<PAGE>

                                                                     Exhibit 4.2


                                2 MERIDIAN ROAD

                               ETOBICOKE, ONTARIO






                                INDUSTRIAL LEASE






                                    BETWEEN

                             565991 ONTARIO LIMITED

                                      AND

                            LORUS THERAPEUTICS INC.
<PAGE>
     THIS LEASE is this 27th day of July, 2001

B E T W E E N:

                             565991 ONTARIO LIMITED
                                (the "Landlord")

                                     -and-

                            LORUS THERAPEUTICS INC.
                                 (the "Tenant")

                                   ARTICLE 1

                            PREMISES - TERM AND USE

1.01     Grant and Premises  In consideration of the performance by the Tenant
of its obligations under this lease, the Landlord leases the Premises (as
hereinafter defined) to the Tenant for the Term (as hereinafter defined).

1.02     Term  The Term of this lease is three (3) years from the 1st day of
April, 2002 to the 31st day of March, 2005.

1.03     Use and Conduct of Business  The Premises shall be used only for
offices, storage and animal and laboratory facilities and for no other purpose.
The Tenant shall conduct its business in the Premises in a reputable and first
class manner. It shall be the responsibility of the tenant to obtain all
necessary municipal licenses and approvals, including any occupancy permit to
carry on its business operations in the Premises in accordance with the use
provided herein. The Tenant shall comply promptly with and conform to the
requirements of all applicable statutes, by-laws, regulations, ordinances and
orders from time to time or at any time in force during the Term of this lease
relating to the particular manner of use by the Tenant of the Premises and with
every applicable regulation, order and requirement of the Insurance Bureau of
Canada or any body having similar functions or of any liability or fire
insurance company by which the Landlord and the Tenant or either of them may be
insured at any time during the Term hereof.

1.04     Acceptance of Premises  The Tenant acknowledges that the Tenant is
taking possession of the Premises, including the existing Leasehold
Improvements, as is, where is, and that such taking of possession shall be
conclusive evidence as against the Tenant that at the time thereof the
Premises and the Leasehold Improvements were in good order and satisfactory
condition, including the heating, electrical, lighting, plumbing, sprinkler,
air-conditioning, mechanical and ventilation systems and roof, and that all
premises, representations and undertakings by or binding upon the Landlord and
made to the Tenant with respect to any alteration, remodelling or decorating
of or installation of fixtures or Leasehold Improvements in the Premises have
been fully satisfied and performed by the Landlord.

                                   ARTICLE II

                                  DEFINITIONS

2.01     In this lease and in the Schedules, if any, to this lease:

(a)      "Additional Rent" means all sums of money required to be paid by the
         Tenant under this lease (except Net Rent) whether or not the same are
         designated "Additional Rent" or are payable to the Landlord or
         otherwise.

(b)      "Alterations" means all repairs, replacements, improvements or
         alterations to the Premises by the Tenant.

(c)      "Architect" means a qualified architect from time to time named by the
         Landlord.

(d)      "Building" means the industrial building located on the Lands and which
         Building has a leasable area of 20,5000 square feet more or less.

<PAGE>
                                     - 2 -

(e)      "Business Tax" means all taxes (whether imposed on the Landlord or
Tenant) attributable to the personal property, trade fixtures, business, income,
occupancy or sales of the Tenant or any other occupant of the Premises and to
any Leasehold Improvements installed in the Premises and to the use of the
Building or Lands by the Tenant.

(f)      "Capital Tax" means the amount of capital tax payable by the Landlord
or the owners of the Lands and Building under the Corporations Tax Act of
Ontario, as amended or replaced from time to time or any other legislation
imposing taxes on account of capital.

(g)      "Commencement Date" means the date on which the Term commences under
Section 1.02 hereof.

(h)      "Contaminant" means any substance which is capable of causing
pollution or contamination to air, land or water and includes any wastes,
contaminants, pollutants, toxic substances or hazardous materials as defined
under applicable federal, provincial or municipal laws, regulations or
guidelines.

(i)      An "Event of Default" shall occur whenever: (i) any Rent is in arrears
and is not paid within 5 days after written demand by the Landlord; (ii) the
Tenant has breached any of its obligations in this lease (other than the payment
of Rent) and: (aa) fails to remedy such breach within 15 days (or such shorter
period as may be provided in this lease); or (bb) if such breach cannot
reasonably be remedied within 15 days or such shorter period, the Tenant fails
to commence to remedy such breach within such 15 days or shorter period or
thereafter fails to proceed diligently to remedy such breach, in either case
after notice in writing from the Landlord; (iii) the Tenant becomes bankrupt or
insolvent or takes the benefit of any statute for bankrupt or insolvent debtors
or makes any proposal, assignment or arrangement with its creditors, or any
steps are taken or proceedings commenced by any Person for the dissolution,
winding-up or other termination of the Tenant's existence or the liquidation of
its assets; (iv) a trustee, receiver, receiver/manager or like Person is
appointed with respect to the business or assets of the Tenant; (v) the Tenant
makes a sale in bulk of all or a substantial portion of its assets other than in
conjunction with a Transfer approved by the Landlord; (vi) this lease or any of
the Tenant's assets are taken under a writ of execution; (vii) the Tenant
purports to make a Transfer other than in compliance with the provisions of this
lease; (viii) the Tenant abandons or attempts to abandon the Premises or
disposes of its goods so that there would not after such disposal be sufficient
goods of the Tenant on the Premises subject to distress to satisfy Rent for at
least 3 months, or the Premises become vacant and unoccupied for a period of 10
consecutive days or more without the consent of the Landlord; or (ix) any
insurance policies covering any part of the Building or any occupant thereof are
actually threatened to be cancelled or adversely changed as a result of any use
or occupancy of the Premises.

