<PAGE>

                                                      AGREEMENT NO. RGDCR45709

                         AGREEMENT FOR EXTENSION OF TERM
                                (AMENDMENT NO. 3)

This  Agreement  for  Extension  of Term is entered into by and between U S WEST
Business Resources,  Inc., a Colorado corporation,  with offices for transaction
of business located at 188 Inverness Drive West,  Englewood,  Colorado 80112, as
agent for U S WEST Communications, Inc. ("Customer") and Applied Digital Access,
Inc., with offices for transaction of business located at 9855 Scranton Road San
Diego, California 92121 ("Supplier").

                                    RECITALS

Customer and  Supplier  entered  into that  certain  agreement  styled " General
Purchasing  Agreement,"  dated  February  15,1994,  as amended by Amendment No.1
dated  February   1,1996,   and  Amendment  No.  2  dated  August  17,1996  (the
"Agreement");

The term of the Agreement  will  automatically  expire on February 16, 1997 (the
"Expiration  Date");  and Customer  and Supplier  wish to extend the term of the
Agreement beyond the Expiration Date under the terms and conditions hereof.

                                    AGREEMENT

In consideration  of mutual promises and advantages to the parties,  the parties
incorporate  by reference  and agree to the  accuracy of the above  recitals and
further agree that the Agreement  shall not expire on the  Expiration  Date, but
shall  automatically renew for an additional four (4) month period commencing on
February  17,1997,  and will  automatically  expire on June 16, 1997.  All other
terms and conditions of the Agreement remain unchanged and shall all continue in
full force and effect.

The term  "Customer" as used herein may be applicable to one or more parties and
the  singular  shall  include the plural.  If there shall be more than one party
referred to as Customer herein,  then their  obligations  shall be several,  not
joint.

The parties  intending to be legally  bound have  executed  this  Agreement  for
Extension of Term as of the dates set forth below in multiple  counterparts each
of which is deemed an original but all of which  together  shall  constitute one
and the same instrument.


U S WEST BUSINESS RESOURCES, INC.,             APPLIED DIGITAL ACCESS, INC.
AS AGENT FOR U S WEST COMMUNICATIONS, INC.

 By /s/ Peggy J. Berggren                       By /s/ James L. Keefe
-------------------------                      ----------------------
 (Authorized Signature)                         (Authorized Signature)

Peggy J. Berggren                              James L. Keefe
-----------------                              ---------------
(Print or Type Name or Signatory)              (Print or Type Name or Signatory)

Contract Agent                                 Chief Financial Officer
--------------                                 ----------------------
(Title)                                        (Title)

January 30,1997                                January 30,1997
---------------                                -----------------
(Execution Date)                               (Execution Date)

                                        1

       CONFIDENTIAL. DISCLOSURE AND DISTRIBUTE SOLELY TO THOSE INDIVIDUALS
                            WHO HAVE A NEED TO KNOW.


<PAGE>

                            IMPERIAL SQUARE LAKE CITY

                            BURNABY, BRITISH COLUMBIA

                                      LEASE


THIS  INDENTURE  made as of January 1, 1997  pursuant to the LAND  TRANSFER FORM
ACT, PART 2


BETWEEN:

            2725321 CANADA INC., c/o PPM Real Estate Managers (Canada) Limited,
            440 - 1090 West Georgia Street, Vancouver, British Columbia, V6E 3V7

            (the "LANDLORD")
                                                              OF THE FIRST PART

AND:

            APPLIED DIGITAL ACCESS - CANADA,  INC., 9855 Scranton
            Road, San Diego, California, U.S.A., 92121

            (the "TENANT")
                                                             OF THE SECOND PART




                                    ARTICLE 1

                         DEFINITIONS AND INTERPRETATION

DEFINITIONS

1.1       The parties agree that the following words shall have the meanings set
forth below and used in this Lease.

         ADDITIONAL RENT means all amounts payable by the Tenant hereunder
         excluding Basic Rent;

         AGREEMENT  TO LEASE means the  agreement  between  the  parties  hereto
         pursuant to which they have entered into this Lease;

         AREA OF THE DEMISED  PREMISES means as of the date hereof the number of
         square  feet set out in  Schedule  "A" hereto  subject to  revision  in
         accordance with such Schedule;

         BASIC RENT means the fixed annual rental payable pursuant to paragraph
         3.1 hereof;

<PAGE>


         BUILDING means the building situate upon the Lands within which the
         Demised Premises are located;

         COMMENCEMENT DATE means the date on which the Term commences, as set
         out in paragraph 2.1;

         COMMON AREAS AND FACILITIES means those portions of the Development and
         the facilities therein or thereon from time to time not occupied by the
         Tenant  or other  tenants  as their  exclusive  premises  or  otherwise
         designated  by the  Landlord  as being for the benefit of or for use by
         the Tenant in common with others  entitled to the use or benefit of the
         same;

         DEMISED PREMISES means those premises described in Schedule "A"
         attached hereto;

         DEVELOPMENT means the Lands and the Project;

         GST means the Goods and Services Tax contained in Part IX of the EXCISE
         TAX ACT,  S.C.  1990,  or any similar tax in  substitution  therefor or
         addition thereto;

         LANDS  means  those  certain  parcels or tracts of land  located in the
         Municipality of Burnaby, in the Province of British Columbia,  and more
         particularly described in Schedule "B" attached hereto;

         OPERATING COSTS means an amount equivalent to the total amount (without
         duplication)  paid or  payable  whether  by the  Landlord  or others on
         behalf of the Landlord for  managing,  operating  and  maintaining  the
         Development including all of the component parts thereof such as are in
         keeping  with  maintaining  the  standard of a first  class  industrial
         complex including without limiting the generality of the foregoing, all
         repairs and  replacements  required  for such  maintenance,  other than
         repairs to and  replacements of the structure of the Building and other
         buildings on the Project,  the costs of providing  electricity,  water,
         gas,  fuel and other  services  and  utilities  (including  heating and
         air-conditioning) not otherwise paid by the tenants of the Project, the
         costs of painting interior areas not normally rented to tenants and the
         costs of painting and otherwise maintaining the outside of the Building
         (including  the roof  thereof)  and all other  buildings on the Project
         (other than those parts for which the Tenant is responsible), the costs
         of  maintaining  roadways and parking areas lying in or adjacent to the
         Project, snow removal, landscape maintenance,  refuse removal and other
         costs in  connection  with the  maintenance  of the  Common  Areas  and
         Facilities, sprinkler protection, fire, casualty, liability, rental and
         other insurance costs (including  self-insurance premiums not in excess
         of normal  insurance  costs),  security  protection,  the amount of all
         salaries, wages, fringe benefits and other employment costs or payments
         made paid to employees  engaged in the  maintenance or operation of the
         Project,  amounts paid to independent contractors for or in relation to
         any services in connection with such maintenance or operation, the cost
         of direct  supervision and of management and other indirect expenses to
         the extent  allocable to the  maintenance and operation of the Project,
         the reasonable rental value of and costs associated with


                                        2

<PAGE>


          (having regard to the rentals prevailing from time to time for similar
          space)  space  utilized  by the  Landlord or its  property  manager in
          connection  with  the  management,  operation  or  maintenance  of the
          Project  and all other  expenses  paid or payable by the  Landlord  in
          connection  with  the  operation  of the  Development  and  all of the
          component parts thereof together with a fee for the administration and
          management  of the  Project  equal  to the  actual  cost  paid  by the
          Landlord to a third party to administer  and manage the Project (which
          shall be a commercially reasonable fee, having regard to the nature of
          the management  services performed and the operation of the Project as
          a first class  industrial  complex) or, if the Landlord itself manages
          the Project,  a fee equal to the amount the Landlord might  reasonably
          pay to a third  party for the  administration  and  management  of the
          Project,  but  Operating  Costs shall not include  interest on debt or
          capital  retirement of debt or any amounts directly  chargeable by the
          Landlord to any tenant or tenants as otherwise  provided  herein.  For
          greater  certainty,  Operating  Costs  shall not  include  the cost of
          structural  and roof repairs or  replacements  (other than relating to
          the roof membrane,  asphalt or  insulation,  which will be included in
          Operating Costs).

          If the  Landlord  sells  100% of a legally  subdivided  portion of the
          Development,  as of the date of sale,  the  Operating  Costs  shall be
          determined  on  the  basis  of  the  legally   subdivided  portion  of
          Development retained by the Landlord;

          PROJECT means the improvements constructed or to be constructed on the
          Lands from time to time, including without limitation, the Building;

          PROPORTIONATE SHARE means the fraction,  the numerator of which is the
          Area of the  Demised  Premises  and the  denominator  of  which is the
          aggregate  area in square feet of all rentable  premises  from time to
          time physically  existing in the Project,  whether  actually rented or
          not, including the Demised Premises;

          RENT means Basic Rent,  Additional  Rent and all other amounts payable
          to the Landlord hereunder;

          TAXES means an amount equal to all taxes,  rates,  duties,  levies and
          assessments whatsoever, whether municipal,  provincial,  parliamentary
          or otherwise,  levied,  imposed or assessed  against the Lands and the
          Project or upon the Landlord on account thereof, or from time to time,
          levied,   imposed  or  assessed  for  education,   schools  and  local
          improvements  and  including  all costs and  expenses  incurred by the
          Landlord in good faith in contesting,  resisting or appealing any such
          taxes, rates,  duties,  levies or assessments,  but excluding Tenant's
          Taxes and  excluding  income or  profits  taxes upon the income of the
          Landlord  to the  extent  that such  taxes  are not  levied in lieu of
          taxes,  rates,  duties,  levies and assessments  against the Lands and
          Project or upon the Landlord on account thereof;

          TENANT'S TAXES means without  limitation all taxes,  licences,  rates,
          duties  and  assessments  imposed  or levied by  lawful  authority  in
          respect of the use or occupancy of the Demised  Premises by the Tenant
          relating to or in respect of personal property in the Demised Premises
          or the Building or the Project and all other business and trade


                                        3
<PAGE>


          fixtures, machinery and equipment, cabinetwork,  furniture and movable
          partitions  owned or  installed  by the  Tenant at the  expense of the
          Tenant or being the property of the Tenant in the Demised  Premises or
          the  Building  or  the  Project,  or  relating  to  or in  respect  of
          improvements to the Demised  Premises built,  made or installed by the
          Tenant or the  Landlord  or at the  Landlord's  or  Tenant's  request,
          whether  any such  taxes are  payable  by law by the  Tenant or by the
          Landlord and whether  such taxes are  included by lawful  authority in
          the taxes,  licences,  rates, duties and assessments imposed or levied
          on or with respect to the Lands or the Project. "Tenant's Taxes" shall
          also  include  any and all  penalties  or other like  charges for late
          payment thereof;

         TERM means the term of this Lease, as set out in paragraph 2.2, plus if
         any extension  thereof is provided for herein and such extension  right
         (or rights) is  exercised  by the Tenant in  accordance  herewith,  the
         period of such exercised extension (or extensions).

SCHEDULES

1.2       The provisions of Schedules hereto are incorporated herein and form
part of this Lease.

GOVERNING LAW

1.3       This Lease shall be construed and governed by the laws of the province
in which the  Demised  Premises  are  located,  and each of the  parties  hereto
severally attorns to the jurisdiction of the courts of such province. Should any
provisions  of this Lease be illegal or  unenforceable  it should 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 provision had never been included.

HEADINGS

1.4       The headings in this Lease form no part of this Lease and shall be
deemed to have been inserted for convenience of reference only.

INTERPRETATION

1.5       Unless the context otherwise  requires,  the word "Landlord"  wherever
it is used herein shall be construed to include and shall mean the Landlord, its
successors  and/or assigns,  the word "Tenant" shall be construed to include and
shall mean the  Tenant  and the  executors,  administrators,  successors  and/or
assigns  of the  Tenant  and when  there are two or more  Tenants or two or more
persons  bound by the Tenant's  covenants  herein  contained  their  obligations
hereunder shall be joint and several, the word "Tenant" and the personal pronoun
"it" relating thereto and used therewith shall be read and construed as Tenants,
and "his", "her", "its" or "their" respectively, as the number and gender of the
party or parties referred to each require and the number of  the verb  agreeing
therewith, shall be construed and agree with the said word or pronoun so
substituted.

                                       4

<PAGE>


USE OF "HEREIN", "HEREOF", ETC.

1.6            In  this  Lease,  "herein",  "hereof",  "hereby",  "hereunder",
"hereto",  "hereinafter" and similar  expressions refer to this Lease and not to
any  particular  paragraph,  section or other portion  thereof,  unless there is
something in the subject matter or context  inconsistent  therewith.  Paragraphs
referred to by number are the  paragraphs  so  numbered in this Lease.  TERMS AS
COVENANTS

1.7            All terms of this Lease and obligations of the parties  hereunder
shall be deemed to be covenants of the parties hereto,  whether or not so stated
in this Lease.

