) each person
known by the  Company  to be the owner of 5% or more of the  outstanding  Common
Stock;  (ii) by each  Director;  and (iii) by all  Officers  and  Directors as a
group. Except as otherwise indicated below, each named beneficial owner has sole
voting and investment power with respect to the shares of Common Stock listed:
<TABLE>
<CAPTION>


Title             Name and Address                                     Amount and Nature                           Percentage of
of Class          of Beneficial Owner                                  of Beneficial Ownership                     Class (1)
--------          -------------------                                  -----------------------                     ---------

<S>               <C>                                                  <C>                                         <C>  
common            Daniel Catalfumo (2)                                 572,365                                     22.5%
stock             c/o Fun Tyme Concepts, Inc.
                  290 Wild Avenue
                  Staten Island, New York 10314

common            Richard Rosso (3)                                    427,278                                     16.8%
stock             c/o Fun Tyme Concepts, Inc.
                  290 Wild Avenue
                  Staten Island, New York 10314

common            Daniel Buchanan (4)                                  15,000                                      *
stock             c/o Fun Tyme Concepts, Inc.
                  290 Wild Avenue
                  Staten Island, New York 10314

common            Imafina, S.A. (5)                                    500,000                                     18.1%
stock             Route de Beaumont
                  4 case 952 ch 1700
                  Fribourg, Switzerland

common            All Officers and Directors                           1,014,643                                   39.4%
stock             as a group (3 persons) (1)-(4)(9)
---------------------------------------------------------------------
</TABLE>
<PAGE>
*        Less than 1%

     (1) Includes a reduction in the number of shares outstanding from 2,676,000
to 2,516,000 due to the Company's buyback, the return of such shares to treasury
is currently  being  undertaken.  From February  through April 1997, the Company
repurchased  an aggregate of 163,535  shares of its Common Stock at a total cost
of $113,660.01. See "Certain Relationships and Related Transactions" and "Recent
Developments."

     (2) Includes  (i) an  aggregate of 151,365  shares of Common Stock owned by
members of Mr. Catalfumo's family, of which Mr. Catalfumo  disclaims  beneficial
ownership;   (ii)  5,000  shares   underlying   options   presently  vested  and
exerciseable;  and (iii) 25,000 shares  underlying  options presently vested and
exerciseable.

     (3) Includes (i) 6,278 shares of Common Stock owned by Mr. Rosso's parents,
of which Mr. Rosso disclaims beneficial ownership;  (ii) 5,000 shares underlying
options  presently vested and  exerciseable;  and (iii) 25,000 shares underlying
options presently vested and exerciseable.

     (4) Mr. Buchanan and the Company entered into a restrictive share agreement
whereby  3,750 shares  vested 30 days from date of grant and 3,750 shares vested
six  months  from the  execution  of the  agreement  and each six  month  period
thereafter  until the shares were fully vested.  All shares are vested as of the
date hereof.

     (5) Includes  250,000  shares of Common Stock and 250,000  shares of Common
Stock issuable upon the exercise of outstanding warrants.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         In May  1995,  prior to the  19,000  to 1 stock  split,  the  Company's
initial  investors,  prior  to the  Company's  IPO,  returned  to the  Company's
treasury an aggregate of 1,767,000 or 75% of the shares of Common Stock owned by
such  shareholders,  on a pro-rata  basis,  and retained an aggregate of 589,000
shares of Common Stock. As compensation for the return of their shares of Common
Stock, the investors received "piggyback" registration rights. At the same time,
each Officer returned 361,000 shares of Common Stock to the Company's  treasury,
for no remuneration or compensation.  In connection with the return of a portion
of their shares of Common Stock held by the  investors,  the Company  recorded a
compensation  charge of  $229,500,  which  charge was based on the  increase  in
percentage ownership of the Company received by the Officers.

     In July  1995,  the  Company  issued a  promissory  note of  $6,500  to Mr.
Catalfumo. This




<PAGE>
note  accrued  interest at the rate of 18% per annum.  During this  period,  Mr.
Catalfumo  advanced an additional  $5,000 to the Company,  which advance did not
accrue interest.  In addition,  the Company issued notes in the amount of $6,500
and $17,000 to Sal  Catalfumo  and Frank  Catalfumo,  respectively,  which notes
accrued  interest  at the  rate of 18% per  annum.  All of these  notes  and the
advance from Mr. Catalfumo were repaid in August 1995. The proceeds of the loans
were utilized for working capital.

         In  December  1995,  the  Company  entered  into a two year  consulting
agreement with Mr. Buchanan pursuant to which Mr. Buchanan agreed to provide the
Company with  consulting  and  advisory  services in  locating,  designing,  and
building  additional  Fun Bubble  facilities  and in informing the Company as to
changes and innovations in the children's  entertainment  industry.  Pursuant to
the terms of the consulting  agreement,  the Company issued Mr.  Buchanan 15,000
restricted  shares of Common  Stock under its 1995 Senior  Management  Incentive
Plan. As of June 30, 1997, all shares are fully vested.

         The Company issued three  promissory  notes in the aggregate  amount of
$200,000,  two notes in the  aggregate  principal  amount of $100,000 in January
1996,  and one note in the  principal  amount of $100,000 in  February,  1996 to
unaffiliated parties, bearing interest at 18% per annum. The principal amount of
each note was payable  together with accrued  interest on the earlier of July 1,
1997 or the  consummation of an IPO of the Company's  securities.  Initially the
notes matured on the earlier of six months from issuance or the  consummation of
an initial public offering of the Company's  securities.  The Company  requested
that holders of the notes amend the term of maturity of the notes to the earlier
of July 1997 and the consummation of an initial public  offering.  The two notes
issued in January 1996 were personally guaranteed by the Company's Officers. The
notes were repaid from the proceeds of the Company's IPO.

         In December  1996,  the Company  granted  Messrs.  Catalfumo  and Rosso
options  each to  purchase  5,000  shares of the  Company's  Common  Stock at an
exercise  price of $0.62 per share.  In  addition,  the  Company  issued  $1,000
bonuses to each of Messrs.  Rosso and  Catalfumo.  In March  1997,  the  Company
granted  Messrs.  Catalfumo and Rosso each options to purchase  25,000 shares of
the Company's Common Stock at an exercise price of $0.69 per share. Both sets of
options are  exerciseable  for a period of five years  commencing on the date of
grant.

         From February through April 1997, the Company  repurchased an aggregate
of 163,535 shares of its Common Stock at a total cost of $113,660.01. The shares
are being returned to treasury as authorized but unissued.

     For information on the Company's compensation arrangements, see "Employment
and Consulting Agreements."



<PAGE>
                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

         All exhibits  except those  designated  with an asterisk (*), which are
filed  herewith,  have  previously  been filed with the Commission in connection
with  the  Company's   Registration  Statement  on  form  SB-2  under  File  No.
33-80931-NY,  pursuant to 17 C.F.R 230.411,  and are  incorporated  by reference
herein.
<TABLE>
<CAPTION>

<S>               <C>  
 3.1     -        Certificate of Incorporation of the Company filed April 19, 1993.
 3.2     -        Certificate of Amendment to the Certificate of Incorporation of the Company filed
                  May 19, 1995.
 3.2(a)  -        Certificate of Amendment to the Certificate of Incorporation of the Company
                  dated February 7, 1996.
 3.3     -        By-Laws of the Company.
 4.1     -        Specimen of Common Stock Certificate.
 4.2     -        Specimen of Common Stock Purchase Warrant Certificate.
 4.5     -        Form of Common Stock Purchase Warrant Agreement.
10.2     -        Employment Agreement of Daniel Catalfumo.
10.3     -        Employment Agreement of Richard Rosso.
10.4     -        Lease Agreement and amendments one through four thereto, between the
                  Company and Block 2467 Lot 1 Associates.
10.5     -        The Company's Senior Management Incentive Plan.
10.7     -        Form of Lock-up Agreement.
         -        Equipment  lease  with  Delta  Play  Ltd.,  and the  guarantee
                  executed by Daniel Catalfumo and Richard Rosso.
10.12    -        Consulting Agreement between the Company and Dan Buchanan.
10.13    -        Restricted Share Agreement between the Company and Dan Buchanan.
         -        Promissory note executed by Daniel Catalfumo and Richard Rosso
                  issued to Delta Play Ltd., for equipment purchased.
         -        Lease  Agreement by and between  Manufacturer's  Lease Company
                  and the  Company  and  personal  guarantees  of the  Company's
                  officers.
10.3*    -        Lease Agreement for East Brunswick Fun Bubble and
                  Amendment thereto.
10.4*    -        Lease Agreement for Edmonton Canada Fun Bubble.
21.0*    -        List of all Company Subsidiaries.
22.0*    -        Inspector of Elections Report for April 24,1997 Annual Meeting.
27.0*    -        Financial Data Schedule.
</TABLE>



<PAGE>
                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized this 11th day of July 1997.


                                                         FUN TYME CONCEPTS, INC.


                                                        By: \s\ Daniel Catalfumo
                                                                Daniel Catalfumo
                                                          President and Director




         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the dates indicated.

<TABLE>
<CAPTION>

<S>                                                  <C>                                                          <C>
\s\ Daniel Catalfumo                                 Chief Executive Officer                                      07/11/97
Daniel Catalfumo                                     President,and Director                                       Date


\s\ Richard Rosso                                    Vice President, Secretary, Treasurer,                        07/11/97
Richard Rosso                                        and Director                                                 Date


\s\ Daniel Buchanan                                  Director                                                     07/11/97
Daniel Buchanan                                                                                                   Date
</TABLE>



<PAGE>

                         REPORT OF INDEPENDENT AUDITORS



Board of Directors
Fun Tyme Concepts, Inc.
Staten Island, New York


         We have audited the accompanying consolidated balance sheet of Fun Tyme
Concepts,   Inc.  and  subsidiaries  as  at  March  31,  1997  and  the  related
consolidated statements of operations,  changes in stockholders' equity and cash
flows for each of the years in the two-year  period then ended.  These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated  financial statements enumerated above
present fairly,  in all material  respects,  the financial  position of Fun Tyme
Concepts,  Inc.  and  subsidiaries  at March  31,  1997 and the  results  of its
operations and its cash flows for each of the years in the two-year  period then
ended in conformity with generally accepted accounting principles.



Richard A. Eisner & Company, LLP

New York, New York
April 30, 1997

With respect to Notes A and D
May 21, 1997


                                       F-1


<PAGE>
<TABLE>
<CAPTION>

                             FUN TYME CONCEPTS, INC.

                           CONSOLIDATED BALANCE SHEET

                              AS AT MARCH 31, 1997


                                   A S S E T S

Current assets:
<S>                                                                 <C>        
   Cash and cash equivalents ....................................   $ 2,155,460
   Inventories ..................................................        32,020
   Prepaid expenses and other current assets ....................        92,194
   Due from officer .............................................         5,000
                                                                    -----------

          Total current assets ..................................     2,284,674

Property and equipment, net .....................................     1,044,879
Other assets ....................................................        84,072
                                                                    -----------


          T O T A L .............................................   $ 3,413,625
                                                                    ===========

                              L I A B I L I T I E S

Current liabilities:
   Accounts payable and accrued expenses ........................   $    78,093
   Customer deposits ............................................        16,030
   Current portion of capital lease obligation ..................        48,952
                                                                    -----------

          Total current liabilities .............................       143,075

Capital lease obligation (less current portion)  ................        60,583
Deferred rent ...................................................        23,683
                                                                    -----------

          Total liabilities .....................................       227,341
                                                                    -----------

                              STOCKHOLDERS' EQUITY

Preferred stock - par value $.01, authorized 500,000
   shares, none outstanding
Common stock - par value $.001, authorized 10,000,000
   shares, 2,676,000 shares issued and outstanding ..............         2,676
Additional paid-in capital ......................................     4,033,298
Deficit .........................................................      (760,047)
Treasury stock, at cost - 133,045 shares ........................       (89,643)
                                                                    -----------

          Total stockholders' equity ............................     3,186,284
                                                                    -----------

          T O T A L .............................................   $ 3,413,625
                                                                    ===========
</TABLE>

                            The accompanying notes to
                           financial statements are an
                              integral part hereof.


                                       F-2


<PAGE>
<TABLE>
<CAPTION>

                             FUN TYME CONCEPTS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS


                                   Year Ended
                                                               March 31,                                                            

                                                            1997           1996

<S>                                                  <C>            <C>        
Operating revenue ................................   $   744,196    $   677,671

Merchandise revenue ..............................       205,714        219,851
                                                     -----------    -----------

          Total revenues .........................       949,910        897,522

Operating expenses ...............................      (944,906)      (892,648)

Cost of merchandise sold .........................      (138,790)      (135,784)

Selling, general and administrative expenses .....      (436,693)      (186,463)
                                                     -----------    -----------

(Loss) from operations ...........................      (570,479)      (317,373)

Other income (expense):
   Other (expense)  ..............................        (4,930)

   Interest income ...............................        88,403          2,069

   Interest (expense) ............................       (11,892)       (25,842)
                                                     -----------    -----------

(Loss) before income taxes .......................      (498,898)      (341,146)

Provision for income taxes:
   Current tax expense ...........................        10,795          2,931
                                                     -----------    -----------


NET (LOSS)  ......................................   $  (509,693)   $  (344,077)
                                                     ===========    ===========


Net (loss) per share .............................   $     (0.21)   $      (.19)
                                                     ===========    ===========


Weighted average common shares and equivalents ...     2,410,795      1,816,195
                                                     ===========    ===========
</TABLE>

                            The accompanying notes to
                           financial statements are an
                              integral part hereof.


                                       F-3


<PAGE>
<TABLE>
<CAPTION>
                             FUN TYME CONCEPTS, INC.

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


                          Preferred Stock Common Stock

                                           Number                 Number
                                           of .                   of        Additional
                                           Shares     Par ($.01)  Shares    par $.001)    Paid-in                 Treasury
                                           Issued     Amount      Issued    Amount        Capital    (Deficit)    Stock    Total
 

<S>                                        <C>        <C>         <C>        <C>          <C>        <C>          <C>      <C>     
Balance - March 31, 1995 ..................                       1,361,000  $1,361       $1,132,541 $(420,090)            $713,812

Issuance of preferred stock ...............150,000    $1,500                              259,976                          261,476

Reclassification of S Corp. losses ........                                               (513,813)  513,813               - 0 -

Conversion of preferred stock .............(150,000)  (1,500)     500,000    500          1,000                            - 0 -

Issuance of shares under the 
management incentive plan .................                       15,000     15           52,485                           52,500

Net (loss) for the year ...................                                                          (344,077)             (344,077)

Balance - March 31, 1996 ..................- 0 -       - 0 -      1,876,000  1,876        932,189    (250,354)             683,711

Issuance of common stock ..................                       800,000    800          3,101,109                       3,101,909

Purchase of 133,045 shares ................                                                          $(89,643)              (89,643)

Net (loss) for the year ...................                                               (509,693)                        (509,693)

BALANCE - MARCH 31, 1997 ..................- 0 -      $- 0 -      2,676,000  $2,676       $4,033,298 $(760,047) $(89,643) $3,186,284
</TABLE>

                            The accompanying notes to
                           financial statements are an
                              integral part hereof.



                                       F-4


<PAGE>
<TABLE>
<CAPTION>

                             FUN TYME CONCEPTS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   Year Ended
                                                                                     March 31,
                                                                               1997          1996
Cash flows from operating activities:
<S>                                                                    <C>            <C>         
   Net (loss) ......................................................   $  (509,693)   $  (344,077)
   Adjustments to reconcile net (loss) to net
     cash (used in) operating activities:
       Compensation charge .........................................        52,500
       Depreciation and amortization ...............................       113,236         90,414
       (Increase) decrease in inventories ..........................       (17,285)         2,704
       (Increase) decrease due from officers .......................        (5,000)         6,156
       (Increase) decrease in prepaid expenses
         and other current assets ..................................       (64,559)         5,887
       (Decrease) increase in accounts payable .....................       (53,364)        54,549
       Increase in customer deposits ...............................         1,022          4,083
       Increase in deferred rent ...................................         1,123          4,873
       (Decrease) increase in deferred
         officers' compensation ....................................       (30,257)        30,257
                                                                       -----------    -----------

           Net cash (used in) operating
             activities ............................................      (564,777)       (92,654)
                                                                       -----------    -----------

Cash flows from investing activities:
   Acquisitions of fixed assets ....................................      (303,328)       (87,191)
   (Increase) in deposits ..........................................       (32,084)        (1,224)
   (Increase) in cash surrender value of
     officers' life insurance ......................................       (26,664)
                                                                                      -----------

           Net cash (used in) investing
             activities ............................................      (362,076)       (88,415)
                                                                       -----------    -----------

Cash flows from financing activities:
   Proceeds of issuance of preferred stock
     and warrants ..................................................       261,476
   Proceeds from issuance of common stock ..........................     3,328,242          8,300
   Proceeds of notes payable to stockholders .......................        35,000
   Proceeds (repayment) of notes payable ...........................      (200,000)       200,000
   Repayments of capital lease obligations .........................       (21,414)       (13,779)
   Repayments of notes payable to stockholders .....................        (1,468)       (61,132)
   Payment of deferred registration costs ..........................      (203,833)
   Purchase of treasury stock ......................................       (89,643)
                                                                                      -----------

           Net cash provided by financing
             activities ............................................     3,015,717        226,032
                                                                       -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS ..........................     2,088,864         44,963

Cash and cash equivalents - beginning of
   period ..........................................................        66,596         21,633
                                                                       -----------    -----------

CASH AND CASH EQUIVALENTS - END OF PERIOD ..........................   $ 2,155,460    $    66,596
                                                                       ===========    ===========

Supplemental schedule of noncash investing and financing activities:
     Equipment acquired by capital lease ...........................   $    64,870    $     4,524

Supplemental disclosures of cash flow information:
     Interest paid .................................................        11,892         19,877
     Taxes paid ....................................................        10,795          2,931
</TABLE>

   The accompanying notes to financial statements are an integral part hereof.

<PAGE>

(NOTE A) - The Company:

         Fun  Tyme  Concepts,   Inc.  (the  "Company")   operates  a  children's
entertainment  center in Staten  Island,  New York for children ages two through
twelve under the trade name "Fun Bubble,  Party/Play  Center".  The Company also
operates a summer day camp  program  during the  summer  months  which  includes
indoor and outdoor  activities  for children  ages three to fourteen.  As of May
1997,  the  Company  signed two leases for the opening of new  locations  one in
Edmonton, Canada and one in East Brunswick, N.J.

(NOTE B) - Summary of Significant Accounting Policies:

         [1]  Principles of consolidation:

                  The  consolidated  financial  statements  as of March 31, 1997
include  the  accounts of the Company  and its wholly  owned  subsidiaries.  All
significant intercompany transactions and accounts have been eliminated.

         [2]  Cash equivalents:

                  The Company considers all highly liquid investment instruments
purchased with a maturity of three months or less to be cash equivalents.

         [3]  Inventories:

                  Inventories  consist of food,  beverage and souvenir items for
sale at the "Fun  Bubble"  and are valued at the lower of cost,  on a  first-in,
first-out basis, or market.

         [4]  Property and equipment:

                  Property and equipment are stated at cost. Depreciation of the
respective  assets  is  computed  using  the  straight-line  method  over  their
estimated lives.  Leasehold  improvements are amortized using the  straight-line
method over the remaining life of the lease, including expected renewal options.

         [5]  Customer deposits:

                  Customer deposits for parties are recorded as liabilities when
received. Revenue is recognized when the event occurs.

         [6]  Advertising costs:

                  Advertising costs are charged to expense as incurred.


(continued)



<PAGE>

(NOTE B) - Summary of Significant Accounting Policies:  (continued)

         [7]  Income taxes:

                  The  Company,  initially,  had  elected  to be treated as an S
corporation  pursuant to Section 1362 of the  Internal  Revenue Code for federal
and state income tax purposes. As a result of this election,  the income of such
companies is generally taxed directly to the individual stockholders.  After the
issuance of preferred  stock in August 1995,  the Company became a C corporation
and adopted  Statement of Accounting  Standards No. 109,  "Accounting for Income
Taxes" which  requires the use of the liability  method of accounting for income
taxes.

                  Losses  incurred  while an S corporation  are not available as
tax loss  carryforwards to the C corporation  since the tax benefits were passed
through to the individual  stockholders.  S Corporation  accumulated losses from
inception  (April 1993) to August 1995 of $513,813 were  reclassified to paid-in
capital as a result of the change from an S corporation to a C corporation.

         [8]  Estimates:

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting periods. Actual results could differ from those estimates.

         [9]  Net loss per share:

                  Net loss per  share is  computed  using the  weighted  average
number of shares  outstanding  during the period.  In accordance with Securities
and Exchange  Commission  requirements,  common  shares issued during the twelve
month  period  prior to the  filing of the  initial  public  offering  have been
included  in the  calculation  as if they were  outstanding  for all  periods of
operations.

    [10]  Concentration of credit risk:

Financial  instruments  which  potentially  subject the  Company to  significant
concentrations of credit risk consist principally of temporary cash investments.
The Company places its temporary  cash  investments  with high credit  financial
institutions  and,  by policy,  limits the amount of credit  exposure to any one
financial institution.

    [11]  Stock based compensation:

                  During 1996,  the Company  implemented  Statement of Financial
Accounting Standards No. 123,  "Accounting for Stock-Based  Compensation" ("SFAS
No. 123").  The provisions of SFAS No. 123 allow companies to either expense the
estimated  fair value of stock  options or to continue  to follow the  intrinsic
value  method  set forth in APB  Opinion  25,  "Accounting  for Stock  Issued to
Employees"  ("APB 25") and disclose the pro forma  effects on net income  (loss)
had the fair value of the options been expensed. The Company elected to continue
to apply APB 25 in accounting


(continued)



<PAGE>
(NOTE B) - Summary of Significant Accounting Policies:  (continued)

for its stock option incentive plans.

    [12]  Recently issued accounting pronouncements:

                  In February 1997,  the Financial  Accounting  Standards  Board
issued  Statement  of Financial  Accounting  Standards  No. 128 , "Earnings  per
Share" ("SFAS 128").  SFAS 128 is effective for the Company's fiscal year ending
March 31,  1998.  The  Company  believes  that SFAS 128 will not have a material
impact on its financial statements.

(NOTE C) - Initial Public Offering:

         On August 15, 1996, the Company completed an initial public offering of
800,000 units for net proceeds of $3,101,909,  each unit comprising one share of
common  stock and one warrant to purchase one share of common stock at $5.25 per
share.  The securities  underlying the units became  separately  transferable in
October  1996. A portion of the proceeds was used to repay  promissory  notes of
$200,000 issued in January and February 1996 which bore interest at 18%.

(NOTE D) - New Facilities:

         In December 1996, the Company signed a lease  agreement for the opening
of a new location in East Brunswick, N.J. Through a wholly owned subsidiary, Fun
Tyme of East  Brunswick,  Inc.,  the  Company is  planning  to  construct a play
structure inside the leased building.

         In May 1997,  the Company  acquired  the assets of a former  children's
entertainment facility in Edmonton, Canada in a bankruptcy proceeding. Through a
wholly owned  subsidiary,  Fun Tyme of Edmonton,  Inc., the Company acquired the
assets for  approximately  $36,000 and entered into a lease  agreement  with the
landlord of the facility.

(NOTE E) - Property and Equipment:

         Property and equipment are summarized as follows:

                              Estimated
                              Useful              March 31,
                              Lives               1997

Building - air structure . . .16 years            $ 179,650
Equipment and autos under
capital lease . . . . . .     3-5 years           150,394
Equipment. . . . . . . . . . .5 years             425,291
Furniture and fixtures . . . .7 years             6,877
Leasehold improvements . . .  15-16 years         532,156

T o t a l. . . . . . .                            1,294,368

Accumulated depreciation and
amortization. . . . . . . . .                     249,489
                                                  ----------

B a l a n c e. . . . .                            $1,044,879
                                                  ==========


(continued)



<PAGE>

(NOTE F) - Prepaid Expenses and Other Current Assets:

         Prepaid expenses and other current assets consist of the following:

                  Prepaid insurance . . . . . . . .  $47,808
                  Other . . . . . . . . . . . . . .   44,386

                                                     $92,194


(NOTE G) - Other Assets:

         Other assets consist of the following at December 31, 1996:

                  Cash surrender value of officers'
                     life insurance (a) . . . . . .  $26,666
                  Deposits. . . . . . . . . . . . .   57,406

                                                     $84,072

         (a) The Company is the  beneficiary of life  insurance  policies on the
lives of the Company's two officers totaling $4,000,000.


(continued)



<PAGE>



(NOTE H) - Leasing Arrangements:

         Operating leases:

         The Company has operating leases for its children entertainment centers
expiring at various  dates  through  March 31, 2007,  some of which have renewal
options.  The  Company  is  responsible  for  property  taxes,  maintenance  and
insurance under the leases.

         Future minimum lease  payments,  including  expected  renewal  options,
under noncancelable operating lease agreements are as follows:

              Year Ending
               March 31,

              1998 . . . . . . . . . . . . . .  $   324,421
              1999 . . . . . . . . . . . . . .       341,744
              2000 . . . . . . . . . . . . . .       348,170
              2001 . . . . . . . . . . . . . .       355,874
              2002 . . . . . . . . . . . . . .       360,480
              Thereafter . . . . . . . . . . .     4,986,900
                                                  ----------

                        Total minimum lease
                           payments. . . . . .  $6,717,589

         Operating lease rent expense for each of the years ended March 31, 1997
and March 31, 1996 was $98,603.

         Pursuant to one of the Company's operating leases, rent expense charged
to  operations   differs  from  rent  paid  due  to  scheduled  rent  increases.
Accordingly,  the Company has recorded deferred rent payable of $23,683 at March
31, 1997.  Rent  expense is  calculated  by  allocating  total  rental  payments
including those  attributable  to scheduled rent  increases,  on a straight-line
basis, over the lease term.

         Capital leases:

         The  Company is  obligated  under  capital  leases for play  equipment,
computer equipment and autos. The leases require monthly payments through August
1999  and  have  interest  imputed  at  rates  from 7% to 28%.  The  leases  are
collateralized by the underlying assets.



(continued)



<PAGE>
(NOTE H) - Leasing Arrangements:  (continued)

         Capital leases:  (continued)

         Future  minimum lease payments  required under these lease  obligations
are as follows:

                  Year Ended
                   March 31,

              1998. . . . . . . . . . . . . .  $ 66,470
              1999. . . . . . . . . . . . . .    48,948
              2000. . . . . . . . . . . . . .    18,398
                                               --------

              Total minimum lease payments. .   133,816
              Less amount representing
                         interest . . . . . . .  24,281

              Present value of net minimum
                 lease payments . . . . . . .   109,535
              Less current portion. . . . . .    48,952
                                                 ------

              Long-term portion . . . . . . .    60,583
                                               ========


(NOTE I) - Related Party Transactions:

     [1]  The  President  of an  equipment  manufacturer,  who is the  principal
supplier of the Company's play  equipment,  was elected as a member of the Board
of Directors of the Company in December 1995. In addition,  the Company  entered
into a two-year consulting agreement with the aforementioned director to provide
the Company with  consulting  services.  Pursuant to the terms of the consulting
agreement the Company issued 15,000 restricted  shares of common stock,  subject
to a vesting schedule (see Note J).

     [2] Amounts due from an officer of the Company bear interest at 6%.


(NOTE J) - Stockholders' Equity:

         [1] In August 1995, the Company  received net proceeds of $261,476 from
the sale to one investor in a private offering of 10 units, each unit consisting
of a) warrants for the purchase of 150,000  common shares at $5.25 per share and
b) 15,000 shares of preferred stock; each share was convertible into 5 shares of
common stock.

                  In  December  1995,  the  holders  of  the  then   outstanding
convertible preferred stock converted 150,000 shares into 500,000 common shares,
in lieu of the 750,000 common



<PAGE>



shares to which they were entitled,  and returned 50,000  convertible  shares to
the Company's treasury.

[2] In February  1995, the Board of Directors  authorized the Senior  Management
Incentive  Plan which  provides for the grant of up to 150,000  shares of common
stock. In December 1995, the Company issued 15,000  restricted  shares of common
stock under its Senior  Management  Incentive  Plan,  valued at $3.50 per share,
whereby  3,750  shares vest 30 days from the date of grant and 3,750 shares vest
six  months  from the  execution  of the  agreement  and each  six-month  period
thereafter.

     The Company  applies APB 25 in  accounting  for  options  issued  under its
Senior  Management  Incentive  Plan and,  accordingly,  recognizes  compensation
expense for the difference between the fair value of the underlying common stock
and the  exercise  price of the  option  at the date of  grant.  The  effect  of
applying  SAS No.  123 to 1997 net loss,  as stated  below,  is not  necessarily
representative  of the effects on reported  net income or loss for future  years
due to, among other things,  (1) the vesting period of the stock options and (2)
the fair value of  additional  stock  options in future  years.  No options were
granted during the year ended March 31, 1996.

     If such  accounting  provisions  of SAS No.  123  were  applied,  then  the
Company's net loss and net loss per share would have been  $(513,793) and $(.21)
for the period  ended  March 31,  1997.  The fair value of the  options  granted
during 1997 are  estimated at $.07 on the date of grant using the  Black-Scholes
option-pricing  model  with  the  following  assumptions:   dividend  yield  0%,
volatility  of 75%,  risk free  interest  rate of 6.04% and expected life of two
years.

     Additional  information  with  respect to 1997  stock  option  activity  is
summarized as follows:


                                             Weighted-
                                             Average
                                             Exercise
                                        Shares         Price

Options granted during the year.        60,000         $.67
Outstanding and exerciseable as
of March 31, 1997 . . . . . .           60,000          .67

     All stock options  issued under the Senior  Management  Incentive  Plan are
exerciseable within five years from the date of grant.

     [3] In January 1997,  the Board of Directors of the Company  approved a buy
back of



<PAGE>



up to an  aggregate of $150,000 of its shares of common  stock.  As of March 31,
1997,  the  Company   repurchased   133,045  shares  of  its  common  stock  for
approximately $90,000.