(j)      "Landlord" means the party named as landlord on the first page of this
lease.

(k)      "Lands" means the lands situated in the City of Toronto in the Province
of Ontario on which the Building is constructed and municipally known as 2
Meridian Road, Toronto, Ontario, as more particularly described in Schedule "A".

(l)      "Leasehold Improvements" means leasehold improvements in the Premises
determined according to common law, and shall include, without limitation, all
fixtures, improvements, installations, alterations and additions from time to
time made, erected or installed in the Building or on the Lands by or on behalf
of the Tenant or any previous occupant of the Premises, including signs and
lettering, partitions, doors and hardware however affixed and whether or not
movable, all mechanical, electrical and utility installations and all carpeting
and drapes with the exception only of furniture and equipment not in the nature
of fixtures.

(m)      "Mortgage" means any and all mortgages, charges, debentures, security
agreements, trust deeds, hypothecs or like instruments resulting from any
financing, refinancing or collateral financing (including renewals or
extensions thereof) made or arranged by the Landlord of its interest in all or
any part of the Premises.

(n)      "Mortgagee" means the holder of, or secured party under, any Mortgage
and includes any trustee for bondholders.

(o)      "Net Rent" means the annual rent payable by the Tenant under Section
3.02.

(p)      "Person" means any person, firm, partnership or corporation, or any
group or combination of persons, firms, partnerships or corporations.

(q)      "Premises" means the Lands and the Building and includes Leasehold
Improvements in or on such premises.
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                                     - 3 -

(r)      "Rent" means the aggregate of Net Rent and Additional Rent.

(s)      "Taxes" means all taxes, levies, charges, local improvement rates,
school assessments (separate and otherwise) and assessments whatsoever assessed
or charged against the Building and the Lands or any part thereof by any lawful
taxing authority and including any amounts assessed or charged in substitution
for or in lieu of any such taxes, including Capital Tax and the Federal Large
Corporations Tax, but excluding only such taxes as capital gains taxes,
corporate, income, profit or excess profit taxes to the extent such taxes are
not levied in lieu of any of the foregoing against the Building or Lands or the
Landlord in respect thereof.

(t)      "Tenant" means the party named as tenant on the first page of this
lease.

(u)      "Term" means the period set out in Section 1.02.

(v)      "Trade Fixtures" means trade fixtures as determined at common law, but
for greater certainty, shall not include: (i) heating, ventilating or air
conditioning systems, facilities and equipment in or serving the Building; (ii)
floor coverings affixed to the floor of the Building; (iii) light fixtures;
(iv) internal stairways and doors; (v) plumbing, sinks, toilets and washroom
partitions; and (vi) any fixtures, facilities, equipment or installations
installed by or at the expense of the Landlord. "Trade Fixtures" shall include
all laboratory equipment and related facilities installed by the Tenant for its
animal experiments.

(w)      "Transfer" means an assignment of this lease in whole or in part, a
sublease of all or any part of the Premises, any transaction whereby the rights
of the Tenant under this lease or to the Premises are transferred to another,
any transaction by which any right of use or occupancy of all or any part of
the Premises is conferred upon anyone, any mortgage, charge or encumbrance of
this lease or the Premises or any part thereof or other arrangement under which
either this lease or the Premises becomes security for any indebtedness or
other obligations and includes any transaction or occurrence whatsoever
(including, but not limited to, expropriation, receivership proceedings,
seizure by legal process and transfer by operation of law), which has changed
or might change the identity of the Persons having lawful use or occupancy of
any part of the Premises.

(x)      "Transferee" means the Person or Persons to whom a Transfer is or is
to be made.

                                  ARTICLE III

                                      RENT

3.01     Covenant to Pay  Except as may be provided in Section 3.02, the Tenant
shall pay Rent from the Commencement Date without prior demand and without any
deduction, abatement, set-off or compensation. If the Commencement Date is not
on the first day of a calendar month, or the first or last Fiscal Year of the
Term comprises less than 12 calendar months, then Rent for such month and such
Fiscal Years shall be pro-rated on a per diem basis, based upon a period of 365
days.

3.02     Net Rent

(a)      The Tenant shall pay Net Rent in equal monthly instalments each in
advance on the first day of each calendar month of the Term as follows:

<TABLE>
<CAPTION>
                                        Annual            Monthly      Net Rent per
           Rent                        Net Rent         Instalments    Square Foot
------------------------------        -----------       -----------    ------------
<S>                                   <C>                <C>              <C>
April 1, 2002 - March 31, 2003        $102,500.00        $8,541.67        $5.00
April 1, 2003 - March 31, 2004        $107,625.00        $8,968.75        $5.25
April 1, 2004 - March 31, 2005        $112,750.00        $9,395.83        $5.50
</TABLE>

(b)      The Tenant shall pay the amount of any goods and services tax, sales
tax, value added tax or any similar tax charged or levied by any government or
other applicable taxing authority on any payments due to the Landlord as Net
Rent.
<PAGE>
                                     - 4 -


(c)      The annual Net Rent and monthly instalments thereof at the
above-mentioned rates per square foot per annum shall be calculated on the
basis of the Premises and Building having a leaseable area of 20,5000 square
feet.