                                    ARTICLE 2

                              DEMISE, TERM AND USE

DEMISE

2.1            In  consideration  of  the  rents,  covenants,  conditions  and
agreements  hereinafter  reserved and  contained on the part of the Tenant to be
paid,  observed and performed the Landlord does demise and lease unto the Tenant
all and  singular the Demised  Premises,  upon the terms and  conditions  herein
contained.  The Tenant  acknowledges  that the Demised Premises are leased on an
"as is,  where is" basis,  and that the  Landlord is not  required to expend any
money or perform any work with respect to the same.

TERM

2.2            TO HAVE  AND TO HOLD the  Demised  Premises  for and  during  the
term  (the  "Term")  of  three  years   commencing   on  January  1,  1997  (the
"Commencement Date") and ending on December 31, 1999.

USE

2.3       The  Demised  Premises  shall  be  used by the  Tenant for the purpose
of administrative office, research and manufacturing of electronic equipment and
for no other use whatsoever  without the prior written  consent of the Landlord,
which consent may be withheld by the Landlord, acting reasonably.

USE OF COMMON AREAS AND FACILITIES, ETC.

2.4       In addition to the leasehold interest herein granted, the Tenant shall
have and the  Landlord  hereby  grants  to the  Tenant  its  employees,  agents,
customers  and  invitees,  in common  with the  Landlord  and all other  persons
authorized  by the  Landlord  from time to time, a licence over the Common Areas
and Facilities for the purpose of gaining access to and better using the Demised
Premises, provided however that this right shall in no way restrict the


                                       5

<PAGE>

Landlord from  maintaining  or improving  the Common Areas and  Facilities or of
changing the  location of or adding to the Building or any other  building on or
constructing  a new  building or buildings  on the Lands.  Without  limiting the
generality of the foregoing,  but subject to the above  limitations,  the Tenant
shall have the  following  rights in common  with all  others  from time to time
entitled thereto:

          (a)  the right to use the driveways  situate upon the Lands hereto for
               the purpose of ingress and egress from the Demised Premises; and


          (b)  the right to park its passenger  motor  vehicles and those of its
               employees and customers upon the Lands subject  always,  however,
               to any  restrictions  thereon which the Landlord may from time to
               time  impose  (which  the  Landlord  may do)  including,  without
               limitation  the  designation  of parking spaces for the exclusive
               use of other  tenants  of the  Project  and their  employees  and
               customers.

POSSESSION

2.5       DELETED.

EXAMINATION OF DEMISED PREMISES

2.6        The Tenant shall examine the Demised Premises and the Building before
taking  possession  hereunder  and such  taking  of  possession  will be, in the
absence  of  agreement  in  writing  to  the  contrary,  evidence  that  on  the
Commencement  Date the Demised  Premises and the Building were in good order and
satisfactory  condition. No promise of the Landlord to alter, remodel or improve
the Demised  Premises  or the  Building  and no  representation  respecting  the
condition of the Demised  Premises or the Building has been made by the Landlord
other than those contained herein or made a part hereof.

OVERHOLDING

2.7        If at the  expiration  of the Term of this Lease the Tenant  shall
hold over with the consent of the Landlord, 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-tenth of the Rent payable
for the 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.


                                       6

<PAGE>



                                    ARTICLE 3

                             RENT AND OTHER PAYMENTS


BASIC RENT

3.1       YIELDING AND PAYING THEREFOR yearly and every year  during  the  said
Term set out in paragraph 2.2 (for clarity,  not inclusive of extensions thereof
if any are  provided  for  herein)  as Basic Rent unto the  Landlord  the sum of
$307,248.00 in lawful money of Canada to be paid in advance in equal consecutive
monthly  instalments  of  $25,604.00  on the first  day of each and every  month
during the Term (but not any  extensions  thereof) to the Landlord,  but subject
however to the  provisions  of paragraph 5 of Schedule  "F" hereto.  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, the Basic Rent and Additional Rent for the fractions of
a month at the  commencement  and at the end of the Term shall be  adjusted on a
per diem basis.

PAYMENTS TO LANDLORD

3.2       All  payments  required to be made to the Landlord by the Tenant under
or in respect of this Lease shall be made in lawful  currency of Canada,  to the
agent of the Landlord,  PPM Real Estate Managers (Canada) Limited at the address
set out on page 1 hereof  or at such  place  or  places  or  other  agent as the
Landlord may designate in writing.

ADDITIONAL RENT

3.3       All amounts  payable by the Tenant  pursuant to paragraphs  4.3, 4.4
and 4.5 hereof shall be payable as Additional  Rent. In addition,  all sums paid
or expenses incurred hereunder by the Landlord, which ought to have been paid or
incurred  by the  Tenant,  or for which the  Landlord  hereunder  is entitled to
reimbursement  from the Tenant, and any interest owing to the Landlord hereunder
may be  recovered  by the  Landlord as  Additional  Rent by any and all remedies
available to it for the recovery of Rent in arrears.

PAYMENTS TO OTHERS

3.4       If the Tenant is required  hereunder to make any payments  other than
to the  Landlord,  the Tenant shall make such  payments  promptly and before any
interest or penalty for non-payment  attaches thereto.  In addition,  the Tenant
shall  produce to the Landlord  from time to time at the request of the Landlord
evidence  satisfactory to the Landlord  acting  reasonably of the due payment by
the Tenant of all payments required to be made by the Tenant under this Lease.

INTEREST ON OVERDUE AMOUNTS

3.5       The Tenant  shall pay to the  Landlord  interest  at the rate of six
percent (6%) per annum over the prime rate being charged by the Landlord's bank,
from time to time on all  payments  of rent and other sums  required  to be made
under the provisions of this Lease which

                                       7



<PAGE>

have become overdue so long as such payments  remain  unpaid,  provided that the
provisions of this paragraph shall not limit any other rights or remedies of the
Landlord.

DISPUTES

3.6       In the  event of a  dispute  as to the  amount of  Operating  Costs,
or the inclusion of any cost,  expense or amount in Operating  Costs,  then such
dispute shall be referred to the  Landlord's  auditor,  whose  decision shall be
final and binding upon the parties hereto.

DEPOSIT

3.7       The  Landlord  hereby  acknowledges  receipt  from the  Tenant of the
sum of $73,011.09  (the  "Deposit"),  which shall be applied firstly toward Rent
and GST thereon for the second month of the Term, with the balance to be held by
the  Landlord  without  interest  as  security  for  the  payment  of  Rent  and
performance  of the Tenant's  obligations  under this Lease.  If at any time the
Tenant is in default of its  obligations  hereunder,  the Landlord  may,  either
before  or after  terminating  this  Lease,  apply  the whole or any part of the
Deposit  to cure such  default or to  compensate  the  Landlord  for any loss or
expense  incurred by the Landlord as a result thereof,  and such  application of
the Deposit  shall be without  prejudice to the  Landlord's  right to pursue any
other  remedy set forth in this Lease or  available  at law. If the whole or any
part of the Deposit is so applied by the Landlord, the Tenant will forthwith pay
to the Landlord a sufficient amount to restore the Deposit to the amount thereof
prior to such application by the Landlord.  If the Tenant promptly pays all Rent
as it falls due and  performs  all of its  obligations  under  this  Lease,  the
Landlord  will  repay  the  Deposit  to the  Tenant  within  60 days  after  the
termination  of this Lease.  The  Landlord may deliver and assign the Deposit to
any purchaser of the Landlord's  interest in the Demised  Premises and thereupon
the Landlord will be discharged  of any further  liability  with respect to such
Deposit.


                                    ARTICLE 4

                      MISCELLANEOUS COVENANTS OF THE TENANT

The Tenant covenants with the Landlord as follows:

PAY RENT

4.1       The Tenant  shall,  during the Term,  pay unto the  Landlord the Basic
Rent hereby reserved in the manner hereinbefore mentioned without any set-off or
deduction whatsoever save as specifically provided for herein, together with all
GST  payable  in  respect  of this  Lease as and when  required  to do so by the
Landlord.

PAY TENANT'S TAXES

4.2       The Tenant shall pay all Tenant's  Taxes on or before the due date
thereof.  If the  Tenant  neglects  or refuses to pay any  Tenant's  Taxes,  the
Landlord  may,  at its  option,  pay

                                       8


<PAGE>


the same and  recover the amount paid by all  remedies  available  to it for the
recovery of Rent in arrears.

PAY UTILITIES

4.3       The Tenant shall pay all rates and charges for water, gas and electric
light and/or power,  heating,  fuel, telephone or other utilities supplied to or
used in the Demised Premises as separately metered or separately invoiced by the
supplier thereof,  and, if not so separately  metered or invoiced,  the Tenant's
Proportionate  Share of such rates and  charges;  PROVIDED  HOWEVER  that if the
Landlord,  acting  reasonably,  determines  that an  allocation of such rates or
charges on a Proportionate Share basis would not be equitable,  the Landlord may
allocate  such rates and  charges on a  reasonable  basis  amongst  the  various
tenants of the  Building  or of the  Development,  and the Tenant  shall pay its
share of the same as reasonably determined by the Landlord.
PAY PROPORTIONATE SHARE OF TAXES

4.4       The  Tenant shall  during and in  respect of  the Term pay  its
Proportionate Share of Taxes. The Tenant's Proportionate Share of Taxes shall be
estimated by the Landlord for such period as the Landlord may determine  (not to
exceed 12 months)  and the Tenant  shall pay the same to the  Landlord  in equal
monthly instalments  together with the regular monthly instalments of Basic Rent
as set out in  paragraph  3.1.  The  Landlord  shall  furnish  to the  Tenant an
estimate of the  Proportionate  Share of Taxes  payable by the Tenant during the
period so determined by the  Landlord.  At the end of such period,  the Landlord
shall  furnish  the Tenant with a  statement  showing  the actual  amount of the
Proportionate  Share  of  Taxes  paid  and  payable  by  the  Tenant  and  if an
overpayment  has been made by the Tenant,  the Landlord shall credit such amount
to the Tenant's Proportionate Share of Taxes for the ensuing period and if there
is no ensuing  period such  amount  shall be paid to the Tenant and if an amount
remains owing to the Landlord in respect of the Tenant's  Proportionate Share of
Taxes, the Tenant shall forthwith pay such amount to the Landlord.

PAY PROPORTIONATE SHARE OF OPERATING COSTS

4.5       The Tenant  shall  during  and in respect of the Term pay its
Proportionate  Share of Operating Costs as follows:  the Tenant's  Proportionate
Share of  Operating  Costs shall be estimated by the Landlord for such period as
the  Landlord may  determine  (not to exceed 12 months) and the Tenant shall pay
the same to the Landlord in equal monthly instalments  together with the regular
monthly  instalments  of Basic Rent as set out in  paragraph  3.1.  The Landlord
shall furnish to the Tenant an estimate of the Proportionate  Share of Operating
Costs payable by the Tenant during the period so determined by the Landlord.  At
the end of such period,  the Landlord  shall furnish the Tenant with a statement
showing the actual amount of the Proportionate Share of Operating Costs paid and
payable by the Tenant,  and the Landlord and Tenant covenant and agree each with
the  other  that  if an  overpayment  of the  Tenant's  Proportionate  Share  of
Operating  Costs has been made by the Tenant,  the  Landlord  shall  credit such
amount to the Tenant's  Proportionate  Share of Operating  Costs for the ensuing
period and if there is no ensuing period such amount shall be paid to the Tenant
and if an amount  remains


                                        9


<PAGE>


owing  to the  Landlord  in  respect  of the  Tenant's  Proportionate  Share  of
Operating Costs, the Tenant shall forthwith pay such amount to the Landlord.

NO NUISANCE

4.6       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 or upon the
Demised  Premises or any part  thereof 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 or upon the Demised Premises or any
part thereof which shall or may be or grow to the annoyance, nuisance, damage or
disturbance  of the occupiers or owners of the Lands,  Project or adjoining land
and properties.

COMPLY WITH LAWS, ETC.

4.7       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 manner of use of the Demised  Premises,  and
shall comply with any and all federal,  provincial,  civic,  municipal and other
authorities or association of insurance  underwriters  or agents and all notices
in pursuance of same and whether served upon the Landlord or the Tenant. Without
limiting the generality of the foregoing, the Tenant shall comply fully with the
provisions of Schedule "D" hereto.

COMPLY WITH RULES AND REGULATIONS

4.8       The Tenant shall observe and comply with the rules and regulations
attached hereto as Schedule "C" with such reasonable  variations,  modifications
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,  and the Tenant  shall  cause its
agents,  servants or  employees  to observe  and comply with the same.  All such
rules and regulations  shall be read as forming part of the terms and conditions
of this Lease as if the same were  embodied  herein as  covenants of the Tenant,
and the Tenant's  failure to keep and observe such rules and  regulations  shall
constitute a breach of this Lease.

GOODS, CHATTELS, ETC. NOT TO BE REMOVED

4.9       The Tenant agrees that all goods,  chattels and fixtures when moved
into the Demised Premises shall not except in the normal course of business,  be
removed from the Demised Premises until all Rent due or to become due during the
Term of this Lease and all utility  charges are fully paid.  The Tenant  further
covenants  and agrees that if the Tenant  shall at any time be in default  under
any of the terms,  covenants or agreements  contained herein, the Landlord shall
have a lien on all of the Tenants  goods,  chattels and fixtures  located in the
Demised  Premises,  but excluding  however  electronic  data storage  equipment,
backup tapes and software  media, as security  against loss or damage  resulting
from any such  default,  and such  goods,  chattels  and  fixtures  shall not be
removed  from the  Demised  Premises by the Tenant  until such  default is cured
unless the Landlord directs otherwise.