     [4] The Company has 2,560,000  shares of common stock reserved for issuance
as follows:

Common stock purchase
warrants. . . . . . . . .          2,425,000
Senior management incentive
plan. . . . . . . . . . .          135,000
                                   -------
                                   2,560,000

(NOTE K) - Income Taxes:

         Deferred  tax assets  (liabilities)  at March 31,  1997 result from the
following:

                                       March 31,
                                            1997

Deferred rent ......................   $   7,850
Organization and deferred costs ....      27,674
Net operating loss carryforward ....     279,828
Depreciation and amortization ......     (22,049)
                                          -------
                                          293,303

Less valuation allowance ...........    (293,303)
                                         -------

Net deferred tax asset .............   $    - 0 -
                                          =======

         At March 31, 1997,  the Company had net  operating  loss  carryforwards
available of  approximately  $823,000  for federal  income tax  purposes,  which
expire at various  dates  through  2011.  Section  382 of the  Internal  Revenue
Service Code contains provisions which limit the loss carryforwards available if
significant changes occur in stockholder ownership interests. As a result of the
consummation  of the initial  public  offering  and  repurchase  of shares,  the
Company  may be  subject to such  limitations  on the  utilization  of the major
portion of its net operating losses.

         The Company's  deferred tax asset has been fully  reserved  because the
realization of such benefit could not be estimated.



<PAGE>
         The  differences  between the statutory  federal income tax rate of 34%
and the actual rate are as follows:


                                   Percent of
                                 Pre-Tax (Loss)
                                 From Operations
                              For the Period Ended
                                   March 31,
                               1997          1996

"Expected" tax (benefit) . . . (34%)         (34%)
Increase in taxes resulting
from:
S corporation losses for
which no tax benefit
has been provided . . .                      15%

Compensation charge . . .                     5%
Increase in valuation
reserve . . . . . . . .         34%          14%
Other . . . . . . . . . .        2%
                               ----
                                 2%           0%

(NOTE L) - Commitments and Contingencies:

         In April 1995, the Company entered into five year employment agreements
with the two  officers  which  provide  for each  officer  an  annual  salary of
$100,000 per annum,  increasing by 10% each year, and a bonus to each ranging up
to 10% of the Company's after-tax profit.

         In October 1996,  the Company  received a complaint from First Richmond
Bank, S.B. ("First  Richmond")  alleging that it breached an equipment lease and
is  seeking  approximately  $163,000  in  damages.  The  Company  has denied all
allegations  and has asserted a  counterclaim  for damages,  attorney  fees, and
other costs  against  First  Richmond.  The motion is currently in the discovery
phase.  As of March 31, 1997,  the Company has an accrued  liability of $75,000,
which is the balance due under the equipment lease.  The accompanying  financial
statements do not include any additional  provision for potential loss resulting
from this complaint as currently no  determination  can be made as to the likely
outcome.



<PAGE>
                                                   Exhibit 10.29
                                   Lease Agreement for East Brunswick Fun Bubble
                                              and Amendment thereto.




                                   L E A S E


                                    Between



                               THE HARARY GROUP,
                    a Partnership of the State of New Jersey,

                                    Landlord

                                      and


                   FUN TYME CONCEPTS OF EAST BRUNSWICK, INC.
                   a Corporation of the State of New Jersey,

                                     Tenant








                            Dated: December 31, 1996








<PAGE>


         THIS  AGREEMENT,  entered  into as of the 31st day of  December,  1996,
between THE HARARY GROUP, a New Jersey  partnership,  having offices  located at
1411 Broadway,  36th Floor, New York, New York 10018 (hereinafter referred to as
"Landlord") and FUN TYME CONCEPTS OF EAST BRUNSWICK,  INC., a corporation of the
State of New Jersey,  having offices located at 290 Wild Avenue,  Staten Island,
New York 10314 (hereinafter referred to as "Tenant").

WITNESSETH:

         PREMISES:  The Landlord  hereby  demises and leases unto the Tenant and
the  Tenant  hereby  hires and takes  from  Landlord,  for the term and upon the
rentals,  terms  and  conditions  hereinafter  specified,   the  premises  known
crosshatched on Schedule "A" (the "Premises") consisting of approximately 15,270
square feet, which Premises are a part of a shopping center (the "Center") known
as the Miracle  Mall  located at Route 18, in the  Township  of East  Brunswick,
County of Middlesex and State of New Jersey, and also includes a right of access
to the  Premises and all public  areas of the Center  together  with the parking
spaces in the parking area in common with other tenants of the Center.

         SECTION 1.  TERM.

     The Premises are leased to the Tenant for an initial term of ten (10) years
(the  "Initial  Term"),  commencing  on or about  April 1,  1997 and  ending  at
midnight on February  28, 2007,  subject to the terms of this Lease.  The actual
commencement  date shall be  determined  in  accordance  with the  provisions of
Section  10 of this  Lease  and the  expiration  date of  this  Lease  shall  be
determined accordingly.

     Tenant  shall  have the  right to  extend  the term of this  Lease  for two
successive  periods  of five (5)  years  each  upon  the  terms  and  conditions
hereinafter set forth in Section 50 of this Lease.

         SECTION 2.  BASIC RENT.

     (a) Basic Rent shall be payable in monthly installments, in advance, on the
first day of each  calendar  month during the term of this Lease,  except that a
proportionately lesser sum may be paid for the first and last months of the term
of this Lease if the Commencement Date is other than the first day of the month.
The Basic Rent payable by Tenant to Landlord during the term hereof shall be the
sum of $1,946,925.00  (calculated on the basis of 15,270 rentable square feet of
space),  which shall be payable in monthly installments as set forth on Schedule
B annexed hereto and made a part hereof. Tenant shall pay one month's Basic Rent
upon satisfaction or waiver by Tenant of the contingency set forth in Section 59
of this Lease, same to be applied against the Basic Rent due and payable for the
first month of the Term.

     In  consideration  of the work to be performed by Tenant in the Premises in
accordance  with the terms of this Lease,  Landlord  agrees that Tenant shall be
entitled to a monthly credit of $1,908.75  against each monthly payment of Basic
Rent due during the  Initial  Term of this Lease  (based on an annual  credit of
$1.50 per square foot).

     (b) Tenant shall pay Basic Rent and any Additional Rent required to be paid
under this Lease  (collectively  referred  to in this Lease as "Rent") in lawful
money of the United States to Landlord at Landlord's address set forth above, or
at such other place as Landlord  may  designate in writing,  without  demand and
without counterclaim, deduction or setoff, except as otherwise provided herein.

     (c) If Tenant shall fail to pay,  within seven (7) days of when the same is
due and payable,  any Basic Rent or any  Additional  Rent,  Tenant  shall,  upon
demand, pay to Landlord a late charge equal to twelve (12%) percent per annum on
the past due amount from the original due date until paid in full.

         SECTION 3.  PROPORTIONATE SHARE.

     For  purposes of this Lease,  Landlord  and Tenant  agree that the Premises
constitute  16.85% of the Center,  based upon the rentable square footage of the
Premises  (15,270  square  feet) and the rentable  square  footage of the Center
(90,610 square feet). The Tenant's Proportionate Share of all expenses and costs
of  operation  of the Center and Real Estate Taxes shall be deemed to be 16.85%,
subject to adjustment  in the event there is an increase in the rentable  square
footage  constructed  by Landlord or the Tenant leases more space in the Center.

        SECTION 4. ADDITIONAL RENT.

     (a)  Tenant  shall  pay as  Additional  Rent  its  Proportionate  Share  of
"Operating  Costs" as defined in Section 8 of this Lease.  Tenant shall pay it's
Proportionate Share of Operating Costs in monthly  installments,  in advance, on
the first day of each month during the term,  based upon Landlord's  estimate of
Operating Costs for the applicable  calendar year. At any time, and from time to
time, Landlord shall advise Tenant in writing of Tenant's Proportionate Share of
Operating  Costs and Tenant  shall pay the same in equal  monthly  installments,
such new rates  being  applied to the  months  for which the  rental  shall have
already been paid for the calendar  year, as well as to the unexpired  months of
such calendar year, with the adjustment for the expired months to be made at the
payment of the next  succeeding  monthly  rental  payment,  all subject to final
adjustment at the  expiration of each  calendar  year as  hereinafter  provided.
Landlord  estimates  that  Tenant's   Proportionate  Share  of  Operating  Costs
(including  Real Estate taxes as defined in this Lease) is  currently  $2.75 per
square foot.

     (b) Landlord  shall submit an invoice to Tenant  within one hundred  twenty
(120) days after the end of each  calendar year during the Term with a statement
of the actual  Operating  Costs;  if Tenant's  Proportionate  Share of Operating
Costs  exceeds the monthly sums  provided  above,  Tenant shall  forthwith  make
payment to the Landlord of the amount in excess of the payments  previously made
by  Tenant  for such  calendar  year,  and if  Tenant's  Proportionate  Share of
Operating  Costs is less than the monthly  sums  provided  above,  Tenant  shall
receive a credit for the difference  against the next  installments  of Rent due
and owing, or if Tenant is entitled to a credit for the last year of this Lease,
such sum shall be refunded to Tenant  within the one  hundred  twenty  (120) day
period provided above.  Tenant's monthly payment of its  Proportionate  Share of
Operating Costs shall be increased or decreased to coincide with any increase or
decrease described above.

     (c) All sums of money or charges  required to be paid by Tenant  under this
Lease (other than Basic Rent),  whether or not the same be so designated,  shall
be deemed "Additional Rent". If such amounts or charges are not paid at the time
provided  in this  Lease,  they  shall  nevertheless,  if not paid when due,  be
collectible  as Additional  Rent with the next  installment  of rent  thereafter
falling due hereunder,  but nothing herein  contained shall be deemed to suspend
or delay the  payment of any amount of money or charges as the same  becomes due
and payable hereunder, or limit any other remedy of the Landlord.

         SECTION 5. INTENTIONALLY OMITTED.

         SECTION 6.  INTENTIONALLY OMITTED.

         SECTION 7.  INTENTIONALLY OMITTED.

         SECTION 8.  OPERATING COSTS.

     (a)  Operating  Costs,  for the  purposes  of this  Lease,  shall  mean the
aggregate of all  expenses of  operating  the common areas of the Center and its
appurtenances and shall include, but shall not be limited to, the following: all
expenses  for   maintaining,   operating   and  repairing  the  Center  and  its
appurtenances,  including  the  expenses  of  normal  replacement  of  worn  out
equipment,  facilities and  installations;  the cost of electricity,  water, and
other  utilities;  security,  gardening  and other  landscaping;  snow  removal,
maintenance  and repair of the  parking  lot  areas,  driveways  and roof;  fire
insurance,  liability insurance, rent insurance, real estate taxes as defined in
Section 29 of this Lease; painting,  supplies, sales or use taxes on supplies or
services;  wages,  salaries,  and fringe  benefits of all persons engaged in the
operation,  maintenance and repair of the Center and its appurtenances, but only
to the extent related or attributable directly to the Center; the charges of any
independent  contractor  who  performs  or does  any of the  work of  operating,
maintaining, or repairing the Center and its appurtenances; and other repair and
operating  and  maintenance  expenses or charges,  including  an  administrative
charge (not to exceed 15% of Operating Costs),  which are made and calculated in
accordance with sound accounting and management  principles  generally  accepted
with respect to the operation of a  first-class  shopping  center,  and which is
reasonable and customary in the geographic  area in which the Center is located.
In accordance with the provisions of Section 3 and 4 of this Lease, Tenant shall
pay its Proportionate Share of such Operating Costs (including,  but not limited
to, its Proportionate Share of the administrative charge referred to above).

     Operating Costs shall not include,  however,  executive  salaries,  leasing
commissions,  and costs of additional buildings,  if any, for which the Landlord
is responsible  and  depreciation,  interest on and  amortization  of mortgages,
franchise,  income and other taxes based upon the income of  Landlord,  provided
the same shall not have been levied as a substitute  for real estate taxes,  and
shall not include any items otherwise  constituting  such expenses to the extent
payment  therefor is  received  from,  or payable  by, any other  tenants of the
Center,  to the extent such items are for the particular  benefit of one or more
tenants of the Center and not for all tenants of the Center as a whole.

         The following items shall be excluded from Operating Costs:

     (1)  costs   attributable   to  Landlord's   design  and   construction  of
improvements  to other  premises  in the  Center  in  connection  with  Landlord
entering into new leases or extending  leases and brokerage  commissions paid by
Landlord;  (2) costs for which Landlord is reimbursed by any parties'  insurance
or by third parties warranting construction; (3) fines or penalties incurred due
to  violations  of  governmental  requirements;  (4) the  costs of  clean-up  or
remediation  of hazardous  or toxic wastes which were not caused by Tenant;  (5)
capital  costs,  so  characterized  according to the  Internal  Revenue Code and
applicable  Regulations  to the extent that they improve the Common Areas beyond
their  original  condition  or utility on the  Commencement  Date of this Lease,
provided  such costs  shall be  amortized  over the useful life of the repair or
improvement  in  accordance  with  the  Internal  Revenue  Code  and  applicable
Regulations,  and  Tenant  shall pay its  Proportionate  Share of the  amortized
portion  that falls  within the Lease  term;  (6)  compensation  paid or owed to
property management firms, attorneys or brokers.

     (b) Tenant (or its accountant and/or  employees),  upon reasonable  advance
written  notice to Landlord,  may examine the books and records of Landlord,  at
Landlord's place of business,  regarding any costs pertaining to Operating Costs
for the  prior  twelve  (12)  month  period,  and may  make  copies  thereof  of
information  which is not  confidential.  If, as a result  of such  examination,
Tenant's  payment of its share of Operating Costs exceeds the amount that Tenant
should have been  billed,  then  Landlord  shall  promptly  refund the excess to
Tenant.  If Tenant shall  disagree  with  Landlord's  determination  of Tenant's
Proportionate  Share of Operating Costs,  then Landlord and Tenant shall attempt
to adjust such  disagreement and if they are unable to do so, such  disagreement
shall be subject to resolution by expedited arbitration in Middlesex County, New
Jersey,  in accordance with the rules of the American  Arbitration  Association.
The determination of the arbitration  shall be conclusive upon the parties,  and
the parties shall share equally the expenses of the arbitration.

     SECTION 9.  COMMON AREAS.

     (a) Tenant and Tenant's  agents,  employees,  licensees and invitees  shall
have the  non-exclusive  right,  during the Term, to the  reasonable  use of the
Common  Areas,  together  with  Landlord  and other  lessees of  portions of the
Center, their invitees,  licensees, agents and employees.  Landlord reserves the
right to grant to the owners and lessees of other  properties in the vicinity of
the Center and to their invitees,  licensees,  agents and employees the right to
use the driveways located in the Center together with lessees of the Center, and
to grant easements and other rights therein for such purpose, provided that same
do not materially  interfere or otherwise  materially  diminish the  visibility,
use,  occupation  and  enjoyment of the Premises or the use and enjoyment of the
Common Areas and appurtenances thereto by the Tenant or its employees,  invitees
and guests.

     In order to establish that the Center, and any portion thereof, is and will
continue to remain private property,  Landlord shall have the unrestricted right
to close (for such periods of time and to the extent  necessary,  in the opinion
or  belief  of  Landlord's  attorneys,  to  be  legally  sufficient  to  prevent
dedication  thereof,  or the accrual of any right in any person or to the public
therein) the entire  Center,  and/or any portion  thereof owned or controlled by
Landlord, to the general public. In connection  therewith,  Landlord may, in its
discretion,  seal off  entrances  to the  Center,  or any portion  thereof,  for
periods of at least one (1) day in each calendar year.  Landlord  agrees that in
exercising such right,  Landlord shall use its best efforts to limit the closure
to the  shortest  time  period  possible  and with the least  interference  with
Tenant's  operations  or  business  as  possible.  All  common  areas  and other
facilities in or about the Center  provided by Landlord  shall be subject to the
exclusive  control  of  Landlord,   provided  there  shall  be  no  unreasonable
obstruction  of Tenant's  right of ingress to or egress from the Premises or any
material negative impact to the visibility of the Premises.  Landlord shall have
the right to construct,  maintain and operate  lighting and other  facilities on
all said areas and  improvements;  to police  same;  to change the area,  level,
location  and  arrangement  of  parking  areas  and other  facilities;  to build
multi-story  parking  facilities,  to allow anyone designated by Landlord to use
the parking  facilities  without charge;  and/or to close temporarily all or any
portion of the parking areas and facilities to discourage  non-customer parking;
and to erect  additional  buildings,  improvements  and structures in the Common
Areas including  without  limitation,  the parking areas designated from time to
time by Landlord; provided, however, Landlord agrees that in exercising any such
rights  hereunder,  there  shall be no  material  negative  impact  on  Tenant's
business operations,  the visibility of the Premises or ingress or egress to the
Premises.  Landlord  agrees that during the Lease Term, it will not construct or
permit  to be  constructed  any  building,  parking  facility,  tower  or  other
structure or improvement,  in the area  cross-hatched on Schedule A-1 as the "No
Build Area", except for any required dumpster enclosures and as may otherwise be
required by  governmental  authority.  Landlord  shall  operate and maintain the
Common Areas in such manner as Landlord in its discretion shall  determine,  and
Landlord  shall  have full  right and  authority  to employ  and  discharge  all
personnel with respect thereto. All Common Areas and facilities which Tenant may
be permitted to use and occupy are to be used and occupied under a non-exclusive
revocable  license.  Except as otherwise  expressly provided  hereunder,  if the
amount of such areas be changed or diminished,  Landlord shall not be subject to
any  liability to Tenant,  nor shall Tenant be entitled to any  compensation  or
diminution  or abatement of rent,  nor shall  diminution of such areas be deemed
constructive or actual eviction.

         SECTION 10.  COMMENCEMENT OF TERM.

     (a) The parties  estimate that the  Commencement  Date shall be on or about
April 1, 1997 (the "Estimated  Commencement  Date"), but the actual Commencement
Date shall be the date which is one hundred  twenty (120) days after issuance of
any  required  building  permits  for the  work,  improvements  and  alterations
required for Tenant to open for business in the Premises (the "Tenant's  Work").
After the Commencement Date,  Landlord and Tenant,  promptly upon the request of
either of them,  will  execute and deliver to each other a  certificate  setting
forth the Commencement Date.

     (b) Tenant shall have the right to take  possession  of the  Premises  upon
issuance  of  building  permits  for  the  Tenant's  Work  for  the  purpose  of
constructing  and  completing  such  Tenant's  Work,  and  for  the  purpose  of
commencing  business  in  the  Premises.   During  such  period  and  until  the
Commencement  Date,  Tenant  shall not be required to pay any Rent to  Landlord,
provided  Tenant shall perform all of its other  obligations  under the terms of
this Lease during said period,  including,  but not limited to,  maintaining any
required  insurance  coverage  in  accordance  with  Section  20 of this  Lease.
Anything  contained  in this Lease to the contrary  notwithstanding,  if for any
reason,  including but not limited to any prior tenant wrongfully  holding over,
Landlord is unable to deliver  possession  of the Premises to Tenant at the time
Tenant receives all required  building  permits,  this Lease shall  nevertheless
continue in full force and effect,  and the one hundred  twenty (120) day period
provided in  subsection  (a) above shall not commence  until  Landlord  delivers
possession of the Premises. Provided however, in the event Landlord is unable to
deliver  possession  of the  Premises  to Tenant  by June 1,  1997,  Tenant  may
terminate this Lease upon written notice to Landlord, without further obligation
of the parties.

     (c) Tenant shall be responsible  for obtaining all  governmental  approvals
(including but not limited to any required site plan approval and/or  variances)
and building permits required for the Tenant's  intended use of the Premises and
for  construction of the Tenant's Work, at its sole cost and expense,  including
but not limited to any variance  and/or site plan approval that may be required.
Tenant shall apply for any such approvals and/or permits within twenty (20) days
after the signing of this Lease by both parties. Tenant shall be responsible for
promptly preparing and providing, at its cost and expense, any and all plans and
specifications  required by the Township of East  Brunswick  for issuance of any
such  approvals  and/or  permits,  subject to Landlord's  prior approval of such
plans and specifications,  which approval shall not be unreasonably  withheld or
delayed.  Tenant shall use its best efforts to obtain all required approvals and
permits and shall diligently and expeditiously  pursue all applications for such
approvals  and permits to  completion.  Tenant shall  advise  landlord as to the
status of all such applications promptly upon request from Landlord.

     In the event  Tenant is  unable,  within 90 days from the date  hereof,  to
secure  all  necessary  governmental  approvals  and/or  permits  (other  than a
Certificate of Occupancy)  required for its intended use of the Premises and for
construction of the Tenant's Work in accordance  with this Lease,  then Landlord
or Tenant  shall have the right,  at any time after said 90 day period (but only
before all such approval and/or permits are obtained),  to terminate this Lease,
upon  written  notice to the other  party,  without  further  obligation  of the
parties.  Landlord  shall  have the  right to void any such  termination  notice
received from Tenant, and to extend the period within which Tenant has to obtain
such  approvals and permits for a period not to exceed ninety (90) days from the
date of Tenant's  termination notice, upon written notice given to Tenant within
ten (10) days after Landlord's  receipt of such termination  notice from Tenant.
In addition,  in the event  Landlord  exercises  this right to extend,  Landlord
shall have the right, at any time during such extended period,  to take over the
application  process on behalf of Tenant,  at  Tenant's  cost and  expense,  and
Tenant shall thereafter cooperate with Landlord in prosecuting such applications
to completion,  provided  Landlord shall not be authorized to make any revisions
to Tenant's plans and specifications or to Tenant's intended use of the Premises
without Tenant's consent, which shall not be unreasonably withheld or delayed.

     Landlord  shall  not be  required  to  make  any  changes,  alterations  or
modifications to the Center or to the Premises,  or to perform any other work in
connection  with any  applications  submitted  by  Tenant.  Landlord  agrees  to
cooperate  with Tenant (at no cost to Landlord) and to assist Tenant in any such
application  so  that  any  required  approvals  and  permits  may  be  obtained
expeditiously.

     (d) Tenant agrees that upon issuance of all required building  permits,  it
shall,  at its sole cost and  expense,  promptly  commence and pursue all of the
Tenant's  Work  to  completion  in  accordance   with  the  approved  plans  and
specifications,  and in compliance with all applicable  codes,  laws,  rules and
regulations,  and in  accordance  with the  requirements  of  Section 16 of this
Lease, and shall obtain any required Certificate of Occupancy in accordance with
the requirements of Section 17(d) of this Lease.

         SECTION 11.  SECURITY DEPOSIT.

     Landlord  has agreed that Tenant shall not be required to post any security
deposit.  Landlord,  however,  expressly  reserves  the  right  to  require  any
sublessee or assignee  consented to by Landlord in accordance with Section 20 of
this  Lease  (referred  to in this  paragraph  as  "Tenant"),  to pay a security
deposit  equal to two (2) months  Basic Rent as then due under the terms of this
Lease as security for the full and faithful performance by the Tenant of all the
terms,  covenants  and  conditions  of this Lease upon the  Tenant's  part to be
performed,  provided  this right shall not apply to any  assignment  or sublease
which does not require  Landlord's  consent pursuant to Section 20 hereof.  Said
sum shall be returned to the Tenant  without  interest,  after the expiration of
the Term  (including  any  Renewal  Terms),  provided  that Tenant has fully and
faithfully  carried out all of said terms,  covenants and conditions on Tenant's
part to be  performed.  Landlord  shall  have the right to apply any part of the
security deposit to cure any default of Tenant,  and if Landlord does so, Tenant
shall,  within ten (10) days after  written  demand,  deposit with  Landlord the
amount applied so that Landlord shall have the full deposit on hand at all times
during the term of this  Lease.  In the event of a sale or lease of the  Center,
subject to this Lease,  the Landlord shall  thereupon be considered  released by
the Tenant from all  liability  for the return of the  security  deposit and the
Tenant  shall look to the new  Landlord  solely for the  return  thereof.  It is
agreed that the foregoing  shall apply to every  transfer or assignment  made of
the security to a new Landlord.  Any security  deposited  under this Lease shall
not be mortgaged,  assigned or encumbered by Tenant without the written  consent
of the Landlord,  and any attempt to do so shall be void. Landlord shall provide
notice to Tenant of all such transfers of the security  deposit within seven (7)
days after said transfer.  No trust relationship is created between Landlord and
Tenant as to any Security Deposit.

         SECTION 12. NET LEASE.

     This  Lease is a net  lease.  The Basic  Rent  shall be  absolutely  net to
Landlord so that except as  expressly  provided in this Lease,  this Lease shall
yield, net to Landlord, the Basic Rent during the Term.

         SECTION 13. PURPOSE, TRADE NAME, RESTRICTIONS.

     (a) Tenant  shall use and occupy the Premises  solely as an  amusement  and
recreational establishment catering primarily to children (includng programs for
children and parents),  and for no other  purpose.  Tenant shall be permitted to
operate a snack  bar in the  Premises  provided  such use does not  violate  any
existing  exclusive  use.  Tenant  covenants and agrees to trade and do business
under the name "Fun Bubble".  Tenant agrees not to use or permit the Premises to
be used for any purpose not described  herein without the prior written  consent
of  Landlord,  which  consent  Landlord  may  withhold  in its sole  discretion,
provided  Landlord agrees not to  unreasonably  withhold or delay its consent if
the proposed use is consistent with the purposes leased to Tenant  hereunder and
is not in conflict with the terms of any other lease in the Center.

     (b) Tenant  covenants and agrees that Tenant,  at its own expense will keep
the premises free of insects,  rodents,  vermin and other pests.  Tenant further
covenants  and agrees that it shall not,  at any time during the Term,  keep any
animals of any kind at the Premises.

     (c)  Tenant  shall not use or  permit  the use of any  apparatus,  or sound
reproduction or transmission equipment, or any musical instrument in such manner
that the sound so  reproduced,  transmitted  or produced shall be audible beyond
the  confines of the  Premises,  and will not use any other  advertising  medium
including,  without  limitation,  flashing lights or  searchlights  which may be
heard or  experienced  outside the  Premises,  except as  permitted  pursuant to
subsection (e) below.

     (d) Tenant  covenants and agrees that it shall not cause,  suffer or permit
any waste or damage to the Premises or permit the Premises or any use thereof to
constitute  a nuisance or  unreasonably  interfere  with the safety,  comfort or
enjoyment  of the Center by  Landlord  or any other  occupants  of the Center or
their  customers,  invitees or any others  lawfully  in or at the  Center.  Upon
written  notice from  Landlord to Tenant that any of the aforesaid is occurring,
Tenant agrees within five (5) days thereafter to do that which may be reasonably
necessary for the purpose of curing or obviating any such condition,  or if such
condition  cannot be cured within such five (5) day period using due  diligence,
then  Tenant  shall  commence  to cure such  condition  within such five (5) day
period and shall diligently pursue such changes to completion.

     (e) Tenant shall not cause or permit  objectionable  odors to emanate or be
dispelled from the Premises.  In the event Tenant distributes handbills or other
advertising  matter or holds  demonstrations  in the parking areas,  walkways or
other common areas of the Center,  Tenant shall promptly  clean-up all resulting
debris,  refuse and materials and shall not interfere with or disrupt the use of
the common  areas or any other  premises in the Center,  or create any public or
private nuisance, and shall comply with all applicable laws.

     (f) Tenant shall not use the plumbing facilities for any other purpose than
that for which they are constructed and will not permit any foreign substance of
any kind to be  thrown  therein  and the  expense  of  repairing  any  breakage,
stoppage,  seepage or damage, whether occurring on or off the Premises resulting
from a violation of this  provision by Tenant or Tenant's  employees,  agents or
invitees  shall be borne by Tenant.  All grease traps and other  plumbing  traps
shall be kept clean and operable by Tenant at Tenant's own cost and expense.  To
the extent any such traps are shared  with  another  tenant of the  Center,  the
maintenance responsibility and cost shall be equitably apportioned.

     (g) Tenant shall  properly  store and dispose of all food waste,  and shall
arrange for removal of food waste from the  Premises  on a daily  basis.  Tenant
shall store all food in enclosed containers and shall not store any food outside
of the  Premises.  Tenant shall take all steps  necessary  to avoid  spillage of
foods and food waste and shall not permit any odors to emanate  from  within the
Premises  or from  outside of the  Premises  and shall  provide  all exhaust and
supply  fans and  other  ventilation  required  for the  operation  of  Tenant's
business, subject to Landlord's approval as required in this Lease.

     (h)  Notwithstanding  anything in this Lease to the contrary,  Tenant shall
not make any  penetrations  into the roof of the Premises or the Center.  In the
event Tenant  requires a penetration  in the roof of the Premises,  Tenant shall
request  Landlord's  permission  for same,  which Landlord may deny, in its sole
discretion,  except for installation of exhaust and supply fans required for the
operation of Tenant's business in the Premises,  in which event,  Landlord shall
not  unreasonably  withhold  its consent to the  installation  of such fans.  If
Landlord  grants its  permission for such roof  penetration,  such work shall be
performed  by a  contractor  designated  by Landlord  at Tenant's  sole cost and
expense.  In the event that Tenant  violates any provision of this  subparagraph
(h),  Landlord may, at its option,  repair or replace any portion of the roof of
the  Premises  requiring  repairing  or replacing at any time during the term of
this Lease, at Tenant's sole cost and expense. In addition,  in the event of any
such  breach by Tenant,  Landlord  may,  at its  option,  repair or replace  any
portion  of the roof of the entire  Center  which  requires  such  repairing  or
replacing  as a result  of  Tenant's  penetration  of the roof in breach of this
subparagraph  (h).  Tenant  shall be  liable  for any and all  damages  (direct,
indirect and  consequential)  to Landlord  and any and all other  tenants of the
Center,  resulting from Tenant's  breach of the provisions of this  subparagraph
(h).

     (i) Tenant shall not under any  circumstances  make any penetrations to the
foundation or any other structural  portions of the Premises.  This subparagraph
(i) shall not apply with respect to any such penetrations made prior to the term
of this  Lease with the  consent of  Landlord  or any  predecessor  owner of the
Center.

         SECTION 14. LANDLORD'S OBLIGATIONS.