3.03     Payment of Additional Rent

(a)      The Rent payable by the Tenant shall be net to the Landlord and clear
of all Taxes, insurance premiums and all costs relating to the Premises, except
for the Landlord's corporate and income taxes (except as otherwise provided
herein), and any principal, interest or other costs payable by the Landlord in
respect of the Landlord's debts. The Tenant shall, except for those costs
required to be paid by the Landlord under this lease, pay all costs and
expenses relating to, or reasonably incurred in respect of, the Premises.

(b)      There shall be no reduction in Rent if all or part of the Premises
become unusable or are damaged or destroyed, except as provided for in Article
VI.

(c)      The Tenant shall pay when due all Business Tax. If the Tenant's
Business Tax is payable by the Landlord to the relevant taxing authority, the
Tenant shall pay the amount thereof to the Landlord or as it directs.

(d)      The Tenant shall promptly deliver to the Landlord on request, copies
of assessment notices, tax bills and other documents received by the Tenant
relating to Taxes and Business Tax and receipts for payment of Taxes and
Business Tax payable by the Tenant.

(e)      The Tenant shall on demand, pay to the Landlord or to the appropriate
taxing authority if required by the Landlord, all goods and services taxes,
sales taxes, value added taxes, business transfer taxes, or any other taxes
imposed on the Landlord with respect to Rent or in respect of the rental of
space under this lease, whether characterized as a goods and services tax, sales
tax, value added tax, business transfer tax or otherwise. The Landlord shall
have the same remedies and rights with respect to the payment or recovery of
such taxes as it has for the payment or recovery of Rent under this lease.

(f)      The Tenant shall pay all Taxes as well as the cost of insurance which
the Landlord is obligated or permitted to obtain under this lease in accordance
with Section 5.03.

(g)      The Tenant shall have the right to contest the amount or legality of
the realty taxes forming part of the Taxes (the "Realty Taxes") and to make
application for the reduction of Realty Taxes or of any assessment upon which
the Realty Taxes are based. The Landlord will, upon the Tenant's written
request, provide or make available to the Tenant information in the Landlord's
possession or control which is required to contest the amount or legality of
the Realty Taxes. The Tenant shall diligently prosecute any such contest, and
shall immediately after the final determination of such contest, pay the amount
of the Realty Taxes which were the subject of such contest as so determined, as
and when they become due and payable, together with any interest, penalties or
other charges which are payable in connection with the Realty Taxes. Before
commencing proceedings to contest any the Realty Taxes, the Tenant shall pay to
the Landlord the amount of Realty Taxes due, or such alternative security as
requested by the Landlord, to be held by the Landlord pending the determination
of such contest. On the determination of such contest, the Landlord shall pay,
out of the amount held by it, the amount required to be paid by the Tenant on
account of the Realty Taxes, and if the amount held by the Landlord exceeds the
amount of Realty Taxes required to be paid by the Tenant, the Landlord shall
make the necessary rebate of such excess amount to the Tenant. If the amount
held by the Landlord is insufficient to pay all of the Realty Taxes, the Tenant
shall, immediately on the determination of such contest, pay to the appropriate
taxing authorities such additional amount as may be required to satisfy the
Realty Taxes in full. The Tenant shall deliver to the Landlord within 90 days
after the date on which the Realty Taxes and charges described in this Section
are paid, official receipts of the appropriate taxing authority evidencing
payment of same.

(h)      There shall be excluded or deducted from Additional Rent the following:

         (i)      capital taxes;

         (ii)     debt servicing costs and retirement of debt;
<PAGE>
                                     - 5 -

         (iii)    all costs of capital nature as determined in accordance with
         generally accepted accounting principals; for the purposes of this
         Section capital costs shall include the cost of leasing equipment if
         the cost of purchasing such equipment would be a capital cost in
         accordance with generally accepted accounting principals and if such
         equipment is normally purchased by the landlords or owners of similar
         buildings;

         (iv)     the cost of replacement of the structure of the Building,
         including, without limitation, the roof and the roof membrane;

         (v)      the cost of any repair, replacement or maintenance required as
         a result of any inherent structural defect in the Building;

         (vi)     costs arising from the negligence of the Landlord or those for
         whom it is in law responsible;

         (vii)    fees paid to a management company in connection with the
         operation of the Building;

         (viii)   any fines or penalties that the Landlord incurs in connection
         with any failure to perform obligations, such as the late payment of
         Taxes;

         (ix)     any monies received by the Landlord pursuant to any warranties
         and guarantees to the extent that such monies are a reimbursement for
         work the cost of which was previously included in Additional Rent;

         (x)      any costs included in Additional rent representing an amount
         paid to any person or other entity related to the Landlord which are in
         excess of the amounts which would have been paid had the Landlord acted
         as a reasonably prudent manager and administrator.

3.04     Additional Rent  Except as otherwise provided in this lease, all
Additional Rent shall be payable by the Tenant to the Landlord within 20
business days after demand.

3.05     Rent Past Due  All Rent past due shall bear interest from the date on
which same became due until the date of payment at five percent (5%) per annum
in excess of the prime interest rate for Canadian Dollar demand loans announced
from time to time by any Canadian chartered bank designated by the Landlord.