                                       10

<PAGE>


USE OF DEMISED PREMISES

4.10      The  Tenant  shall not use the Demised  Premises  nor suffer or permit
the Demised  Premises to be used for any other purpose than that provided for in
paragraph  2.3,  nor shall the Tenant use the Demised  Premises in any way which
will impair the  efficient and proper  operation of the sprinkler  system in the
Building.

CONTINUOUS OCCUPATION

4.11      The Tenant shall  commence the use of the Demised  Premises  referred
to in paragraph 2.3 within 30 days from the Commencement Date and shall carry on
such use continuously during the Term.

SIGNS

4.12      The Tenant shall not,  without the  Landlord's  prior  written
permission,  paint,  display,  inscribe,  place  or  affix  any  sign,  picture,
advertisement,  notice, lettering or direction on any part of the outside of the
Building  or the  Project or visible  from the  outside of the  Building  or the
Project  or in any  corridor,  hallway,  entrance  or other  public  part of the
Building  or  Project;  PROVIDED  THAT the  Landlord  shall  prescribe a uniform
pattern for identification  signs for tenants to be placed on the outside of the
main door  leading  into the  Demised  Premises;  FURTHER  PROVIDED  THAT at the
request of the Tenant and at the Tenant's expense, the Landlord shall cause such
a sign to be placed in position.

PEACEFUL SURRENDER

4.13      The Tenant shall, at the expiration or sooner termination of the
said  Term,  peaceably  surrender  and yield up unto the  Landlord  the  Demised
Premises with the  appurtenances,  together with all fixtures or erections which
at any time  during the said Term shall be made  therein or thereon  (other than
tenant's or trade  fixtures  removed  pursuant to paragraph  4.15 or Alterations
which the Landlord  requires to be removed pursuant to paragraph 7.2(b)) in good
and  substantial  repair and condition,  reasonable  wear and tear and damage by
fire or other  insured peril  excepted,  and deliver to the Landlord all keys to
the Demised Premises which the Tenant has in its possession.

CONDITION AT EXPIRATION

4.14      The Tenant shall immediately before the expiration or sooner
termination of the Lease wash the floors,  windows, doors, walls and woodwork of
the Demised Premises. The Tenant further covenants that the Tenant will not upon
such  expiration  or sooner  termination  leave upon the  Demised  Premises  any
rubbish or waste  material  and will leave the  Demised  Premises in a clean and
tidy  condition.  Without  limiting the generality of the foregoing,  the Tenant
shall  ensure that all trade  fixtures  and other items which the Tenant has the
right or  obligation  hereunder  to remove from the Demised  Premises  are fully
removed, and any damaged caused by such removal is fully made good, on or before
the last day of the Term.


                                       11

<PAGE>



REMOVAL OF FIXTURES

4.15      Subject to  paragraph 4.9 hereof the Tenant may at the expiration
of the Term  hereby  granted,  take,  remove  and carry  away  from the  Demised
Premises all fixtures,  fittings,  shelving, counters or other articles upon the
Demised  Premises  in the nature of trade or tenants'  fixtures,  but the Tenant
shall in such removal do no damage to the Demised  Premises,  or shall make good
any damage which the Tenant may occasion thereto; PROVIDED THAT the Tenant shall
not remove or carry away from the Demised  Premises  any part of the Building or
any plumbing,  heating,  air-conditioning  or ventilating  plant or equipment or
other Building services;  PROVIDED FURTHER that notwithstanding  anything herein
contained the Landlord  shall have the right upon the  termination of this Lease
by  effluxion  of  time or  otherwise  to  require  the  Tenant  to  remove  its
installations,  alterations,  additions,  partitions and fixtures or anything in
the nature of leasehold  improvements  made or installed by the Tenant or by the
Landlord  on behalf of the  Tenant  and to make  good any  damage  caused to the
Demised Premises by such removal.

USE OF WASHROOMS

4.16      The Tenant shall keep and maintain the  washrooms in a sanitary
condition,  and shall not use the washrooms,  or suffer or permit its customers,
licensees, invitees, servants, agents, or employees to use the washrooms for any
purpose other than the purpose for which they were designed.

OVERLOADING

4.17      The  Tenant  shall  not do or  suffer  or  permit  any  waste or
damage,  disfigurement  or injury to the Demised  Premises or the  fixtures  and
equipment thereof or permit or suffer any overloading of any floor thereof,  and
shall not place in, on or about the Demised  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.  The Tenant  shall  repair any damage  done to the Demised
Premises or the Building by reason of any excessive weight placed in the Demised
Premises or excessive vibration caused in the Demised Premises.

NUISANCE AND WASTE

4.18      The Tenant shall not cause or suffer or permit  any oil or grease
or any harmful,  objectionable,  dangerous,  poisonous  or  explosive  matter or
substance  to be  discharged  into the Demised  Premises or the  Building or the
Development  or into  the  driveways,  common  areas,  ditches,  water  courses,
culverts,  drains or sewers in or adjacent thereto, and will take all reasonable
measure  for  insuring  that any  effluent  discharged  will  not be  corrosive,
poisonous  or  otherwise  harmful,  or cause  obstruction,  deposit or pollution
within  the  Demised  Premises,  or  the  Building,  or the  Development  or the
driveways,  common areas, ditches,  water courses,  culverts,  drains, or sewers
thereof.  Without  limiting the  generality of the  foregoing,  the Tenant shall
comply fully with the provisions of Schedule "D" hereto.


                                       12


<PAGE>

ACCESS

4.19      The Tenant shall not permit any vehicles belonging to the Tenant,
its customers,  invitees,  licensees, agents or servants to cause obstruction on
any roads,  driveways or common areas in the neighbourhood of the Development or
prevent  the  ingress  or egress to all other  tenants in the  Building  and the
Development  and will use its best  endeavours  to  ensure  that  persons  doing
business  with the  Tenant and its  servants  and  workers  shall not permit any
vehicles to cause such obstruction as aforesaid.

USE OF YARD AREAS

4.20      The Tenant shall not place,  nor suffer or permit its customers,
invitees,  licensees,  agents or servants to place any  materials in the yard or
yards of the Project or the adjacent driveways,  parking or common areas thereof
and shall  cause no  obstruction  to  vehicles  operating  on the said  adjacent
driveways, parking or common areas.

NO AUCTION

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

ESTOPPEL CERTIFICATES

4.22       To provide  within 15  calendar  days of the request and at the
cost of the Landlord (such cost to be reasonable)  an estoppel  certificate  for
the Landlord,  addressed to the Landlord and any  potential  buyer or mortgagee,
binding  upon the  Tenant,  in the  Landlord's  standard  form  containing  such
statements as the Landlord may  reasonably  require with  reasonable  promptness
upon request by the Landlord.

LANDLORD MAY PERFORM TENANT'S COVENANTS

4.23      If the Tenant shall fail to perform or cause to be performed each
and every one of the  covenants  and  obligations  of the  Tenant in this  Lease
contained  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
moneys) and all payments,  expenses, charges, fees and disbursements,  including
reasonable solicitors' fees and disbursements,  incurred or paid by or on behalf
of the Landlord in respect  thereof  shall be paid by the Tenant to the Landlord
forthwith.

                                       13


<PAGE>

                                    ARTICLE 5

                              LANDLORD'S COVENANTS

The Landlord covenants with the Tenant as follows:

QUIET ENJOYMENT

5.1       The Tenant, paying the Rent hereby  reserved  and  performing  the
covenants herein on the Tenant's part contained, shall and may peaceably possess
and  enjoy  the  Demised  Premises  for the  Term  hereby  granted  without  any
interruption  or  disturbance  from the  Landlord or any other person or persons
lawfully  claiming by, from or under the Landlord;  SUBJECT ALWAYS to the terms,
covenants and conditions contained in this Lease.

TAXES

5.2       The Landlord shall pay or cause to be paid Taxes subject to
contribution by the Tenant as provided in paragraph 4.4 hereof.

MANAGEMENT, OPERATION AND MAINTENANCE

5.3       The Landlord acting reasonably shall manage, operate, maintain, repair
and replace the Project and Lands subject to the cost and expense  thereof being
contributed to by the Tenant as provided in paragraph 4.5 hereof.


                                    ARTICLE 6

                             INSURANCE AND INDEMNITY

TENANT INSURANCE

6.1       The  Tenant  shall,  at its expense, provide and maintain in force
          during the Term:

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

     (b) owned automobile  insurance with respect to all motor vehicles owned by
     the Tenant and operated in its business;

     (c)  comprehensive  general  liability of not less than  $3,000,000.00  per
     occurrence and property damage  insurance,  including fire,  tenant's legal
     liability  insurance,  for the  benefit  of  injury or death to one or more
     persons,  or property  damage,  occurring  in the  Demised  Premises or the
     Building or on the Development; and


                                       14

<PAGE>



     (d)  insurance 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 leasehold improvements, trade fixtures and furniture and equipment
     to the full insurable value thereof.

DETAILS OF POLICIES

6.2       All policies of insurance required to be maintained by the Tenant
shall have the following provisions or characteristics:

               (a) all insurance shall be effected with insurers and brokers and
               upon terms and conditions  satisfactory  to the Landlord,  acting
               reasonably;

               (b) to the extent  applicable,  all policies of  insurance  shall
               contain a waiver of subrogation  clause in favour of the Landlord
               and shall also  contain a clause  requiring  the  insurer  not to
               cancel or change the insurance  without first giving the Landlord
               30 days' prior written notice thereof; and

               (c) all  policies  of  insurance  shall be written to protect the
               Landlord   and  its   mortgagees,   if  any,   and  the   Tenant,
               notwithstanding  any act or neglect of such  parties  which might
               otherwise  result in the  forfeiture  of such  policies or any of
               them.

PROOF OF INSURANCE

6.3       The Tenant shall provide, upon request,  proof of  new or  continued
insurance to the Landlord at least 7 days prior to the  expiration  date recited
in any of the Tenant's insurance policies,  such proof to be in form and content
satisfactory to the Landlord,  acting  reasonably.  The Tenant agrees that if it
does not provide or maintain in force such  insurance,  the  Landlord  may,  but
shall not be obligated to, take out the necessary  insurance and pay the premium
therefor  for  periods of one year at a time,  and the  Tenant  shall pay to the
Landlord as Additional Rent the amount of such premium immediately on demand. In
the event the Landlord  takes out insurance as aforesaid,  the Landlord shall in
no way be responsible for the sufficiency of such insurance.

PRIORITY OF CLAIMS

6.4       If both the Landlord 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 Landlord and the balance,  if any, to the  settlement of the
claim of the Tenant.

ACTS CONFLICTING WITH INSURANCE

6.5       The  Tenant  shall not do or  permit  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 Demised Premises
or the Building or the  Development  are insured or which may cause any increase
in premium to be paid in respect of any such policy. If any such policy or


                                       15


<PAGE>


policies is or are 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 written  notice of  termination  to the Tenant,  and if the premium to be
paid in respect of any such  policy is  increased  by any act or omission of the
Tenant  (including the use of the Demised Premises  described in paragraph 2.3),
the Tenant shall pay to the  Landlord the amount by which said premium  shall be
so increased.

INDEMNITY TO THE LANDLORD

6.6       The Tenant shall  indemnify  and save harmless the Landlord from any
and all liabilities, damages, costs, claims, suits or actions arising out of:


          (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 or performed;

          (b) any occurrence in, upon, about or at the Demised Premises,  except
          to the extent  caused by the  negligence  or wilful  misconduct of the
          Landlord;

          (c) any and all costs  incurred  by the  Landlord  in making  good any
          damage  caused  to  the  Development   including  the  furnishing  and
          amenities  thereof  as a result  of the  negligent  or  wilful  act or
          omission  of the  Tenant or any  person  for whom the Tenant is in law
          responsible; and

          (d) any injury to any  licensee,  invitee,  agent or  employee  of the
          Tenant, including death resulting at any time therefrom,  occurring in
          or  about  the  Development,  except  to  the  extent  caused  by  the
          negligence or wilful misconduct of the Landlord;

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

FURTHER INDEMNITY

6.7       Notwithstanding anything to the contrary herein contained, if the
Project or the Building or any part thereof or any appurtenance thereto, becomes
damaged or  destroyed  through the  negligence  or wilful act or omission of the
Tenant  or any  person  for  whom the  Tenant  is in law  responsible,  then all
necessary  repairs,  replacements or alterations shall at the sole option of the
Landlord,  be made either by the Landlord or the Tenant,  but in any event,  the
expense  thereof  shall be borne by the  Tenant  who  shall  pay the same to the
Landlord  forthwith on demand and the same shall be  collectible by the Landlord
from the Tenant as if Rent in arrears;  the provisions of paragraph 7.1(c) shall
apply to this  paragraph  if the Tenant is  required  to carry out the  repairs,
replacements or alterations pursuant to this paragraph.