     (a)  Except as  otherwise  provided  in this  Lease,  Landlord,  as part of
Operating  Costs,  shall keep in good  repair  the  structural  parts,  roof and
foundation  of the Center,  the Common  Areas,  common  facilities  and systems,
grounds,  shrubs  and lawns in the  Center,  except for  repairs or  maintenance
occasioned by the  negligence or intentional  act of Tenant or Tenant's  agents,
employees,  permitted  licensees  or  contractors.  Any  repairs or  maintenance
occasioned by the negligence or intentional act of Tenant's  agents,  employees,
permitted  licensees or contractors shall be repaired at the cost and expense of
Tenant upon five (5) days advance notice to Tenant, except in case of emergency.
The Landlord shall keep the driveways and parking areas  reasonably free of snow
and ice.

     (b) Except as specifically provided elsewhere in this Lease, there shall be
no allowance to Tenant for a diminution  of rental value and no liability on the
part of Landlord  by reason of  inconvenience,  annoyance  or injury to business
resulting  from  Landlord's,  Tenant's or other's  making or failing to make any
repairs,  alterations,  additions  or  improvements  in or to any portion of the
Center or the  Premises or in or to the  fixtures,  appurtenances  or  equipment
thereof,  unless same shall  constitute  a default  under this  Lease.  Landlord
agrees  to use its best  efforts  to make  any  repairs  required  to be made by
Landlord  under the terms of this Lease.  The provisions of this Section 14 with
respect to the  making of  repairs  shall not apply in the case of fire or other
casualty,  which is dealt with in Section 18 hereof or as elsewhere  required in
this Lease.

         SECTION 15. CONDITION OF PREMISES; REPAIRS.

     The  Tenant  shall  keep  the  Premises  in  good  condition,   repair  and
appearance,  including  without  limiting the generality of the  foregoing,  all
plumbing,  pipes, electrical wiring and conduits which are for the exclusive use
of Tenant and not located in the slab or foundation; heating,  air-conditioning,
ventilating,  electrical,  lighting facilities and equipment within the Premises
which are used  exclusively  by  Tenant;  fixtures,  exposed  surface  of walls,
ceilings, decking, floors (excluding slab and foundation), windows, doors, plate
glass and  skylights  located  within  the  Premises,  and signs  located on the
Premises.  In addition,  Tenant shall be responsible for repairing,  at its cost
and expense, any and all work, alterations, additions and improvements installed
or  constructed  by Tenant,  whether  structural or  non-structural.  The Tenant
further  agrees to keep the Premises and all parts thereof,  including,  but not
limited  to,  electrical  wiring,  plumbing  and  heating,  ventilating  and air
conditioning equipment,  windows, walkways, exits and entrances to the Premises,
in a clean and sanitary  condition and free from trash,  snow, ice,  inflammable
materials and other  objectionable  matter.  The Tenant shall quit and surrender
the Premises at the end of the Term in good condition,  reasonable wear and tear
and damage by casualty excepted,  and shall not make any alterations,  additions
or  improvements  to the Premises  except in accordance  with the  provisions of
Section  16 and  other  applicable  provisions  of this  Lease.  All  erections,
alterations, additions and improvements, which are permanent in character, which
may be made upon the Premises  either by the Landlord or the Tenant shall be the
property  of the  Landlord  and shall  remain upon and be  surrendered  with the
Premises  as a part  thereof at the  expiration  or sooner  termination  of this
Lease,  without  compensation  to  the  Tenant.  At  the  expiration  or  sooner
termination  of this Lease,  Tenant  shall  remove all of its  furniture,  trade
fixtures, machinery and equipment, and Tenant shall repair any structural damage
to the Premises resulting from Tenant's removal of such items.

         SECTION 16. ALTERATIONS.

     (a) The Demised  Premises  are leased to Tenant in their  strictly  "AS IS"
condition,  except  Landlord  shall cause the  theater  seats,  curtains,  movie
screens and other trade fixtures,  equipment and signs of the existing tenant of
the Premises to be removed  prior to the delivery of  possession of the Premises
to Tenant, and subject to the requirement that the HVAC system currently serving
the Premises  shall be in good working  order on the  Commencement  Date and the
roof of the Premises shall be free of leaks.  Nothing  contained in this Section
16(a) shall  relieve or be deemed to relieve  Landlord of any  obligation it may
have to make repairs under the terms of this Lease.  Landlord represents that it
has no notice of any structural defects in the Premises.

     (b)  Tenant  shall  be  responsible  for any and all  work,  installations,
additions, alterations and improvements required for Tenant to open for business
in the Premises,  including but not limited to all structural and non-structural
alterations and any required  leveling of the existing floor.  Tenant shall make
no alterations, additions, permanent decorations,  installations,  substitution,
or improvements in or to the Premises,  including but not limited to the removal
or  installation of any partition,  doors,  electrical  installations,  plumbing
installations,  water coolers, air-conditioning or cooling systems, or any other
apparatus,   whether  structural  or  nonstructural   (hereinafter  the  "Tenant
Changes")  without  Landlord's  prior written  consent in each  instance,  which
consent shall not be unreasonably  withheld or delayed,  and only upon complying
with all of the  provisions  of this  Section.  In making any such  alterations,
additions  or  improvements,  Tenant  shall  comply  with  the  requirements  of
subsections (i) through (iv) of this  subsection (b), and with the  requirements
of subsections (c), (d), (e) and (f) of this Section 16.

     Prior to  commencing  any Tenant  Changes,  or tenant's  Work as defined in
Section 10 of this Lease,  Tenant, at its sole cost and expense shall obtain and
deliver to Landlord, for Landlord's prior consent, all of the following:

     (i) Detailed  architect's  plans and  specifications,  showing the proposed
Tenant Changes; (ii)A certificate evidencing that Tenant or Tenant's contractors
have procured and paid for workers' compensation  insurance covering all persons
employed in  connection  with the Tenant  Changes or who might assert claims for
death  orbodily  injury  against  Landlord,  Tenant,  or  the  Center;  (iii)  A
certificate  evidencing that the personal  injury and property damage  insurance
required  of Tenant  under  Section  21(b) is in full  force and  effect,  and a
certificate from Tenant's contractors evidencing personal injury insurance in an
amount not less than $1,000,000.  and property damage insurance in an amount not
less than $300,000.,  in connection with the Tenant Changes;  (iv) Such permits,
authorizations or consents as may be required by any applicable law, rule, order
or  requirement  of any  governmental  authority  having  jurisdiction  thereof,
provided,  however,  that  no  plans,  specifications  or  applications  (or any
modifications  or  amendments  thereto)  shall  be  filed  by  Tenant  with  any
governmental  authority without first obtaining Landlord's prior written consent
in each instance, not to be unreasonably withheld or delayed. Landlord agrees to
cooperate  with Tenant  (including,  without  limitation,  execution of required
applications) in connection with any permits,  approvals,  consents and licenses
which are required in connection with the Tenant Changes permitted hereunder.

     (c) In no event shall any material or equipment  be  incorporated  in or to
the Premises in connection  with any Tenant Changes with is subject to any lien,
encumbrance,  security interest or charge of any kind whatsoever,  or subject to
any title retention  agreement.  Any construction  lien claim,  notice of unpaid
balance or other  lien  filed  against  all or any part of the  Premises  or the
Center or Landlord's  interest  therein,  for work claimed to have been done for
Tenant,  or  materials  claimed  to have  been  furnished  to  Tenant,  shall be
discharged by Tenant within  thirty (30) days  thereafter,  at Tenant's cost and
expense,  by filing any bond required by law or otherwise.  Tenant shall defend,
indemnify  and save  Landlord  harmless  from and against any such liens and all
costs and expenses (including  reasonable  attorney's fees) incurred by Landlord
in connection therewith.

     (d) Tenant shall cause all Tenant  Changes to be performed  promptly at its
sole cost and expense,  in a good and  workmanlike  manner,  using prime quality
materials  and  equipment,  at least equal in quality and class to the  original
Center installations, and in compliance with all applicable laws, and government
rules, permits,  authorizations,  licenses, regulations and orders. Tenant shall
not unreasonably  disturb or materially  interfere with or delay Landlord in the
operation  of the Center or the  provision  of services  thereto or to any other
lessees of the Center or any of their employees,  agents,  licensees or invitees
in the  performance  of such Tenant  Changes,  and shall not obstruct any of the
Common  Areas or cause any damage or injury to the Center or to the  property of
Landlord or any other lessee of the Center,  or any of their employees,  agents,
licensees or invitees.


     (e) Tenant shall not  intentionally  exercise any of its rights pursuant to
the provisions of this Section in a manner which would create any work stoppage,
picketing,   labor  disruption  or  dispute  under  Landlord's  union  contracts
affecting the Center,  if any, nor shall Tenant  interfere  with the business of
Landlord or any other lessee or occupant of the Center. Landlord represents that
there are no such union contracts currently affecting the Center.

     (f)  Notwithstanding  the right of Landlord to approve any matter described
in this  Section,  Landlord  shall have no  responsibility  or liability for the
performance  or  quality  of  work or  materials  furnished  by any  contractor,
subcontractor,  agent or consultant of Tenant. The approval by Landlord, whether
expressed or implied,  of any Tenant  Changes shall in no way affect  Landlord's
rights or Tenant's  obligations  relating to the  restoration of the Premises at
the  expiration  or other  termination  of the Term as provided in Section 15 of
this Lease.




<PAGE>


     SECTION 17. COMPLIANCE WITH RULES AND REGULATIONS; COMPLIANCE WITH LAW.

     (a) Reasonable rules and regulations regarding the Premises and the Center,
including  the  walkways  and  parking  areas,  and the use  thereof,  which may
hereafter be  promulgated  by the Landlord,  shall be observed by the Tenant and
the  Tenant's  employees,  agents  and  business  invitees,  as long as they are
uniformly  applied to and  enforced  against all tenants of the Center,  are not
discriminatory and do not interfere with the Tenant's normal business operations
at  the  Premises.  The  Landlord  reserves  the  right  to  rescind  any  rules
promulgated hereafter,  and to make such other and further rules and regulations
as in its reasonable judgment may from time to time be desirable for the safety,
care and cleanliness of the Premises and the Center and for the  preservation of
good order therein, which rules, when so made and reasonable notice given to the
Tenant,  shall have the same force and  effect as if  originally  made a part of
this Lease.  Such other and further  reasonable  rules  shall not,  however,  in
addition to the above, be inconsistent with the proper and rightful enjoyment by
the  Tenant of the  Premises  and the  Center in the  conduct  of its  business.
Landlord  represents  that  there are no such  Landlord's  rules or  regulations
currently existing.

     (b) As an  essential  inducement  to  execution  of this Lease by Landlord,
Tenant acknowledges and agrees that Tenant's employees shall not be permitted to
park in an area other than that  designated  by  Landlord  from time to time for
such purpose, and Tenant agrees to take all steps necessary, upon written notice
from  Landlord,   required  to  enforce   compliance  with  Landlord's   parking
regulations.  In the event  Tenant's  employees  continue to violate  Landlord's
parking  regulations after such written notice from Landlord Tenant shall pay to
Landlord the sum of ten and 00/100 ($10.00)  dollars per day for each car of its
employees  which is parked in an area other than that designated by Landlord for
employee  parking.  All such  regulations  respecting  employee parking shall be
uniformly  applied to and enforced  against all tenants of the Center.  Landlord
agrees that any such employee parking regulations  promulgated by Landlord shall
not interfere with the Tenant's normal business operations at the Premises.

     (c) Tenant  shall,  at its expense,  comply  promptly  with all  applicable
statutes,  ordinances,  rules, regulations,  orders, restrictions of record, and
requirements  in effect during the Term or any part of the term hereof  relating
to the use by Tenant of the Premises,  including  the making of  structural  and
non-structural  repairs or alterations  due to Tenant's  occupancy.  If any such
laws,  ordinances,  rules or regulations  shall require  structural  alterations
which would have been required  irrespective of the nature of the tenancy,  then
in such event the same shall be complied  with by  Landlord  and shall be deemed
part of Operating Costs.

     (d) Subject to Tenant obtaining any zoning or site plan approvals  required
for its use and  occupancy  of the  Premises  in  accordance  with the  terms of
Section 10(c) of this Lease,  Tenant hereby accepts the Demised Premises subject
to  all  applicable  zoning,  municipal,  county  and  state  laws,  ordinances,
covenants of record,  and  regulations  governing and  regulating the use of the
Premises,  and accepts this Lease subject  thereto and to all matters  disclosed
thereby and by any exhibits attached hereto. Landlord makes no representation as
to any  permissive  use or  zoning  ordinance  interpretation.  Tenant  shall be
responsible for obtaining, at Tenant's cost and expense, a permanent Certificate
of Occupancy  for the Premises  from the Township of East  Brunswick  permitting
Tenant's use of the Premises as provided herein,  if required by applicable law.
Provided  however,  the  Commencement  Date set forth in Section 10 shall not be
delayed  or  otherwise  extended  by  reason  of  Tenant's  failure  to obtain a
Certificate  of Occupancy  on or before the  Commencement  Date,  except if such
failure  results from  Landlord's  failure to complete  any work  required to be
performed by Landlord  hereunder.  Landlord  agrees to cooperate  with Tenant in
obtaining any required Certificate of Occupancy for the Premises.

         SECTION 18.  DAMAGES TO CENTER; WAIVER OF SUBROGATION.

     (a) In the  event  of (i) the  total  destruction  of the  Premises  or the
destruction  of fifty  (50%)  percent or more of the area of the Center by fire,
explosion,  the elements or any other cause during the Term or (ii) such partial
destruction  thereof as to render the Premises  wholly  untenantable,  unfit for
occupancy,  or unusable for Tenant's purposes hereunder,  and in the case of (i)
or (ii),  should  the  Premises  be so badly  damaged  that the same  cannot  be
repaired within one hundred eighty (180) days from the happening of such damage,
then and in such case the term hereby created  shall,  at the option of Landlord
or Tenant,  to be  exercised  by written  notice  sent  within  thirty (30) days
following the casualty or loss,  cease and become null and void from the date of
such damage or  destruction,  and the Tenant  shall  immediately  surrender  the
Premises and all of the Tenant's interest therein to Landlord, and rent shall be
adjusted between Landlord and Tenant to the time of such damage,  in which event
the Landlord may re-enter and  repossess the Premises and may remove all parties
therefrom; provided that Tenant shall not have the right to terminate this Lease
in any such  event if the  damage is caused  by  Tenant or  Tenant's  employees,
agents,  licensees  or  invitees.  If  neither  Landlord  nor  Tenant  elects to
terminate this Lease, or should the Premises be rendered  untenantable and unfit
for occupancy,  but yet be repairable within 180 days from the happening of such
damage,  Landlord shall restore or rebuild the Center and the Premises as nearly
as possible to their previous condition with reasonable  promptness,  subject to
Force  Majeure.  Landlord  shall have no duty or obligation to restore  Tenant's
Property, equipment, fixtures or Tenant Changes.

     (b) In any case in which  Tenant's  use of the Premises is  materially  and
adversely affected by any damage to the Center or appurtenances  thereto,  there
shall be  either  an  abatement  or an  equitable  reduction  in Basic  Rent and
Additional  Rent  depending  on the period for which and the extent to which the
Premises  are not  reasonably  usable for the  purpose for which they are leased
hereunder.  If the damage  results  from the fault of the  Tenant,  or  Tenant's
agents,  contractors,  employees  or  invitees,  Tenant  shall be entitled to an
abatement or reduction in the Basic and  Additional  Rent, but not to exceed the
amount of any rent insurance payable to Landlord.

     (c) Tenant and Landlord  each waive any and all rights of recovery  against
the other and against the officers,  employees,  agents, and  representatives of
the other,  for loss or damage,  etc.,  to such waiving party or its property or
the property of others under its control,  whether due to the acts or negligence
of the other  party,  where  such loss or damage is  insured  against  under any
insurance  policy  in force at the time of such  loss or  damage.  In  obtaining
policies of insurance required by this Lease, Landlord and Tenant shall obtain a
waiver of subrogation  endorsement or an express  provision in the policy having
that  effect.  In the event that any  insurer  imposes a charge for making  such
waiver  endorsement,  the charge shall be paid by the respective  party; and, in
the event that either party fails to obtain such a waiver  endorsement  from its
insurer,  then the other party shall be likewise relieved from its obligation to
do so.  Nothing in this  paragraph  shall be  construed  as a waiver of recovery
rights with regard to damages not compensated by insurance.  SECTION 19. EMINENT
DOMAIN; CONDEMNATION.

     (a) If the whole of the Premises  shall be taken under the power of eminent
domain,  then this lease shall be terminated as of the day  possession  shall be
taken.

     (b) If  more  than  twenty-five  (25%)  percent  of the  floor  area of the
Premises,  or if more than fifty (50%) percent of the common parking area, or if
more than  fifty  (50%)  percent of all of the  ground  level  floor area of the
Center shall be taken under power of eminent  domain,  either Landlord or Tenant
may terminate  this lease by written  notice given within thirty (30) days after
the date or  surrendering  possession to the public  authority  pursuant to such
taking,  and if neither  Landlord  nor Tenant  elects to  terminate  this lease,
Landlord shall restore and adapt the remaining  Premises,  and the rent shall be
reduced as described in Paragraph (c) of this Section.

     (c) If twenty-five (25%) percent or less of the floor area of the Premises,
or fifty  (50%)  percent  or less of the common  parking  area,  or fifty  (50%)
percent or less of all of the  ground  level  floor area of the Center  shall be
taken  under the power of eminent  domain,  this lease shall not  terminate  but
shall  continue in full force and effect,  except that the rent shall be reduced
in the same proportion that the floor area of the Premises so taken bears to the
total floor area demised to Tenant at the time of such taking,  or, in the event
of a taking of part of the  parking  area or of part of the ground  floor  level
area of the Center, the rent shall be equitably reduced;  and Landlord shall, at
its own cost and expense, make all necessary  restorations to the Premises as to
constitute  the  Premises or the  building of which the  Premises  are a part, a
complete architectural unit.

     (d) Tenant  shall not be  entitled to any part of the award for such taking
or any  payment  in lieu  thereof,  whether  such  award  shall  be  awarded  as
compensation  for  diminution  in  value to the  leasehold  or to the fee of the
Premises;  provided however,  Tenant may file a separate claim for any taking of
fixtures and  improvements  owned by Tenant which have not become the Landlord's
property, and for moving and relocation expenses,  provided the same shall in no
way affect or diminish Landlord's award.

         SECTION 20.  ASSIGNMENT, SUBLETTING.

     (a) The Tenant shall not,  without first  obtaining the written  consent of
the  Landlord,  assign,  mortgage,  pledge or encumber this Lease in whole or in
part, or sublease the Premises or any part  thereof,  which consent shall not be
unreasonably  withheld or delayed. This covenant shall be binding upon the legal
representatives  of the Tenant  and on every  person to whom  Tenant's  interest
under  this  Lease  passes by  operation  of law,  but shall not apply to (i) an
assignment or subletting  to the parent,  subsidiary or an affiliated  entity of
the Tenant or an entity under the same  control as the Tenant,  or a division of
the Tenant,  (ii) to the transfer of Tenant's leasehold interest occasioned by a
consolidation  or merger  involving  the  Tenant so long as the net worth of any
such  related  entity or  resulting  entity is equal to or greater  than the net
worth of the Tenant  immediately prior to such consolidation or merger, or (iii)
to the subleasing or licensing by Tenant of not more than a total of 4500 square
feet of space within the Premises for sale by vendors of items  consistent  with
Tenant's intended use of the Premises hereunder, provided any such use is not in
conflict with the terms of any other lease in the Center. No consent of Landlord
shall  be  required  with  respect  to a public  or  private  offering,  sale or
placement  of equity or debt  securities  of Tenant or to the trading or sale of
such securities on public exchanges or in private placements.

     (b) To the extent  Landlord's  consent is required under this Lease, if the
Tenant shall desire to sublet all or any portion of the Premises, it shall first
submit  in  writing  to the  Landlord,  the name  and  address  of the  proposed
subtenant;  the terms and conditions of the proposed subletting;  the nature and
character of the  business of the proposed  subtenant;  banking,  financial  and
other  credit  information   relating  to  the  proposed  subtenant   reasonably
sufficient to enable  Landlord to determine the proposed  subtenant's  financial
responsibility.  If the nature and  character  of the  business of the  proposed
subtenant,  and the proposed  use and  occupancy of the Premises by the proposed
subtenant,  is in keeping and  compatible  with the dignity and character of the
Center,  then Landlord agrees not to unreasonably  withhold or delay its consent
to any such  proposed  subletting,  providing  that Tenant  shall,  by notice in
writing as described above,  advise Landlord of its intention to sublease all or
any part of the  Premises,  on and after a stated  date which  shall not be less
than sixty (60) days after the date on which  Tenant's  notice is given.  In the
event the proposed use of the Premises by the proposed  subtenant differs in any
material manner from that of the then existing Tenant,  Landlord shall thereupon
have the right, to be exercised by giving written notice to Tenant within thirty
(30) days  after  Landlord's  receipt  of  Tenant's  notice,  to  recapture  the
Premises. Such recapture notice shall, if given, cancel and terminate this Lease
with  respect to the space  therein  described  as of the date  thirty (30) days
following  the date set forth in  Tenant's  notice,  or thirty  (30) days  after
Tenant shall have  surrendered  possession of the Premises,  whichever is later,
with no further  obligation  due by Tenant with respect to such space after said
date.  In the event  less than all of the  Premises  are  sublet or  recaptured,
Tenant or any permitted sublessee shall be obligated to construct and erect such
partitioning  and means of ingress  and egress as may be  required  to sever the
space  retained by Tenant  from the space  recaptured  or sublet.  If this Lease
should be  cancelled  pursuant to the  foregoing  with  respect to less than the
entire Premises,  the Basic Rent and Additional Rent and Tenant's  Proportionate
Share shall be proportionately  adjusted,  and this Lease, as so amended,  shall
continue  thereafter  in  full  force  and  effect.  Notwithstanding  any  other
provision  herein,  Landlord shall receive any rent or other  consideration  due
under any sublease  approved by Landlord to the extent same exceeds the Rent due
and payable pursuant to the terms of this Lease.

     (c) Any  subletting  or  assignment  of this  Lease  shall not in any event
release or discharge Tenant of or from any liability,  whether past,  present or
future,  under this Lease, and Tenant shall remain liable hereunder with respect
to the entire  Premises,  except as  otherwise  provided  herein or by law.  The
subtenant or assignee shall also agree in writing,  to assume,  comply with, and
be bound by all of the terms, covenants,  conditions,  provisions and agreements
of this Lease; and Tenant shall deliver to Landlord promptly after execution, an
executed duplicate original copy of such sublease or assignment and an agreement
of assumption by the  subtenant or assignee.  With respect to any  assignment or
sublease  which  requires  Landlord's  consent  and which  involves  a  proposed
assignee  or  sublessee  having a net worth of less than  $200,000.00,  Landlord
expressly  reserves  the right,  as a condition  to its consent to any  proposed
assignment  or  sublease,  to require  the  personal  guarantee  of payment  and
performance  of the Tenant's  obligations  hereunder  from the principals of any
proposed assignee or sublessee.

         (d) Any  assignment  or sublease must provide that it is subject to all
of the terms and  conditions of this Lease and any sublease must provide that in
the event of the  expiration or other  termination  of this Lease for any reason
whatsoever whether  voluntary,  involuntary or by operation of law, prior to the
expiration date of such sublease,  the proposed  subtenant  agrees,  but only if
requested by and at the option of Landlord, to make full and complete attornment
to Landlord for the balance of the term of the sublease.  Such attornment  shall
be evidenced by an agreement  in form and  substance  satisfactory  to Landlord,
which the  proposed  subtenant  agrees to execute and deliver at any time within
five (5) days after request of Landlord,  its  successors  and assigns,  and the
proposed  subtenant  waives the provisions of any law now or hereafter in effect
which may give the proposed  subtenant  any right of election to  terminate  the
sublease or to surrender  possession of the Premises in the event any proceeding
is brought by Landlord under this Lease to terminate this Lease.

         SECTION 21.  INDEMNITY AND TENANT'S INSURANCE.

     (a) Tenant  shall  indemnify  and hold  harmless  Landlord,  its  invitees,
employees  or assigns  from and against any and all claims,  liability,  losses,
damages,  costs and expenses  arising from  Tenant's use of the Premises and any
other part of the Center,  or from the conduct of Tenant's  business or from any
activity,  work or things done,  permitted or suffered by Tenant in or about the
Premises,  the Common Areas or elsewhere,  and shall further  indemnify and hold
harmless  Landlord  from and  against  any and all  claims,  losses and  damages
arising  from any breach or  default in the  performance  of any  obligation  on
Tenant's part to be performed under the terms of this Lease, or arising from any
negligence of the Tenant,  or any of Tenant's agents,  contractors,  invitees or
employees and from and against all costs,  reasonable  attorney's fees, expenses
and  liabilities  incurred  in the  defense  of any such  claim or any action or
proceeding  brought  thereon;  and in case any action or  proceeding  be brought
against Landlord by reason of any such claim, Tenant, upon notice from Landlord,
shall defend the same at Tenant's expense by counsel reasonably  satisfactory to
Landlord.  Tenant, as a material part of the  consideration to Landlord,  hereby
assumes  all risk of damage to  property  or injury to persons in, upon or about
the  Premises  arising  from any cause and  Tenant  hereby  waives all claims in
respect  thereof  against  Landlord.  Provided,  however,  Tenant  shall  not be
obligated to indemnify  Landlord from any liability  caused by or resulting from
the negligence of Landlord, its agents or employees.

     Landlord  shall  indemnify  and hold Tenant  harmless  from and against all
claims, actions,  damages,  expenses and judgments for loss, damage or injury to
property or person resulting or occurring by reason of the willful misconduct or
negligence of Landlord or any of Landlord's agents,  contractors,  or employees,
or by  reason  of  Landlord's  breach  or  default  in  the  performance  of any
obligation on Landlord's  part to be performed under the terms of this Lease. If
Tenant  shall,  without  fault on its  part,  be made a party to any  litigation
commenced  by or  against  Landlord  by  reason  of the  willful  misconduct  or
negligence of Landlord or any of Landlord's agents,  contractors,  or employees,
Landlord shall protect and hold Tenant  harmless and pay all  reasonable  costs,
expenses and reasonable attorney's fees incurred or paid by Tenant in connection
with such  litigation.  Provided,  however,  Landlord  shall not be obligated to
indemnify  Tenant from any liability,  costs or expenses  caused by or resulting
from the negligence of Tenant, its agents or employees.

     Nothing  contained  herein shall limit or restrict or be deemed to limit or
restrict  Landlord's  or  Tenant's  rights  against any other  party,  person or
entity.

     (b) Tenant  shall pay,  provide and keep in force  during the Term  hereof,
Comprehensive  General  Liability  Insurance  against  claims for bodily injury,
death  or  property  damage  occurring  on,  in or  about  the  Premises  or any
appurtenances  thereto,  arising out of the ownership,  operation and control of
the Premises by Tenant,  including, but not limited to, contractual liability in
connection  with  the  indemnification  of  Landlord  herein,  in  total  limits
(including the amount of any umbrella liability  coverage  maintained by Tenant)
of not less than  $3,000,000.00  in respect to bodily injury or death to any one
person,  and  $3,000,000.00  in  respect  to any  one  occurrence,  accident  or
disaster,  and property damage with limits of not less than  $500,000.00 or such
other  amounts as may from time to time be reasonably  required by Landlord,  or
the holder of the first mortgage.  Tenant shall cause Landlord and any mortgagee
of the  Center to be named as an  additional  named  insured  on said  liability
insurance.

     (c) Tenant covenants and represents, said representation being specifically
designed  to induce  Landlord  to execute  this Lease,  that  Tenant's  personal
property,  fixtures and all  improvements,  alterations  and  additions  made by
Tenant,  and any other items which Tenant may bring to the Premises which may be
subject to any claim for damages or  destruction  due to  Landlord's  negligence
shall be fully  insured  by a policy of  insurance  covering  all risks  with no
deductible,  which policy shall specifically provide for a waiver of subrogation
for  Landlord  without  regard to whether  or not same shall cost an  additional
premium and notwithstanding anything to the contrary contained in this Lease.

     (d) Tenant shall provide and keep in force such other insurance and in such
amounts as may, from time to time, be  reasonably  required by Landlord,  or any
mortgagee,  wherein Landlord is named as an additional named insured,  or by the
holder of any  mortgage  to which  this  Lease is  subject,  against  such other
insurable  hazards  as at the  time are  normally  insured  against  in cases of
premises similarly situated and similarly used.

     (e) All  insurance  required to be provided by Tenant by the  provisions of
this Section shall be carried in favor of Landlord,  Tenant,  and any mortgagee,
as their respective interests may appear, in such responsible companies licensed
in New Jersey and in such form as shall be reasonably  satisfactory to Landlord.
All policies referred to hereunder, and required to be procured by Tenant, shall
be paid for by Tenant and shall be non-assessable  and shall require thirty (30)
days  prior  notice  by the  insurer  by  registered  mail to  Landlord,  of any
cancellation  thereof  or change  therein  affecting  the  coverage  thereunder.
Landlord agrees that the insurance  coverage required of Tenant hereunder may be
carried  under a blanket  policy  covering  other  locations  of  Tenant  and by
umbrella addition.

     (f) Tenant shall procure policies for all said insurance for periods of not
less than one (1) year and shall  deliver to Landlord such policies and evidence
of the  payment of premiums  thereon  within ten (10) days after the date hereof
(but in any event  before  Tenant  commences  occupancy  of the Premises for any
purpose, including for the purpose of commencing construction of Tenant's Work),
and shall procure renewals thereof from time to time, delivering certificates of
said  renewals to the Landlord at least  thirty (30) days before the  expiration
thereof,  together with such evidence of payment as is provided by the insurance
carrier.

      SECTION 22.  FAILURE TO OBTAIN FIRE INSURANCE.