3.06     Utilities  The Tenant shall pay, when due, all charges for gas,
electricity, water, steam, telephone and other utilities used in or on the
Premises. The Tenant shall also pay for apparatus, meters and other things
leased or purchased at the request of the Tenant or the utility's provider, or
as may be required by the Landlord, acting reasonably, in connection with
utility services, and for all work performed by anyone in connection with such
utilities.

3.07     Net Lease  This lease is a completely net lease to the Landlord,
except as expressly herein set out.

3.08     Deposits

(a)      The Landlord acknowledges receipt of the Tenant's deposit in the
amount of $9,139.57 in Canadian funds which will be applied, without interest,
against the Net Rent (and GST) due for the period April 1 to 30, 2002.

(b)      The Landlord further acknowledges receipt of the Tenant's deposit in
the amount of $10,000.00 in Canadian funds which will not be applied on account
of Rent but is to be held by the Landlord, without interest, as security for
the full and faithful performance by the Tenant of all the agreements, terms,
covenants and conditions herein set forth and applied against expenses or other
costs or damages incurred by the Landlord and to be payable as liquidated
damages and not as penalty, upon forfeiture, default or early termination by
the Tenant without prejudice to any further claims by the Landlord for damages
and any remedy for recovery thereof. In the event the Tenant carries out the
terms and conditions of this lease, the Tenant shall, after vacating the
Premises be entitled to the return of its deposit less any deductions made in
respect of any default of the Tenant.

<PAGE>
                                     - 6 -

                                   ARTICLE IV

                      MAINTENANCE, REPAIRS AND ALTERATIONS

4.01     Maintenance by Tenant

(a)      Except for damage caused by fire or other insured casualty, the
repair of which is provided for in Article V, the Tenant shall, at its own
expense;

         (i)      maintain and repair the interior and exterior of the Building,
         including the roof and parking lot, in good order and first class
         condition in the same manner as a careful and prudent owner would do
         including, without limitation, the repair of wear and tear which is
         necessary to maintain the improvements and equipment of the Building in
         such manner so that they function properly having regard to their
         nature and purpose for which they are intended to be used or to keep
         the appearance of the Premises neat, clean and presentable, provided
         that the Tenant shall not be required to repair any structural defects,
         unless such structural defects are caused or contributed to by the
         fault or negligence of the Tenant or those for whom it is in law
         responsible, in which case the repair of such structural defects shall
         be the Tenant's responsibility; and

         (ii)     maintain and make such repairs and replacements to the roof
         (except for structural defects, unless such structural defects are
         caused or contributed to by the fault or the negligence of the Tenant
         or those for whom it is in law responsible), equipment, facilities,
         paved areas, fences, landscaping and other installations forming part
         of the Building or the Premises, including the Leasehold Improvements,
         heating, ventilating, air-conditioning, mechanical, electrical and
         plumbing systems, and to keep same in good order and first class
         condition in the same manner as a careful and prudent owner would do
         including, without limitation, the repair of wear and tear which is
         necessary to maintain same in such manner so that they function
         properly having regard to their nature and the purpose for which they
         are intended to be used or to keep the appearance of the Premises neat,
         clean and presentable.

(b)      The Landlord may, with 24 hours prior notice, except in cases of
emergency when no notice is required, enter the Premises to view the state of
repair. If the Landlord notifies the Tenant of the need for repairs, the Tenant
will repair in accordance with such notice, subject to the exceptions set out
in subsection (a) above. On the expiration or date of early termination of this
lease, the Tenant shall surrender the Premises to the Landlord in broom-swept
condition and in a good state of repair consistent with the obligations imposed
upon the Tenant during the Term. No provision of this subsection (b) shall
require the Tenant on the expiration or other termination of this lease to
repair reasonable wear and tear, except to the extent that repair of wear and
tear is necessary to maintain the improvements and equipment of the Building in
such manner so that they shall function properly, having regard to their nature
and the purpose for which they are intended to be used, and except to the
extent that repair of wear and tear is necessary to keep the appearance of the
Premises neat, clean and presentable. All repairs required to be made pursuant
to this subsection (b) shall be completed prior to the date upon which this
lease terminates.

(c)      If the Tenant is in default of the provisions of subsections (a) and
(b) above, the Landlord may proceed to make the needed repairs and may then
charge its costs for so doing to the Tenant for immediate payment on demand.

(d)      The Tenant shall keep the Premises and the sidewalks and other areas
adjacent to the Premises, clean and free of refuse and other obstructions, and
shall comply with any laws governing the condition or cleanliness of the
Premises, the sidewalks and such adjacent areas.

(e)      The Tenant shall not, by its act or omission, permit anything to occur
in the Premises which shall be or shall result in a nuisance.

(f)      The Tenant shall promptly comply with the requirements of all laws at
any time in force during the Term which affect the condition or use of the
Premises. If the Tenant defaults under the provisions of this subsection, the
Landlord may itself comply with the requirements of this subsection, and the
Tenant shall within 20 business days pay all reasonable expenses incurred by
the Landlord in so doing.

(g)      The Tenant shall heat the Building at its own expense to such
temperature as may be necessary to prevent damage to the Building, the
Leasehold Improvements and the Trade Fixtures.