LANDLORD NOT RESPONSIBLE FOR INJURIES, LOSS, DAMAGE

6.8       The Landlord shall not be  responsible in any way for any injury
(including  death) to any  person  or for any loss of or damage to any  property
belonging  to the Tenant or to other  occupants  of the  Demised  Premises or to
their respective customers, invitees,

                                       16

<PAGE>


licensees,  agents, servants or any other persons from time to time attending at
the Demised  Premises  while such person or property is in or about the Building
or  Development  or  any  roadways,  parking  areas,  lawns,  sidewalks,  steps,
truckways, platforms, corridors, or stairways in connection therewith, including
without  limiting  the  foregoing,  any loss of or damage  to any such  property
caused by theft or  breakage,  or by steam,  water,  rain or snow which may leak
into, issue or flow from any part of the Building or Development or any adjacent
or neighbouring  lands or premises or from any other place or quarter or for any
loss of or damage caused by or  attributable  to the condition or arrangement of
any electric or other wiring or for any damage  caused by smoke or anything done
or omitted to be done by the  Landlord or by any other tenant of premises in the
Building or the  Project or for any other loss  whatsoever  with  respect to the
Demised Premises and/or any business carried on therein.

NO LIABILITY FOR INDIRECT DAMAGES

6.9       Under no  circumstances  shall  the  Landlord  be liable  for
indirect or consequential damage or damages for personal discomfort,  illness or
death by reason of the  non-performance or partial  performance of any covenants
of the Landlord herein contained  including,  without limiting the generality of
the  foregoing,  the heating of the Demised  Premises  or the  operation  of the
air-conditioning  equipment,  plumbing or other equipment in the Building or the
Demised Premises.

LANDLORD INSURANCE

6.10      The  Landlord  shall take out and keep in force  during the Term
insurance with respect to the Development except for the leasehold  improvements
in the Demised Premises. The insurance to be maintained by the Landlord shall be
in respect of periods and to amounts and on terms and conditions which from time
to time are insurable at a reasonable  premium and which are normally insured by
reasonably prudent owners of properties similar to the Development,  all as from
time to time determined at reasonable  intervals by insurance  advisors selected
by the Landlord,  and whose opinion  shall be  conclusive.  Unless and until the
insurance advisors shall state that any such perils are not customarily  insured
against by owners of  properties  similar to the  Development,  the perils to be
insured  against by the  Landlord  shall  include,  without  limitation,  public
liability, boilers and machinery and fire and extended perils and may include at
the option of the  Landlord  losses  suffered by the Landlord in its capacity as
Landlord through business interruption.

                                    ARTICLE 7

                             REPAIRS AND ALTERATIONS

REPAIRS

7.1      (a) The Tenant shall, during the Term and at the Tenant's sole cost and
         expense,  well  and  sufficiently  renew,  rebuild,   repair,  replace,
         operate,  maintain,  paint  and keep  the  Demised  Premises,  with the
         appurtenances and all fixtures including plumbing, electrical, heating,
         air-conditioning   and  other  facilities  and  systems,  in  good  and


                                       17

<PAGE>

         substantial  repair  when,  where  and  so  often  as  need  shall  be,
         reasonable  wear and tear and  damage by fire and other  risks  against
         which the Landlord is insured only excepted.

         (b) The Landlord and its agents shall have the right at all  reasonable
         times  during the Term,  to enter the  Demised  Premises to examine the
         condition  thereof,  and the Tenant shall well and sufficiently  repair
         and  make  good the  Demised  Premises  according  to  notice  from the
         Landlord,  such repairs to be made as  expeditiously as possible but in
         any event within the time provided for by the Landlord.

         (c) The Tenant shall, when necessary and whether upon receipt of notice
         from the Landlord or not, effect and pay for such repairs, replacements
         or  alterations as may be the  responsibility  of the Tenant under this
         Lease by the use of contractors or other qualified  workers  designated
         or approved by the  Landlord in writing.  If the Tenant fails to comply
         with the  Landlord's  request to effect such repairs,  replacements  or
         alterations  within the time  provided  for by the  Landlord,  then the
         Landlord may cause such  repairs,  replacements  or  alterations  to be
         undertaken.  In that event, or in the event that the Landlord elects to
         make the repairs,  replacements or alterations referred to in paragraph
         6.7,  then the Landlord  shall be entitled to recover from the Tenant a
         fee of supervision  for the carrying out of such repairs,  replacements
         or  alterations,  such fee to be an amount  equal to 15% of the  moneys
         expended or of the cost of repairs, replacements or alterations carried
         out by or under the supervision of the Landlord,  which amount shall be
         in addition to the cost of such work or moneys  expended,  and the cost
         of such work or  moneys  expended  together  with the said fee shall be
         collectible by the Landlord from the Tenant as if Rent in arrears.  The
         Rent hereunder shall in no wise abate while such repairs,  replacements
         or alterations  are being made by reason of loss or interruption of the
         business of the Tenant because of the prosecution of any such work.

         (d) The Tenant  shall  throughout  the term  operate and  maintain  the
         heating,  ventilating,  air-conditioning and humidity control equipment
         (herein  referred to as "HVAC") within or serving the Demised  Premises
         in such a manner as to maintain  reasonable  conditions of temperature,
         air circulation and humidity within the Demised  Premises as determined
         by the Landlord. The Tenant shall comply with such reasonable rules and
         regulations as the Landlord shall make from time to time respecting the
         maintenance,  repair  and  operation  of the HVAC and  shall,  upon the
         request  of the  Landlord  and at the cost of the  Tenant,  obtain  and
         maintain  throughout the term a preventative  maintenance  contract for
         the HVAC with a maintenance company acceptable to the Landlord.

ALTERATIONS

7.2      (a) The  Tenant  shall not  without  the prior  written  consent of the
         Landlord,  which consent shall not be unreasonably  withheld,  make any
         installations,  alterations,  repairs  or  improvements  in or  to  the
         Demised Premises (collectively "Alterations").  The Tenant shall submit
         to the Landlord  detailed plans and  specifications  of any Alterations
         when  applying  for  consent,  and the  Landlord  reserves the right to
         recover from the


                                       18

<PAGE>


          Tenant the cost of having its  architects  or  engineers  examine such
          plans and  specifications.  The  Landlord  may require that any or all
          work to be done, or materials to be supplied  hereunder  shall be done
          or supplied by the Landlord's contractors and/or workers provided that
          the  cost  of  such  work  or  materials  shall  be  reasonable  or by
          contractors and/or workers engaged by the Tenant but first approved by
          the Landlord. 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 shall be deemed to be
          an Alteration  within the meaning of this paragraph.  No connection to
          an existing base receptacle shall be made if such connection would, if
          made, overload the capacity of such receptacle.

          (b) Any  Alterations,  business  and  trade  fixtures,  machinery  and
          equipment, cabinet work, furniture or immovable partitions attached to
          the Demised Premises in any way other than by their own weight and all
          plumbing or wiring  installed  by or on behalf of the Tenant  shall be
          deemed to become the Landlord's property forthwith upon their being so
          attached.  Notwithstanding the foregoing,  the Landlord may by written
          notice to the  Tenant at least 60 days prior to the expiry of the Term
          elect  to  require  the  Tenant  to  remove  all  or any  part  of the
          Alterations,  business and trade  fixtures,  machinery and  equipment,
          cabinet work,  furniture or immovable partitions owned or installed by
          the Tenant at the expiration of this Lease, in which case such removal
          shall be done at the  Tenant's  expense and the Tenant  shall,  at its
          expense,  repair any  damage to the  Demised  Premises  caused by such
          removal.  If the Tenant does not remove such property  forthwith  upon
          written  notice from the  Landlord,  the Landlord may remove the same,
          and the cost of such removal and the cost of  repairing  any damage to
          the Demised Premises  occasioned thereby shall be paid to the Landlord
          by the Tenant  forthwith  upon demand,  and the  Landlord  will not be
          responsible  for any loss or  damage to such  property  caused by such
          removal.

          (c) The Tenant shall  promptly pay all charges  incurred by the Tenant
          for any work,  materials  or  services  that may be done,  supplied or
          performed  in  respect of the  Demised  Premises  and shall  forthwith
          discharge  any liens at any time filed  against  the Lands or any part
          thereof and shall keep the Lands free from liens.  If 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 and any  amount so paid  together  with all
          disbursements  and costs in respect of such proceedings on a solicitor
          and client basis 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 Demised  Premises  any notices that the
          Landlord  may  desire  to post  under  the  provisions  of  applicable
          builders' or mechanics' lien or other legislation.


          (d) The Tenant  shall not  without  the 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.


                                       19
<PAGE>


NOTICE OF ACCIDENTS, DEFECTS, ETC.

7.3       The Tenant shall give the Landlord prompt written notice of any damage
to or defect in the heating and  air-conditioning  apparatus,  water pipes,  gas
pipes, telephone lines, electric light or other wires or other casualty.

CARE OF DEMISED PREMISES

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

         (b) The Tenant  shall at its own expense be  responsible  for and shall
         maintain and replace from time to time as may be  reasonably  necessary
         during  the  Term of this  Lease  all  light  fixtures,  bulbs,  tubes,
         ballasts,  starters and fuses in the Demised Premises.  Notwithstanding
         the  foregoing,  the  Landlord  shall  have the right to attend to such
         maintenance and replacements,  but the expense thereof shall remain the
         responsibility of the Tenant.

         (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  window in or upon the
         Demised Premises which become damaged or broken.

         (d) The  Tenant  shall not allow any  ashes,  refuse,  garbage or other
         loose or  objectionable  material to accumulate in or about the Demised
         Premise.

         (e) The Tenant  shall  place in  containers  of a type  approved by the
         Landlord all garbage and refuse and such containers  shall be deposited
         for pick-up at such times and places as are  designated in writing from
         time to time by the Landlord.

         (f) The Tenant shall  maintain in good  operating  condition and to the
         satisfaction  of the Landlord the water,  sewer and gas connections and
         all other mechanical systems in the Demised Premises and shall keep the
         same in clean and good working order.  It is understood and agreed that
         in case the said  fixtures and  equipment or any part thereof  shall be
         damaged or destroyed or become  incapable of performing their function,
         the Tenant shall repair or replace the same to the  satisfaction of the
         Landlord.

         (g) The Tenant shall make all repairs and  replacements  to the Demised
         Premises made necessary by reason of burglary or attempted burglary.

         (h) The Tenant shall heat the Demised  Premises at all reasonable times
         and shall  maintain  such heat at a  temperature  required  to  prevent
         damage of any nature or kind whatsoever to the Demised Premises, and if
         damage does occur to the Demised  Premises due to the Tenant's  failure
         to heat, the Tenant agrees to pay for the repairs arising thereby.

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


                                       20

<PAGE>

LANDLORD'S RIGHT TO DO WORK

7.5      (a) The  Landlord  shall  have the  right to make  additions  to and/or
         improvements or  installations in and/or repairs to the Building and/or
         the  Project  and/or  the  Common  Areas and  Facilities  and  whenever
         reference  is made in this Lease to the  Building or the Project or the
         Common Areas and Facilities,  it shall mean the Building and/or Project
         and/or  the Common  Areas and  Facilities  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 Project,  the Building,  the Demised  Premises  and/or
         Common Areas and  Facilities  as may be  reasonably  necessary  for the
         purposes   aforesaid  and  may  interrupt  or  suspend  the  supply  of
         electricity,  water or other  services  when  necessary  and until said
         additions,  improvements,  installations  or  repairs  shall  have been
         completed,  there shall be no  abatement in Rent nor shall the Landlord
         be liable by reason thereof.

         (b) The Landlord and any persons  authorized by the Landlord shall have
         the right to use, install,  maintain and/or repair pipes,  wires, ducts
         or other installations in, under or through the Demised Premises for or
         in connection  with the supply of any services to the Demised  Premises
         or any other  premises in the Building.  Such services  shall  include,
         without  limiting the  generality of the foregoing,  gas,  electricity,
         water,   sanitation,    telephone,   heating,    air-conditioning   and
         ventilation.  There  shall be no  abatement  of Rent  while  such  use,
         installation, maintenance and/or repair is being carried out, by reason
         of loss or  interruption  of the business of the Tenant  because of the
         prosecution of any such work.

         (c) The Landlord and any persons  authorized by the Landlord shall have
         the right to enter upon the Demised Premises to make such  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  Demised
         Premises that may be required therefor.  There shall be no abatement of
         Rent 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.

         (d) The  Landlord  shall  provide  reasonable  advance  notice prior to
         exercising its rights under the preceding  provisions of this paragraph
         7.05 save in the case of a real or apprehended emergency,  when no such
         notice shall be required, and all additions, improvements, installation
         or repairs performed by the Landlord under the preceding  provisions of
         this  paragraph  7.05  shall  be made as  expeditiously  as  reasonably
         possible and in a manner which  interferes  as little as possible  with
         the Tenant's permitted use of the Demised Premises.