     (a) Tenant shall not do or suffer anything to be done in the Premises which
will increase the rate of fire  insurance on the Center.  If any of the policies
of insurance as in this Lease  provided to be obtained and  maintained by Tenant
or Landlord cannot be obtained and/or kept in force through  Tenant's fault, and
Tenant shall fail to commence to cure,  remedy and correct the  condition  which
makes it  impossible to obtain and keep in force said  policies  within  fifteen
(15) days after written  notice from  Landlord,  and Tenant  fails,  neglects or
refuses to proceed  diligently  to cure such  condition,  Landlord may terminate
this Lease by giving at least  fifteen (15) days notice of such  termination  to
Tenant,  and this Lease shall terminate at the expiration date fixed by Landlord
in said  notice  with the same  force and  effect  as if that were the  original
expiration  date hereof,  and Tenant shall be and remain  liable to Landlord for
all damages and losses  suffered by Landlord in the same manner as if this Lease
were  terminated  for any other default by Tenant.  In lieu of  exercising  such
right of  termination,  Landlord  may,  at its option,  obtain such  policies at
regular or increased rates and pay premiums therefor, and Tenant shall reimburse
Landlord for the amount of such premium (with respect to any policy  required to
be carried by Tenant under this Lease),  or increase in premium (with respect to
any policy  carried  by  Landlord),  upon  demand,  and if not paid,  the amount
thereof,  together with  interest at twelve (12%)  percent per annum,  to accrue
from the date of demand by  Landlord,  shall be added to the  amount of the rent
next coming due, as Additional Rent.

     (b) If because of Tenant's occupancy, it shall be impossible to obtain fire
insurance on the  buildings and  improvements  in the Center in an amount and in
form reasonably  required by Landlord,  and in fire insurance companies licensed
in the State of New Jersey, the Landlord may, at is option, terminate this Lease
on not less than thirty (30) days written notice to Tenant,  and the term hereof
shall terminate and come to an end as of the date set forth in Landlord's notice
to Tenant.

     SECTION 23.  RIGHT TO INSPECT AND EXHIBIT.

     Landlord  may enter the  Premises,  but  shall  not be  obligated  to do so
(except as required by any specific  provision of this Lease), at any reasonable
time on reasonable notice to Tenant (except that no notice need be given in case
of emergency) for the purpose of making such repairs, replacements or additions,
in, to, and about the Premises or the Center, as Landlord deems necessary in its
reasonable judgment,  for the safety and/or preservation of the Premises and the
Center; to inspect or protect the same; to effect compliance with any law, order
or regulation of any  governmental  authority having  jurisdiction;  to take all
required  materials  into the  Premises  for such  purposes;  to erect,  use and
maintain pipes and conduits in and through the Premises; provided, in all cases,
Landlord shall use its best efforts to minimize any  interference  with Tenant's
business  operations in the Premises.  Except as otherwise expressly provided in
this  Lease,  in no event  shall  Tenant have any claims  against  Landlord  for
necessary and reasonable  interruptions of Tenant's  business,  or for any other
consequential  damages  sustained  by  Tenant  in the  course  of such  repairs,
replacements or restoration,  however occurring  (except for Landlord's  willful
misconduct), nor shall any of the foregoing constitute an actual or constructive
eviction of Tenant or subject  Landlord to any liability or impose upon Landlord
any  obligation,   responsibility  or  liability   whatsoever,   for  the  care,
supervision  or repair of the Center of which the  Premises  are a part,  or any
part  thereof,  other than as  specifically  provided in this Lease,  or entitle
Tenant to any  compensation  or  diminution  or abatement of the rent  reserved.
Landlord shall enter the Premises in such instances and do such work in a manner
so as to cause the least  possible  interference  with the operation of Tenant's
business at the Premises.

     Landlord  shall  have the right to  exhibit  the  Premises  to  prospective
purchasers  or lenders.  For twelve (12) months prior to the  expiration  of the
Term, Landlord, or its agents, may exhibit the Premises to prospective tenants.

     SECTION 24.  NO LIABILITY OF LANDLORD.

     Landlord and its agents, and employees, shall not be liable for any loss or
damage to Tenant's  property or otherwise,  nor shall  Landlord,  its agents and
employees  be liable for any injury or damage to persons or  property  resulting
from fire, explosion,  falling plaster, steam, gas, electricity,  water, rain or
snow or leaks  from any part of the  Center  or from the  pipes,  appliances  or
plumbing  works or from the roof,  street or sub-surface or from any other place
or by dampness or by any other cause of whatsoever nature,  unless caused by and
due to the willful  misconduct  of Landlord or the  negligent act or omission of
Landlord,  its agents or employees.  Nothing contained herein shall be deemed to
impose on the Tenant liability for any of the foregoing unless caused by Tenant.

     SECTION 25.  LANDLORD'S EXCULPATION.

     Notwithstanding  the requirements of any provision of this Lease,  Landlord
shall not be liable for failure to furnish any services when such failure is due
to Force Majeure, provided Landlord shall furnish same as soon as possible using
due diligence.  Landlord shall not be liable, under any circumstances,  for loss
of, or injury to,  Tenant or Tenant's  business or property  however  occurring,
through or in connection  with or incidental to the furnishing of, or failure to
furnish,  any  services,  except for the willful  misconduct or negligent act or
omission of Landlord,  its agents and employees,  in which event Tenant shall be
entitled to a pro rata reduction in rent for the failure or interruption of such
services for a period in excess of 48 consecutive hours. In any event,  Landlord
shall  use  reasonable  efforts  to  eliminate  the  cause of any  such  service
stoppage.

         SECTION 26.  UTILITIES, SERVICES, TAXES, ETC., AND HVAC.

     (a) The Tenant shall furnish heat and air  conditioning at its own cost and
expense.

     (b)  Tenant   shall   repair  all  utility,   ventilating,   heating,   air
conditioning,  electrical,  gas and other  utility  lines  within the  Premises,
except if damage  outside of the Premises is caused by the  negligence,  acts or
omissions of the Tenant, its agent, servants or employees, in which event Tenant
shall likewise repair same outside of the Premises. If the repair is required as
a result of the negligence,  acts or omissions of Landlord, its agents, servants
or employees,  Tenant shall notify Landlord,  and Landlord shall have the option
to (a) make the  repairs at its sole cost and  expense,  or (b) have Tenant make
the repairs,  in which event Landlord will  reimburse  Tenant for the reasonable
cost thereof.  Tenant shall replace, at its own expense, any and all glass which
may be broken in and on the Premises.

     Tenant shall be responsible  for the repair and  replacement of all heating
and air conditioning equipment serving the Premises,  except Landlord represents
and agrees that the heating,  ventilating and air  conditioning  systems serving
the Premises shall be in good working condition at the commencement of the Term.

     (c) Tenant shall pay all costs for electricity,  water,  standby  sprinkler
charges,  repairs to the sprinkler system,  gas and other utilities and services
consumed by it. Tenant shall also be responsible for making any sprinkler system
installation, modification or alteration arising directly out of Tenant's use of
the Premises, or as a result of any alterations, installations or additions made
by Tenant in the Premises.

     (d) In the event that any utility deposits are necessary,  Tenant shall pay
said deposits to the utility company.

     (e)  Tenant  shall  enter  into and  maintain  during  the Term  hereof,  a
maintenance agreement with a qualified firm to service the heating,  ventilating
and air conditioning  systems servicing the Premises,  at Tenant's sole cost and
expense.  Tenant shall  provide  Landlord  with proof that such  agreement is in
effect upon request from Landlord.

         SECTION 27. INSOLVENCY OF TENANT.

     If at any time  during  the term of this  Lease the  Tenant  shall make any
assignment  for the benefit of  creditors,  or be decreed  insolvent or bankrupt
according to law, or if a receiver is appointed for the Tenant,  and the same is
not  dismissed  within sixty (60) days,  then the  Landlord  may, at its option,
terminate this Lease,  exercise of such option to be evidenced by written notice
to that effect  served upon the assignee,  receiver,  trustee or other person in
charge of the Tenant's estate or the liquidation of the Tenant's property.  Such
termination shall not release or discharge any payment of rent payable hereunder
and then accrued,  or any  liability  then accrued by reason of any agreement or
covenant   herein   contained   on  the  part  of  Tenant  or   Tenant's   legal
representatives.

         SECTION 28. DEFAULTS.

         (a) In the event that Tenant  defaults in the payment of any Basic Rent
or any Additional Rent and such default continues for five (5) days after notice
to Tenant, TIME BEING OF THE ESSENCE; or if Tenant defaults in fulfilling any of
the  covenants or  agreements  of this Lease on its part to be kept or performed
and such default is not cured within fifteen (15) days after written notice from
Landlord  or its agent or if such  default is of such  nature  that it cannot be
completely cured within such period, Tenant does not commence such curing within
fifteen (15) days and thereafter fails to proceed with due diligence and in good
faith to cure such default;  or if this Lease is  transferred  to or devolves by
merger,  consolidation or operation of law upon any person,  firm or corporation
other than Tenant,  except as maybe specifically  permitted by this Lease; or if
Tenant  abandons the Premises or Tenant fails to take possession of the Premises
within fifteen (15) days after the  Commencement  Date;  then and in any of such
events, Landlord or its agent, may give Tenant a written notice specifying a day
not less than five (5) days thereafter  whereupon the Term shall end, and on the
day specified the Term shall expire as if that day were the day herein fixed for
the  expiration  of the Term,  and  Tenant  shall  then quit and  surrender  the
Premises to Landlord and Tenant shall remain liable as herein provided.

     (b) Upon the occurrence of any of the events specified above,  Landlord may
re-enter the Premises and remove Tenant by summary proceedings or otherwise.  In
case of any such re-entry,  expiration of the Term and/or  dispossess by summary
proceedings or otherwise,  the Basic Rent and  Additional  Rent shall become due
and  payable  up to the time of such  re-entry,  dispossess  and/or  expiration,
together  with such  reasonable  expenses  as  Landlord  may incur in  obtaining
possession of the Premises  (including but not limited to reasonable  attorneys'
fees,  brokerage fees and/or the cost of putting the Premises in good order, and
for preparing the same for re-rental)  but Tenant shall not be  responsible  for
substantial  "build to suit" types of expenses.  Landlord may relet the Premises
or any part or parts thereof, for a term or terms which may at Landlord's option
be less than or exceed the  period  which may  otherwise  have  constituted  the
balance  of the Term and may  grant  reasonable  concessions,  or free  rent and
Tenant shall not be credited therewith;  and Tenant or the legal representatives
of Tenant  shall also pay  Landlord  as  liquidated  damages  for the failure of
Tenant to observe and perform said  Tenant's  covenants  herein  contained,  any
deficiency  between all Basic Rent and Additional  Rent hereby  reserved  and/or
covenanted  to be paid and the net  amount,  if any,of the basic and  additional
rents  collected  on account of the lease of the  Premises  for the period which
would  otherwise have  constituted  the balance of the Term. Any such liquidated
damages  shall be paid in  monthly  installments  by  Tenant  on the  rent  days
specified in the Lease,  until  Landlord or Tenant shall elect to accelerate the
payment of such  liquidated  damages,  in which event Tenant shall pay Landlord,
within ten (10) days after Landlord's demand, an amount equal to such deficiency
above discounted to present value by allowing  interest at the rate of four (4%)
percent per annum. Any suit brought to collect the amount of such deficiency for
any month shall not  prejudice  in any way the rights of Landlord to collect the
deficiency for any subsequent month by a similar proceeding.  Landlord shall not
be liable for inability to relet the Demised  Premises.  The words "re-enter" or
"re-entry"  as used in this Lease  shall not be  restricted  to their  technical
legal meaning.  Tenant shall not be entitled to any surplus accruing to Landlord
as a result of any reletting and no such reletting shall  constitute a surrender
and acceptance or be deemed evidence thereof. Tenant hereby waives all rights of
redemption  to which  Tenant or any person under Tenant might be entitled by any
law now or hereafter in force.

     (c) In the event of a breach or  threatened  breach by Tenant of any of the
covenants  or  provisions  of this  Lease,  Landlord  shall  have  the  right of
injunction  and the right to invoke any remedy allowed at law or in equity as if
re-entry,  summary  proceedings and other remedies were not herein provided for.
Mention in this Lease of any particular  remedy shall not preclude Landlord from
any other remedy, in law or in equity.

     (d) If Tenant  shall  default,  after  applicable  notice and cure  periods
provided for in this Lease,  in the  performance of any  provision,  covenant or
condition on its part to be  performed  under this Lease,  Landlord  may, at its
option,  perform  the same for the  account  and at the  expense of  Tenant.  If
Landlord at any time shall be compelled to pay or elects to pay any sum of money
or do any act which  requires  the  payment of any sum of money by reason of the
failure of the Tenant to comply with any provision of this Lease, or if Landlord
incurs  any  expense  including  reasonable  attorneys  fees in  prosecuting  or
defending any action or proceeding by reason of any default of Tenant under this
Lease,the  sums so paid by Landlord  with  interest at the rate of twelve  (12%)
percent per annum, together with costs and damages shall be due from and be paid
by Tenant to Landlord on demand as additional rent hereunder.

         SECTION 29.  REAL ESTATE TAXES.

     (a) In addition to the Basic Rent, Tenant shall pay its Proportionate Share
of Real Estate Taxes imposed on the Center, to be included as part of Landlord's
Operating Costs payable pursuant to Section 4 of this Lease. Notwithstanding the
above,  Landlord may invoice Tenant separately for Tenant's  Proportionate Share
of Real Estate Taxes, provided such Real Estate Taxes are not otherwise included
in Tenant's share of Operating Costs for the applicable period. For the purposes
of this Section, "Real Estate Taxes" shall mean the real estate taxes, water and
sewer  charges,  assessments  and other  governmental  charges  imposed upon the
Center and the improvements  thereon.  If and to the extent that due to a change
in the method of taxation or assessment,  any franchise,  capital stock, capital
gains, rent,  income,  profit or any other tax or charge shall be substituted in
whole or in part for the current ad valorem taxes now or hereafter  imposed upon
the real estate,  such franchise,  capital stock,  capital gains,  rent, income,
profit or other tax or charge  shall be deemed  included in the term Real Estate
Taxes for the purpose of this Section.

     (b) If Landlord  shall  institute a tax appeal,  and said tax appeal  shall
result in a  reduction  in taxes,  then the  Tenant  shall pay to  Landlord  its
Proportionate  Share of Landlord's  costs of said appeal,  but in no event shall
that  amount  exceed the  reduction  in taxes,  and Tenant  shall  receive or be
credited with its  Proportionate  Share of any refund or reduction.  

          SECTION 30.  SIGNS.

     Landlord  agrees  that  Tenant  shall have the right to place a sign on the
front facade of the Premises, at Tenant's sole cost and expense,  subject to the
provisions  hereof. No sign shall be affixed to or placed upon any exterior part
of the Premises or the Center by the Tenant,  except in such manner, and of such
size,  design  and color as shall be  approved  in advance  by the  Landlord  in
writing.  Landlord hereby approves  Tenant's  signage as set forth in Schedule C
annexed hereto. Landlord agrees that Tenant shall have the right to place a sign
on the pylon sign for the Center  located  at the  intersection  of Route 18 and
Lake Avenue,  in such  location and of such design to be approved by Landlord in
advance,  which approval shall not be unreasonably  withheld,  and provided that
the size of Tenant's sign shall not exceed fifty (50%) percent of the total area
of the pylon sign.  Tenant shall be  responsible  for complying with any and all
applicable  laws,  rules and  regulations  relating  to any  signage  erected or
installed by Tenant. SECTION 31. OUTSIDE STORAGE.

     Tenant shall not store any goods, other than temporarily in connection with
the delivery of any item, outside of the Premises or any place in the Center.

         SECTION 32.  FINANCIAL STATEMENTS.

     Tenant shall, if required by Landlord's  mortgagee or any future mortgagee,
or  prospective  mortgagee or  prospective  purchaser,  submit to Landlord,  any
prospective  mortgagee or  purchaser,  without cost to the  Landlord,  a copy of
Tenant's current financial statement which shall be considered "confidential" by
the  recipient.  Tenant  shall also,  without  cost to  Landlord,  submit to any
prospective  mortgagee or purchaser such prior statements as it may have, as and
when required by Landlord or Landlord's  mortgagee or  prospective  mortgagee or
prospective  purchaser  but in no event for more than two (2) years  before  the
current financial statement's year. 

         SECTION 33. MERCHANTS' ASSOCIATION.

     In the event that a Merchants' Association is established, Tenant agrees to
abide by the By-Laws of the Association,  and shall pay its proportionate  share
of any dues,  assessments,  or costs incurred by the Association,  not to exceed
Five  Hundred  ($500.00)  Dollars per annum.  Tenant  shall  become and remain a
member of the  Association so long as one exists.  Landlord  represents  that no
merchants association currently exists for the Center.

         SECTION 34.  SUBORDINATION; PRIORITY OF FEE MORTGAGES.

     This  Lease,  any  amendments,  extensions,  options (if any) and any other
rights granted to Tenant hereunder shall be subject and subordinate at all times
in lien and  priority to any and all present  and future  ground and  underlying
leases  affecting  all or any part of the  Center  and to any and all  mortgages
which  may now or  hereafter  be placed on or affect  such  leases,  and/or  the
Center,  and to all  renewals,  modifications,  consolidations,  and  extensions
thereof,  without the necessity of any further  instrument or act on the part of
Tenant.  Tenant shall execute and deliver upon demand any further  instrument or
instruments  confirming the  subordination of this Lease to the lien of any such
ground  and/or  underlying  lease or mortgage if requested to do so by Landlord,
and any further  instrument or instruments of attornment  that may be reasonably
desired by any such mortgagee or Landlord.  Notwithstanding  the foregoing,  any
mortgagee  may at any  time  subordinate  its  mortgage  to this  Lease  without
Tenant's  consent,  by giving notice in writing to Tenant,  and  thereupon  this
Lease shall be deemed prior to such mortgage  without regard to their respective
dates of execution and delivery,  and in that event,  such mortgagee  shall have
the same  rights  with  respect  to this  Lease as  though  this  Lease had been
executed  prior to the  execution  and  delivery  of the  mortgage  and had been
assigned to such mortgagee.  Landlord agrees to use its best efforts to obtain a
nondisturbance  agreement  from any  existing  mortgagee,  and  from any  future
mortgagee  of the  Center  or from any  ground  lessee of the  Center.  Landlord
represents  that there are no ground leases  currently in effect with respect to
the Center. 

            SECTION 35. MORTGAGEE PROTECTION CLAUSE.

     Tenant  agrees  to give  all  mortgagees  and/or  trust  deed  holders,  by
certified  mail, a copy of any notice of default  served on  Landlord,  provided
that prior to such notice Tenant has been notified, in writing (by way of notice
of assignment of rents and leases or otherwise), of the name and address of such
mortgagees  and/or trust deed holders.  The mortgagees and/or trust deed holders
shall  have the same  time  within  which to cure  such  default  as is given to
Landlord  under this Lease.  Failure to provide such notice within any specified
period of time  shall not  constitute  a waiver  by  Tenant of its  rights  with
respect to such  default;  however,  Tenant may not exercise any rights  against
Landlord  until the  mortgagees  and/or  trust deed  holders have been given the
notice and opportunity to cure provided for above.

         SECTION 36:  WATER, STANDBY SPRINKLER, SPRINKLER
                              ALARM AND SEWER (IF ANY) CHARGES:

     Tenant shall pay as  Additional  Rent (and not as part of Operating  Costs)
its Proportionate Share of water, standby sprinkler,  sprinkler alarm, and sewer
(if any)  charges for the Common  Areas or which are billed to Landlord  for the
entire Center. Tenant shall pay to Landlord in monthly installments on the first
day of each  month  its  estimated  Proportionate  Share of such  charges.  Upon
receipt  of a final  bill or bills for such  charges  for each year of the Term,
each party agrees to pay the other on demand, such amount as may be necessary to
adjust  the  amount  paid  hereunder  to the  actual  amount  paid to the entity
providing such service and/or utility;  provided,  however,  should Landlord owe
Tenant,  such  amount  may be treated as a credit to  Tenant's  next  succeeding
payments for such  charges.  The monthly  installments  of such charges shall be
increased  or  decreased  on account of such  final bill or bills.  

          SECTION  37. BUSINESS HOURS.

     The Tenant agrees to conduct its business and remain open Monday to Friday,
9:30 a.m. to 9:00 p.m., Saturday, 9:30 a.m. to 7:00 p.m., and Sunday, 10:00 a.m.
to  6:00  p.m.,  except  that  Tenant  may  close  on July 4,  New  Year's  Day,
Thanksgiving Day, Christmas Day, Mother's Day, Easter Sunday,  Memorial Day, and
Labor Day,  Rosh  Hashanoh  and Yom  Kippur.  In the event that  Tenant does not
remain open as aforesaid it shall pay Landlord,  as Additional Rent, $250.00 per
day for each day or part thereof  that it is closed.  Nothing  contained  herein
shall be deemed to restrict  or prevent  Tenant  from  opening  for  business at
additional times, subject to applicable laws, ordinances, rules and regulations.
Tenant need not remain open because of severe inclement weather, or by reason of
fire or other casualty at the Premises,  or by reason of force majeure.  

      SECTION  38. CENTER.

     (a) The  Center  shall  include  the  parcel(s)  of land  and  improvements
generally  depicted  as the  Center  whether  owned in fee or  ground  leased by
Landlord,  and as more  particularly  described  in  Schedule A annexed  hereto.
Landlord  reserves the right to add to or sever the ownership of or title to any
portion of the Center at any time, provided however,  the exercise of such right
shall in no way reduce the Tenant's rights or Landlord's  obligations hereunder,
or increase  Tenant's  obligations  under the terms of this Lease,  or interfere
with Tenant's use of the Premises, parking area or other Common Areas. Except as
otherwise  expressly set forth in this Lease, it is agreed that the depiction of
the Center does not  constitute  a  representation,  covenant or warranty of any
kind by Landlord. Subject to the terms, provisions and restrictions set forth in
this Lease, Landlord reserves the right to change the size and dimensions of the
Center, the number and location of buildings, building dimensions, the number of
floors in any of the buildings,  store dimensions,  identity, number and type of
other stores and  tenancies,  and the Common  Areas,  and provided same does not
unreasonably  interfere with Tenant's use of the Premises,  or increase Tenant's
obligations  hereunder,  and does not adversely  affect the ingress or egress to
the Premises or the visibility of the Premises. This Lease shall not be affected
or  impaired  by any change to, or  easements  or other  rights  granted in, any
lawns,  sidewalks,  driveways,  curb cuts or streets  adjacent  to or around the
Center, except as otherwise provided in this Lease.

     (b) In the  event  that the  Landlord  exercises  its  rights  pursuant  to
paragraph (a) above,  Operating Costs shall be determined  pursuant to Section 8
hereof on the basis of the redefined Center.

     (c) Landlord shall have the right to convert the Premises and/or the Center
into  condominiums  and in connection  therewith  Landlord shall be permitted to
assign this Lease to the owner of a  condominium  which  includes the  Premises,
provided the foregoing  shall in no way reduce the Tenant's rights or Landlord's
obligations hereunder,  or increase Tenants obligations (financial or otherwise)
under the terms of this Lease, or interfere with Tenant's use of the Premises or
the Common Areas,  or require Tenant to purchase or otherwise incur any expenses
or to change or alter the Premises.  In such event,  the Tenant agrees to attorn
to the owner of such  condominium  as  Landlord  under this  Lease.  

     SECTION 39. CONTROL OF TENANT.

     If  Tenant  under  this  Lease  is  a  corporation,  other  than  a  public
corporation, and if at any time during the Term of this Lease a majority of such
corporation's  shares of capital stock shall be  transferred to a related entity
or corporation, Tenant shall so notify Landlord. If Tenant is a corporation, and
more than fifty (50%) percent of the stock ownership or voting control of Tenant
is transferred to a non-related  person,  entity or  corporation,  same shall be
deemed an  assignment  of this Lease and shall be governed by the  provisions of
Section 20 of this Lease. 

     SECTION 40. PROCESSING CHARGE.

     Tenant  agrees to reimburse  Landlord for  reasonable  attorneys'  fees and
accounting  fees  incurred by Landlord  when  Landlord's  consent or approval is
requested  by  Tenant  or is  required  by this  Lease  in  connection  with the
processing and documentation of any assignment, subletting, license, concession,
creation of a security interest, granting of a collateral assignment,  change of
ownership or other transfer  required by Tenant, to the extent same specifically
relate to the Premises. Such amount is to be paid no later than the next monthly
Basic Rent installment date. 
     
     SECTION 41. RIGHT OF FIRST REFUSAL.

     In the event that any or all of Tenant's  interest in the Demised  Premises
and/or this Lease is transferred  by operation of law to any trustee,  receiver,
or  other  representative  or agent  of  Tenant,  or to  Tenant  as a debtor  in
possession,  and  subsequently  any or all of  Tenant's  interest in the Demised
Premises and/or this Lease is offered or to be offered by Tenant or any trustee,
receiver,  or other  representative  or  agent of  Tenant  as to its  estate  or
property  (such  person,  firm or entity  being  hereinafter  referred to as the
"Grantor"), for assignment, conveyance, lease, or other disposition to a person,
firm or entity other than  Landlord  (each such  transaction  being  hereinafter
referred to as a "Disposition"), it is agreed that Landlord has and shall have a
right of first refusal to purchase,  take, or otherwise  acquire,  the same upon
the same terms and  conditions  as the Grantor  thereof  shall  accept upon such
Disposition  to  such  other  person,  firm,  or  entity;  and as to  each  such
Disposition  the Grantor  shall give  written  notice to Landlord in  reasonable
detail of all of the terms and conditions of such Disposition within twenty (20)
days next following its  determination to accept the same but prior to accepting
the same, and Grantor shall not make the  Disposition  until and unless Landlord
has  failed  or  refused  to  accept  such  right  of  first  refusal  as to the
Disposition,  as set forth  herein.  The  parties  agree that the right of first
refusal set forth in this Section 41 shall only apply in the event a petition in
bankruptcy,  receivership,  assignment  for the benefit of  creditors or similar
insolvency proceeding is filed by or against Tenant.

     Landlord  shall  have  sixty (60) days next  following  its  receipt of the
written notice as to such Disposition in which to exercise the option to acquire
Tenant's  interest  by such  Disposition,  and the  exercise  of the  option  by
Landlord  shall be effected by written notice to that effect sent to the Grantor
by certified or registered  mail; but nothing  herein shall require  Landlord to
accept a particular  Disposition or any  Disposition,  nor does the rejection of
any one such  offer of first  refusal  constitute  a waiver  or  release  of the
obligation of the Grantor to submit other offers  hereunder to Landlord.  In the
event Landlord  accepts such offer of first refusal,  the  transaction  shall be
consummated pursuant to the terms and conditions of the Disposition described in
the  notice to  Landlord.  In the event  Landlord  rejects  such  offer of first
refusal, Grantor may consummate the Disposition with such other person, firm, or
entity;  but any  decrease  in price of more than two (2%)  percent of the price
sought from Landlord or any change in the terms of payment for such  Disposition
shall  constitute a new transaction  requiring a further option of first refusal
to be given to Landlord hereunder.

     In the event this Lease is assigned or transferred  to an entity  unrelated
to Tenant as part of or in connection  with any  bankruptcy or other  insolvency
proceeding commenced by or against Tenant, the monthly credit against Basic Rent
due to  Tenant  pursuant  to the  terms  of  Section  2(a) of this  Lease  shall
terminate and shall be of no further force or effect as of the effective date of
the assignment or transfer.


         SECTION 42: ENVIRONMENTAL CLEAN-UP RESPONSIBILITY ACT/ISRA

     At all times during the Term of this Lease,  Tenant shall handle  hazardous
substances  and  waste,  if any,  as  defined  in the New  Jersey  Environmental
Clean-Up  Responsibility  Act  ("ECRA"),  as such  law has been  amended  by the
Industrial Site Recovery Act ("ISRA"),  and may from time to time hereinafter be
amended,  which are brought  into or placed in the  Premises by Tenant or any of
its agents, employees, contractors, licensees or invitees, in such fashion as to
avoid any discharge of hazardous  substances  or wastes at the Premises.  Tenant
represents and warrants that the business  operations  which it shall conduct at
the Premises do not constitute the operation of an industrial  establishment  as
defined in ECRA/ISRA or, on the other hand, if it is or at any time shall become
such an  industrial  establishment,  Tenant will  comply  with all  requirements
during  operations and at the time of closing,  terminating or transferring  the
operations,  at its sole cost and expense. Tenant shall cooperate with Landlord,
at no cost or  expense  to  Tenant,  in any  effort of  Landlord  to obtain  all
approvals  under ISRA which are necessary to the  completion of any  transaction
respecting  the  Landlord or the  Premises,  whether or not Tenant is a party to
such transaction;  provided, however, that Tenant shall be obligated to incur no
expense in connection with a sale of the Center by Landlord,  wherein Tenant has
had no ISRA-related activity at the Premises. Notwithstanding anything herein to
the contrary,  the  provisions of this section shall survive the  termination of
the tenancy under this Lease. Tenant's SIC Number is 7999. The Tenant agrees not
to store any  hazardous  substances  or waste as  defined  by  ECRA/ISRA  on the
Premises,  other than in de minimus amounts required in connection with cleaning
or normal consumer uses.

     Tenant  agrees to  indemnify,  defend and hold  Landlord and its  officers,
employees  and agents  harmless  from any and all  claims,  judgments,  damages,
fines,  penalties,   liabilities,   costs  and  expenses  (including  reasonable
attorney's  fees,  consultant  fees and expert fees) which arise during or after
the Term of this Lease in connection with the presence or suspected  presence of
toxic or hazardous substances or wastes in the soil, groundwater on or under the
Center or in the Premises caused by the acts of Tenant, its officers, employees,
agents,  contractors  or  invitees.   Notwithstanding  anything  herein  to  the
contrary,  the  provisions of this section shall survive the  termination of the
tenancy under this Lease.