4.02     Tenant's Alterations

(a)      The Tenant shall not place any thing on, nor make any opening in, the
roof or walls of the Building, without the prior written consent of the
Landlord, which consent shall not be unreasonably
<PAGE>
                                     - 7 -

withheld or delayed. On the termination of this lease, or at such time as the
Tenant vacates the Premises, the Tenant shall repair any damage caused to the
Building as a result of having placed any thing on, or having made openings in,
the roof, and shall restore the roof and walls to the their condition at the
Commencement Date, all to the satisfaction of the Landlord, acting reasonably.

(b)      The Tenant shall have the right, at is sole cost, to erect such
corporate signage on the Lands or Building as it may require to identify its
business. All signs shall be in conformity with applicable laws and by-laws,
and shall be subject to the prior written approval of the Landlord which
approval shall not be unreasonably withheld. Prior to the expiration of the
Term, the Tenant shall, at its cost, remove all such signage on the Lands and
Building and any damage caused to the Building or Lands as a result of erecting
or removing signs shall be repaired by the Tenant, at its sole cost, to the
reasonable satisfaction of the Landlord, prior to the expiration of the Term.

(c)      The Tenant shall make no Alterations to the Building or on the Lands
unless it has first delivered to the Landlord plans showing such proposed
alterations or additions in reasonable detail, and obtained the written consent
of the Landlord to such plans and any Alterations. The Landlord shall not
unreasonably withhold or delay such consent, but may give consent on such
conditions as the Landlord considers proper in the circumstances. All work
performed shall be performed at the Tenant's sole cost, in a good and
workmanlike manner, free from defects and using new first class materials, and
construction shall be subject to supervision by the Landlord. It shall not be
considered unreasonable for the Landlord to withhold its consent to any
Alterations if they in any way involve the structural elements of the Building
or the Premises. In addition, all work shall be completed to the satisfaction
of the Landlord, acting reasonably. The Tenant shall, at its cost, obtain all
required permits and comply with all laws, by-laws and regulations of all
governmental authorities having jurisdiction.

(d)      The Tenant shall indemnify the Landlord from all actions and
liabilities for which the Landlord may become liable as a result of any breach
by the Tenant of a covenant of this lease, or as a result of any personal
injury, property damage or death occurring because of the wilful act or
omission or negligence of the Tenant or those for whom it is in law
responsible. This indemnification shall survive the termination of this Lease
insofar as any such breach, personal injury, property damage or death occurring
during the Term.

         The Landlord shall indemnify the Tenant from all actions and
liabilities for which the Tenant may become liable as a result of any breach by
the Landlord of a covenant of this lease, or as a result of any personal
injury, property damage or death occurring because of the wilful act or
omission or negligence of the Landlord or those for whom it is in law
responsible. This indemnification shall survive the termination of this Lease
insofar as any such breach, personal injury, property damage or death occurring
during the Term.

(e)      Except in the case of injury, death or property damage caused by any
breach by the Landlord of a covenant in this lease, or by the wilful act or
omission or negligence of the Landlord or those for whom it is in law
responsible, the Landlord shall not be liable for any personal injury, death or
property damage sustained by the Tenant, or its employees, agents, sublessees,
licensees, or those doing business with it in or on the Premises, no matter how
caused; and the Tenant shall indemnify the Landlord against all actions or
liabilities arising out of such personal injury, death or property damage or
loss. The Tenant releases the Landlord and its officers, agents and employees
from all claims for damages or other expenses arising out of such personal
injury, death or property loss or damage, except as aforesaid.

         Except in the case of injury, death or property damage caused by any
breach by the Tenant of a covenant in this lease, or by the wilful act or
omission or negligence of the Tenant or those for whom it is in law
responsible, the Tenant shall not be liable for any personal injury, death or
property damage sustained by the Landlord, or its employees, agents, sublessees,
licensees, or those doing business with it in or on the Premises, no matter how
caused; and the Landlord shall indemnify the Tenant against all actions or
liabilities arising out of such personal injury, death or property damage or
loss. The Landlord releases the Tenant and its officers, agents and employees
from all claims for damages or other expenses arising out of such personal
injury, death or property loss or damage, except as aforesaid.

(f)      The Tenant shall pay the costs of installing, upgrading and
maintaining a sprinkler supervisory system in the Building, if such a system is
required by any law or regulation of any governmental authority or any fire or
liability insurance company by which either the Landlord or Tenant may be
insured during the Term.

<PAGE>
                                     - 8 -

(g)      Notwithstanding anything to the contrary contained in this lease, the
Tenant shall not cut down any trees on the Lands.

4.03     Removal of Improvements and Fixtures  All Leasehold Improvements (other
than Trade Fixtures), shall immediately upon their placement become the
Landlord's property without compensation to the Tenant. Except as otherwise
agreed by the Landlord in writing, no Leasehold Improvements shall be removed
from the Premises by the Tenant either during or at the expiry or sooner
termination of the Term except that:

(a)      the Tenant may, during the Term, in the usual course of its business,
remove its Trade Fixtures, provided that the Tenant is not in default under this
lease;

(b)      the Tenant shall, at the expiration or earlier termination of the
Term, at its sole cost, remove its Trade Fixtures from the Premises, failing
which, at the option of the Landlord, the Trade Fixtures shall become the
property of the Landlord and may be removed from the Premises and sold or
disposed of by the Landlord in such manner as it deems advisable; and