                                       21


<PAGE>


LANDLORD'S RIGHT TO INSPECT AND DISPLAY SIGN

7.6       During the Term hereby created any person or persons may inspect the
Demised  Premises and all parts thereof at all  reasonable  times on producing a
written order to that effect signed by the Landlord or its agents.  In addition,
the  Landlord  shall have the right  during the last three months of the Term to
show the Demised  Premises to prospective  tenants during normal  business hours
upon reasonable  advance notice and to place upon the Demised  Premises a notice
of reasonable  dimensions and reasonably  placed so as not to interfere with the
business  of the Tenant,  stating  that the  Demised  Premises  are for rent and
further  provided that the Tenant will not remove such notice or permit the same
to be  removed  and will  co-operate  with the  Landlord  in the  showing of the
Demised Premises.

LANDLORD'S REPAIRS

7.7       The Landlord covenants with the Tenant:

          (a)      subject to Article 9, to keep in a good and reasonable  state
          of repair,  and consistent with the general  standards of buildings of
          similar age, character and comparable location in British Columbia:

                    (i)  the  Building  (other  than the  Demised  Premises  and
                         premises of other  tenants)  including the  foundation,
                         roof,  exterior walls including exterior glass portions
                         thereof,  the systems for interior climate control, the
                         elevators,  entrances, stairways, corridors and lobbies
                         and  washrooms  and other Common  Areas and  Facilities
                         from  time to time  provided  for use in  common by the
                         Tenant  and  other  tenants  of the  Building  and  the
                         systems provided for bringing  utilities to the Demised
                         Premises;  and




                    (ii) the structural members or elements of the Building; and

          (b) to repair defects in construction  performed or installations made
          by the Landlord in the Demised  Premises and damage in respect of fire
          or other  perils  against  which the Landlord is required to or has in
          fact maintained insurance coverage hereunder.

                                   ARTICLE 8

                             TRANSFER AND ASSIGNMENT

ASSIGNING OR SUBLETTING

8.1       The  Tenant  shall  not  assign  this  lease or  sublet,  part with or
share  possession of the Demised  Premises or by licence permit any other person
or corporation to occupy the Demised  Premises in whole or in part and shall not
mortgage  this  Lease or any  right  hereunder  or  interest  herein  (herein  a
"Transfer")  without the prior written  consent of the Landlord,  which consent,
subject as hereinafter provided shall not be unreasonably  withheld. At the time
that the Tenant  requests the consent of the Landlord,  the Tenant shall deliver
to the Landlord


                                       22

<PAGE>


such  information in writing as the Landlord may reasonably  require  respecting
the proposed assignee, subtenant, occupant or licensee (herein the "Transferee")
including without limitation:


         (a)      the identity of the proposed Transferee;

         (b)      the specific terms and conditions of such proposed assignment,
         sublease or other dealing;

         (c)      the names and addresses of the beneficial owners of the shares
         of any proposed corporate Transferee;

         (d)      current information on the financial affairs and business
         experience of the proposed Transferee, including references; and

         (e)      such other information as the Landlord may reasonably require.

Within 15 days of receiving  all of the  information  required as set out above,
the  Landlord  shall by  written  notice  advise the  Tenant  that the  Landlord
consents  or does  not  consent  to the  Transfer  or,  alternatively,  that the
Landlord has elected to exercise its right under paragraph 8.4.

NO RELEASE

8.2       In no event shall any  Transfer,  whether the Landlord has  consented
to the same or not,  release  or  relieve  the Tenant  from its  obligations  to
perform fully all of the terms,  covenants  and  conditions of this Lease on its
part to be  performed  and in any  event  the  Tenant  shall be  liable  for the
Landlord's reasonable costs incurred in connection with the Tenant's request for
consent.

CHANGE OF CONTROL

8.3       If the Tenant is a  non-reporting or closely  held company, any change
in control of such  company  shall be deemed to be a Transfer  for the  purposes
hereof.

RIGHT OF LANDLORD TO TERMINATE

8.4       Notwithstanding anything to the contrary herein contained, upon the
Landlord  receiving  a request  from the Tenant to consent  to a  Transfer,  the
Landlord  shall  have the right to  terminate  this  Lease  with  respect to the
portion of the Demised Premises which is the subject of the Transfer, such right
to be exercised by written  notice within 15 days of the Landlord  receiving all
of the  information  required  pursuant to  paragraph  8.1.  Should the Landlord
exercise its right of termination as aforesaid,  the Tenant shall have a further
period of 15 days from receipt of the Landlord's  notice to withdraw its request
for  consent to the  Transfer,  failing  which this Lease shall  terminate  with
respect  to the  portion of the  Demised  Premises  which is the  subject of the
Transfer as of the date set out in the Landlord's  notice of termination  (which
shall be not less than 30 nor more  than 60 days from the date of such


                                       23

<PAGE>


notice),  and the  Tenant  shall  pay Rent to the date of  termination  for such
portion of the  Demised  Premises,  following  which this Lease shall cease with
respect to such portion and all obligations  hereunder (save such as have arisen
prior to the date of termination) shall cease.

SALE BY LANDLORD

8.5       In the event of a sale or  conveyance  by the Landlord of the Lands on
which the Building is located or in the event of an  assignment of this Lease by
the  Landlord,  then to the  extent  such  purchaser  or  assignee  assumes  the
obligations  of the  Landlord  hereunder  the same shall  operate to release the
Landlord  from any future  liability  upon any of the  covenants 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 responsibility of 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.


                                    ARTICLE 9

                              DAMAGE OR DESTRUCTION

DAMAGE OR DESTRUCTION WITHOUT TERMINATION

9.1       If during the Term hereby demised or any extension thereof the Demised
Premises  shall be damaged or destroyed by a peril or perils in respect of which
the Landlord is insured,  the Rent shall abate in proportion to that part of the
Demised Premises  rendered unfit for occupancy bears to the whole of the Demises
Premises until the Demised Premises are rebuilt; and the Landlord agrees that it
will with reasonable  diligence repair the Demised Premises unless the Tenant is
obligated to repair under the terms hereof or unless this Lease is terminated as
hereinafter provided; subject always to the provisions of paragraph 9.2 or 9.3.

DAMAGE OR DESTRUCTION WITH TERMINATION

9.2       If the Demised Premises or the Building of which the Demised Premises
form a part or the Project are damaged or destroyed by any cause  whatsoever and
if in the opinion of the Landlord  reasonably  arrived at, the Demised  Premises
cannot be  repaired,  rebuilt or made fit for the  purposes of the Tenant or any
other  premises in the Building or the Project  cannot be  repaired,  rebuilt or
made fit for the purposes of other tenants, in either case within 90 days of the
damage or destruction,  the Landlord may, at its option, terminate this Lease by
giving  the  Tenant  within  30 days of such  damage  or  destruction  notice of
termination and thereupon the Basic Rent, Additional Rent and any other payments
for which the Tenant is liable under this Lease shall be apportioned and paid to
the date of such damage or destruction and the Tenant shall immediately  deliver
up  possession  of  the  Demised   Premises  to  the  Landlord;   PROVIDED  THAT
notwithstanding  the  termination  of this Lease as in this paragraph set forth,
the Tenant shall remain  liable for any  outstanding  obligations  of the Tenant
under this Lease as at the time of such termination.


                                       24

<PAGE>


DAMAGE OR DESTRUCTION OF BUILDING

9.3       If the  Building  or part thereof  shall be damaged or  destroyed and
such  damage  or  destruction,  in  the  opinion  of  the  Landlord,  materially
interferes with the enjoyment of the Demised Premises by the Tenant, the Rent in
respect of the Demised  Premises shall abate in proportion to such  interference
during the period such interference shall continue.


                                   ARTICLE 10

                              DEFAULT AND RE-ENTRY

RE-ENTRY

10.1     (a) It is hereby  expressly agreed that if and whenever the Rent hereby
         reserved, or any part thereof, shall be unpaid for seven days after the
         date on which the same  ought to have  been  paid,  although  no formal
         demand  shall  have been  made  therefor,  or in case of the  breach or
         non-performance  of any of the covenants or agreements herein contained
         on the part of the Tenant which breach or non-performance continues for
         a period of 15 days after written  notice from the Landlord,  or if the
         Demised Premises are vacated or become vacant or remain  unoccupied for
         five days or are not used for the purpose  specified then and in any of
         such cases the Landlord shall have the immediate  right to re-enter and
         take possession of the Demised  Premises  whereupon,  at the Landlord's
         option,  the balance of the Term shall be forfeit and the  Landlord may
         remove all persons and  property  from the  Demised  Premises  and such
         property so removed may be stored wherever the Landlord  chooses at the
         Tenant's cost and expense.

         (b) Should the  Landlord  elect to  re-enter,  as herein  provided,  or
         should it take possession  pursuant to legal proceedings or pursuant to
         any notice  provided for by law, it may either  terminate this Lease or
         it may from  time to time  without  terminating  this  Lease  make such
         alterations  and  repairs  as may be  necessary  in order to relet  the
         Demised  Premises,  and may  relet  the  Demised  Premises  or any part
         thereof  for such  term or  terms  (which  may be for a term  extending
         beyond the Term of this  Lease) at such rental or rentals and upon such
         other terms and  conditions as the Landlord in its sole  discretion may
         deem  advisable;  upon each such  reletting,  all rents received by the
         Landlord  from such  reletting  for the  unexpired  portion of the Term
         shall be applied,  first, to the payment of any indebtedness other than
         Rent due hereunder  from the Tenant to the Landlord;  secondly,  to the
         payment  of  any  costs  and  expenses  of  such  reletting,  including
         brokerage fees and  solicitors'  fees and of costs of such  alterations
         and repairs;  thirdly, to the payment of Basic Rent and Additional Rent
         due and unpaid hereunder and the residue,  if any, shall be held by the
         Landlord  and  applied in payment of future Rent as the same may become
         due and payable  hereunder.  If such rents received from such reletting
         during any month are less than that  required  to be paid  during  that
         month by the Tenant hereunder, the Tenant shall pay all such deficiency
         to the Landlord.  Such deficiency shall be calculated and paid monthly.
         No such re-entry

                                       25


<PAGE>

          or taking  possession of the Demised Premises by the Landlord shall be
          construed as an election on its part to terminate  this Lease unless a
          written notice of such intention be given to the Tenant or left on the
          Demised   Premises.   Notwithstanding   any  such  reletting   without
          termination,  the  Landlord  may  at  any  time  thereafter  elect  to
          terminate this Lease for such breach.  Should the Landlord at any time
          terminate this Lease for any breach, in addition to any other remedies
          it may have it may recover from the Tenant all damages it may incur by
          reason of such breach,  including the cost of re-entering  the Demised
          Premises,  reasonable  solicitors' fees and including the worth at the
          time of such termination of the excess,  if any, of the amount of rent
          charges equivalent to Rent reserved in this Lease for the remainder of
          the Term over the then reasonable rental value of the Demised Premises
          for  the  remainder  of  the  Term,  all of  which  amounts  shall  be
          immediately due and payable by the Tenant to the Landlord.

BANKRUPTCY

10.2           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 if the
Tenant  shall make any  assignment  for the  benefit of  creditors,  or becoming
bankrupt or insolvent shall take the benefit of any Act that may be in force for
bankrupt  or  insolvent  debtors,  or if the Tenant  should  abandon the Demised
Premises  then in any such  case  the  said  Term  shall  at the  option  of the
Landlord,  immediately  become  forfeited and void and the then current  month's
Rent and Rent for the three months next following shall  immediately  become due
and  payable  and in such case it shall be lawful for the  Landlord  at any time
thereafter to re-enter into or upon the Demised  Premises,  or any part thereof,
and the same to have again, repossess and enjoy as of its former estate anything
herein contained to the contrary notwithstanding, and neither this Lease nor any
interest  therein nor any estate  created  hereby  shall pass to or enure to the
benefit of any trustee in  bankruptcy  or any  receiver or any  assignee for the
benefit of  creditors  or  otherwise  by  operation  of law. For the purposes of
section  65.2(3)(a) of the  BANKRUPTCY  AND  INSOLVENCY  ACT (Canada) the Tenant
acknowledges  that the six months rent referred to therein shall mean six months
Rent hereunder  calculated  from the date on which the repudiation of this Lease
takes effect pursuant to such Act.

WAIVER OF EXEMPTION FROM DISTRESS

10.3           In  consideration of the premises and of the  leasing and letting
by the  Landlord  to the  Tenant of the  Demised  Premises  for the Term  hereby
created  (and it is upon that  express  understanding  that these  presents  are
entered  into),  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  hereby  created on the
Demised  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  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 waives, 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.


                                       26

<PAGE>

FOLLOW CHATTELS

10.4      In case of removal by the Tenant  of the goods and  chattels  of the
Tenant from the Demised  Premises,  the Landlord may follow the same for 30 days
or such longer period of time as may be permitted by law.

OVERLOOKING AND CONDONING

10.5      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 as to defeat or affect in any way the rights of the
Landlord   hereunder   in  respect  of  any   subsequent   default,   breach  or
non-observance.