     (b) In the event  there is any  hazardous  or toxic  substances  located or
contained within the Premises or the Center,  Landlord shall be responsible,  at
its cost and  expense,  for the  prompt  removal of the such  materials,  all in
accordance  with  the  requirements  of  applicable  law,  and for  any  related
alterations, additions,  installations,  repairs or improvements to the Premises
or the Center,  except to the extent any such  material has been brought into or
onto the Premises or the Center by Tenant, its agents, employees, contractors or
invitees,  in which case,  Tenant shall be  responsible  for the prompt  removal
thereof in accordance  with  applicable  laws and for such related  alterations,
additions,  installations,  repairs or  improvements.  Nothing  contained herein
shall limit or restrict or be deemed to limit or restrict  Landlord's  rights or
remedies as to any third party, at law or in equity. Landlord represents that to
the best of its knowledge, there are no hazardous or toxic substances located or
contained within the Premises or the Center. Tenant agrees to notify Landlord of
the presence of any such  materials in the Premises  immediately  upon  becoming
aware  thereof.  Landlord  agrees to  indemnify,  defend and hold Tenant and its
officers,  employees  and agents  harmless  from any and all claims,  judgments,
damages, fines, penalties, liabilities, costs and expenses (including reasonable
attorney's  fees,  consultant  fees and expert fees) which arise during or after
the  Term  of  this  Lease  in  connection   with  a  breach  of  the  foregoing
representation  and/or the presence or suspected  presence of hazardous or toxic
substances  in the  soil,  groundwater  on or under the  Center or the  Premises
caused by the acts of Landlord, its officers,  employees, agents, contractors or
invitees,  except to the extent such substances are present as the result of the
willful  misconduct  or  affirmative  act of Tenant,  its  officers,  employees,
agents,  contractors  or  invitees.   Notwithstanding  anything  herein  to  the
contrary, the provisions of this Subsection shall survive the termination of the
tenancy under this Lease.

         SECTION 43.  MODIFICATIONS REQUESTED BY MORTGAGEE.

     In the event that any existing or prospective mortgagee of the Center shall
request a change in the language of the terms of this Lease, or the execution of
any  document  in  connection  therewith,  Tenant  agrees to make such change or
execute such document provided the same shall not increase Tenant's  obligations
or  liabilities  under  this  Lease,  decrease  its  rights  hereunder,   reduce
Landlord's   obligations  or  liabilities  under  this  Lease,  or  unreasonably
interfere with Tenant's normal business operations.

         SECTION 44.  QUIET ENJOYMENT.

     Landlord  represents that it has title to the Center and has the full right
and power to execute  and  perform  this  Lease and to grant the estate  demised
herein.  Landlord  covenants  and agrees  that if and so long as Tenant pays the
rent herein  reserved,  and performs and observes the covenants,  conditions and
agreements  hereof  upon the part of the Tenant to be  performed  and  observed,
Landlord  shall do nothing to affect  Tenant's  right to  peaceably  and quietly
have, hold and enjoy the Premises for the term herein mentioned,  subject to the
provisions of this Lease.

         SECTION 45.  ESTOPPEL CERTIFICATE.

     Tenant and Landlord  agree,  at any time,  and from time to time,  upon not
less than ten (10) days' prior notice to the other, to execute,  acknowledge and
deliver to the other, a statement in writing,  addressed to the other and to any
mortgagee,  prospective  mortgagee,  or any other party  specified  by Tenant or
Landlord,  certifying that this Lease is unmodified and in full force and effect
(or,  if there have been  modifications,  describing  them),  and  stating  that
Landlord has  delivered and Tenant has accepted  possession;  the dates to which
basic rent,  additional rent and other charges have been paid, the date on which
the term of the Lease  commenced and stating  whether or not to the knowledge of
the signer of such certificate,  there exists any default by either party in the
performance of any covenant,  agreement,  term, provision or condition contained
in this Lease,  and, if so, specifying each such default of which the signer may
have  knowledge,  and stating any other fact or certifying  any other  condition
reasonably  requested  by  Landlord  or Tenant  or  reasonably  required  by any
mortgagee,  prospective mortgagee or purchaser or assignees of such mortgagee or
of Landlord  or Tenant,  it being  intended  that any such  statement  delivered
pursuant  hereto may be relied  upon by Landlord  and Tenant or a  purchaser  of
Landlord's or Tenant's interest and by any mortgagee or prospective mortgagee or
other party requesting same hereunder.


     SECTION 46. HOLDING OVER.

     In the event that Tenant  shall remain in occupancy of the Premises for any
period  beyond  the  expiration  of the term of this  Lease or any  renewals  or
extensions  thereof,  such  occupancy  shall be  deemed  to be a  month-to-month
tenancy  at a  monthly  rental  equal to  twice  the sum of the  Basic  Rent and
Additional  Rent  payable  for the last month of the Term,  and Tenant  shall be
liable for any  additional  damages  that might be  suffered  by  Landlord.  The
acceptance of rent by Landlord shall not be deemed to create a new or additional
tenancy other than as  aforesaid.  Nothing  contained  herein shall be deemed to
limit or restrict  Landlord's  rights at law or in equity,  in the event  Tenant
remains in  occupancy of the Premises  upon the  expiration  of the Term without
Landlord's consent.

         SECTION 47.  NO WAIVER; ENTIRE AGREEMENT; NO SURRENDER.

     (a) The failure of Landlord to seek redress for  violation of, or to insist
upon the strict  performance  of any  covenant,  agreement,  term,  provision or
condition of this Lease, or any of Landlord's  Rules and  Regulations  shall not
constitute a waiver thereof and Landlord shall have all remedies provided herein
and by  applicable  law with  respect to any act,  which  would have  originally
constituted a default.  The receipt by Landlord of Basic Rent or Additional Rent
with  knowledge of the breach of any  covenant,  agreement,  term,  provision or
condition of this Lease shall not be deemed a waiver of such breach. The failure
of Landlord to bill or collect rent in a timely  fashion  shall not be construed
as a waiver of  Landlord's  right to collect rent at any time during the Term or
any time thereafter.

     (b) This Lease with the  schedules,  riders and exhibits,  if any,  annexed
hereto  contains  the entire  agreement  between  Landlord  and Tenant,  and any
agreement  hereafter  made between  Landlord and Tenant shall be  ineffective to
change,  modify, waive, release,  discharge,  terminate or effect a surrender or
abandonment  of this Lease,  in whole or in part,  unless such  agreement  is in
writing and signed by the party against whom enforcement is sought.

     (c) No employee of Landlord or of Landlord's agents shall have any power to
accept the keys of the Demised  Premises prior to the  termination of the Lease.
The delivery of keys to any employee of Landlord or of  Landlord's  agents shall
not operate as a termination of the Lease or a surrender of the Premises. In the
event of Tenant at any time  desiring to have  Landlord  sublet the Premises for
Tenant's  account,  Landlord or Landlord's  agents are authorized to receive the
keys for such  purposes  without  releasing  Tenant from any of the  obligations
under this Lease.  Tenant hereby relieves  Landlord of any liability for loss or
damage to any of Tenant's effects in connection with such subletting.

     (d) No payment by Tenant or receipt by  Landlord of an amount less than the
Rent stipulated in this Lease shall be deemed to be other than on account of the
earliest stipulated Rent, nor shall any endorsement or statement on any check or
any  letter  accompanying  any check or  payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's  right to recover the balance of such rent or pursue any other remedy
provided in this Lease or by law.

         SECTION 48.  REIMBURSEMENT OF LEGAL EXPENSES.

     Tenant  agrees to pay to Landlord upon demand,  as  additional  rent, a sum
equal to all costs and expenses (including  reasonable attorney's fees) incurred
by  Landlord  during or after  the Term in  enforcing  all or any of  Landlord's
rights under this Lease  because of a breach by Tenant as  determined by a court
of competent jurisdiction.

     Landlord  agrees to pay to  Tenant,  upon  demand,  all costs and  expenses
(including  reasonable  attorney's  fees) incurred by Tenant during or after the
Term in enforcing  Tenant's  rights under this Lease  resulting from a breach of
this Lease by Landlord as determined by a court of competent jurisdiction.

     SECTION 49.  BROKER.

     Tenant and Landlord  warrant and  represent to each other that there are no
brokers  who  negotiated  or  brought  about  this  transaction  other than R.J.
Brunelli & Co., Inc. Landlord shall be responsible for payment of any commission
due to said named  broker  pursuant to separate  agreement.  Tenant and Landlord
shall  indemnify,  defend and hold each other  harmless from and against any and
all claims for any brokerage  commissions or other compensation  asserted by any
other  broker  or  person  in  connection  with  this  Lease,  arising  from the
respective  acts of Tenant or  Landlord  in  breach of this  representation  and
warranty,  including  but not  limited  to any  costs  and  expenses  (including
reasonable attorneys fees) related thereto.

     SECTION 50.  OPTION TO RENEW.

     Tenant is hereby  granted  two (2)  options  to renew  this  Lease upon the
following terms and conditions:

     (a) At the time of the  exercise of each option to renew and at the time of
the said renewal, Tenant shall not be in default beyond applicable grace periods
in  accordance  with the terms and  provisions  of the Lease,  and Tenant or any
permitted  assignee or sublessee shall be in possession of the Premises pursuant
to this Lease.

     (b)  Notice  of  exercise  of each  option  shall be sent to  Landlord,  in
writing,  at least nine (9) months before  expiration of the term of this Lease,
as same may have been previously extended.

     (c) The  renewal  terms  shall  each be for a term of  five  (5)  years  to
commence  at the  expiration  of the term of this  Lease,  as same may have been
previously  extended,  and all of the terms and conditions of this Lease,  other
than the Basic Rent shall apply during any such renewal term.

     (d) The  Basic  Rent to be paid  during  such  renewal  terms  shall  be as
follows:

     (i) The Basic  Rent to be paid  during  the  first  renewal  term  shall be
payable in the annual amounts and monthly  installments as set forth on Schedule
B annexed hereto and made a part hereof; and

     (ii) The Basic  Rent to be paid  during the  second  renewal  term shall be
payable in the annual amounts and monthly  installments as set forth on Schedule
B annexed hereto and made a part hereof.


         SECTION 51.  EXECUTION BY LANDLORD.

     The submission of this Lease Agreement for examination  does not constitute
a reservation  of or option for the Premises and this Lease shall be of no force
and effect  whatsoever  unless it shall have been  executed by the  Landlord and
Tenant  and copies  thereof  shall have been  received  by the  parties or their
respective attorneys.

     SECTION 52.   RECORDATION.

     Tenant  covenants  not  to  place  this  Lease  or  the  Commencement  Date
certificate  referred to in Section 10(a) on record.  At the request of Landlord
or Tenant,  the other party will  execute a  memorandum  of lease for  recording
purposes  containing  references  to the  material  provisions  of this Lease as
Landlord and Tenant shall  mutually  deem  necessary.  If requested by Landlord,
Tenant shall  execute a  recordable  discharge  of the  memorandum  of lease and
deliver same to Landlord's  attorney  prior to recording the  memorandum,  to be
held in escrow until  expiration or termination of this Lease in accordance with
its terms.

         SECTION 53.   NOTICES.

     Any  notice,  request or demand  permitted  or  required to be given by the
terms and provisions of this Lease,  or by any law or  governmental  regulation,
either by Landlord to Tenant or the Tenant to Landlord, shall be in writing, and
shall be delivered by overnight  courier service with receipt  acknowledged,  or
mailed by registered or certified mail, return receipt  requested,  addressed if
to Tenant,  to Attention:  Dan Catalfumo,  290 Wild Avenue,  Staten  Island,  NY
10314,  and if to Landlord,  to Attention:  Joseph Harary,  1411 Broadway,  36th
Floor,  New York, NY 10018,  with a copy to Richard A. Epstein,  100  Plainfield
Avenue, Edison, New Jersey 08817. Such notice, request or demand shall be deemed
given when  actually  delivered or if mailed,  when received by the addressee as
evidenced by the return receipt,  or if refused,  the date on which delivery was
first attempted as evidenced by the postal  records.  Either party may from time
to time,  by notice as  aforesaid,  designate a different  address for  notices,
requests or demand.

         SECTION 54.  PERSONS BOUND.

     The covenants,  agreements,  terms, provisions and conditions of this Lease
shall  bind and inure to the  benefit  of the  respective  heirs,  distributees,
executors, administrators,  successors, assigns and legal representatives of the
parties  hereto with the same effect as if  mentioned in each  instance  where a
party  hereto is named or referred  to, but nothing  herein  contained  shall be
construed  to give  Tenant the right to assign  this Lease.  The  covenants  and
obligations  on the part of Landlord  under this Lease shall not be binding upon
Landlord  herein named with respect to any period  subsequent to the transfer of
its interest in the Center,  by operation of law or otherwise,  and in the event
of such transfer or any subsequent  transfer Tenant agrees to look solely to the
transferee for the performance of Landlord's covenants and obligations, but only
with  respect to the  period  beginning  with such  transfer  and ending  with a
subsequent transfer of such interest, and all acts, covenants or obligations due
on the part of Landlord  during its ownership  shall survive any act of transfer
of the fee title to or leasehold interest in the Center.

         SECTION 55.  PARTIAL INVALIDITY.

     If any provision of this Lease or any application  thereof to any person or
circumstance  shall be determined to be invalid or unenforceable,  the remaining
provisions  of this Lease or the  application  of such  provision  to persons or
circumstances  other  than those to which it is held  invalid  or  unenforceable
shall not be affected  thereby and shall be valid and enforceable to the fullest
extent permitted by law.

         SECTION 56. CONSENTS.

     Except as expressly  set forth in this Lease,  all  consents and  approvals
required of Landlord  shall not be  unreasonably  withheld or delayed,  provided
Tenant  shall not make or assert any claim for,  and  Tenant  hereby  waives any
claim for money damages by way of setoff, counterclaim or defense, or otherwise,
based upon any claim or  assertion  by Tenant  that  Landlord  has  unreasonably
withheld or  unreasonably  delayed any consent or  approval.  Tenant's  sole and
exclusive  remedy shall be an action or  proceeding  for  specific  performance,
injunction or declaratory judgment.  This Section shall not be applicable in the
event a court of competent jurisdiction determines that Landlord has acted in an
arbitrary  or  capricious  manner.  This  Section  shall  also not  apply to any
diminution in the rental value of the Premises to Tenant resulting from Landlord
having  unreasonably  withheld or delayed its consent or approval,  provided the
Tenant's  damages  shall not exceed the amount of Rent payable by Tenant for the
period so affected.

         SECTION 57.  LANDLORD'S LIEN.

     To secure the payment of all of the rents,  taxes,  charges,  penalties and
damages herein covenanted to be paid by Tenant,  and for the purpose of securing
all of the  Tenant's  obligations  under  this  Lease,  Tenant  hereby  gives to
Landlord an express lien on and security  interest in all  property,  equipment,
chattels and fixtures  which may be placed in or on the Premises and also on any
proceeds  of  insurance  which may  accrue to Tenant by reason of  damages to or
destruction  of any such  property.  This  lien  and  security  interest  may be
foreclosed by public or private sale upon ten (10) days notice of sale to tenant
and the  Landlord  shall have the right to become the  purchaser  upon being the
highest bidder at such sale.

         SECTION 58.  MISCELLANEOUS.

     (a) As used in this  Lease,  the term  "Force  Majeure"  shall  mean  fire,
catastrophe, casualty, strikes or labor trouble, civil commotion, acts of God or
the public enemy,  governmental  prohibitions  or  regulations,  or inability in
obtaining materials, or any other causes beyond Landlord's or Tenant's control.

     (b) Tenant agrees that neither Landlord,  nor Landlord's agents,  employees
or  representatives  nor any other party has made,  and Tenant does not rely on,
any  representations,  warranties  or promises  with respect to the Center,  the
Premises or this Lease, except as herein expressly set forth.

     (c) The Section  headings of this Lease are for convenience  only and shall
not  limit or define  the  meaning  or  content  hereof.  All  pronouns  and any
variations thereof shall be deemed to refer to the masculine,  feminine, neuter,
singular or plural, as the identity of the person or persons may require.

     (d) Anything elsewhere to the contrary  notwithstanding,  Tenant shall look
solely to the estate of Landlord in the Center for the  satisfaction of each and
every  remedy of Tenant in the event of any default or breach by  Landlord  with
respect  to any of the  terms,  covenants  and  conditions  of this  Lease to be
observed  and/or  performed  by  Landlord,  and no other  property  or assets of
Landlord or any general partner of Landlord or their  respective  successors and
assigns shall be subject to levy,  execution or other enforcement  procedure for
the  satisfaction  of Tenant's  remedies,  such  exculpation  of liability to be
absolute and without any exceptions whatsoever.

     (e) If Tenant is a  corporation,  each  individual  executing this Lease on
behalf of said corporation represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of the corporation in accordance with a
duly adopted  resolution  of the Board of Directors  of said  corporation  or in
accordance with the by-laws of said corporation,  and that this Lease is binding
upon said  corporation in accordance with its terms. If Tenant is a corporation,
Tenant shall, upon execution of this Lease, deliver to Landlord a certified copy
of a resolution  of the Board of Directors of said  corporation  authorizing  or
ratifying the execution of this Lease.

     (f) This  Lease  shall be  governed  by the laws of the  State in which the
Center is located.

         SECTION 58.  LEASE CONTINGENCY.

     Landlord  and  Tenant  hereby  agree that this  Lease  Agreement  and their
respective  obligations  hereunder are  conditioned  on the Landlord  obtaining,
within  thirty (30) days after the  signing  hereof,  a written  waiver from the
owner  of the  Burger  King in the  Center  of its  restaurant  exclusive  as to
Tenant's  intended  use of a portion  of the  Premises  for the sale of food and
beverages or other proof, satisfactory to the Tenant in its reasonable judgment,
that such restaurant  exclusive is of no force or effect as to Tenant's intended
sale of food and  beverages in the  Premises,  including  but not limited to any
court order determining the issue.

     In the  event  Landlord  is  unable to  obtain  such  waiver or such  other
satisfactory  proof within such thirty (30) day period,  and any extended period
agreed to in writing by the parties,  either party may thereafter terminate this
Lease upon  written  notice to the other  party,  but only before such waiver or
other satisfactory proof is obtained, without further obligation of the parties.

     The parties  further agree that the time frames for Tenant to apply for and
to obtain any required governmental approvals and building permits in accordance
with  Section  10(c) of this  Lease  shall not  commence  to run until  Tenant's
receipt of the  required  waiver or such other proof  satisfactory  to establish
that the  Burger  King  restaurant  exclusive  is of no force  or  effect  as to
Tenant's intended sale of food and beverages in the Premises.

     IN WITNESS  WHEREOF,  this Lease has been  executed and delivered as of the
31st day of December, 1996.


ATTESTED:                                              FUN TYME CONCEPTS OF EAST
                                                        BRUNSWICK, INC. (Tenant)




By:_________________________    By:______________________________
                                                                               
President


WITNESS:    HARARY GROUP (Landlord)



____________________________    By:_______________________________
                                   JOSEPH HARARY, Partner




<PAGE>



SCHEDULE A


The Premises





<PAGE>



SCHEDULE B

<TABLE>
<CAPTION>

Payment of Basic Rent


Lease Year(s)              Annual Rent                        Monthly Installment
<S>                        <C>                                         <C>       
    1                      $183,240.00                                 $15,270.00
    2                      $183,240.00                                 $15,270.00
    3                      $183,240.00                                 $15,270.00
    4                      $183,240.00                                 $15,270.00
    5                      $183,240.00                                 $15,270.00
    6                      $206,145.00                                 $17,178.75
    7                      $206,145.00                                 $17,178.75
    8                      $206,145.00                                 $17,178.75
    9                      $206,145.00                                 $17,178.75
   10                      $206,145.00                                 $17,178.75


First Renewal Term

   11                      $231,951.00                                 $19,329.25
   12                      $230,888.00                                 $19,329.25
   13                      $230,888.00                                 $19,329.25
   14                      $230,888.00                                 $19,329.25
   15                      $230,888.00                                 $19,329.25


Second Renewal Term

   16                      $260,964.00                                 $21,747.00
   17                      $260,964.00                                 $21,747.00
   18                      $260,964.00                                 $21,747.00
   19                      $260,964.00                                 $21,747.00
   20                      $260,964.00                                 $21,747.00

</TABLE>



<PAGE>



SCHEDULE C

Tenant's Approved Signage






<PAGE>




TABLE OF CONTENTS

         SECTION 1.   TERM.

         SECTION 2.   BASIC RENT.

         SECTION 3.   PROPORTIONATE SHARE.

         SECTION 5.   INTENTIONALLY OMITTED.

         SECTION 6.   INTENTIONALLY OMITTED.

         SECTION 7.   INTENTIONALLY OMITTED.

         SECTION 8.   OPERATING COSTS.

         SECTION 9.   COMMON AREAS.

         SECTION 10.  COMMENCEMENT OF TERM.

         SECTION 11.  SECURITY DEPOSIT.

         SECTION 12.  NET LEASE.

         SECTION 13.  PURPOSE, TRADE NAME, RESTRICTIONS.

         SECTION 14.  LANDLORD'S OBLIGATIONS.

         SECTION 15.  CONDITION OF PREMISES; REPAIRS.

         SECTION 16.  ALTERATIONS.

         SECTION 17. COMPLIANCE WITH RULES AND REGULATIONS; COMPLIANCE WITH LAW.

         SECTION 18.  DAMAGES TO CENTER; WAIVER OF SUBROGATION.

         SECTION 19.  EMINENT DOMAIN; CONDEMNATION.

         SECTION 20.  ASSIGNMENT, SUBLETTING.

         SECTION 21.  INDEMNITY AND TENANT'S INSURANCE.

         SECTION 22.  FAILURE TO OBTAIN FIRE INSURANCE.

         SECTION 23.  RIGHT TO INSPECT AND EXHIBIT.

         SECTION 24.  NO LIABILITY OF LANDLORD.

         SECTION 25.  LANDLORD'S EXCULPATION.

         SECTION 26.  UTILITIES, SERVICES, TAXES, ETC., AND HVAC.

         SECTION 27.  INSOLVENCY OF TENANT.

         SECTION 28.  DEFAULTS.

         SECTION 29.  REAL ESTATE TAXES.

         SECTION 30.  SIGNS.

         SECTION 31.  OUTSIDE STORAGE.

         SECTION 32.  FINANCIAL STATEMENTS.

         SECTION 33.  MERCHANTS' ASSOCIATION.

         SECTION 34.  SUBORDINATION; PRIORITY OF FEE MORTGAGES.

         SECTION 35.  MORTGAGEE PROTECTION CLAUSE.

         SECTION 36:  WATER, STANDBY SPRINKLER, SPRINKLER
                      ALARM AND SEWER (IF ANY) CHARGES.

         SECTION 37.  BUSINESS HOURS.

         SECTION 38.  CENTER.

         SECTION 39.  CONTROL OF TENANT.

         SECTION 40.  PROCESSING CHARGE.

         SECTION 41.  RIGHT OF FIRST REFUSAL.

         SECTION 42:  ENVIRONMENTAL CLEAN-UP RESPONSIBILITY ACT/ISRA.

         SECTION 43.  MODIFICATIONS REQUESTED BY MORTGAGEE.

         SECTION 44.  QUIET ENJOYMENT.

         SECTION 45.  ESTOPPEL CERTIFICATE.

         SECTION 46.  HOLDING OVER.

         SECTION 47.  NO WAIVER; ENTIRE AGREEMENT; NO SURRENDER.

         SECTION 48.  REIMBURSEMENT OF LEGAL EXPENSES.

         SECTION 49.  BROKER.

         SECTION 50.  OPTION TO RENEW.

         SECTION 51.  EXECUTION BY LANDLORD.

         SECTION 52.  RECORDATION.

         SECTION 53.  NOTICES.

         SECTION 54.  PERSONS BOUND.

         SECTION 55.  PARTIAL INVALIDITY.

         SECTION 56.  CONSENTS.

         SECTION 57.  LANDLORD'S LIEN.

         SECTION 58.  MISCELLANEOUS.

         SECTION 59.  LEASE CONTINGENCY.

         EXHIBITS:         SCHEDULE A:  THE PREMISES

                                    SCHEDULE B:  RENT SCHEDULE

                                    SCHEDULE C:  TENANT'S APPROVED SIGNAGE

<PAGE>
                                  Exhibit 10.30
                 Lease Agreement for Edmonton Canada Fun Bubble.

         THIS INDENTURE made the           day of           ,  19   .


BETWEEN:

         SUN LIFE ASSURANCE  COMPANY OF CANADA,  a body  Corporate  incorporated
         under the laws of Canada having its head office in the  Municipality of
         Metropolitan Toronto, Ontario,

                       (hereinafter called the "Landlord")

                                OF THE FIRST PART

                                      -and-

                       FUN TYME CONCEPTS OF EDMONTON INC.


                        (hereinafter called the "Tenant")

                               OF THE SECOND PART


                                    ARTICLE I

SECTION 1.00    DEFINITIONS

         In this Lease the following terms have the following meanings:

(a)            "Building" means the building or buildings now or hereafter
               erected on the Lands;

(b)            "Commencement Date" means the 1st day of April, 1997;

(c)            "Deposit" means the sum of $29,725.67 as referred to in
               Section 3.03, to the twelfth, twenty-fourth and last months
               Minimum Rent, Operating Expenses, Taxes and GST;

(d)            "Lands" means all and singular those certain lands
               described in Schedule "A"attached hereto;

(e)            "Landlord's Address" means

                  "for payment of rent" as referred to in Article III:

                  P.O. Box 4104, Station "A"
                  City of Toronto
                  Province of Ontario, M5W 2P1;

                  "for service" as referred to in Section 14.07:

                  #440, 10123 - 99th Street
                  City of Edmonton
                  Province of Alberta, T5J 3H1
                      ;
               or such other address as the Landlord may advise the Tenant
               from time to time;

(f)            "Lease" means this Indenture and all Schedules attached
               hereto.

(g)            "Lease Year" means each consecutive twelve (12) calendar
               month period during the Term commencing on the first day of
               January provided that the first Lease Year shall commence
               -------
               on the Commencement Date and end on the day immediately
               preceding the commencement of the next following Lease Year
               and the last Lease Year shall expire on the expiry or
               sooner termination of the Term provided that, the Landlord
               may from time to time, by notice to the Tenant, specify an
               annual date from which each subsequent Lease Year for the
               purposes of any of the articles, sections or other


<PAGE>


               provisions of this
               Lease is to commence,  and, the then current  Lease Year for that
               purpose  or  purposes,  will  terminate  on the date  immediately
               preceding the commencement of that new Lease Year;

(h)            "Minimum Rent" means

                  a) the annual  sum of  Seventy  Three  Thousand,  Two  Hundred
                  Dollars ($73,200.00) payable in advance in equal,  consecutive
                  monthly  instalments  of Six  Thousand,  One  Hundred  Dollars
                  ($6,100.00) for the first thirty (30) months of the Term being
                  April 1, 1997 to the last day of September 1999;

                  b) the annual sum of Seventy Nine Thousand, Two Hundred Ninety
                  Six  Dollars   ($79,296.00)   payable  in  advance  in  equal,
                  consecutive monthly  instalments of Six Thousand,  Six Hundred
                  Eight Dollars ($6,608.00) for the second thirty (30) months of
                  the Term being October 1, 1999 to
                  the last day of March 2002 and;

                  c) the annual sum of Eighty Five  Thousand,  Four Hundred Four
                  Dollars ($85,404.00) payable in advance in equal,  consecutive
                  monthly  instalments of Seven Thousand,  One Hundred Seventeen
                  Dollars  ($7,117.00)  for the thirty  (30)  months of the Term
                  being April 1, 2002 to the last day of September 2004 and;

                  d) the annual sum of Ninety One Thousand, Five Hundred Dollars
                  ($91,500.00) payable in advance in equal,  consecutive monthly
                  instalments of Seven Thousand, Six Hundred Twenty Five Dollars
                  ($7,625.00)  for the last thirty (30) months of the Term being
                  October 1, 2004 to
                  the last day of March 2007 and;

(i) "Operating  Expenses" means the total of all costs and expenses  incurred by
or on behalf of the Landlord in respect of or in connection  with the operating,
managing, maintaining,  insuring and repairing (including structural repairs not
the  responsibility  of the Landlord herein) of the Building,  the Lands and the
improvements thereon,  including any loading dock and spur track, such as are in
keeping  with  maintaining  the  standard  of a first class  industrial  complex
including without limitation,  cost of all repairs and replacements  (including,
at the Landlord's  option, the amortization of such costs, on a basis consistent
with generally accepted accounting  principles),  the costs of painting interior
areas not  normally  rented to tenants and the costs of painting  and  otherwise
maintaining  the outside of the  Building,  other than those parts for which the
Tenant is  responsible,  the costs of  maintaining,  repairing and replacing the
roadways,  driveways,  loading  and  parking  areas,  the cost of snow  removal,
landscape  maintenance,  refuse  removal and other costs in connection  with the
repair,  replacement and maintenance of outside areas and facilities,  sprinkler
protection,  depreciation  and notional  interest costs (equal to the Stipulated
Rate  determined  at  the  time  of  acquisition)  with  respect  to  machinery,
equipment,  facilities,  systems or property  installed in or used in connection
with the Building if the principal purpose or intent of such use or installation
was to reduce the cost of other items included in Operating  Expenses,  the cost
of fire, casualty,  liability,  rental, boiler,  extended perils and plate glass
insurance and all such other insurance against casualties,  perils and losses as
the Landlord may elect to insure against from time to time (and, if the Landlord
elects to self-insure, in whole or in part, the amount of reasonable contingency
reserves not exceeding the amount of premiums  which would  otherwise  have been
incurred in respect of the risks undertaken),  security protection,  the cost of
service  contracts  with  independent   contractors,   spur  track  rental,  all
electricity, gas, water (hot and cold), sewer and other utility charges incurred
by the Landlord,  cost of heating,  cooling and  ventilating all space including
both rentable and  non-rentable  areas,  the amount of all  salaries,  wages and
fringe benefits paid to employees engaged in the maintenance or operation of the
Building or the Lands, and all other expenses paid or payable by the Landlord in
connection with the operation of the Building,
improvements  and the Lands (but shall not  include  Taxes,  interest on debt or
capital retirement of debt or any amounts directly chargeable by the Landlord to
any tenant or tenants as provided in their  respective  leases) and an allowance
of fifteen percent (15%) of the aggregate of (i) the aforesaid amounts, and (ii)
Taxes, for building management and overhead expenses of the Landlord;

(j)            "Permitted Use" means an indoor playground, recreational and
               educational facility for children. The Permitted Use may
               also include the operation of a snack bar and/or a food
               service counter.