(c)      The Tenant shall, at the expiration or earlier termination of the
Term, at its sole cost, either remove such of the Leasehold Improvements in the
Premises as the Landlord shall require to be removed and restore the Premises
to the condition that existed on October 1st, 1995, being the commencement of
the lease of Hemosol Inc., the previous tenant, including the removal of all
partitions (other than partitions in the front office with a low ceiling
located in the southerly portion of the Building and separated from the rest of
the office by a concrete block wall) to the extent required by the Landlord,
or, at the Landlord's option, pay to the Landlord the estimated cost of such
removal and restoration as determined by the Architect, acting reasonably, and
the Landlord shall utilize such payment by the Tenant for such removal and
restoration. If the Landlord requires the Tenant to perform such work, then:

         (i)      the Tenant shall, at its expense, repair any damage caused to
         the Building by such removal; and

         (ii)     if the Tenant fails to complete such work within 30 days
         following the expiry or earlier termination of the Term, the Tenant
         shall pay compensation to the Landlord for each day following such 30th
         day until completion of such work, at a rate equal to the per diem Rent
         payable during the last month preceding the expiry or earlier
         termination of the Term, which sum is agreed by the parties to be a
         reasonable estimate of the damages suffered by the Landlord for the
         loss of use of the Premises. The Tenant's obligation aforesaid shall
         also include the obligation of the Tenant to close off all electrical
         wiring which may have previously served any machinery or equipment
         installed by the Tenant in the Building.

4.04     Liens  The Tenant shall promptly pay for all materials supplied and
work done in respect of the Premises so as to ensure that no lien is registered
against any portion of the Lands or Building or against the Landlord's or
Tenant's interest therein. If a lien is registered or filed as a result of work
done by or for the Tenant or material supplied to or for the Tenant, the Tenant
shall cause all such registrations of any such claims or certificates of actions
related thereto to be discharged or vacated at its own expense within 5 days of
notice from the Landlord requiring it to do so, failing which the Landlord, in
addition to any other rights and remedies it may have hereunder, may, but shall
not be obligated to, cause such claims or certificates to be discharged or
vacated by payment into court of the appropriate amounts and the Tenant shall
forthwith pay to the Landlord such amounts, costs and expenses in respect
thereof. Nothing in Section 4.04 prevents the Tenant from contesting, in good
faith, and in accordance with the appropriate law, the amount or validity of
any claim by any worker of the Tenant as long as the Tenant discharges or
vacates such claim in the manner set out above.

4.05     Notice by Tenant  The Tenant shall notify the Landlord of any material
accident, defect, damage or deficiency in any part of the Premises which comes
to the attention of the Tenant, its employees or contractors notwithstanding
that the Landlord may have no obligation in respect thereof.
<PAGE>
                                     - 9 -


                                   ARTICLE V

                            INSURANCE AND INDEMNITY


5.01     Tenant's Insurance

(a)      The Tenant shall maintain the following insurance throughout the Term
at its sole cost;

         (i)      "All Risks" (including flood and earthquake) property
         insurance, naming the Tenant, the Landlord, the owners of the Lands and
         Building and the Mortgagee as additional insured parties, containing a
         waiver of any subrogation rights which the Tenant's insurers may have
         against the Landlord and against those for whom the Landlord is in law
         responsible (except a waiver of such subrogation rights where the
         Landlord or those for whom it is responsible have been wilfully
         negligent), and (except with respect to the Tenant's chattels)
         incorporating the Mortgagee's standard mortgage clause. Such insurance
         shall insure:

                  (aa)     property of every kind owned by the Tenant or for
                  which the Tenant is legally liable located on or in the
                  Building including, without limitation, Leasehold
                  Improvements, in an amount equal to not less than 90% of the
                  full replacement cost thereof, subject to a stated amount
                  co-insurance clause; and

                  (bb)     extra expense insurance in such amount as will
                  reimburse the Tenant for loss attributable to all risks
                  referred to in this Section 5.01(a)(i);

         (ii)     comprehensive general liability insurance of not less than
         $5,000,000 for each occurrence for bodily injury and property damage,
         personal injury liability, tenants legal liability and blanket
         contractual liability. Such policies shall provide for cross liability,
         and name the Landlord and the Mortgagee as additional insured;

         (iii)    Tenant's "all risks" legal liability insurance for the
         replacement cost value of the Building, which insurance shall have
         inclusive limits of not less than $2,000,000;

         (iv)     automobile liability insurance on a non-owned form including
         contractual liability, and on an owner's form covering all licensed
         vehicles operated by or on behalf of the Tenant; and

         (v)      any other form of insurance which the Tenant or the Landlord,
         acting reasonably, or the Mortgagee requires from time to time in form,
         in amounts and for risks against which a prudent tenant would insure.


(b)      All policies referred to in this Section 5.01 shall:

         (i)      be taken out with insurers reasonably acceptable to the
         Landlord;

         (ii)     be in a form reasonably satisfactory to the Landlord;

         (iii)    be non-contributing with, and shall apply only as primary and
         not as excess to, any other insurance available to the Landlord;

         (iv)     not be invalidated as respects the interest of the Landlord or
         the Mortgagee by reason of any breach of or violation of any warranty,
         representation, declaration or condition; and

         (v)      contain an undertaking by the insurers to notify the Landlord
         by registered mail not less than 30 days prior to any material change,
         cancellation or termination.