                                   ARTICLE 11

                                  SUBORDINATION

SUBORDINATION

11.1      The Tenant covenants and agrees with the Landlord that the Tenant
shall from time to time upon the written request of the Landlord,  enter into an
indenture:

         (a)  subordinating the Term hereby demised and the rights of the Tenant
         hereunder to any mortgage, including any deed of trust and mortgage and
         all indentures  supplemental  thereto, or any ground lease,  present or
         future,  which includes the Demised  Premises;  or at the option of the
         Landlord

         (b) agreeing  that the Term hereby  demised  shall be prior to any such
         mortgage,  including any deed of trust and mortgage and all  indentures
         supplemental thereto, or ground lease,

provided  if the Tenant  fails to execute  any such  indenture  with  reasonable
promptness  upon  request  by  the  Landlord,   the  Tenant  hereby  irrevocably
authorizes  and appoints the Landlord as its attorney to execute the same on the
Tenant's  behalf.  Notwithstanding  any such  postponement or  subordination  as
aforesaid,  the Tenant agrees that its obligations under this Lease shall remain
in full  force and  effect  notwithstanding  any  action at any time  taken by a
mortgagee  or head  landlord  of the Lands or any part  thereof to  enforce  the
security of any such mortgage,  including any deed of trust and mortgage and all
indentures  supplemental thereto, or ground lease; PROVIDED ALWAYS however, that
any  postponement or  subordination  given hereunder shall reserve to the Tenant
the right to continue in possession of the Demised  Premises  under the Terms of
this Lease so long as the Tenant shall not be in default hereunder.


                                       27

<PAGE>

                                   ARTICLE 12
                                     NOTICES

NOTICES

12.1       Any notice,  advice,  document or writing  required or  contemplated
by any provision hereof shall be given in writing and if to the Landlord, either
delivered personally or transmitted by facsimile to an officer of the Landlord's
agent,  PPM Real  Estate  Managers  (Canada)  Limited or mailed by prepaid  mail
addressed to the Landlord care of PPM Real Estate Managers  (Canada)  Limited at
the following address:

         PPM Real Estate Managers (Canada) Limited
         440 - 1090 West Georgia Street
         Vancouver, British Columbia
         V6E 3V7

         (facsimile number: (604) 682-5425)

with a copy to:

         PPM Real Estate Managers (Canada) Limited
         1200, 141 Adelaide Street West
         Toronto, Ontario
         M5H 3L9

         (facsimile number: (416) 362-1431)

         Attention:  Senior Vice-President

and if to the  Tenant,  either  delivered  personally  to the  Tenant  (or to an
officer of the Tenant,  if a corporation) or mailed by prepaid mail addressed to
the Tenant at the Demised  Premises,  or if an address of the Tenant is shown in
the description of the Tenant above, to such address. Every such notice, advice,
document  or  writing  shall  be  deemed  to  have  been  given  when  delivered
personally,  upon the usual  confirmation of transmission and receipt if sent by
facsimile, or if mailed as aforesaid, upon the fifth day after being mailed save
and except in the event of a labour dispute or other disruption affecting postal
service  occurring within five days of the date of mailing in which event notice
will not be deemed to have been received until actually  received.  The Landlord
may from time to time by notice  in  writing  to the  Tenant  designate  another
address as the address to which  notices are to be mailed to it, or specify with
greater  particularity  the address and persons to which such  notices are to be
mailed and may require that copies of notices be sent to an agent  designated by
it. The Tenant may, if an address of the Tenant is shown in the  description  of
the  Tenant  above,  from  time to time by notice in  writing  to the  Landlord,
designate  another  address as the address to which  notices are to be mailed to
it, or specify with greater  particularity the address to which such notices are
to be mailed.


                                       28

<PAGE>


                                   ARTICLE 13

                            MISCELLANEOUS PROVISIONS

UNAVOIDABLE FAILURES OR DELAYS

13.1      Notwithstanding  anything  to the  contrary in the Lease contained, if
either party hereto shall be bona fide delayed or hindered in or prevented  from
the  performance  of any term,  covenant or act required  hereunder by reason of
strikes, labour troubles inability to procure materials or services,  failure of
power,  restrictive  governmental  laws  or  regulations,  riots,  insurrection,
sabotage,  rebellion,  war, act of God, or other reason whether of a like nature
or not,  not the fault of the party  delayed  in  performing  work or doing acts
required  under  the  terms  of this  Lease,  then  performance  of such  terms,
covenants  or acts shall be extended  for a period  equivalent  to the period of
such delay.  The  provisions of this  paragraph  shall not operate to excuse the
Tenant from the prompt  payment of Basic  Rent,  Additional  Rent,  or any other
amounts which it is required by the terms of this Lease to pay.  This  paragraph
shall not be construed to include in the reasons for any such delays,  financial
impecuniosity or incapacity.

ENTIRE AGREEMENT

13.2      This Lease and the Schedules (including the rules and
regulations)  attached  hereto  and  which  form part  hereof  set forth all the
covenants,  promises,  agreements,  conditions and  understandings,  between the
Landlord  and the  Tenant  concerning  the  Demised  Premises  and  there are no
covenants,  promises, agreements,  conditions or understandings,  either oral or
written,  between  them  other  than are  herein  set  forth.  Except  as herein
otherwise provided, no subsequent alteration,  amendment,  change or addition to
this Lease shall be binding  upon the  Landlord or the Tenant  unless in writing
and  signed  by each of them  except  the  rules  and  regulations  adopted  and
promulgated by the Landlord and in accordance with the provisions of this Lease.

SUBDIVISION

13.3      The Tenant will at the request of the Landlord and at no expense
to the Tenant execute all consents, sign all subdivision plans and do all things
necessary to permit the subdivision of the Lands.

REGISTRATION

13.4      The Tenant  shall not have the right to  register  this Lease
without the prior consent of the Landlord,  which consent may be withheld in the
Landlord's  sole  discretion,  and the Landlord  shall not be obliged to deliver
this  Lease  in  registrable   form.   Should  the  Landlord   consent  to  such
registration,  or should the Landlord require this Lease to be registered,  then
the  parties  shall   re-execute  this  Lease  in  registrable   form  and  such
registration  and the preparation of any plan necessary  therefore shall be done
by and at the sole cost and  expense  of the party  desiring  to  register  this
Lease.

                                       29

<PAGE>


NET LEASE INTENT

13.5      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 and that the Landlord shall not be responsible  during
the Term  hereof  for any costs,  charges,  expenses  and  outlays of any nature
whatsoever  arising  from or relating to the Demised  Premises,  or the contents
thereof and without  limiting the generality of the foregoing,  the Tenant shall
be liable for the  payment of all  charges,  impositions  and  expenses of every
nature and kind  relating to the Demised  Premises and the contents  thereof and
its  Proportionate  Share of all  charges,  impositions,  and  expenses of every
nature and kind relating to those parts of the  Building,  Project and Lands not
intended for leasing and the Tenant covenants with the Landlord accordingly.

TIME OF ESSENCE

13.6      Time shall be of the essence of this Lease.

BINDING EFFECT

13.7      This Lease and everything  herein contained shall enure to the benefit
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
paragraph 8.1 to any assignment or sublease.

RELOCATION OF DEMISED PREMISES

13.8      DELETED.


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

The Corporate Seal of                      )
2725321 CANADA INC.                        )
was affixed in the presence of:            )
                                           )
/s/ Mary B. Aubrey                         )
-----------------------                    )                        C/S
Mary B. Aubrey                             )
Vice President                             )
                                           )
/s/ Paul A. Brundage                       )
-----------------------                    )
Paul A. Brundage                           )
Vice President                             )


                                       30

<PAGE>

The Corporate Seal of APPLIED              )
DIGITAL ACCESS - CANADA, INC.              )
was affixed in the presence of:            )
                                           )
/s/ James L. Keefe                         )
-----------------------                    )                        C/S
James L. Keefe, Chief Financial Officer    )
                                           )
                                           )
                                           )
-----------------------                    )
Authorized Signatory                       )


                                       31

<PAGE>





                                  SCHEDULE "A"

Referred to in the attached Lease made as of January 1, 1997 between 2725321
CANADA INC. as Landlord, and APPLIED DIGITAL ACCESS - CANADA, INC. as Tenant.


The Demised  Premises are that part of the Building situate on the Lands legally
described in Schedule  "B" hereto.  The Demised  Premises are shown  outlined in
heavy black line on the sketch plan attached to this Schedule "A".

The Demised  Premises  shall exclude the outside face of all perimeter  walls of
the Demised Premises but shall include windows and doors in the perimeter wall.

In  calculating  the  Area  of  the  Demised  Premises  or of the  Building  the
calculation  shall be computed by  measuring  from the  exterior  surface of the
Building,  in the case of exterior  walls,  and to the centre of partitions that
separate the Demised Premises from adjoining  rentable areas or Common Areas and
Facilities.  There shall be no deduction for vestibules or other recesses inside
the building line or for columns, ducts, projection or other structural elements
necessary to the  Building.  The Demised  Premises  includes all  installations,
fixtures, furnishings and amenities located within the Demised Premises.

The Area of the Demised  Premises is hereby  estimated to be 25,604 square feet,
provided the Landlord may have the Area of the Demised Premises  measured by its
architect  or engineer,  and if the same is different  from the figure set forth
above then Basic Rent and the  Tenant's  Proportionate  Share  shall be adjusted
accordingly, such adjustment to be retroactive to the Commencement Date.



<PAGE>




                        [ATTACH SKETCH PLAN OF BUILDING]


            [NOTE: OUTLINE THE DEMISED PREMISES IN HEAVY BLACK LINE]



<PAGE>



                                  SCHEDULE "B"

Referred to in the attached Lease made as of January 1, 1997 between 2725321
CANADA INC. as Landlord, and APPLIED DIGITAL ACCESS - CANADA, INC. as Tenant.


LEGAL DESCRIPTION OF LANDS

                  Lots A and B
                  District Lot 10
                  Group 1, New Westminster District
                  Plan 72477

MUNICIPAL ADDRESS OF DEMISED PREMISES

                  8630 - 8654 Commerce Court
                  Burnaby, B.C.
                  V5A 4N6



<PAGE>



                                  SCHEDULE "C"

Referred to in the attached Lease made as of January 1, 1997 between 2725321
CANADA INC. as Landlord, and APPLIED DIGITAL ACCESS - CANADA, INC. as Tenant.


                              RULES AND REGULATIONS

1.   Tenants  shall  not  burn any  trash or  garbage  in or about  the  Demised
     Premises or anywhere within the confines of the Lands.

2.   Tenants shall not keep or display any merchandise on or otherwise  obstruct
     any part of the Lands except as is specifically permitted in this Lease.

3.   Floors shall not be overloaded.

4.   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.

5.   Tenants  shall in  connection  with their  advertising  in  relation to the
     business  carried  on in the  Demised  Premises  use and  promote  the name
     IMPERIAL  SQUARE LAKE CITY 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  tenants 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.  Tenant  shall  not use  such  name in  regard  to any
     business other than their business upon the Demised Premises. Tenants agree
     that they will not carry on or permit to be carried on any  business in the
     Demised Premises under a name or style other than their own name or call or
     permit the Demised Premises or any business carried on therein to be called
     any name other than their own name,  without the prior  written  consent of
     the Landlord.

6.   Tenants  shall,  upon written  notice from the  Landlord,  within five days
     furnish the  Landlord  with the current  Provincial  License  Number of any
     vehicle owned or used by employees of tenants.

7.   Tenants  shall not bring upon their  premises any  equipment,  motor or any
     other thing which may damage the Building or the Project.

8.   No  merchandise,  supplies,  materials,  garbage,  refuse or other chattels
     shall be  allowed  to remain on any  common  area,  and must at all time be
     contained within the Demised Premises.

9.   The  Tenant  shall not use or occupy in any manner  whatsoever  the area of
     recess,  if any,  between  the lease line of the Demised  Premises  and the
     store front of the Demised  Premises,  and the Landlord reserves the entire
     control over such area.

<PAGE>



10.  Wherever any window area is not used for the purpose of entrances,  offices
     or show areas, the Tenant must construct at its own expense,  enclosures or
     decorative  screens as  specified  and approved by the  Landlord,  so as to
     protect the windows in that area from damage.

11.  If any  additional  locks or bolts of any kind shall be placed  upon any of
     the doors or windows of the Demised  Premises,  or if any changes  shall be
     made in existing locks or mechanisms thereof,  the Tenant shall provide the
     Landlord with a duplicate key or keys so as to allow the Landlord access to
     the Demised  Premises as and when required.  The Tenant shall at the end of
     the Term or renewal  term as the case may be,  return to the  Landlord  all
     keys to the Demises  Premises and to all other areas of the Building or the
     Project which may have been supplied to the Tenant.

12.  No animals or motor vehicles shall be brought into the Demised  Premises or
     the Building.

13.  DELETED.

14.  The doors and windows or other apertures that reflect or admit light or air
     into the  passageways  or into any portion of the  Demised  Premises or the
     Building  shall not be  covered or  obstructed  by the Tenant in any manner
     whatsoever.

15.  Windows shall not be left open so as to admit rain or snow.

16.  It shall be the  responsibility  of the Tenant to prevent  any person  from
     throwing  objects  out of  windows or into the ducts or  stairwells  of the
     Demised  Premises or the  Building,  and the Tenant shall pay for any cost,
     damage or injury resulting from any such act or acts.