(k)            "Premises" means that portion of the Building as shown,
               outlined and described in Schedule "B" attached hereto and
               Premises shall be deemed to include all facilities,
               structures, improvements, erections, additions, alterations
               and equipment therein from time to time but shall exclude
               the exterior, sub-floors, foundation and roof of the
               Building;

(l)            "Proportionate Share" means the fraction which has as its
               numerator the floor area of the Premises and as its
               denominator the rentable floor area of the Building;

(m)            "Rent" means all Minimum Rent, additional rent and all other
               monies payable by the Tenant under or pursuant to this
               Lease;

(n)            "Stipulated Rate" means the annual rate equal to three
               percentage (3%) points over the annual rate of interest
               charged and published from time to time by the main branch
               of the Landlord's bank in the City in which the Lands are
               situate, as its most favourable rate of interest to its most
               creditworthy and substantial commercial customers on large
               loans, commonly known as its "prime rate";

(o)            "Taxes" means an amount equivalent to all taxes, rates,
               duties, levies and assessments whatsoever whether municipal,
               provincial,
               parliamentary, school or otherwise, charged, levied, imposed
               or assessed against or upon or in respect of the Building,
               the Lands or any improvements now or hereafter erected
               thereon or any part thereof or any one or more thereof or
               upon the Landlord on account thereof including all taxes,
               rates, duties, levies and assessments for education and
               local improvements (excluding any tax assessed separately or
               charged directly to the Tenant which has been attracted by
               the Tenant's improvements and equipment and excluding any
               corporate, income, profits and excess profits taxes assessed
               upon the income of the Landlord) and shall also include any
               and all taxes which may in future be levied in lieu of or,
               in addition to, Taxes as hereinbefore defined whether in
               existence at the Commencement Date or not.  Any costs and
               expenses (including legal costs on a solicitor and his own
               client basis) incurred by the Landlord in contesting,
               resisting or appealing the Taxes or any part thereof shall
               be added to and included in the amount of such Taxes.  Taxes
               shall be deemed to include an amount equal to all taxes,
               levies and impositions paid or payable by the Landlord which
               are based upon or computed by reference to the Landlord's
               interests, ownership of, or capital employed in the Lands or
               Building, or both, determined as if the Lands and Building
               were the only real property owned by the Landlord;


(p)            "Term" means One Hundred Twenty (120) months unless sooner
               terminated pursuant to the provisions of this Lease;


(q)            "Landlord's   Architect"   means  the  independent   professional
               architect,  or  engineer  or  quantity  surveyor  selected by the
               Landlord   from  time  to  time  for  the   purposes   of  making
               determinations hereunder.

                                   ARTICLE II

SECTION 2.00    DEMISE

               In  consideration  of  the  rents,   covenants,   conditions  and
agreements  herein  reserved and contained on the part of the Tenant to be paid,
observed and performed,  the Landlord  hereby demises and leases unto the Tenant
the Premises.

SECTION 2.01    TERM

               TO  HAVE  AND TO  HOLD  the  Premises  for and  during  the  Term
commencing on the Commencement Date.

SECTION 2.02    POSSESSION

               The Landlord  shall not be liable for failure to give  possession
of the Premises on the Commencement Date by reason of the fact that the Building
or the Premises are not ready for occupancy, or due to a prior tenant wrongfully
holding over or any other persons  wrongfully  occupying  the Premises.  In such
event,  payment of the rent under this Lease shall not commence until possession
is given  or is  available  but the  Term  shall  nevertheless  commence  on the
Commencement  Date.  If the Tenant shall have  occupied the Premises or any part
thereof prior to the  Commencement  Date (which the Tenant shall not be entitled
to do except with the prior  written  consent of the  Landlord)  such  occupancy
shall deem to have been  subject to this Lease and the rent for the  duration of
such  occupancy  shall be at the rate herein  provided and be due and payable in
advance as of the first day of each month until the  Commencement  Date on a per
diem basis.

SECTION 2.03    EXAMINATION OF PREMISES

               The Tenant will  examine the  Premises  and the  Building  before
taking  possession of the Premises and such taking of possession will be, in the
absence of an  agreement  signed by the  Landlord  in  writing to the  contrary,
conclusive  evidence as against the Tenant that at the time thereof the Premises
and the Building were in good order,  ready for  occupancy  and in  satisfactory
condition  and no further work or  improvements  are required to be made or done
and that there exists no promise of the Landlord to alter, remodel,  decorate or
improve  the  Premises  or  the  Building  and  no  warranty  or  representation
whatsoever  respecting  the  Premises  or the  Building  have  been  made by the
Landlord or its agents or employees other than those expressly contained herein.

                                   ARTICLE III

SECTION 3.00    MINIMUM RENT

(a) YIELDING AND PAYING  therefor yearly and every year during the Term unto the
Landlord,  the Minimum Rent to be paid in advance in equal  consecutive  monthly
instalments on the first day of each and every month during the Term  commencing
on the Commencement Date.

(b) If the Term  commences  on any day  other  than the first or ends on any day
other than the last day of a calendar  month,  rent for the fractions of a month
at the  commencement  and at the end of the Term shall be adjusted pro rate on a
per diem basis based on a period of three hundred and sixty-five  (365) days and
payable  on the  Commencement  Date and the first  day of the last  month of the
Term, respectively.

(c) The Tenant will  deliver to the  Landlord on or before the  commencement  of
each Lease Year a series of monthly  post-dated  cheques  for each month of such
Lease Year in respect of the  monthly  payments of Minimum  Rent and  additional
rent payable to the  Landlord  during such Lease Year.  SECTION  3.01  Operating
Expenses

(a) The Tenant  covenants and agrees to pay to the  Landlord,  during each Lease
Year, as additional rent, in advance,  in equal consecutive  monthly instalments
and payable on the dates the monthly instalment of Minimum Rent is payable,  the
Proportionate Share of Operating Expenses.

(b)  The  amount  of such  Proportionate  Share  of  Operating  Expenses  may be
estimated by the Landlord for each Lease Year and the Landlord  shall furnish to
the Tenant an estimate of such Proportionate Share of Operating Expenses and the
Tenant shall pay to the Landlord such estimated Proportionate Share of Operating
Expenses in monthly  instalments in advance as aforesaid during such Lease Year.
The Landlord may, if during the course of any such Lease Year there shall be any
increase or decrease in the Landlord's  estimate of such Proportionate  Share of
Operating  Expenses for such Lease Year, adjust its estimate and upon the Tenant
being  notified of such  adjustment  the Tenant's  monthly  instalments  of such
estimated  Proportionate  Share of Operating  Expenses  from and  including  the
instalment  next due after the giving of notice of adjustment  shall be adjusted
in accordance with the Landlord's notice. Provided the Lease is in good standing
and the Tenant is not in default of any of its covenants an/or obligations,  the
Landlord  shall  not  adjust  the  Tenant's  estimated  Proportionate  Share  of
Operating  Expenses  during  the  course  of a Lease  Year in the event the such
adjustment  represents a variance of less than 10.0% of the original  estimation
of Operating Expenses for that Lease Year.

(c) When the  Operating  Expenses for such Lease Year are finally  determined by
the Landlord, the Landlord shall furnish the Tenant with a statement showing the
actual amount of the Operating Expenses for such Lease Year and the Landlord and
Tenant  covenant  and agree each with the other that if an  overpayment  of such
Operating  Expenses has been made by the Tenant the  Landlord  shall credit such
amount to such Operating Expenses for the next following Lease Year and if there
is no such next following Lease Year such amount shall be paid to the Tenant and
if an amount remains owing to the Landlord in respect of such Operating Expenses
the Tenant shall forthwith pay such amount to the Landlord.

(d) Neither party may claim a readjustment of a Proportionate Share of Operating
Expenses based upon an error of estimation,  determination or calculation of the
Proportionate  Share or of the  Operating  Expenses  unless  claimed  in writing
before one year after the end of the Lease Year to which the claim relates.

(e) Once each Lease Year,  the Tenant may at its sole cost and expense,  examine
the  Landlord's  records  which  were  used by the  Landlord  to  ascertain  the
Operating  Expenses for the previous Lease Year. The examination of such records
shall take place in the location where the Landlord keeps the said records.

SECTION 3.02    TAXES

(a) The Tenant  covenants and agrees to pay to the Landlord  during the Term, as
additional  rent,  in advance,  in equal  consecutive  monthly  instalments  and
payable on the dates the monthly  instalments of the Minimum Rent are payable, a
certain share of the Taxes determined as follows:

(i) the Tenant will pay the amount determined when the appropriate mill rate for
Taxes is  applied  to the  Assessment  for the  Premises;  "Assessment"  in this
subsection  3.02 means the assessed  value upon which business  assessments  are
calculated,  or would be calculated  if a business  were being  conducted in the
Premises in respect of which the assessed value is determined;

(ii) the Tenant will also pay its Proportionate  Share of any amounts determined
by applying the appropriate mill rate for Taxes against any separate Assessments
for the non-rentable areas of the Lands and Building or any part thereof, and

(iii) if there is not or if there  ceases to be a  separate  Assessment  for the
Premises  or if there  ceases to be a  separate  Assessment  for any part of the
Lands or  Building,  for which  there was one  previously  during the Term,  or,
otherwise if the Landlord so elects, the Tenant will pay its Proportionate Share
of Taxes.

(b) The amount of such share of Taxes may be  estimated by the Landlord for each
Lease Year and the  Landlord  shall  furnish to the Tenant an  estimate  of such
share of Taxes and the Tenant shall pay to the Landlord such estimated  share of
Taxes in monthly instalments in advance as aforesaid during such Lease Year. The
Landlord  may,  if during the  course of any such Lease Year there  shall be any
increase or decrease in the Landlord's  estimate of such share of Taxes for such
Lease Year,  adjust its estimate  and,  upon the Tenant  being  notified of such
adjustment,  the Tenant's  monthly  instalments of such estimated share of Taxes
from and  including  the  instalment  next due  after  the  giving  of notice of
adjustment shall be adjusted in accordance with the Landlord's notice.  Provided
the Lease is in good  standing  and the  Tenant is not in  default of any of its
covenants  an/or  obligations,  the  Landlord  shall  not  adjust  the  Tenant's
estimated  Proportionate Share of Taxes during the course of a Lease Year in the
event the such  adjustment  represents  a  variance  of less  than  10.0% of the
original estimation of Taxes for that Lease Year.

(c) When the Taxes for such Lease Year are finally  determined  by the Landlord,
the Landlord shall furnish the Tenant with a statement showing the actual amount
of the Taxes for such Lease Year and the Landlord and Tenant  covenant and agree
each with the other  that if an  overpayment  of such Taxes has been made by the
Tenant  the  Landlord  shall  credit  such  amount  to such  Taxes  for the next
following  Lease  Year and if there is no such next  following  Lease  Year such
amount  shall  be paid to the  Tenant  and if an  amount  remains  owing  to the
Landlord in respect of such Taxes the Tenant shall  forthwith pay such amount to
the Landlord.

(d) The Tenant  covenants  and agrees to reimburse the Landlord  throughout  the
Term and at the times and in the manner  specified by the Landlord  from time to
time, the full amount of any tax, sales tax, goods and services tax, value added
tax,  multi-stage  sales tax,  business  transfer  tax or any other  similar tax
levied, rated,  charged,  imposed or assessed in respect of the rent, additional
rent or any other  amounts  payable  pursuant to this Lease or in respect of the
space demised under this Lease.

(e) Once each Lease Year,  the Tenant may at its sole cost and expense,  examine
the  Landlord's  records  which were used by the Landlord to ascertain the Taxes
for the previous Lease Year. The examination of such records shall take place in
the location where
the Landlord keeps the said records.

SECTION 3.03    DEPOSIT

               The  Landlord  acknowledges  receipt  of the  Deposit  which  the
Landlord may use,  retain or apply all or part of to the extent required for the
payment of any rent or any other sums as to which the Tenant is in default or as
compensation  on  account  for any loss or  damage  arising  from the  breach or
default by the Tenant of any  provision  of this Lease.  If the  Landlord  uses,
retains or applies  all or part of the said sum for other than the last  month's
Minimum  Rent as provided  above,  the Tenant  will,  upon  notification  by the
Landlord,  pay to the  Landlord  the amount  required  to  reimburse  it for the
amounts so applied. SECTION 3.04 PAYMENTS TO LANDLORD

(a) All  payments  required to be made by the Tenant under or in respect of this
Lease shall be made in lawful money of Canada  without any  set-off,  abatement,
demand,  compensation or deduction  whatsoever to the Landlord at the Landlord's
Address  for  payment of rent or to such agent or agents of the  Landlord as the
Landlord  shall from time to time  direct in writing to the  Tenant.  The Tenant
shall pay to the Landlord,  as additional rent,  interest at the Stipulated Rate
on all payments of rent which has become overdue so long as such payments remain
unpaid.

(b) All sums of money  payable to or  incurred by the  Landlord,  which ought to
have been paid or incurred by the Tenant, or for which the Landlord hereunder is
entitled to be paid or to be  reimbursed  by the Tenant may be  recovered by the
Landlord  together with costs  (including  legal fees on a solicitor and his own
client basis and all fees and costs  related to recovery or  collection  of such
sums) and  interest at the  Stipulated  Rate,  as rent,  by any and all remedies
available to it for the recovery of rent in arrears.

SECTION 3.05    NET LEASE

               The Tenant  acknowledges and agrees that it is intended that this
Lease  shall be a  completely  carefree  net lease for the  Landlord,  except as
expressly herein set out, that the Landlord shall not be responsible  during the
Term for any costs,  charges,  impositions,  taxes,  expenses  or outlays of any
nature  whatsoever  arising  from or  relating to the  Premises,  or the use and
occupancy thereof or the contents  thereof,  or the business carried on therein,
and the Tenant shall pay all charges, impositions,  taxes, costs and expenses of
every nature and kind  relating to the Premises and its  Proportionate  Share of
all charges,  impositions,  costs and expenses of every nature and kind relating
to those parts of the Building not intended for leasing.

                                   ARTICLE IV

SECTION 4.00    QUIET ENJOYMENT

         The Landlord  covenants that the Tenant upon duly and regularly  paying
the rent and performing and observing the covenants and agreements herein on the
Tenant's part contained,  shall and may peaceably possess and enjoy the Premises
for the Term without any  interruption  or disturbance  from the Landlord or any
other  person  lawfully  claiming  by,  from  or  under  the  Landlord  subject,
nevertheless, to the terms, covenants, agreements and conditions of this Lease.

         The  Landlord   will  operate  and  maintain  the  Building  and  Lands
(excluding  the Premises or other  leased or leasable  areas) as would a prudent
Landlord of comparable  buildings in the City of Edmonton,  having regard to the
size, age, location, nature, character and use of the Building.

                                    ARTICLE V

SECTION 5.00    PERFORM COVENANTS

         The Tenant shall pay the rent at the times and in the manner
herein provided and shall observe and perform all the covenants,
agreements and conditions on its part to be observed and performed
in accordance with this Lease.
SECTION 5.01    BUSINESS TAX

         The  Tenant  shall  pay,  as  additional  rent,  to the  lawful  taxing
authority,  when due, all business  taxes and all other  taxes,  rates,  levies,
licence  fees and charges  levied or assessed in respect of the use or occupancy
of the Premises or the  equipment,  machinery,  or fixtures  brought  therein or
belonging to the Tenant,  or to anyone  occupying the Premises with the Tenant's
consent,  and to pay to the Landlord  upon demand the portion of any tax,  rate,
duty,  fee, levy or charge levied or assessed upon the Lands and the Building or
any part thereof that is attributable  to any Tenant's  improvements or fixtures
on the  Premises  constructed  by or on behalf of or  belonging  to the  Tenant,
including  penalties for late payment  thereof.  The Tenant shall not appeal any
assessment of any of the foregoing without the consent of the Landlord which, if
given,  shall be deemed to be on the express  understanding that the Tenant will
at the same time,  appeal,  as agent for the  Landlord,  the  assessment  of the
Landlord's  interest in the Premises and the Tenant shall indemnify the Landlord
against  any  costs  suffered,  incurred  or  imposed  on the  Landlord  and not
recoverable from other tenants by reason of such appeal.

SECTION 5.02    UTILITIES

         The Tenant  shall pay  promptly  to the  Landlord,  or as it  otherwise
directs from time to time, when due, as additional  rent, all rates,  levies and
charges  (including  installation  charges) for water,  gas,  sewer and electric
light and electrical power,  telephone or other utilities supplied to or used in
the Premises as separately  metered or separately  invoiced by the supplier and,
if not so metered or invoiced, the Proportionate Share of such rates, levies and
charges  provided  however if the Tenant is an excessive user (in the Landlord's
opinion  acting  reasonably)  of any such  utilities the Tenant shall be charged
accordingly as the Landlord  shall  determine  acting  reasonably and the Tenant
shall pay all costs of making such determination including,  without limitation,
the cost of the purchase and installation of a meter or other special equipment.

SECTION 5.03    EVIDENCE OF PAYMENTS

         The  Tenant  shall  produce  to the  Landlord  from time to time at the
request of the Landlord  satisfactory  evidence of the due payment by the Tenant
of all payments required to be made by the Tenant under this Lease.

SECTION 5.04    NO NUISANCE

         The Tenant  shall not at any time  during the Term,  use,  exercise  or
carry on or permit or suffer to be used,  exercised  or carried on, in, about or
upon the  Premises  or any part  thereof  any waste or any  noxious,  noisome or
offensive act,  trade,  business,  occupation or calling,  and no act, matter or
thing whatsoever shall at any time during the Term be done in, about or upon the
Premises or any part  thereof  which  shall or may be or grow to the  annoyance,
nuisance,  damage or  disturbance  of the  occupiers,  tenants  or owners of the
Building or adjoining land and properties.

SECTION 5.05    COMPLY WITH LAWS AND REGULATIONS

         The  Tenant  shall  comply  promptly  at its  expense  with  all  laws,
ordinances,  regulations,   requirements  and  recommendations,   which  may  be
applicable to the Tenant or to the use,  operation or occupation of the Premises
or the making by the Tenant of any repairs, alterations, changes or improvements
therein,  of any  and  all  federal,  provincial,  civic,  municipal  and  other
authorities  or  association  of  insurance  underwriters  (including,   without
limitation, the rules and regulations of the Canadian Board of Fire Underwriters
and the Insurer's Advisory  Organization and any successor bodies) or agents and
all notices in  pursuance  of same and whether  served upon the  Landlord or the
Tenant.  Without  having  made any  enquiries,  the  Landlord  is unaware of any
violations  relating to the Tenant's  proposed  operation or  occupation  of the
Premises. SECTION 5.06 COMPLY WITH RULES

         The Tenant agrees that the rules and regulations endorsed on this Lease
or  attached   hereto  as  Schedule   "C"  with  such   reasonable   variations,
modifications,  amendments  and  additions as shall from time to time be made by
the Landlord and any other and further reasonable rules and regulations that may
be made by the  Landlord  and  communicated  to the Tenant in  writing  shall be
observed and performed by the Tenant and its agents, invitees,  clerks, servants
and employees and all such rules and  regulations  now in force or hereafter put
in force shall be read as forming part of the terms and conditions of this Lease
as if the same were embodied  herein;  all such rules and  regulations  shall be
deemed to be a part of this Lease.

SECTION 5.07    GOODS, CHATTELS AND FIXTURES NOT TO BE REMOVED

         The  Tenant  agrees  that all  goods,  chattels,  equipment  and  trade
fixtures when moved into the Premises shall not,  except in the normal course of
business,  be  removed  from the  Premises  until all rent due or to become  due
during the Term is paid in full.

SECTION 5.08    PEACEFUL SURRENDER

(a) The Tenant  shall,  at the  expiration  or sooner  termination  of the Term,
peaceably  surrender and yield up unto the Landlord the Premises,  together with
all  fixtures and  improvements  which at any time during the Term shall be made
therein or thereon, in as good condition and repair as the Tenant is required to
maintain the Premises  throughout  the Term and the Tenant shall  deliver to the
Landlord all keys to the  Premises  which the Tenant has in its  possession  and
inform the Landlord of all combinations of locks, safes and vaults.

(b) Without  limiting  the  foregoing  the Tenant shall  immediately  before the
expiration  or  sooner  termination  of the Lease  strip,  seal and wax all tile
flooring,  strip and seal all  concrete  flooring,  steam  clean or shampoo  all
carpeted  flooring,  wash  all  glass,  doors,  woodwork,   light  fixtures  and
washrooms,  fill all holes and repaint all painted wall surfaces of the Premises
to the reasonable  specifications  and satisfaction of the Landlord.  The Tenant
further  covenants  that the  Tenant  will not upon  such  expiration  or sooner
termination  leave in, on, about or upon the Premises or Lands any Environmental
Hazards (as hereinafter defined) or any rubbish or waste material and will leave
the Premises in a clean and tidy condition.

SECTION 5.09    CARE OF PREMISES

(a) The  Tenant  shall take good care of the  Premises  and keep same in a tidy,
clean and good condition.

(b) The Tenant shall, at its own expense,  be responsible for and shall maintain
and replace from time to time as may reasonably be necessary during the Term all
light fixtures,  light bulbs,  fluorescent  tubes,  ballasts and starters in the
Premises.  The Landlord shall have the right to attend to such  maintenance  and
replacements  at the Tenant's  expense which shall be payable as additional rent
by the Tenant forthwith on demand.

(c) The Tenant shall, at its own expense, replace or repair, under the direction
and to the  reasonable  satisfaction  of the  Landlord,  the  glass,  locks  and
trimmings of the doors and windows in or upon the Premises  which become damaged
or broken.

(d) The Tenant shall properly heat the Premises, at its own expense,  during the
Term hereof at all times to the extent  necessary to prevent  damage  thereto by
frost or other causes.

(e) The Tenant shall maintain (including, without limitation, the performance of
regular and periodic  servicing,  maintenance and inspections as a prudent owner
would) in good operating condition
and to the  satisfaction  of the  Landlord,  all pipes,  wiring  and  electrical
apparatus  and  all  plumbing   fixtures  and  heating,   ventilating   and  air
conditioning  equipment and all other mechanical  systems and electrical systems
in or about the Premises and shall keep the same in clean and good working order
and repair. It is understood and agreed that in case the said fixtures,  systems
and  equipment  or any part  thereof  shall be  damaged or  destroyed  or become
incapable of  performing  their  function the Tenant shall  forthwith  repair or
replace  (as the  Landlord  may  require)  the same to the  satisfaction  of the
Landlord. The Landlord shall have the right to service,  maintain or inspect, or
any one or more of them, the said fixtures,  systems and equipment or cause same
to be maintained or inspected,  or both, at the Tenant's  expense,  the costs of
which  shall be payable as  additional  rent by the Tenant  forthwith  on demand
together with an  administrative  fee equal to fifteen (15%) percent of all such
costs.

(f)      The Tenant shall keep well painted the painted portions of the
interior of the Premises.

(g)      The Tenant shall keep and maintain the washrooms in a sanitary
condition.

(h) The  Tenant  shall not do or suffer or permit any  Environmental  Hazards to
exists on, in or about the  Premises  or any waste or damage,  disfiguration  or
injury to the Premises or the fixtures and equipment thereof or permit or suffer
any  overloading  of any floors  thereof and shall not place in, on or about the
Premises any fixtures, equipment, machinery, or materials of a weight beyond the
capacity for which the  Building is  designed,  or to the extent that will cause
damage to the Building or cause  excessive  vibration;  and that the Tenant will
repair  any  damage  done to the  Premises  or the  Building  by  reason  of any
excessive  weight placed in the Premises,  or excessive  vibration caused in the
Premises.

(i) The  Tenant  shall not use water for any  purpose  other  than  sanitary  or
drinking without the prior written consent of the Landlord.

SECTION 5.10    ACCESS

(a) The Tenant  shall not permit  any  vehicles  belonging  to the  Tenant,  its
employees, contractors or agents to cause obstruction on any roads, driveways or
parking areas about the Building, or prevent the ingress and egress by any other
tenant  in the  Building  or any  adjoining  buildings,  and  will  use its best
endeavours  to ensure that  persons  doing  business  with the Tenant  shall not
permit any vehicles to cause such obstruction as aforesaid.

(b) The  Tenant  shall  not  stack  any  materials  in the  yard or yards of the
Building,  adjacent driveways, or common areas and shall cause no obstruction to
vehicles operating on the roads, driveways or parking areas.

                                   ARTICLE VI

                  The Tenant covenants with the Landlord that:

SECTION 6.00    USE OF PREMISES

         The Premises shall not be used for any other purpose than the Permitted
Use and then subject to the other provisions of this Lease.  Notwithstanding the
Permitted  Use, the  Premises  shall not be used in any way which may impair the
efficient  or  proper  operation  of the  sprinkler  system  or any  mechanical,
plumbing or  electrical  systems or  heating,  ventilating  or air  conditioning
equipment within or about the Building. SECTION 6.01 NUISANCE, WASTE

         The  Tenant  shall not cause or  suffer  or permit  the  manufacturing,
transportation,  storage,  discharge  or disposal of any  contaminant  or waste,
flammable, explosive,  radioactive corrosive or poisonous material or substance,
urea  formaldehyde  foam  insulation,  asbestos,  PCBs  or  pollution  or  other
environmentally   hazardous,   dangerous  or  noxious  substances  or  materials
including those declared or determined by the standards  established by relevant
governmental  statutes,   by-laws  or  regulations  to  be  hazardous  or  toxic
(collectively called "Environmental Hazards") in, on or from the Premises.

SECTION 6.02    ACTS CONFLICTING WITH INSURANCE

         The Tenant  shall not do, omit to do or permit to be done or omitted to
be done any act or thing which may render void or voidable or conflict  with the
requirements  of any policy or policies of insurance,  including any regulations
of fire insurance  underwriters  applicable to such policy or policies,  whereby
the  Premises or the  Building or the  contents of the premises of any tenant in
the  Building  are insured or which may cause any increase in premium to be paid
in respect of any such policy.  In the event that any such policy or policies is
or are  cancelled  or are  threatened  to be  cancelled  by reason of any act or
omission of the Tenant,  the Landlord  shall have the right,  at its option,  to
terminate  this Lease  forthwith by giving notice of  termination to the Tenant,
and in the event that the  premium  to be paid in respect of any such  policy is
increased by any act or omission of the Tenant, including the Permitted Use, the
Tenant shall pay to the  Landlord  the amount by which said premium  shall be so
increased.

SECTION 6.03               AUCTION

         The Tenant  shall not at any time  during  the Term  permit any sale by
auction to be held within the Premises or upon the Lands or any part thereof.


SECTION 6.04               RAIL SPUR

If the Premises do now or hereafter  have access to a railway spur or are now or
hereafter  served by a railway  spur the  Tenant  shall  forthwith  execute  and
deliver any  agreements  in respect  thereof  which are  required by the railway
company  or other  authority  operating  the said  railway  or  required  by the
Landlord,  and the Tenant shall reimburse to the Landlord or pay directly to the
railway company or other  authority  operating the said railway all payments and
compensation  whatsoever  which  are  required  to be paid by the  Tenant or the
Landlord  including,  without  limitation,  any  prepayments  for the use of the
railway facilities and other materials or otherwise and the costs of repairs and
replacements  of the rail lines,  track bed, ties and any other  apparatus  (but
excluding any amounts included in the Operating  Expenses and paid by the Tenant
under section 3.01 hereof),  and the Tenant shall observe and perform all terms,
conditions,  covenants and obligations under the said agreements and any and all
requirements  whatsoever of the railway company or other authority operating the
said railway or the Landlord.  The Tenant shall  indemnify and save harmless the
Landlord from and against any and all loss, cost,  expense,  damage,  claims and
liability whatsoever in respect of the use of the railway spur by the Tenant and
in respect of the said agreements and all requirements of the railway company or
other authority operating the said railway or the Landlord.

                                   ARTICLE VII

SECTION 7.00    TENANT'S REPAIRS

(a) The Tenant shall at all times during the Term  repair,  maintain,  decorate,
operate,  amend and keep the Premises,  with the  appurtenances  thereto and all
equipment and fixtures  therein,  as a prudent owner would,  when,  where and so
often as the need  shall be,  reasonable  wear and tear,  structural  repair for
which the Landlord is responsible  pursuant to section 7.01 hereof and damage by
fire not due to the  negligence or wilful act or omission of the Tenant or those
for whom the Tenant is legally  responsible,  lightning and tempest (hereinafter
collectively  referred to as "Tenant Repair  Exceptions")  only excepted and the
Tenant will,  upon notice in writing,  reimburse the Landlord as additional rent
for the costs,  plus interest at the Stipulated  Rate until repaid together with
an  administration  fee equal to fifteen  (15%)  percent of the aggregate of the
foregoing  costs,  of repairing or restoring  any damage  (including  structural
repair  referred to in section 7.01 hereof)  caused by the  negligence or wilful
acts or  omissions  of the  Tenant  or  those  for whom the  Tenant  is  legally
responsible, to the Building or the Lands.

(b) The  Landlord and its agents  shall have the right at all  reasonable  times
during the Term,  to enter the Premises to examine the  condition  thereof,  and
further,  that all want of reparation that upon such a view shall be found,  and
for the  amendment  of  which  notice  is  given,  the  Tenant  shall  well  and
sufficiently  repair and make good accordingly within fifteen (15) days from the
date of such notice.  Provided the Landlord does not require immediate access to
the  Premises as the result of an  emergency,  the  Landlord  shall  provide the
Tenant with one days advance notice of its intention to enter the Premises.