(c)      Certificates of insurance on the Landlord's standard form or, if
required by the Landlord, certified copies of such insurance policies, shall be
delivered to the Landlord forthwith upon request. If the Tenant fails to take
out or to keep in force any insurance referred to in this Section 5.01 or should
any such insurance not be approved by either the Landlord or the Mortgagee and
should the Tenant not commence to diligently rectify (and thereafter proceed to
diligently rectify) the situation within 48 hours, or such longer period as
permitted by the Landlord's insurer, after written notice by the Landlord to the
Tenant (stating, if the Landlord or the Mortgagee, from time to time, does not
approve of such insurance, the reasons therefor) the Landlord has the right
without assuming any obligation in connection therewith, to effect such
insurance at the sole cost of the Tenant and all outlays by the Landlord shall
be paid by the
<PAGE>
                                     - 10 -


Landlord shall be paid by the Tenant to the Landlord without prejudice to any
other rights or remedies of the Landlord under this lease.

(d)      If the Tenant fails to comply with any of the obligations in this
Article V, such failure shall constitute an event of default under this lease
and shall entitle the Landlord to the same rights and remedies available with
respect to any other default, including, without limitation, the right of
terminating this lease and re-entering the Premises, all without releasing the
Tenant from its obligations. The Landlord may, at its option, elect to comply
with such obligations at the cost and expense of the Tenant (including
Landlord's legal fees on a solicitor and his own client basis) and the Tenant
shall pay all such costs and expenses to the Landlord forthwith on demand.

5.02     Cancellation of Insurance  If any insurer under any insurance policy
covering any part of the Building or any occupant thereof cancels or threatens
to cancel its insurance policy or reduces or threatens to reduce coverage under
such policy by reason of the use of the Premises by the Tenant or by any
Transferee, or by anyone permitted by the Tenant to be upon the Premises, the
Tenant shall remedy such condition within 48 hours after notice thereof by the
Landlord.

5.03     Landlord's Property Insurance  The Landlord shall throughout the Term
carry:

(a)      insurance on the Building (excluding the foundations and excavations)
and machinery, boilers and equipment in or servicing the Building and owned by
the Landlord or the owners of the Building (excluding any property which the
Tenant is obliged to insure under Section 5.01) on an all risks of physical
loss or damage basis, naming the Tenant as additional insured, subject to the
Tenant's obligations to insure under Section 5.01; and

(b)      such other form or forms of insurance as the Landlord or the Mortgagee
reasonably considers advisable.

         Such insurance shall be in such reasonable amounts and with such
reasonable deductibles as would be carried by a prudent owner of a reasonably
similar building, having regard to size, age and location. Notwithstanding the
Landlord's covenant in this Section and notwithstanding any contribution by the
Tenant to the cost of the Landlord's insurance premiums, the Tenant acknowledges
and agrees that: (i) the Tenant is not relieved of any liability arising from or
contributed to by its negligence or its wilful act or omissions; (ii) no
insurable interest is conferred upon the Tenant under any insurance policies
carried by the Landlord; and (iii) the Tenant has no right to receive any
proceeds of any insurance policies carried by the Landlord.


                                   ARTICLE VI

                             DAMAGE AND DESTRUCTION


6.01     No Abatement  If the Building is damaged or destroyed in whole or in
part by fire or any other occurrence this lease shall continue in full force
and effect and there shall be no abatement of Rent except as provided in this
Article VI.

6.02     Damage to Building  If the Building is at any time destroyed or
damaged as a result of fire or any other casualty required to be insured
against by the Landlord or the Tenant, as the case may be, under this lease or
otherwise insured against by the Landlord or the Tenant, as the case may be,
and not caused or contributed to by the Tenant, then the following provisions
shall apply:

(a)      if the Building is rendered untenantable only in part, the Landlord
shall diligently repair the base Building, to the extent of insurance proceeds
received by the Landlord, and Rent shall abate proportionately to the portion
of the Building rendered untenantable from the date of destruction or damage
until the Landlord's repairs have been completed;

(b)      if the Building is rendered wholly untenantable, the Landlord shall
diligently repair the base Building, to the extent of insurance proceeds
received by the Landlord, and Rent shall abate entirely from the date of
destruction or damage until the Landlord's repairs have been completed;

(c)      if the Building is not rendered untenantable in whole or in part, the
Landlord shall diligently perform such repairs to the base Building, to the
extent of insurance proceeds received by the Landlord, but in such
circumstances Rent shall not terminate or abate;

(d)      upon being notified by the Landlord that the Landlord's repairs have
been substantially completed, the Tenant shall diligently perform all repairs
to the Building which are the Tenant's
<PAGE>
                                     - 11 -



responsibility under Article V, and all other work required to fully restore
the Building for use in the Tenant's business, in every case at the Tenant's
cost and without any contribution to such cost by the Landlord, whether or not
the Landlord has at any time made any contribution to the cost of supply,
installation or construction of Leasehold Improvements in the Building, and the
Landlord will advise the Tenant of the Landlord's construction schedule; and

(e)      nothing in this Section 6.02 shall require the Landlord to rebuild the
Building in the condition which existed before any such damage or destruction
so long as the Building as rebuilt will have reasonably similar facilities to
those in the Building prior to such damage or destruction, having regard,
however, to the age of the Building at such time.