17.  Keys or other  devices  which  are made  available  to the  Tenant  for the
     purpose of providing access to the exterior doors of the Building shall not
     be  duplicated  and shall be  returned  to the  Landlord  immediately  upon
     termination of this Lease.

The  foregoing  rules  and  regulations  as from time to time  amended,  are not
necessarily  of  uniform  application  but may be  waived in whole or in part in
respect of other tenants without affecting their  enforceability with respect to
the Tenant or the  Demised  Premises.  For the benefit and welfare of all or any
tenants  of  premises  upon the  Lands as it may exist  from  time to time,  the
Landlord  shall have the right to issue further Rules and  Regulations  and such
further Rules and Regulations shall thereupon be binding on all tenants.

                                       2

<PAGE>



                                  SCHEDULE "D"

Referred to in the attached Lease made as of January 1, 1997 between 2725321
CANADA INC. as Landlord, and APPLIED DIGITAL ACCESS - CANADA, INC. as Tenant.


                              HAZARDOUS SUBSTANCES

DEFINITIONS

1.              In this Schedule "D":

"HAZARDOUS SUBSTANCE" means:

               (a) any radioactive material;

               (b) any explosive;

               (c) any substance  that, if added to any water,  would degrade or
               alter or form part of a process of  degradation  or alteration of
               the quality of that water to the extent that it is detrimental to
               its use by man or by any animal, fish or plant;

               (d) any solid, liquid, gas or odour or combination of any of them
               that, if emitted into the air,  would create or contribute to the
               creation of a condition of the air that:

                   (i) endangers the health, safety or welfare of persons
                    or the health or animal life;

                   (ii) interferes with normal enjoyment of life or property; or

                   (iii) causes damage to plant life or to property;

               (e) any toxic substance;

               (f) any  substance  declared to be  hazardous  or toxic under any
               Law,  Regulation  or Order (as  defined  below) now or  hereafter
               enacted  or  promulgated  by any  governmental  authority  having
               jurisdiction over the Landlord,  the Tenant, the Demised Premises
               or the Development of which the Demised Premises form a part; and


               (g)  any  other  substance  which  is or  may  become  hazardous,
               dangerous or toxic to persons or property;

"LAWS" means all applicable  federal,  provincial,  state,  municipal,  or local
laws, by-laws,  statutes,  or ordinances,  including,  without  limitation,  the
following: the Canadian ENVIRONMENTAL PROTECTION ACT, the British Columbia WASTE
MANAGEMENT  ACT  and  other   applicable  laws  relating  to  the   environment,
occupational safety, product liability and transportation;


<PAGE>


"REGULATIONS"  mean all  rules,  regulations  or the like  promulgated  under or
pursuant to any Laws; and

"ORDERS"  mean all  applicable  orders,  decisions,  or the like rendered by any
ministry, department or administrative or regulatory agency.

TENANT'S COVENANT AS TO USE

2.        Without  limiting the generality of the covenants of the Tenant in the
Lease contained,  the Tenant covenants and agrees that the Tenant will not bring
upon the Demised Premises or any part thereof any Hazardous Substances and if at
any time,  notwithstanding the foregoing covenant of the Tenant,  there shall be
any Hazardous  Substances upon the Demised Premises or a part thereof whether or
not brought thereupon by the Tenant, the Tenant shall, at its own expense:


         (a)  immediately  give the Landlord  notice  specifying  the nature and
         location of the Hazardous  Substances and thereafter  give the Landlord
         from  time to time  written  notice  of the  extent  and  nature of the
         Tenant's compliance with the following provisions of this paragraph;

         (b) promptly remove the Hazardous  Substances from the Demised Premises
         in a manner  which  conforms  with all  Laws,  Regulations  and  Orders
         governing the movement of the same and the reasonable  requirements  of
         the Landlord in connection with the movement; and

         (c) if  requested  by the  Landlord,  obtain at the  Tenant's  cost and
         expense from an  independent  consultant  designated or approved by the
         Landlord  verifying  the complete and proper  removal  thereof from the
         Demised  Premises  or,  if such is not the  case,  reporting  as to the
         extent  and  nature  of  any  failure  to  comply  with  the  foregoing
         provisions of this paragraph.

COMPLIANCE WITH LAWS

3.        Without  limiting the generality of the covenants of the Tenant in the
Lease contained,  the Tenant shall, at its own cost and expense, comply with all
Laws,  Regulations  and  Orders  from  time  to time in  force  relating  to the
Landlord,  the Tenant,  the business of the Tenant,  the Demised Premises or the
Development   relating  to  Hazardous  Substances  and  the  protection  of  the
environment  and shall  immediately  give written  notice to the Landlord of the
occurrence of any event in the Demised  Premises or on the Development  which is
in breach of any such Laws,  Regulations  or Orders or a  contravention  thereof
and, if the Tenant shall,  either alone or with others,  cause the occurrence of
such event, the Tenant shall, at its own expense:

                                       2


<PAGE>


         (a)  immediately  give the Landlord  notice of the  occurrence  and the
         contravention  and  thereafter  give  the  Landlord  from  time to time
         written notice of the extent and nature of the Tenant's compliance with
         the following provisions of this paragraph;

         (b)  promptly remedy the contravention in a manner which conforms with
         all Laws, Regulations and Orders  governing the movement  of the same;
         and

         (c) if  requested  by the  Landlord,  obtain at the  Tenant's  cost and
         expense from an  independent  consultant  designated or approved by the
         Landlord   verifying   the  complete   and  proper   remedying  of  the
         contravention  or, if such is not the case,  reporting as to the extent
         and nature of any failure to comply with the  foregoing  provisions  of
         this paragraph.

The Tenant shall, at its own expense,  remedy any damage to the Demised Premises
and the Development  caused by such event within the Demised  Premises or by the
performance of the Tenant's obligations under this paragraph as a result of such
occurrence.  If the Tenant fails to do so, the Landlord may at its option remedy
the damage, and may recover its cost and expenses of so doing from the Tenant as
Additional Rent under the Lease.

If any governmental  authority having jurisdiction shall require the clean-up of
any Hazardous Substances held, released,  spilled,  abandoned or placed upon the
Demised  Premises or the  Development  or released into the  environment  by the
Tenant in the course of the Tenant's business or as a result of the Tenant's use
or occupancy of the Demised Premises, then the Tenant shall, at its own expense,
prepare  all  necessary  studies,  plans and  proposals  and submit the same for
approval,  provide  all  bonds  and  other  security  required  by  governmental
authorities  having  jurisdiction and carry out the work required and shall keep
the Landlord  fully informed and provide to the Landlord full  information  with
respect  to the  proposed  plans  and  comply  with  the  Landlord's  reasonable
requirements  with respect to such plans. The Tenant agrees that if the Landlord
determines,  in its own  discretion,  that the  Landlord,  its  property  or its
reputation is placed in any jeopardy by the  requirement  for any such work, the
Landlord  may  itself  undertake  such work or any part  thereof at the cost and
expense of the Tenant.

ENQUIRIES BY LANDLORD

4.        The Tenant hereby authorizes the Landlord to make enquiries from time
to time of any  government or  governmental  agency with respect to the Tenant's
compliance with any and all laws and regulations  pertaining to the Tenant,  the
Tenant's business and the Demised Premises  including  without  limitation Laws,
Regulations and Orders pertaining to Hazardous  Substances and the protection of
the  environment;  and the Tenant covenants and agrees that the Tenant will from
time to time provide to the Landlord such written  authorization as the Landlord
may reasonably require in order to facilitate the obtaining of such information.
Without  limiting the generality of the  foregoing,  the Landlord shall have the
right,  during  the  last  3  months  of  the  Term,  to  cause  an  independent
environmental  audit or assessment of the Demised Premises or the Building to be
performed, and if such audit or assessment indicates

                                       3

<PAGE>




the  presence of  Hazardous  Substances  the Tenant  shall bear the cost of such
audit  or  assessment,   together  with  the  cost  of  the  clean-up,  removal,
containment, treatment, detoxification or neutralization, as the case may be, of
such Hazardous Substances.

EVENT OF DEFAULT

5.        The presence of  any Hazardous Substances in the Demised  Premises
without the prior written  approval of the Landlord shall be considered to be an
event of default for the purposes of the Lease.

OWNERSHIP OF HAZARDOUS SUBSTANCES

6.        If the Tenant  shall  bring or create  upon the  Development  or the
Demised  Premises  any  Hazardous  Substance  or if the conduct of the  Tenant's
business shall cause thereto be any Hazardous  Substance upon the Development or
the Demised Premises then, notwithstanding any rule of law to the contrary, such
Hazardous  Substance shall be and remain the sole and exclusive  property of the
Tenant and shall not become the property of Landlord  notwithstanding the degree
of affixation of the Hazardous  Substance or the goods  containing the Hazardous
Substance to the Demised  Premises or the  Development and  notwithstanding  the
expiry or earlier termination of this Lease.

SURVIVAL OF COVENANTS

7.        The  obligations  of the Tenant  hereunder  relating to Hazardous
Substances  shall survive the expiry or earlier  termination  of this Lease save
only that,  to the extent that the  performance  of those  obligations  requires
access to or entry upon the  Demised  Premises  or the  Development  or any part
thereof, the Tenant shall have such entry and access only at such times and upon
such terms and conditions as the Landlord may from time to time specify; and the
Landlord  may,  at the  Tenant's  cost and  expense,  itself  or by its  agents,
servants, employees,  contractors and subcontractors,  undertake the performance
of any necessary work in order to complete such  obligations of the Tenant;  but
having  commenced such work, the Landlord shall have no obligation to the Tenant
to complete such work.

                                       4


<PAGE>

                                  SCHEDULE "E"


Referred to in the attached Lease made as of January 1, 1997 between 2725321
CANADA INC. as Landlord, and APPLIED DIGITAL ACCESS - CANADA, INC. as Tenant.


                               INDEMNITY AGREEMENT

THIS AGREEMENT made as of January 1, 1997,

BETWEEN:

             APPLIED DIGITAL ACCESS, INC., 9855 Scranton Road, San Diego,
             ----------------------------
             California, U.S.A.  92121


             (hereinafter called the "Covenantor")

AND:

             2725321 CANADA INC., c/o PPM Real Estate Managers (Canada) Limited,
             -------------------
             1090 West Georgia Street, Vancouver, B.C.  V6E 3V7.


             (hereinafter called the "Landlord")


In consideration  of the Landlord  entering into the lease (the "Lease") made as
of January 1, 1997  between the Landlord  and APPLIED  DIGITAL  ACCESS - CANADA,
INC. (the  "Tenant") and of other good and valuable  consideration,  the receipt
and  sufficiency  of  which  is  hereby  acknowledged  by  the  Covenantor,  the
Covenantor hereby represents and warrants to the Landlord that it is financially
interested  in the  affairs  of the  Tenant and  covenants  and agrees  with the
Landlord as follows:

1.        The Covenantor is financially interested in the affairs of the Tenant,
and the granting of this  Indemnity  Agreement  is in the best  interests of the
Covenantor.

2.        The Covenantor shall indemnify and save harmless the Landlord in
respect of any default by the Tenant in the  carrying  out of each and every one
of the Tenant's covenants and agreements in the Lease set out.

3.        If any default is made by the Tenant under the Lease the Covenantor
shall on demand of the Landlord forthwith remedy such default.

4.        The Covenantor shall indemnify and save harmless the Landlord with
respect to all losses, costs, expenses, claims, liabilities and damages that may
be suffered or incurred by the Landlord by reason of or relating to, directly or
indirectly, any default by the Tenant under the Lease.


<PAGE>


5.        This indemnity is absolute and unconditional.

6.        The Landlord shall not be bound or required to proceed  against the
Tenant or any  other  obliged  person  or to have  recourse  to or  exhaust  any
security  from time to time held by it for the  performance  of the covenants or
agreements  of the Tenant in the Lease  contained  or to pursue any other remedy
whatsoever which may be available to the Landlord before proceeding  against the
Covenantor.

7.        The  obligations of the Covenantor  under this Agreement  shall extend
to the Term of the Lease and any overholding by the Tenant and to any renewal or
extension of the Term of the Lease, whether such renewal or extension is entered
into by the Tenant or by an assignee of the Tenant.

8.        No proceeding  under this  Agreement and no recovery made as a result
thereof  will  be a bar  or a  defence  to any  further  proceeding  under  this
Agreement.