SECTION 7.01    LANDLORD'S REPAIRS

         Subject  to Article  IX, the  Landlord  shall be  responsible  only for
structural repairs necessarily required to correct inherent defects in design or
construction of the following components of the Building:

(a)      the roof deck (excluding the protective system above the deck
surface);

(b) the bearing walls (excluding perimeter caulking of walls, doors and windows,
tuckpointing of bricks and blocks, parging repairs and waterproofing of exterior
wall surfaces), and

(c) the floor and foundation, save and except damage caused by the negligence or
wilful acts or  omissions of the Tenant,  its  employees,  invitees,  licensees,
agents,  servants or other  persons from time to time on or about the  Premises,
the  Building  or the Lands with the  express or implied  consent,  approval  or
invitation of the Tenant or its subtenant.

As at the  Commencement  Date, the Landlord is not aware of inherent  defects in
the design or construction of the Building's roof deck,  bearing walls, floor or
foundation.

                                  ARTICLE VIII

SECTION 8.00    ALTERATIONS

(a) The Tenant  shall not without  the prior  written  consent of the  Landlord,
which  consent  shall  not be  unreasonably  withheld,  make any  installations,
additions,  partitions,  alterations or improvements to the Premises. The Tenant
shall submit to the Landlord detailed plans and  specifications of any such work
or installation  when applying for consent,  and the Landlord reserves the right
to  recover  from the  Tenant the cost of having  its  architects  or  engineers
examine such plans and  specifications  which costs shall be paid by the Tenant,
as
additional rent,  forthwith on demand.  The Landlord may require that any or all
work to be done,  or materials  to be supplied  hereunder be done or supplied by
the Landlord's  contractors  or workmen or by contractors or workmen  engaged by
the Tenant but first approved by the Landlord.  Any work performed by the Tenant
shall be performed by competent  workmen whose labour union  affiliation  is not
incompatible  with those of any workmen  who may be employed in the  Building by
the Landlord,  its contractors or subcontractors.  In any event, any or all work
to be done or materials to be supplied  hereunder  shall be at the sole cost and
expense of the Tenant and shall be done and  supplied and paid for in the manner
and  according  to such  terms  and  conditions,  if any,  as the  Landlord  may
prescribe.  Any  connections of apparatus to the electrical  system other than a
connection to an existing base  receptacle,  or other connection or apparatus to
the  plumbing  lines shall be deemed to be an  alteration  within the meaning of
this Lease.

(b) The Tenant covenants with the Landlord that the Tenant shall promptly pay or
cause to be paid all  charges  incurred  by or on  behalf  of the  Tenant or any
subtenant  or  occupant  of the  Premises  or any part  thereof,  for any  work,
materials or services that may be done,  supplied or performed in respect of the
Premises and shall forthwith  discharge any liens in respect of same at any time
filed  against the Lands or Building or any part  thereof and keep the Lands and
Building  free from liens and in the event  that the Tenant  fails to do so, the
Landlord  may,  but shall be under no  obligation  to, pay into court the amount
required  to obtain a discharge  of any such lien in the name of the Tenant,  or
subtenant or occupant,  and any amount so paid together  with all  disbursements
and costs in respect of such proceedings on a solicitor and his own client basis
and interest at the Stipulated  Rate on all such monies from the date of payment
by the  Landlord to the date of  reimbursement  by the Tenant  together  with an
administrative  fee of  fifteen  (15%)  percent of the  aggregate  of all of the
foregoing sums, shall be forthwith due and payable by the Tenant to the Landlord
as additional  rent. The Tenant shall allow the Landlord to post and keep posted
on the  Premises  any  notices  that the  Landlord  may desire to post under the
provisions of the  construction,  mechanic's or builder's  lien  legislation  or
other legislation.

(c) If required by the Landlord, the Tenant shall not commence to make or permit
to  be  commenced  to  be  made,  any  installations,   alterations,  additions,
partitions  or  improvements  until  the  Tenant  delivers  to the  Landlord  an
indemnity  bond, in a form and for an amount  acceptable  to the Landlord,  of a
duly  incorporated  surety company licensed to carry on in the Province in which
the Lands are situate the business of indemnity insurance, insuring the Landlord
against any loss,  costs or damages of the Landlord arising out of or due to any
default  in  the  payment  of  the  cost  of  such  installations,  alterations,
additions,  partitions  or  improvements.  The  Landlord  shall not  require  an
indemnity  bond  in  the  event  the  estimated   cost  of  any   installations,
alterations, additions, partitions or improvements does not exceed $50,000.

(d) The Tenant shall not without  prior  written  consent of the Landlord put up
any window drapes,  blinds,  awnings or other similar things or cover the floors
with anything other than loose rugs.

(e)  In  making  any  installations,   additions,  partitions,   alterations  or
improvements,  the Tenant  will not alter or  interfere  with any  installations
which may have been made by the  Landlord and in no event  whatsoever  shall the
Tenant alter or interfere with or affect the structural elements or the strength
or outside appearance of the Building.


SECTION 8.01    LANDLORD'S RIGHT TO DO WORK

(a) The Tenant  covenants  and agrees with the  Landlord  that the  Landlord has
retained and reserved the sole and exclusive  right to use or to lease to others
for their own use the roof or exterior  walls of the  Building  and to construct
upon the Lands any other building or buildings or structures as the Landlord may
wish.

(b) The Landlord shall have the right to make additions (including free standing
structures  separate and apart from any  existing  building on the Lands) to and
improvements  or  installations  in and repairs to the  Building and the outside
areas or the Lands or either one or more of them and whenever  reference is made
in this Lease to the  "Building," it shall mean the building or buildings as the
same may be changed,  added to or improved  from time to time and in relation to
any such  additions,  improvements,  installations,  or repairs the Landlord may
cause such reasonable obstructions of and interference with the use or enjoyment
of the Building or the Premises or both as may be  reasonably  necessary for the
purposes aforesaid and may interrupt or suspend the supply of electricity,  gas,
water or other services when necessary and until said  additions,  improvements,
installations  or  repairs  shall  have been  completed  and  there  shall be no
abatement  in rent nor shall the Landlord be liable by reason  thereof  provided
that all such additions, improvements, installations or repairs shall be made as
expeditiously as reasonably possible.

(c) The Landlord and any persons authorized by the Landlord shall have the right
to use, install,  maintain or repair or any one or more of them,  pipes,  wires,
ducts  or other  installations  in,  under or  through  the  Premises  for or in
connection with the supply of any services to the Premises or any other premises
in the Building.  Such services  include without  limiting the generality of the
foregoing,    electricity,   water,   gas,   sanitation,   telephone,   heating,
air-conditioning and ventilation.

(d) The Landlord and any persons authorized by the Landlord shall have the right
to  enter  upon the  Premises  to make  such  reasonable  decorations,  repairs,
alterations, improvements or additions as it may deem advisable and the Landlord
or any persons  authorized by the Landlord shall be allowed to take all material
into and upon the Premises that may be required therefore.  The rent shall in no
way  abate  while  such  decorations,  repairs,  alterations,   improvements  or
additions  are being made by reason of loss or  interruption  of the business of
the Tenant because of the prosecution of any such work.

(e) Nothwithstanding the contents of Section 8.01 (b), (c) and (d), in the event
more than 50% of the Premises  are render  wholly unfit for the Tenant's use for
more  than  fourteen  (14)  consecutive  days  as a  result  of  the  Landlord's
decorations, repairs, alterations,  improvements or additions (provided that the
Landlord's decorations, repairs, alterations,  improvements or additions are not
the result of the negligence, default or wilful act or omission of the Tenant or
its agents, servants,  employees, workmen or invitees or other persons from time
to time on or about the  Premises,  the Building or the Lands with the expressed
or implied consent, approval or invitation of the Tenant), then the rent payable
under this Lease shall abate  until the  Premises  may be once again used by the
Tenant.

(f)      Notwithstanding the above, Landlord will use reasonable efforts
not to interfere with Tenant's business.

SECTION 8.02    REMOVAL OF FIXTURES

         Subject  to  Section  5.07  hereof,  the  Tenant may at or prior to the
expiration  of the Term  hereby  granted,  take,  remove and carry away from the
Premises any of its fixtures,  fittings,  shelving,  counters or other  articles
upon the  Premises in the nature of trade or tenants'  fixtures,  but the Tenant
shall in such  removal  do no damage  to the  Premises,  or shall  make good any
damage which the Tenant may occasion  thereof;  provided further that the Tenant
shall not remove or carry away from the Premises  any building or any  plumbing,
heating,  air-conditioning  or ventilating  plant or equipment or other Building
services;  and further  notwithstanding  anything  contained in this Lease,  the
Landlord shall have the right to require the Tenant upon the termination of this
Lease  by  affluxion   of  time  or  otherwise  to  remove  any   installations,
alterations,  additions,  partitions  and  fixtures or anything in the nature of
leasehold  improvements  made or  installed by or on behalf of the Tenant or any
subtenant  or  occupant  of the  Premises,  or by the  Landlord on behalf of the
Tenant  or by any  previous  tenant  or  occupant  of the  Premises  or any part
thereof, and to make good any damage caused to the Premises by such removal. Any
installations,  alterations,  additions, partitions and fixtures and anything in
the nature of the leasehold  improvements  not removed by the Tenant or required
to be  removed  by the  Landlord,  shall  become the  absolute  property  of the
Landlord  without any cost to the Landlord or  compensation  to the Tenant,  any
subtenant or occupant of the Premises,  free and clear of all liens, charges and
encumbrances whatsoever.

SECTION 8.03    SIGNS

         The Tenant shall not paint, display, inscribe, place or affix any sign,
picture, advertisement,  notice, lettering or direction, or any window blinds or
awnings,  on any part of the outside of the Building or visible from the outside
of the Building, or in any corridor,  hallway, entrance or any other public part
of the Building,  without the prior written  approval of the Landlord;  provided
that the Landlord may prescribe a uniform pattern for  identification  signs for
tenants  to be placed on the  outside of the  Premises.  Provided  that,  at the
request of the Tenant and at the Tenant's  expense,  the Landlord  shall, at its
option, either permit such sign to be placed or, cause such a sign to be placed,
in  position  in the form of  lettering,  style and  design  and in the size and
position as directed by the Landlord in writing. Provided that on the expiration
or  sooner  termination  of this  Lease,  the  Tenant  shall  cause any signs as
aforesaid  to be removed or  obliterated  at its own  expense  and in a good and
workmanlike  manner.  The Tenant will  indemnify  and save harmless the Landlord
from and against any loss, suit, action, damage, injury or claim suffered by any
person,  firm or  corporation  arising out of or by reason of the  erection,  or
presence of any such  sign(s) or awnings,  or the removal of same and whether or
not the Tenant, its officers,  employees, agents, invitees or servants have been
negligent with respect to the same.


                                   ARTICLE IX

         The parties hereto agree each with the other as follows:

SECTION 9.00    DAMAGE OR DESTRUCTION OF PREMISES

(a) If, during the Term,  the Premises  shall be damaged or destroyed by a peril
or perils  which would be covered by a standard  fire  insurance  policy with an
extended  coverage  endorsement  thereto,  the  Minimum  Rent shall abate in the
proportion  that the part of the Premises  rendered unfit for occupancy bears to
the whole of the  Premises  until the  Premises  are  rebuilt;  and the Landlord
agrees that it will with  reasonable  diligence  repair the Premises  unless the
Lease is terminated in accordance with the provisions herein, except for:

(i)      any repair the Tenant is obligated to make under the terms
         hereof, and

(ii)     the property of the Tenant or any occupant of the Premises, or
         any part thereof, and any improvements installed by or on behalf
         of the Tenant, any previous tenant, or any occupant of the
         Premises, or any part thereof, all of which the Tenant agrees
         to repair and restore, in each such case, to substantially the
         condition same were in immediately before such destruction or
         damages occurred, but in any event subject always to the
         provisions of paragraphs 9.00(b), 9.00(c), 9.00(d) and 9.00(e)
         hereof.

(b) If the Premises are damaged or destroyed by any cause  whatsoever and if, in
the opinion of the Landlord's Architect,  the Premises cannot be rebuilt or made
fit for the  purposes of the Tenant  within one hundred and twenty (120) days of
the damage or  destruction,  the Landlord  instead of  rebuilding  or making the
Premises  fit for the Tenant as provided in Section  9.00(a)  above,  may at its
option,  terminate  this Lease by giving the Tenant  within  thirty (30) days of
such damage or destruction notice of termination and thereupon the rent shall be
apportioned  and paid to the date of such damage or  destruction  and the Tenant
shall immediately deliver up possession of the Premises to the Landlord.

(c) If the  Building  or part  thereof  shall be damaged or  destroyed  and such
damage  or  destruction  shall,  in the  opinion  of the  Landlord's  Architect,
materially  interfere  with the  enjoyment  of the  Premises by the Tenant,  the
Minimum  Rent in respect  of the  Premises  shall  abate in  proportion  to such
interference during the period of such interference.

(d) If the  Building  shall,  in the  opinion of the  Landlord's  Architect,  be
damaged to the extent  that no less than FORTY (40%) per cent of the area of the
Building  requires repair or  reconstruction  (and whether or not there shall be
any damage to the Premises), the Landlord instead of rebuilding or repairing the
Building as provided in Section 9.00(a) above, may at its option, terminate this
Lease  by  giving  the  Tenant,  within  thirty  (30)  days  of such  damage  or
destruction,  notice of termination and the Tenant shall immediately  deliver up
possession of the Premises to the Landlord.

(e)  Provided  always that there shall be no  cessation  or abatement of rent if
damage to the Premises or the  Building or any part thereof  shall have been the
result of the negligence, default or wilful act or omission of the Tenant or its
agents, servants,  employees,  workmen or invitees or other persons from time to
time on or about the  Premises,  the Building or the Lands with the expressed or
implied consent, approval or invitation of the Tenant.

SECTION 9.01    NOTICE OF ACCIDENTS, DEFECTS OR DAMAGES

         The  Tenant  shall  immediately  advise  the  Landlord,   and  promptly
thereafter  by notice  confirm such advice to the Landlord of any accident to or
defect in the plumbing,  gas pipes,  water pipes,  heating,  ventilating and air
conditioning  apparatus,  electrical  equipment,  conduits, or wiring, or of any
damage  or  injury  to the  Premises,  or any part  thereof,  howsoever  caused;
provided that nothing  herein shall be construed so as to require  repairs to be
made by the Landlord, except as expressly provided in this Lease.

SECTION 9.02    DAMAGE TO BUILDING BY TENANT

         The Tenant shall  reimburse  the  Landlord  forthwith on demand for all
costs incurred by the Landlord in making good any damage caused to the Building,
the  Lands,  the  improvements  thereon,  or any  part  thereof,  including  the
furnishings and amenities thereof as a result of the negligence or wilful act or
omission of the Tenant, its employees,  invitees, licensees, agents, servants or
other  persons from time to time in or about the  Premises,  the Building or the
Lands with the express or implied consent of the Tenant.

                                    ARTICLE X

SECTION 10.00    ASSIGNING OR SUBLETTING

(a) The Tenant  shall not suffer or permit any other  person to use or to occupy
the  Premises  and shall not  mortgage  this  Lease or any  right  hereunder  or
interest  herein and shall not assign  this Lease or sublet the  Premises or any
part thereof (all of the foregoing being hereinafter collectively referred to as
a  "Transfer")  without  the prior  consent in writing  of the  Landlord,  which
consent  shall  not be  unreasonably  withheld.  This  prohibition  against  any
Transfer  shall be  construed to include a  prohibition  against any Transfer by
operation  of law. The Tenant shall not assign the Lease with respect to part of
the Premises only.

(b) The  Tenant  shall,  at the time the  Tenant  requests  the  consent  of the
Landlord to any Transfer,  deliver to the Landlord such  information  in writing
(herein  called the  "required  information")  as the  Landlord  may  reasonably
require respecting the proposed occupier, user, assignee, mortgagee or subtenant
(all  of  the  foregoing  being  hereinafter  collectively  referred  to as  the
"Transferee")  including  the name,  address,  nature of  business,  reputation,
financial  responsibility  and  standing  of  such  Transferee  and  the  terms,
conditions  and rental  rate of such  Transfer.  After  receiving  the  tenant's
request, the Landlord shall have the right, at its option, in lieu of consenting
to the Transfer,  to terminate  the Lease if the Transfer  relates to all of the
Premises  or, if the  Transfer  relates to a portion  only of the  Premises,  to
terminate the Lease with respect to such portion,  by giving within fifteen (15)
days after receiving the required information,  on not less than thirty (30) nor
more than sixty (60) days written notice of  termination  to the Tenant.  In the
event of such  termination,  the Tenant shall  surrender the Premises or portion
thereof,  as the case  may be,  in  accordance  with  the  said  notice  and the
provisions of this Lease relating to surrender of the Premises at the expiration
of the Term and the rent shall be  adjusted to the date of  termination  and, if
the Lease is terminated  in respect of only a portion of the Premises,  the rent
shall be abated proportionately.

(c) If such consent of the Landlord  shall be given,  the Tenant shall  Transfer
only to the  Transferee  named and upon the terms,  conditions and at the rental
rate  provided to the  Landlord  as part of the  required  information  and such
Transferee shall enter into an agreement,  in form and content determined by the
Landlord,  covenanting and agreeing with the Landlord to comply with and perform
all the  obligations,  covenants and  agreements in this Lease  contained on the
part of the Tenant to be complied with or performed and shall covenant and agree
directly  with the  Landlord  not to  mortgage  or assign any lease or sublet in
whole or in part,  its  premises  without  the consent of the  Landlord  and the
provisions of this Article X shall apply mutatis mutandis. In the event that the
Tenant has not completed such Transfer within thirty (30) days after the consent
of the Landlord is given,  such  consent of the Landlord  shall be null and void
and the Tenant shall not be permitted to Transfer  without  again  conforming to
all of the provisions of this Article X.

(d) In no event shall any  Transfer  to which the  Landlord  may have  consented
release or relieve  the Tenant  from its  obligations  to fully  perform all the
terms,  covenants  and  conditions of this Lease on its part to be performed for
the entire  Term and any renewal or  extension  thereof,  and in any event,  the
Tenant shall be liable for the Landlord's  costs incurred in connection with the
Tenant's request for consent whether or not the Landlord consents to any request
to a Transfer.  Notwithstanding any consent of the Landlord to any Transfer, the
Landlord's  consent shall be required for any further or other  Transfer and the
provisions  of this  Article X shall  apply to each and every  Transfer  and any
consent of the Landlord  shall not act as a waiver of any of the  provisions  of
this Article X.

(e)      If the Tenant is a corporation or if the Landlord has consented
to any Transfer to a corporation, any transfer or issue by sale,
assignment, bequest, inheritance, operation of law or other
disposition,  or by  subscription,  from  time to time of all or any part of the
corporate shares of the Tenant or of any parent or subsidiary corporation of the
Tenant or any  corporation  which is an associate or affiliate of the Tenant (as
those terms are defined  pursuant to the Canada Business  Corporations  Act S.C.
1974-75,  c. 33 and  amendments  thereto),  which  results  in any change in the
effective voting control of the Tenant by the person holding such voting control
at the  Commencement  Date (or at the date any  Transfer to the  corporation  is
consented  to by the  Landlord)  and which does not  receive  the prior  written
consent of the  Landlord in each  instance,  which  consent may be  unreasonably
withheld,  notwithstanding any statutory provision to the contrary, entitles the
Landlord  to  terminate  this  Lease upon five (5) days'  written  notice to the
Tenant.  If the Landlord  elects to cancel this Lease as  aforesaid,  the Tenant
shall have the right to advise the Landlord  within five (5) days after  written
notice of the  Landlord's  election  that the  Tenant  elects to have this Lease
reinstated  by  the  transfer,   sale,  assignment  or  other  disposition  (the
"Re-Transfer")  from the shareholders of the Tenant after such change in control
to the  shareholders of the Tenant existing as at the  Commencement  Date (or at
the date that any Transfer to the corporation was consented to by the Landlord).
If the Tenant  effects such  Re-Transfer  within thirty (30) days  following the
Landlord's  election,  and  forthwith  thereafter  provides  the  Landlord  with
evidence  satisfactory to the Landlord of such  Re-Transfer,  this Lease will be
reinstated as of the date of the  termination  by the Landlord as aforesaid.  If
this Lease is  terminated  as  aforesaid,  the  Landlord  may  re-enter and take
possession  of  the  Premises  whereupon  the  Landlord's  rights  and  remedies
contained in Section 12.00 hereof shall apply.  The Tenant shall make  available
to the Landlord, or its lawful representatives,  all corporate books and records
of the Tenant for  inspection  at all  reasonable  times,  in order to ascertain
whether there has been any change in control of the Tenant corporation. However,
this Section 10.00(e) shall not apply to the Tenant if and so long as the Tenant
is a public  corporation  whose  shares are traded and listed on any  recognized
stock exchange in Canada or the United States, so long as prior to or as soon as
reasonably possible after any such change of control of the Tenant, the Landlord
receives assurances satisfactory to the Landlord that there will be a continuity
of the existing  management  of the Tenant,  and of its business  practices  and
policies notwithstanding any such change of control.

(f) Any  Transfer  in breach of Article X shall,  until and unless the  Landlord
shall have  otherwise have  consented,  be invalid and of no force or effect but
shall nevertheless constitute a default hereunder.

(g) The Landlord's  consent to any Transfer shall not be effective  unless given
by the  Landlord in writing and no such  consent  shall be deemed or presumed by
any act or omission of the  Landlord  other than an express  consent in writing;
without limiting the generality of the foregoing,  the Landlord may collect rent
and any other amounts from the Transferee and apply the net amount  collected to
the rent and other amounts payable  pursuant to this Lease and the collection or
acceptance of such amounts shall not be deemed to be a waiver of the  Landlord's
rights  under  this  Article  X nor an  acceptance  of or  consent  to any  such
Transfer.

(h) If pursuant to a Transfer  consented to by the  Landlord,  a Transferee  has
sublet  all or part of the  Premises  from the  Tenant and has agreed to pay the
Tenant a rent (which shall be deemed to include any premiums, bonuses, key money
or lump sum payments made by the Transferee to the Tenant,  or as the Tenant may
direct,  that may  reasonably  be considered to be for the use of all or part of
the  Premises,  or  amounts  payable  for  the  purchase  or  use  of  leasehold
improvements  or chattels in excess of their fair market value,  lump sums to be
amortized  over the term of the  sublease for the  purposes of  calculating  the
rent) or other  amount in respect of its use of the  Premises or any part of the
Premises  that  exceeds  the rent  payable by the Tenant to the  Landlord  (or a
pro-rated portion of such rent in the case of a Transfer of less than the entire
Premises),  the Tenant will pay to the Landlord  monthly,  as  additional  rent,
together  with  Minimum  Rent,  an amount  equal to the excess rent  received or
receivable by the Tenant from the  Transferee.  (i)  Notwithstanding  the above,
Tenant has right to sublet up to 20% of the  Premises  to a third  party for the
operation  of a service  currently  provided  by the Tenant,  provided  that the
Tenant will be held responsible for the obligations of the Lease.

                                   ARTICLE XI

SECTION 11.00    TENANT'S INSURANCE

(a)            The Tenant shall at its own expense, provide and maintain
in force during the Term:

               (i)         plate  glass  insurance,   for  the  benefit  of  the
                           Landlord, any and all mortgagees of the Landlord (the
                           "Mortgagee") and the Tenant, covering all plate glass
                           in the  Premises,  including  plate glass windows and
                           doors, in an amount equal to the full insurable value
                           thereof;


               (ii)        comprehensive general public liability (covering
                           personal and bodily injury, death and property
                           damage) on an occurrence basis with respect to all
                           construction, installation and alteration done in the
                           Premises by the Tenant, the business carried on, in
                           or from the Premises, any private rail crossing
                           servicing the Lands and the Tenant's use and
                           occupancy thereof and of the Premises, of not less
                           than Five Million Dollars ($5,000,000.00) (or such
                           greater amount as the Landlord may reasonably require
                           provided any change is consistent with market rates
                           for comparable uses in comparable facilities);

               (iii)       insurance in such amounts as may be reasonably
                           required by the Landlord in respect of fire and such
                           other perils as are from time to time defined in the
                           usual extended coverage endorsement covering the
                           Tenant's trade fixtures and the furniture and
                           equipment of the Tenant and all leasehold
                           improvements of the Tenant, and which insurance shall
                           contain a waiver of subrogation clause in favour of
                           the Landlord and such insurance shall include the
                           Landlord and the Mortgagee as named insureds as the
                           Landlord's and the Mortgagee's interest may appear
                           with respect to insured leasehold improvements and
                           provide that any proceeds recoverable in the event of
                           loss to leasehold improvements shall be payable to
                           the Landlord and the Mortgagee jointly but the
                           Landlord and Mortgagee shall agree to make available
                           such proceeds toward the repair or replacement of the
                           insured property if this Lease is not terminated
                           pursuant to any provision hereof;

               (iv)        Tenant's legal liability insurance (for the full
                           replacement cost of the Premises),

               (v)         any other form of insurance as the  Landlord,  acting
                           reasonably,  requires  from  time to time  for  risks
                           against  which a prudent  tenant  would insure and in
                           respect of which insurance is available.

               (vi)        business  interruption  insurance  in such amounts as
                           will reimburse the Tenant for direct or indirect loss
                           of earnings  attributable to the perils to be insured
                           against by the Tenant  hereunder and any other perils
                           commonly   insured  against  by  prudent  tenants  or
                           attributable to loss of access to the Premises or the
                           Building or the Lands as a result of such Perils.

(b) All  insurance  required to be maintained  by Tenant  hereunder  shall be in
amounts and on terms satisfactory to Landlord and the Mortgagee.  Such insurance
shall be by policies in form and content  satisfactory  from time to time to the
Landlord and the Mortgagee and
with  insurers  acceptable  to Landlord and the Mortgagee and shall provide that
such insurers shall provide to Landlord and the Mortgagee thirty (30) days prior
written notice of  cancellation  or material  alteration of such policies.  Each
policy shall name the Landlord and the Mortgagee as additional  insureds  except
for coverage for Tenant's  fixtures and  furnishings and equipment but including
coverage for leasehold improvements in respect of Landlord's and the Mortgagee's
insurable interests therein, and shall contain a waiver of subrogation in favour
of Landlord and the Mortgagee and shall protect and indemnify the Landlord,  the
Mortgagee and Tenant. The Tenant shall furnish to the Landlord certificates, or,
if required by Landlord or the Mortgagee,  the original  policies (signed by the
insurers) of the  insurance  from time to time required to be effected by Tenant
and evidence acceptable to Landlord of their continuation in force.

(c) In the event  that the  Tenant  shall  fail to insure  and keep  insured  as
hereinbefore  provided in this Section  11.00,  the Landlord  upon five (5) days
prior  notice in writing to the Tenant,  shall be free to effect such  insurance
and the costs  thereof,  together  with a sum equal to fifteen  (15%) percent of
such costs as an administration  fee together with interest on all such costs at
the  Stipulated  Rate from the date of  payment by the  Landlord  to the date of
reimbursement  by the  Tenant,  to be due and  payable  forthwith  on  demand as
additional rent hereunder.

(d) In the event that the Landlord,  the Mortgagee and the Tenant have claims to
be indemnified under any such insurance, the indemnity shall be applied first to
the  settlement  of the claim of the  Mortgagee  and then the  Landlord  and the
balance, if any, to the settlement of the claim of the Tenant.

SECTION 11.01    INDEMNITY TO LANDLORD

               The Tenant shall, notwithstanding Section 11.00 hereof, indemnify
and save harmless the Landlord from any and all liabilities,  damages, expenses,
costs,  fees  (including  legal fees on a solicitor  and his own client  basis),
claims, suits or actions arising from or growing out of the following, which may
have occurred after the Commencement Date:

(a)            any breach, violation, or non-performance of any covenant,
condition or agreement in this Lease set forth and contained on the
part of the Tenant to be fulfilled, kept, observed and performed;

(b)            any damage to property occasioned by the use or occupation
of the Premises or any part thereof;

(c) any injury to any person or persons  including  death  resulting at any time
therefrom,  occurring  in,  upon or about  the  Premises  or any  areas  used in
connection  with the  Premises,  or any part  thereof  arising out of the use or
occupation of the Premises or any part thereof;

(d) any  act or  omission  of the  Tenant,  its  agents,  employees,  licensees,
servants,  invitees  or other  persons  from  time to time in,  on or about  the
Premises,  the  Building  or the Lands  with the  express  or  implied  consent,
approval or invitation of the Tenant, or

(e)            any Environmental Hazards caused by or permitted by the
Tenant or any subtenant of the Tenant or any other party occupying
or using the Premises or any part thereof,

and this indemnity shall survive the expiry or sooner termination of
this Lease.



<PAGE>


                                   ARTICLE XII

         The parties hereto agree each with the other as follows:

SECTION 12.00    RE-ENTRY

(a) If and whenever the rent or any part thereof or any other monies  payable by
the Tenant  under this  Lease,  shall be unpaid when the same ought to have been
paid,  and said rent remains  unpaid five (5) days after the  Landlord  provides
Notice of such arrears,  or in case of the breach or  non-performance  of any of
the  covenants  or  agreements  (other  than for the  payment  of rent and other
monies)  herein  contained  on the  part  of  the  Tenant  and  said  breach  or
non-performance remains uncured ten (10) days after the Landlord provides Notice
of same,  or if the Premises are vacated or become  vacant or remain  unoccupied
for five (5) days or are not used for the purpose  specified then, and in any of
such cases,  the then current  month's rent  together with the rent for the next
three months next ensuing shall immediately become due and payable, and it shall
be lawful for the Landlord at any time thereafter  without notice or any form of
legal  process  whatever,  to  re-enter  into and upon the  Premises or any part
thereof,  in the name of the whole,  and the same to have again,  repossess  and
enjoy,  as of the Landlord's  former estate,  anything  herein  contained to the
contrary  notwithstanding,  whereupon  this  Lease  shall  terminate  forthwith,
anything herein contained to the contrary  notwithstanding  whereupon this Lease
shall terminate forthwith, anything contained herein or in any statute or law to
the contrary notwithstanding,  provided however such termination shall be wholly
without  prejudice to the right of the  Landlord to recover  arrears of rent and
damages  for any  antecedent  breach  of  covenant  on the  part of the  Tenant.
Notwithstanding such termination, the Landlord may subsequently recover from the
Tenant all losses,  damages,  costs (including legal fees on a solicitor and his
own  client  basis) and  expenses  whatsoever  suffered  by reason of this Lease
having been prematurely  determined.  For greater certainty,  the Landlord shall
not be required to provide  notice of its  intention to re-enter the Premises in
the event the Premises  are vacated or become  vacant or remain  unoccupied  for
five (5) days.