9.        The  Covenantor  waives  the right to  receive  notice of any  default
by the Tenant under the Lease.

10.       The obligations of the Covenantor under this Agreement shall in no way
be released, discharged, reduced or otherwise affected by:

          (a)  modifications,  releases or  discharges  granted to the Tenant in
          respect of its  obligations to keep,  observe or perform its covenants
          and agreements under the Lease;

          (b) any agreement or other dealing between the Landlord and the Tenant
          having the effect of amending or altering the Lease or the obligations
          of the Tenant thereunder;

          (c) any neglect,  delay or  forbearance  of the Landlord in demanding,
          requiring or enforcing the keeping,  observance or  performance by the
          Tenant of any of its covenants or agreements under the Lease or by the
          Covenantor of any of its obligations under this Agreement;

          (d) granting any extension of time, waivers, or indulgences;

          (e) any  assignment  of the Lease or  subletting  by the Tenant or any
          trustee in bankruptcy,  receiver or other  successor or any consent of
          the Landlord to any assignment or subletting;

          (f)  bankruptcy,  insolvency  or  dissolution  of  the  Tenant  or the
          Covenantor;

          (g) any other  compromising,  modifying  or  releasing of the Tenant's
          obligations  under the Lease  through the  operation of any statute or
          law;

                                       2

<PAGE>

          (h) any event or  occurrence  which  would  have the  effect at law of
          terminating or rendering  unenforceable any covenants or agreements of
          the Tenant in the Lease contained or of the Covenantor hereunder;

          (i) any failure by the  Landlord to give notice to the  Covenantor  of
          any default by the Tenant under the Lease;

          (j) any re-entry by the Landlord onto the premises  demised under,  or
          termination of, the Lease;

          (k) any change in the constitution of the Tenant, if a partnership; or

          (l)  any  other  matter,  thing,  act  or  omission  of  the  Landlord
          whatsoever.

11.        Without  limiting the generality of the foregoing,  the Covenantor
shall be bound by the terms and  provisions  of the Lease in the same  manner as
though the Covenantor were the tenant named in the Lease.

12.       Except in the case of a surrender accepted by the Landlord,  if the
lease is terminated,  or if the Lease is disclaimed  pursuant to any statute, or
if the Lease is  repudiated  by the Tenant  pursuant  to the  provisions  of the
BANKRUPTCY  AND  INSOLVENCY  ACT (Canada),  then and in any of such cases at the
option of the Landlord to be  exercised  at any time within 6 months  thereafter
the  Covenantor  shall  execute and deliver a new lease of the premises  demised
under the Lease  between the Landlord as landlord and the  Covenantor  as tenant
for a term equal in duration  to the residue of the Term of the Lease  remaining
unexpired   immediately  prior  to  the  effective  date  of  such  termination,
disclaimer or repudiation.  Such new lease shall contain the same landlord's and
tenant's  obligations  respectively  and the  same  covenants,  obligations  and
agreements,  terms and  conditions  in all respects  (including  the proviso for
re-entry) as are contained in the Lease. If the Covenantor  fails to execute and
deliver  a new  lease as  aforesaid,  the  Covenantor  shall be  deemed  to have
executed and delivered the same.

13.       The benefit of the Covenantor's covenants  herein may,  from time to
time, be assigned, collaterally, conditionally or otherwise, to any other entity
to whom the Landlord  assigns the benefits of the Lease and such other  assignee
shall be entitled to enforce the  provisions  hereof  against the  Covenantor as
though  such  assignee  were the  original  contracting  party  hereto  with the
Covenantor.

14.       This  Agreement  shall  extend to and be binding  upon the Covenantor,
its heirs, executors, administrators,  successors and assigns and shall enure to
the benefit of and may be enforced by the Landlord,  its  successors and assigns
and any  mortgagee,  chargee,  or other  encumbrancer  of all or any part of the
premises demised under the Lease.

15.  This  Agreement  shall  be  construed  in  accordance  with the laws of the
Province of British Columbia.

                                       3


<PAGE>

IN WITNESS  WHEREOF this Agreement has been executed by the Covenantor as of the
day and year first above written.

The Corporate Seal of APPLIED               )
DIGITAL ACCESS, INC.                        )
was hereunto affixed in the presence of:    )
                                            )
                                            )                 C/S
---------------------------------------     )
                                            )
                                            )
---------------------------------------     )
                                            )


                                       4

<PAGE>



                                  SCHEDULE "F"

Referred to in the attached Lease made as of January 1, 1997 between 2725321
CANADA INC. as Landlord, and APPLIED DIGITAL ACCESS - CANADA, INC. as Tenant.


                               SPECIAL PROVISIONS


1.  EXTENSION  OF TERM -  Provided  the  Tenant  has not been in  default in the
performance of its obligations pursuant to the Lease, and provided the Tenant is
Applied  Digital Access - Canada,  Inc. and is itself in possession of the whole
of the  Demised  Premises  or has  sublet  the  Demised  Premises,  or a portion
thereof,  in accordance with the Lease, the Tenant will have the right to extend
the Term,  upon giving the Landlord  notice of its intention to do so no earlier
than March 31, 1999 and no later than June 30, 1999, for a further period of two
years (the "Extended Term") upon the same terms and conditions as are set out in
the Lease, except that:

         (a)      there will be no further right to extend the Term following
         the expiration of the Extended Term;

         (b) any requirement on the Landlord's part to do any Landlord's Work or
         pay to the Tenant any construction allowance, inducement, loan or other
         amount in  connection  with the Lease or  improvements  in the  Demised
         Premises,  and any right of first  refusal,  will not apply  during the
         Extended Term; and

         (c) the annual  Basic Rent shall be mutually  agreed  upon  between the
         Landlord  and the Tenant  based upon the current  market Basic Rent for
         comparably  sized and  improved  premises in similar  buildings  in the
         area,  as  designated  by the Landlord as at October 1, 1999,  provided
         that the annual Basic Rent for the Extended Term shall not be less than
         the annual  Basic Rent  payable by the Tenant for the last 12 months of
         the initial Term,  and provided  further that if the parties are unable
         to agree to such  annual  Basic  Rent by no later than 30 days prior to
         the expiry of the  initial  Term,  then the annual  Basic Rent shall be
         determined by arbitration in accordance with the COMMERCIAL ARBITRATION
         ACT of British  Columbia as then in force and applying the criteria set
         out above.  If the annual  Basic  Rent has not been  determined  by the
         commencement  of the Extended  Term, the Tenant shall pay Basic Rent at
         the rate applicable to overholding as set out in the Lease,  and within
         10 days after the Basic Rent for the Extended Term is  determined,  the
         parties  shall  retroactively  adjust  the Basic  Rent  owing  from the
         commencement of the Extended Term.

If the Tenant  fails to exercise  this  option to extend the Term in  accordance
with the  foregoing,  or if the foregoing  conditions  are not  satisfied,  this
option to extend shall be null and void.

2.  AVAILABLE SPACE - The Landlord shall  undertake to use reasonable efforts to
keep the Tenant  informed on the  availability  of any space available for lease
direct from the Landlord in the Building.  Notwithstanding  the  foregoing,  the
failure  by the  Landlord  to so inform  the  Tenant  shall not give rise to any
liability whatsoever to the Tenant on the part of the Landlord.


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3.  ACCESS - the Tenant  shall have  access to the Demised Premises 24 hours per
day each and every day of the year  throughout  the Term,  except for unforeseen
Building  emergencies,  and subject to the Landlord's security  procedures.  The
Tenant  shall  have the right to have  heating,  ventilating,  air-conditioning,
hydro and elevator  service as it may require  outside of normal business hours,
upon reasonable  request and any reasonable cost(s) related thereto shall be the
Tenant's responsibility.

4.  PARKING - So long as the Tenant is Applied Digital Access - Canada, Inc. and
is itself in occupation  of the whole of the Demised  Premises or has sublet the
Demised  Premises,  or a portion  thereof,  in  accordance  with the Lease,  and
provided  the  Tenant  has  not  been  in  default  in  the  performance  of its
obligations  pursuant to the Lease,  the  Landlord  will make  available  to the
Tenant for its use 51 reserved parking spaces identified by the Tenant's name in
a location to be  designated by the Landlord from time to time at no cost to the
Tenant throughout the Term or any extension thereof.

5.  FREE  BASIC  RENT -  Provided  the  Tenant is in  possession  of the Demised
Premises,  has executed the Lease and is not in default  thereunder,  the Tenant
shall  not be  required  to pay  Basic  Rent for the  first  month of the  Term,
provided  the Tenant  shall pay all  Additional  Rent  provided for in the Lease
throughout such period.

                                       2


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                                    I N D E X

ARTICLE               DESCRIPTION                                           PAGE
-------               -----------                                           ----



ARTICLE 1             DEFINITIONS AND INTERPRETATION

       1.1            Definitions............................................1
       1.2            Schedules..............................................4
       1.3            Governing Law..........................................4
       1.4            Headings...............................................4
       1.5            Interpretation.........................................4
       1.6            Use of "herein", "hereof", etc.........................5
       1.7            Terms as Covenants.....................................5

ARTICLE 2             DEMISE, TERM AND USE

       2.1            Demise.................................................5
       2.2            Term...................................................5
       2.3            Use....................................................5
       2.4            Use of common areas and facilities, etc................6
       2.5            Possession.............................................6
       2.6            Examination of Demised Premises........................6
       2.7            Overholding............................................6

ARTICLE 3             RENT AND OTHER PAYMENTS

       3.1            Basic Rent.............................................7
       3.2            Payments to Landlord...................................7
       3.3            Additional Rent........................................7
       3.4            Payments to Others.....................................7
       3.5            Interest on Overdue Amounts............................8
       3.6            Disputes...............................................8
       3.7            Deposit................................................8

ARTICLE 4             MISCELLANEOUS COVENANTS OF THE TENANT

       4.1            Pay Rent...............................................8
       4.2            Pay Tenant's Taxes.....................................9
       4.3            Pay Utilities..........................................9
       4.4            Pay Proportionate Share of Taxes.......................9
       4.5            Pay Proportionate Share of Operating Costs.............9
       4.6            No Nuisance...........................................10
       4.7            Comply with Laws, etc.................................10
       4.8            Comply with Rules and Regulations.....................10
       4.9            Goods, Chattels, etc. Not to be removed...............11
       4.10           Use of Demised Premises...............................11
       4.11           Continuous Occupation.................................11
       4.12           Signs.................................................11
       4.13           Peaceful Surrender....................................11
       4.14           Condition at Expiration...............................12
       4.15           Removal of Fixtures...................................12
       4.16           Use of Washrooms......................................12
       4.17           Overloading...........................................12
       4.18           Nuisance and Waste....................................13

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ARTICLE               DESCRIPTION                                           PAGE
-------               -----------                                           ----

       4.19           Access................................................13
       4.20           Use of Yard Areas.....................................13
       4.21           No Auction............................................13
       4.22           Estoppel Certificates.................................13
       4.23           Landlord May Perform Tenant's Covenants...............14

ARTICLE 5             LANDLORD'S COVENANTS

       5.1            Quiet Enjoyment.......................................14
       5.2            Taxes.................................................14
       5.3            Management, Operation and Maintenance.................14

ARTICLE 6             INSURANCE AND INDEMNITY

       6.1            Tenant Insurance......................................15
       6.2            Details of Policies...................................15
       6.3            Proof of Insurance....................................16
       6.4            Priority of Claims....................................16
       6.5            Acts Conflicting with Insurance.......................16
       6.6            Indemnity to the Landlord.............................16
       6.7            Further Indemnity.....................................17
       6.8            Landlord not Responsible for Injuries, Loss, Damage...17
       6.9            No Liability for Indirect Damages.....................17
       6.10           Landlord Insurance....................................18

ARTICLE 7             REPAIRS AND ALTERATIONS

       7.1            Repairs...............................................18
       7.2            Alterations...........................................19
       7.3            Notice of Accidents, Defects, etc.....................20
       7.4            Care of Demised Premises..............................20
       7.5            Landlord's Right to do Work...........................21
       7.6            Landlord's Right to Inspect and Display Sign..........22
       7.7            Landlord's Repairs....................................23

ARTICLE 8             TRANSFER AND ASSIGNMENT

       8.1            Assigning or Subletting...............................23
       8.2            No Release............................................24
       8.3            Change of Control.....................................24
       8.4            Right of Landlord to Terminate........................24
       8.5            Sale by Landlord......................................25

ARTICLE 9             DAMAGE OR DESTRUCTION

       9.1            Damage or Destruction Without Termination.............25
       9.2            Damage or Destruction with Termination................25
       9.3            Damage or Destruction of Building.....................26

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ARTICLE               DESCRIPTION                                           PAGE
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ARTICLE 10            DEFAULT AND RE-ENTRY

       10.1           Re-entry 26
       10.2           Bankruptcy............................................27
       10.3           Waiver of Exemption from Distress.....................27
       10.4           Follow Chattels.......................................28
       10.5           Overlooking and Condoning.............................28

ARTICLE 11            SUBORDINATION

       11.1           Subordination.........................................28

ARTICLE 12            NOTICES

       12.1           Notices  .............................................29

ARTICLE 13            MISCELLANEOUS PROVISIONS

       13.1           Unavoidable Failures or Delays........................30
       13.2           Entire Agreement......................................30
       13.3           Subdivision...........................................30
       13.4           Registration..........................................31
       13.5           Net Lease Intent......................................31
       13.6           Time of Essence.......................................31
       13.7           Binding Effect........................................31
       13.8           Relocation of Demised Premises........................32

  Schedule "A"        Demised Premises
  Schedule "B"        Legal and Municipal Descriptions
  Schedule "C"        Rules and Regulations
  Schedule "D"        Hazardous Substances
  Schedule "E"        Indemnity Agreement
  Schedule "F"        Special Provisions