(b) The Tenant  further  agrees with the Landlord that in any of the cases above
described in Section  12.00(a),  the  Landlord,  in addition to the other rights
hereby  reserved to it,  shall have the right to enter the Premises or otherwise
without being liable for any prosecution  therefor and to re-lease or sublet, as
the Tenant's agent, the Premises or any part thereof,  and to apply the proceeds
of such  re-leasing or sub-leasing on account of rent due or in  satisfaction of
the breach of any covenant or agreement  herein  contained  and the Tenant shall
remain liable for the deficiency, if any. SECTION 12.01 INSOLVENCY

         If the Term  hereby  granted  shall be at any time  seized  or taken in
execution or in attachment by any creditor of the Tenant or any if the Tenant or
any  guarantor  or  indemnifier  of this  Lease or of the  Tenant's  obligations
hereunder,  shall make any  assignment  for the benefit of creditors,  or become
bankrupt  or  insolvent  or shall  take the  benefit  of any Act that may now or
hereafter be or become in force,  for  bankrupt or  insolvent  debtors or file a
proposal or a receiver or receiver and manager is appointed for all or a portion
of the Tenant's  property or any steps are taken or any action or  proceeding is
instituted by the Tenant or any other party,  including without limitation,  any
court or  governmental  body, for the  dissolution,  winding up,  liquidation or
other  termination of the corporate  existence of the Tenant or any guarantor or
indemnifier of this Lease or their respective assets,  then and in any such case
the Term shall, at the option of the Landlord,  immediately become forfeited and
void and the then  current  month's  rent and the rent for the three (3)  months
next following shall immediately become due and payable as liquidated damages to
the  Landlord  and in such case it shall be lawful for the  Landlord at any time
thereafter to re-enter  into and upon the Premises or any part  thereof,  in the
name of the whole,  and the same to have  again,  repossess  and enjoy as of its
former estate anything herein contained to the contrary notwithstanding.

SECTION 12.02    LANDLORD MAY PERFORM TENANT'S COVENANTS

         If the Tenant shall fail to perform or cause to be performed any of the
covenants or obligations of the Tenant in this Lease  contained,  on the part of
the Tenant to be observed or performed,  the Landlord  shall have the right (but
shall not be obligated) to perform or cause the same to be performed,  and to do
or cause to be done  such  things  as may be  necessary  or  incidental  thereto
(including   without  limiting  the  foregoing,   the  right  to  make  repairs,
installations,  erections and expend monies) and all payments,  expenses, costs,
charges, fees (including all legal fees on a solicitor and his own client basis)
and  disbursements  incurred or paid by or on behalf of the  Landlord in respect
thereof  shall  be paid by the  Tenant  to the  Landlord,  as  additional  rent,
forthwith together with a sum equal to fifteen (15%) percent of the aggregate of
all  payments,   expenses,   costs,   charges,  fees  and  disbursements  as  an
administration  fee together  with  interest on all such sums at the  Stipulated
Rate from the date incurred until repaid by the Tenant.

SECTION 12.03    FOLLOW CHATTELS

         Provided  that  in case of  removal  by the  Tenant  of the  goods  and
chattels of the Tenant from off the  premises,  the Landlord may follow the same
for thirty (30) days.

SECTION 12.04    WAIVER OF EXEMPTIONS

         That in consideration of the leasing and letting by the Landlord to the
Tenant of the Premises  for the Term (and it is upon that express  understanding
that these presents are entered into) that notwithstanding anything contained in
any statute or in any statute which may  hereafter be passed,  none of the goods
or chattels of the Tenant at any time during the  continuance of the Term on the
Premises shall be exempt from levy by distress for rent in arrears by the Tenant
as provided for in any such statute or any amendment or amendments thereto,  and
that upon any claim being made for such  exemption  by the Tenant or on distress
being made by the  Landlord  this  covenant and  agreement  may be pleaded as an
estoppel  against  the  Tenant in any  action  brought  to test the right to the
levying  upon any such  goods as are named as  exempted  in any such  statute or
amendment or amendments  thereto;  the Tenant  waiving as the Tenant hereby does
all and every  benefit  that could or might have accrued to the Tenant under and
by virtue of any such  statute or any  amendment or  amendments  thereto but for
this covenant.
SECTION 12.05    OVERLOOKING AND CONDONING

         Any condoning,  excusing or overlooking by the Landlord of any default,
breach or  non-observance  by the  Tenant at any time or times in respect of any
covenant, proviso or condition herein contained shall not operate as a waiver of
the Landlord's rights hereunder in respect of any subsequent default,  breach or
non-observance  nor so as to  defeat  or  affect  in any way the  rights  of the
Landlord   hereunder   in  respect  of  any   subsequent   default,   breach  or
non-observance.  The subsequent  acceptance of rent by the Landlord shall not be
deemed  to be a waiver  of any  preceding  breach  by the  Tenant  of any  term,
covenant or condition of this Lease  regardless of the  Landlord's  knowledge of
such preceding breach at the time of acceptance of such rent.

SECTION 12.06    FORCIBLE RE-ENTRY

         In the event that the  Landlord  shall be  entitled  under the terms of
this  Lease or by law to enter  the  Premises,  then  the  Landlord  shall be at
liberty to effect such re-entry forcibly,  and for such purpose the Landlord, or
its servants or agents duly  authorized in writing may break open locks,  doors,
windows, or otherwise, as may be deemed necessary for such purposes,  without in
any way incurring any liability of becoming responsible for damages or otherwise
to the Tenant.

SECTION 12.07    REMEDIES GENERALLY

         Mention  in this  Lease of any  particular  remedy of the  Landlord  in
respect of the default by the Tenant does not  preclude  the  Landlord  from any
other  remedy in respect  thereof,  whether  available at law or in equity or by
statute or expressly provided for in this Lease. No remedy shall be exclusive or
dependent upon any other remedy, but the Landlord may from time to time exercise
any one or more of such  remedies  generally or in  combination,  such  remedies
being  cumulative  and not  alternative.  Whenever  the Tenant seeks a remedy in
order to enforce the observance or  performance of one of the terms,  covenants,
agreements and conditions contained in this Lease on the part of the Landlord to
be observed or performed,  the Tenant's only remedy,  if any,  shall be for such
damages  as  the  Tenant  shall  be  able  to  prove  in a  court  of  competent
jurisdiction  that it has suffered as a result of a breach (if  established)  by
the Landlord in the  observance of any of the terms,  covenants,  agreements and
conditions contained in this Lease on the part of the Landlord to be observed or
performed.


                                  ARTICLE XIII

               The parties hereto agree each with the other as follows:

SECTION 13.00              LANDLORD NOT RESPONSIBLE FOR
                           INJURIES, LOSS OR DAMAGE

               Except with respect to any Excess Claim,  the Landlord  shall not
be responsible in any way or under any  circumstances  whatsoever for any injury
to any person  (including  death) however caused or for any loss of or damage to
any property  belonging to the Tenant,  any subtenant,  or to other occupants of
the Premises or to their respective  invitees,  licensees,  agents,  servants or
other persons from time to time  attending at the Premises  while such person or
property  is in,  upon,  at or about the  Building  or the Lands or any  parking
areas,  sidewalks,  steps,  truckways,  railway  siding,  platforms,  corridors,
stairways,  including  without limiting the foregoing,  any loss of or damage to
any such property caused by theft or breakage,  or failure to keep the Premises,
the  Building  or the Lands in repair and free from  refuse,  obnoxious  odours,
vermin or other foreign matter,  defective  wiring,  plumbing,  gas,  sprinkler,
steam, sewer, water or other pipes or fixtures, the bursting,  leaking,  running
or clogging of any heating,  ventilating or air-conditioning  equipment or other
mechanical systems (including elevator system, if any), cistern tank,  sprinkler
system,  boiler,  washstand,  closet or  wastepipe,  discharge of the  sprinkler
system,  water,  snow,  ice or other foreign matter being upon or coming through
the roof, skylight,  trap-doors, doors, windows or from any part of the Building
or any  adjacent  or  neighbouring  lands and  premises  or  otherwise,  acts or
negligence of guests,  invitees or employees of the Tenant or other occupants of
the  Premises,  the Building or the Lands,  acts or  negligence of any owners or
occupants  of adjacent  or  contiguous  premises  or  property or their  guests,
invitees or employees,  acts of God, acts or negligence of any person or for any
loss  whatsoever  with  respect to the Premises  and/or any business  carried on
therein.

"Excess Claim" means any claim arising from any injury to any person  (including
death) or any loss of or damage to any property  belonging to the Tenant, or its
invitees,  in,  upon at or about the  Building  or the Lands or  parking  areas,
sidewalks,  steps, truckways,  platforms,  corridors, or stairways caused by the
negligence  of the  Landlord or by the breach by the  Landlord of its  covenants
contained  in this lease except for and to the extent any such claim is or would
be covered by or insured  under any policy of insurance the Tenant has placed or
is obligated to place pursuant to Section 11.00 hereof.

SECTION 13.01    NO LIABILITY FOR INDIRECT DAMAGES

               Under no  circumstances  whatsoever  shall the Landlord be liable
for  indirect or  consequential  damage or damages for  personal  discomfort  or
illness by reason of the non-performance or partial performance of any covenants
of the Landlord herein contained.

SECTION 13.02    UNAVOIDABLE FAILURE OR DELAYS BY LANDLORD

               Whenever and to the extent that the  Landlord  shall be unable to
fulfil or shall be delayed or  restricted in the  fulfilment  of any  obligation
hereunder in respect of the supply or provision of heating,  air-conditioning or
any service or any utility or the doing of any work by reason of being unable to
obtain the material,  goods, equipment,  service,  utility or labour required to
enable  it to  fulfil  such  obligation  or by  reason  of any  statute,  law or
order-in-council  or any regulation or order passed or made pursuant  thereto or
by reason of the order of direction of any administration controller or board of
any  governmental  department or officer or other  authority or by reason of not
being able to obtain any permission or authority  required  thereby or by reason
of any other cause beyond its control whether of the foregoing character or not,
the Landlord  shall be relieved from the  fulfilment of such  obligation and the
Tenant shall not be entitled to compensation for any inconvenience,  nuisance or
discomfort  thereby  occasioned.  There shall be no  deduction  from the rent by
reason of any such  failure  or cause.  In the event the  Landlord  is unable to
fulfil or shall be delayed or  restricted in the  fulfilment  of any  obligation
hereunder,  and the  Tenant has the  ability  to remedy any such  inconvenience,
nuisance  or  discomfort  they  occasion,   the  Tenant  may  correct  any  such
circumstance  at their own  expense,  provided  the Tenant acts within all legal
parameters  and any  work the  Tenant  carries  out is  performed  by  qualified
tradespeople.

                                   ARTICLE XIV

         The parties hereto agree each with the other as follows:

SECTION 14.00    SALE OF PREMISES

         Notwithstanding  section 14.14 of this Lease, in the event of a sale or
conveyance  by the Landlord of the Building or  assignment  of this Lease by the
then current  Landlord,  the same shall operate to release the Landlord from any
future liability upon any of the covenants, agreements or conditions, express or
implied,  herein  contained on the part of the  Landlord,  and in such event the
Tenant agrees to look solely to the  successor in interest of the  Landlord.  If
any  security  is given by the  Tenant to  secure  performance  of the  Tenant's
covenants hereunder, the Landlord may transfer such security to the purchaser of
the reversion and  thereupon the Landlord  shall be discharged  from any further
liability in reference thereto.

SECTION 14.01    EXHIBITING PREMISES

         Provided the Landlord has delivered  one days prior  written  notice to
the  Premises,  any person or persons  may inspect  the  Premises  and all parts
thereof at all reasonable times. The Landlord shall have the right to place upon
the Lands a notice of reasonable  dimensions and reasonably  placed so as not to
interfere  with the  business of the Tenant,  stating  that the Premises are for
sale or for rent and  further  provided  that the Tenant  will not  remove  such
notice or permit the same to be removed.

SECTION 14.02    OVERHOLDING

         If at the  expiration  of the Term of this Lease the Tenant  shall hold
over,  the  tenancy of the Tenant  thereafter  shall,  in the absence of written
agreement  to the  contrary,  be from  month to month only at a rental per month
equal to one-sixth  (1/6th) of the Minimum  Rent  payable for the calendar  year
immediately  preceding such expiration,  payable monthly in advance on the first
day of each month and shall be subject to all other terms and conditions of this
Lease except as to duration and any option to renew or extend the Term.

SECTION 14.03    CALCULATIONS

         In the event any  calculation,  estimation or determination of the area
of the Premises or the Building or of the Operating  Expenses or the Taxes or of
Proportionate Share, is disputed or called into question, it shall be calculated
or determined by the Landlord's Architect,  quantity surveyor or accountant (any
one or more of whom may be an  employee  of the  Landlord),  as the case may be,
whose certificate  shall be conclusive.  All measurements of area shall be taken
from the exterior  wall surface in the case of outside walls and from the centre
line of all walls in case of interior  dividing walls and no deduction  shall be
made for  doorways,  columns,  shafts,  stairs  or other  interior  obstruction,
construction or equipment.
SECTION 14.04    SUBORDINATION

         If required by the Landlord so to do, the Tenant shall subordinate this
Lease  to any  mortgages,  including  any  deed of trust  and  mortgage  and all
indentures  supplemental thereto,  which now or hereafter during the Term affect
or relate to this  Lease,  the  Premises  and to all  modifications  or renewals
thereof. The Tenant agrees to execute promptly,  from time to time any assurance
which the  Landlord  may  require  to  confirm  this  subordination  and  hereby
constitutes the Landlord, the agent or attorney of the Tenant for the purpose of
executing any such assurance and of making application at any time and from time
to time to register postponement of this Lease in favour of any such mortgage in
order to give effect to the provisions of this clause. In the event the Landlord
obtains mortgage financing on the Lands and Building,  the Landlord shall make a
good faith effort to obtain a non-disturbance agreement in favour of the Tenant,
provided  the Lease is in good  standing and the Tenant is not in default of its
covenants and obligations hereunder.

SECTION 14.05    CERTIFICATE OF STATUS

         Whenever  requested  from time to time by the Landlord or any actual or
proposed purchaser,  mortgagee or encumbrancer of the Building, the Tenant shall
promptly execute and deliver, to the party requesting the same, a certificate or
acknowledgement as to the status and validity of this Lease and the state of the
rental account herein, and such other information as may reasonably be required.

SECTION 14.06    LEASE ENTIRE RELATIONSHIP

         The Tenant  acknowledges that there are no covenants,  representations,
warranties,  agreements  or  conditions  expressed  or  implied,  collateral  or
otherwise forming part of or in any way affecting or relating to this Lease save
as expressly  set out in this Lease and that this Lease  constitutes  the entire
agreement  between the Landlord and the Tenant and may not be modified except by
subsequent  agreement in writing of equal formality executed by the Landlord and
the Tenant.

SECTION 14.07    NOTICES

(a) Any notice herein  provided for or given hereunder if given by the Tenant to
the Landlord shall be given in writing and shall be sufficiently given if mailed
by registered  mail,  postage prepaid to the Landlord at the Landlord's  Address
for service.

(b) Any notice herein provided for or given hereunder,  if given by the Landlord
to the Tenant,  shall be in writing and shall be sufficiently given if delivered
or mailed by registered  mail,  postage prepaid to the Tenant at the Premises or
left at the  Premises.  In the event the Landlord  delivers  notice  pursuant to
Section 12.00 (a) herein, the Landlord shall also deliver notice to the Tenant's
Head Office at:

         Fun Tyme Concepts of Edmonton Inc.
         c/o Fun Time Concepts Incorporated
         290 Wild Avenue
         Staten Island, New York
         10314
         Phone:            (718) 761-6100
         Fax:     (718) 761-6448

(c) Any notice  mailed as aforesaid  shall be  conclusively  deemed to have been
given on the third business day following the day on which such notice is mailed
as aforesaid . In the event of any existing or  threatened  disruption in postal
services, service by mail shall not be an acceptable means of delivery until ten
(10) days after normal  postal  service has  commenced.  The Landlord may at any
time give  notice in  writing  to the  Tenant of any  change of  address  of the
Landlord  and from and  after the  giving of such  notice  the  address  therein
specified  shall be deemed to be the address of the Landlord  for  service.  The
word "notice" in this section 14.07 shall be deemed
to include any request,  demand, direction or statement in writing in this Lease
provided or permitted to be given by the Landlord to the Tenant or by the Tenant
to the Landlord.

SECTION 14.08    ACCORD AND SATISFACTION

         No payment by the Tenant or receipt by the Landlord of a lesser  amount
than the monthly payment of rent and additional rent herein stipulated is deemed
to be other than on account of the earliest  stipulated rent and additional rent
nor is any endorsement or statement on any cheque or any letter accompanying any
cheque or payment as rent or additional rent deemed an  acknowledgement  of full
payment or an accord and satisfaction, and the Landlord may accept and cash such
cheque or payment  without  prejudice  to the  Landlord's  right to recover  the
balance of such rent or pursue any other remedy provided in this Lease.

SECTION 14.09    GOVERNING LAW

         This Lease shall be construed  and governed by the laws of the Province
in which the Lands are situate.  All of the  provisions  of this Lease are to be
construed  as  covenants  and  agreements  as though  the words  importing  such
covenants and agreements were used in each separate section and paragraph hereof
and all of such covenants and  agreements  shall be deemed to run with the Lands
and the reversion therein.  Should any provision of this Lease be illegal or not
enforceable they shall be considered separate and several from the

Lease and its remaining provisions shall remain in force and be binding upon the
parties hereto as though the illegal or unenforceable  provisions had never been
included. The schedules shall form part of this Lease.

SECTION 14.10    FRUSTRATION

         The Landlord and Tenant agree that  notwithstanding  the  occurrence or
existence of any event or  circumstance  or the  non-occurrence  of any event or
circumstance  and so often  and for as long as the same  may  occur or  continue
which,  but for  this  paragraph,  would  frustrate  or  void  this  Lease,  the
obligations and liabilities of the Tenant hereunder shall continue in full force
and effect as if such event or circumstance had not occurred or existed.

SECTION 14.11    TIME OF ESSENCE

         Time shall be of the essence of this Lease.

SECTION 14.12    REGISTRATION

         The Tenant shall not register  this Lease  provided that the Tenant may
register a notice thereof with the prior consent of the Landlord.

SECTION 14.13    CAPTIONS

         The headings,  captions,  section numbers,  article numbers and indices
appearing in this Lease have been  inserted as a matter of  convenience  and for
reference  only and in no way define,  limit,  construct or enlarge the scope or
meaning of this Lease or any provisions hereof.

SECTION 14.14    BINDING EFFECT

         This Lease and everything  herein  contained shall enure to the benefit
of and be binding upon the heirs, executors, administrators, successors, assigns
and other  legal  representatives,  as the case may be,  of each of the  parties
hereto,  subject to the  granting  of consent by the  Landlord  as  provided  in
Article X to any assignment or sublease, and every reference herein to any party
hereto shall include the heirs, executors,  administrators,  successors, assigns
and other legal  representatives of such party, and where there is more than one
Tenant or there is a female party or corporation, the provisions hereof shall be
read with all grammatical  changes thereby rendered  necessary and all covenants
shall be deemed joint and several.
                                   ARTICLE XV

                               SPECIAL PROVISIONS

15.01          Free Minimum Rent

               Notwithstanding  anything  herein  contained,  the  Tenant  shall
receive a total of three (3) months of free  Minimum  Rent,  being the months of
April 1997, May 1997 and June 1997.  During these three months with free Minimum
Rent, the Tenant shall be required to pay all Operating Expenses and Taxes.

15.02          Exclusivity

               Provided  the Lease is in good  standing and the Tenant is not in
default of any of its covenants and/or obligations, the Landlord shall not lease
space in the Building to any other tenant whose main use would be the  operation
of a children's indoor playground within the Building..





                  IN WITNESS  WHEREOF the  parties  hereto  have  executed  this
Indenture on the day and year set forth above.



                                SUN LIFE ASSURANCE COMPANY OF CANADA



                                        Per: ___________________________________
                                                      Authorized Signing Officer


                                        Per: ___________________________________
                                                      Authorized Signing Officer


                                              FUN TYME CONCEPTS OF EDMONTON INC.


                                        Per:____________________________________

                                                                             c/s
                                        Per:____________________________________


Schedules

Schedule A - Lands
Schedule B - Premises
Schedule C - Rules and Regulations




<PAGE>





                                  SCHEDULE "A"



The  Landlord  is the  Registered  owner of the  Lands,  Building  and  Premises
described as follows:


               Lot:                         Thirteen (13)
               Block:               Five (5)
               Plan:                        6207 K.S. Strathcona Industrial Park

               Containing three and  one-hundredths  (3.01) acres, more or less,
excepting thereout; fifty-one hundredths (0.51) of and acre, more or less.



Municipally known as:


               3904 - 91 Street, Edmonton, Alberta



Consisting of:

               12,200 square feet, more or less. The Tenant's Proportionate
Share is 33.3%.







                           Initials of Tenant:


                           Initials of Landlord:



















<PAGE>




                                  SCHEDULE "C"

     Rules and Regulations Referred to in Annexed Lease

1.                The Tenant shall not perform any acts or carry on any
practice which may injure the lands or be a nuisance to any other
tenants of the building.

2.                The Tenant shall not burn any trash or garbage in or about
the demised premises or anywhere within the confines of the lands.


3.                The Tenant shall not keep or display any merchandise on
or otherwise obstruct any part of the lands except as is specifically
permitted in the Lease.

4.                Floors shall not be overloaded.  Floor loading shall not
exceed the maximum load permitted by the building specifications.

5. All loading and  unloading  of  merchandise,  supplies,  materials,  garbage,
refuse  and  other  chattels  shall  be made  only  through  or by means of such
doorways as the Landlord shall designate in writing from time to time.

6. The Tenant  shall in  connection  with its  advertising  in  relating  to the
business  carried on in the  demised  premises  use and  promote the name of the
building or such other name as the landlord may from time to time  designate and
in using such name in any advertisement, sign, poster, printing or other writing
the Tenant will print,  write or designate the same in a manner to be determined
from time to time by the landlord and in no other  manner.  The Tenant shall not
use such name in regard to any business other than its business upon the demised
premises. The Tenant agrees that it will not carry on or permit to be carried on
any  business in the demised  premises  under a name or style other than its own
name or call or permit the  premises  or any  business  carried on therein to be
called any name other than its own name,  without the prior  written  consent of
the Landlord.

7. The Tenant shall, upon written notice from the Landlord, within five (5) days
furnish the Landlord with the current  Provincial  License Number of any vehicle
owned or used by employees of the Tenant.

8.                The Tenant shall not bring upon its premises any equipment,
motor or other thing which might damage the building.

9. Garbage or refuse  shall be placed in  containers  of a type  approved by the
Landlord  inside the demised  premises and shall be removed only at such time or
times as the Landlord shall from time to time advise the Tenant.

10.               No merchandise, supplies, materials, garbage, refuse or
other chattels shall be allowed to remain on any loading dock or
common area.



                           Initials of Tenant:


                           Initials of Landlord:






<PAGE>



                      SUN LIFE ASSURANCE COMPANY OF CANADA

                                  MULTI-TENANT
                         STANDARD INDUSTRIAL LEASE FORM

                                      - i -
<TABLE>
<CAPTION>

                          TABLE OF CONTENTS                                Page

ARTICLE I
<S>                                 <C>                                    <C>
               Section              1.00    Definitions                    1

ARTICLE II
               Section              2.00    Demise                         4
                                    2.01    Term                           4
                                    2.02    Possession                     4
                                    2.03    Examination of Premises        4

ARTICLE III
               Section              3.00    Minimum Rent                   5
                                    3.01    Operating Expenses             5
                                    3.02    Taxes                          6
                                    3.03    Deposit                        7
                                    3.04    Payments to Landlord           7   
                                    3.05     Net Lease                     7

ARTICLE IV
               Section              4.00    Quiet Enjoyment                8

ARTICLE V
               Section              5.00    Perform Covenants              8
                                    5.01     Business Tax                  8
                                    5.02     Utilities                     8
                                    5.03     Evidence of Payments          9
                                    5.04     No Nuisance                   9
                                    5.05     Comply with Laws and 
                                             Regulations                   9
                                    5.06     Comply with Rules             9
                                    5.07     Goods, Chattels and Fixture
                                             Not to be Removed             9
                                    5.08     Peaceful Surrender            9
                                    5.09     Care of Premises              10
                                    5.10     Access                        11

ARTICLE VI
               Section              6.00    Use of Premises                11
                                    6.01     Nuisance, Waste               11
                                    6.02     Acts Conflicting with 
                                             Insurance                     11
                                    6.03     Auction                       12
                                    6.04     Rail Spur (deleted)           12

ARTICLE VII
               Section              7.00    Tenant's Repairs               12
                                    7.01     Landlord's Repairs            13

ARTICLE VIII
               Section              8.00    Alterations                    13
                                    8.01     Landlord's Right to 
                                             Do Work                       14
                                    8.02     Removal of Fixtures           15
                                    8.03     Signs                         15






<PAGE>


                                                  -ii-


ARTICLE IX
               Section              9.00    Damage or Destruction
                                            of Premises                    16
                                    9.01     Notice of Accidents,
                                             Defects, or Damages           17
                                    9.02     Damage to Building by Tenant  17

ARTICLE X
               Section              10.00    Assigning or Subletting       17

ARTICLE X1
               Section              11.00            Tenant's Insurance    19
                                    11.01            Indemnity to Landlord 20

ARTICLE XII
               Section              12.00            Re-Entry              21
                                    12.01             Insolvency           22
                                    12.02             Landlord May Perform
                                                      Tenant's Covenants   22
                                    12.03             Follow Chattels      22
                                    12.04             Waiver of Exemptions 
                                                      (deleted)            23
                                    12.05             Overlooking and 
                                                      Condoning            23
                                    12.06             Forcible Re-Entry    23
                                    12.07             Remedies Generally   23

ARTICLE XIII
               Section              13.00            Landlord Not Responsible 
                                                     for Injuries, Loss 
                                                     or Damage             23
                                    13.01            No Liability for Indirect
                                                     Damages               24
                                    13.02            Unavoidable Failure 
                                                     or Delays By Landlord 24
ARTICLE XIV
               Section              14.00            Sale of Premises      25
                                    14.01             Exhibiting Premises  25
                                    14.02             Overholding          25
                                    14.03             Calculations         25
                                    14.04             Subordination        25
                                    14.05             Certificate of 
                                                      Status               26
                                    14.06             Lease Entire 
                                                      Relationship         26
                                    14.07             Notices              26
                                    14.08             Accord and 
                                                      Satisfaction         27
                                    14.09             Governing Law        27
                                    14.10             Frustration          27
                                    14.11             Time of Essence      27              
                                    14.12             Registration         27
                                    14.13             Captions             27
                                    14.14             Binding Effect       27

ARTICLE XV - SPECIAL PROVISIONS

               Section              15.01            Free Minimum Rent     28
                                    15.02             Exclusivity          28

</TABLE>

<PAGE>


                                  Exhibit 21.0
                        List of all Company Subsidiaries.


                        LIST OF ALL COMPANY SUBSIDIARIES




1.       Fun Tyme of New Brunswick, Inc.
2.       Fun Tyme of Edmonton, Inc.






<PAGE>
                                  Exhibit 22.0
         Inspector of Elections Report for April 24,1997 Annual Meeting.

                             FUN TYME CONCEPTS, INC.
                         ANNUAL MEETING OF STOCKHOLDERS

                                 April 24, 1997

                        REPORT OF INSPECTORS OF ELECTION

To the Secretary of the Annual Meeting of
Stockholders of Fun Tyme Concepts, Inc.

          The undersigned,  having been duly appointed  inspector of election at
the Annual  Meeting of  Stockholders  of Fun Tyme  Concepts,  Inc.,  held at the
offices of Klarman &  Associates,  14 West 60th  Street,  New York,  New York on
April 24, 1997, does hereby report and certify as follows:

     1.  Pursuant to such  appointment,  we executed the oath of office and duly
delivered the same to the Chairman of the meeting.

     2. We  inspected  the  certified  list of  stockholders  of  Common  Shares
prepared by the  Company's  transfer  agent,  and we certify  that the number of
Common Shares of the Company  issued,  outstanding  and entitled to vote at such
Annual Meeting was 2,676,000 shares.

     3. We tallied the number of  stockholders  of Common Shares present at such
meeting,  in person and by proxy, and we certify that there were present at such
meeting, in person and by proxy, stockholders holding 1,884,684 Common Shares of
the Company, thus constituting a quorum.

     4. The following  persons who received the votes set forth  opposite  their
names were duly elected  directors by the holders of the Shares of the Company's
Common Stock to serve until the next annual  meeting of  stockholders  and until
their  respective  successors  shall have been elected and shall have qualified,
each having received at least a plurality of the votes cast:
<TABLE>
<CAPTION>

                                    Votes Cast                             Withhold
Nominees                                For                            Authority to Vote
--------                            ----------                         -----------------
<S>                                          <C>                          <C>   
Daniel Catalfumo                             2,186,457                    28,534
Richard Rosso                                2,186,457                    28,534
Dan Buchanan                                 2,186,457                    28,534
</TABLE>








<PAGE>
        5. The proposal to authorize the  Corporation to ratify on the proposal
to reverse-spilt the Corporation's outstanding shares on a 1 for 3 basis.
<TABLE>
<CAPTION>

                           Votes Cast                Votes Cast
                               For                   Against                    Abstain
                           ----------                ----------                 -------
                           <S>                       <C>                        <C>                        <C>   
                           1,059,137                 1,144,854                  11,000
</TABLE>

          IN  TESTIMONY  WHEREOF,  I have  hereunto set my hand this 24th day of
April, 1997.

                                                       /s/ Marie Elena Cocchiaro
                                                           Inspector of Election







<PAGE>

<PAGE>