6.03     Right of Termination  Notwithstanding Section 6.02, if the damage or
destruction which has occurred in the Building is such that in the reasonable
opinion of the Architect the Building cannot be rebuilt or made fit for the
purposes of the Tenant within 180 days of the happening of the damage or
destruction, the Landlord may, at its option, terminate this lease on notice to
the Tenant given within 30 days after such damage or destruction. If such
notice of termination is given, Rent shall be apportioned and paid to the date
of such damage or destruction and the Tenant shall immediately deliver vacant
possession of the Premises in accordance with the terms of this lease.

6.04     Architect's Certificate  The certificate of the Architect shall bind
the parties as to:

(a)      whether or not the Building is rendered untenantable and the
percentage of the Building rendered untenantable;

(b)      the date upon which either the Landlord's or Tenant's work of
reconstruction or repair is completed or substantially completed and the date
when the Building is rendered tenantable; and

(c)      the state of completion of any work of the Landlord or the Tenant.

6.05     Insurance Proceeds  The Landlord and the Tenant will each:

(a)      cause their respective insurance policies to provide that insurance
proceeds must be used for the rebuilding or repair of any damage or destruction
to the Building;

(b)      use their best efforts to cause the Mortgagee to release promptly any
insurance proceeds to the Landlord or the Tenant, as the case may be, so that
the Landlord or the Tenant, as the case may be, can promptly set about the
rebuilding or repair of the Building;

(c)      use their best efforts to collect the full proceeds of insurance from
their respective insurers; and

(d)      use the proceeds to promptly rebuild or repair the Building.


                                  ARTICLE VII

                      ASSIGNMENT SUBLETTING AND TRANSFERS


7.01     Assignments, Subleases and Transfers  The Tenant shall not enter into,
consent to or permit any Transfer without the prior written consent of the
Landlord in each instance, which consent may not be unreasonably withheld.
Notwithstanding the foregoing, the Tenant may sublet or enter into a sublease
solely in respect of the Building, or any part thereof, provided it obtains the
prior written consent of the Landlord in respect of any sublease, which consent
shall not be unreasonably withheld, and further provided that, without
limitation, the subtenant complies with Section 1.03 hereof. Notwithstanding
any statutory provision to the contrary, it shall not be considered
unreasonable for the Landlord to take into account whether in the Landlord's
opinion, the financial background, business history and capability of the
proposed Transferee is satisfactory. Consent by the Landlord to any Transfer if
granted shall not constitute a waiver of the necessity for such consent to any
subsequent Transfer. This prohibition against Transfer shall include a
prohibition against any Transfer by operation of law and no Transfer shall take
place by reason of the failure of the Landlord to give notice to the Tenant
within 30 days as required by Section 7.02.

7.02     Transfer Process  If the Tenant intends to effect a Transfer, the
Tenant shall give prior notice to the Landlord of such intent specifying the
identity of the Transferee, the type of Transfer contemplated, the portion of
the Premises affected thereby, and the financial and other terms of the
Transfer, and shall
<PAGE>
                                     - 12 -


provide such financial, business or other information relating to the proposed
Transferee and its principals as the Landlord, acting reasonably, or any
Mortgagee requires, together with copies of any documents which record the
particulars of the proposed Transfer. The Landlord shall, within 21 days after
having received such notice and all requested information, notify the Tenant
either that it consents or does not consent to the Transfer in accordance with
the provisions and qualifications of this Article VII.

7.03     Conditions of Transfer

(a)      If there is a permitted Transfer, the Landlord may collect rent from
the Transferee and apply the net amount collected to the Rent payable under
this lease but no acceptance by the Landlord of any payments by a Transferee
shall be deemed a waiver of the Tenant's covenants or any acceptance of the
Transferee as tenant or a release from the Tenant from the further performance
by the Tenant of its obligations under this lease. Any consent by the Landlord
shall be subject to the Tenant and Transferee executing an agreement with the
Landlord agreeing that the Transferee will be bound by all of the terms of this
lease and, except in the case of a sublease, that the Transferee will be so
bound as if it had originally executed this lease as tenant.

(b)      Notwithstanding any Transfer permitted or consented to by the
Landlord, the Tenant shall remain liable under this lease and shall not be
released from performing any of the terms of this lease.

(c)      The Landlord's consent to any Transfer shall be subject to the
condition that if the net rent and additional rent to be paid by the Transferee
under such Transfer exceeds the Net Rent and Additional Rent payable under this
lease, the amount of such excess shall be paid by the Tenant to the Landlord.
If the Tenant receives from any Transferee, either directly or indirectly, any
consideration other than net rent or additional rent for such Transfer, either
in the form of cash, goods or services (other than the proceeds of any
financing as the result of a Transfer involving a mortgage, charge or similar
security interest in this lease) the Tenant shall forthwith pay to the Landlord
an amount equivalent to such consideration. The Tenant and the Transferee shall
execute any agreement required by the Landlord to give effect to the foregoing
terms.

(d)      Notwithstanding the effective date of any permitted Transfer as
between the Tenant and the Transferee, all Net Rent and Additional Rent for the
month in which such effective date occurs shall be paid in advance by the
Tenant so that the Landlord will not be required to accept partial payments of
Net Rent and Additional Rent for such month from either the Tenant or
Transferee.

(e)      Any document evidencing any Transfer permitted by the Landlord, or
setting out any terms applicable to such Transfer or the rights and obligations
of the Tenant or Transferee thereunder, shall be prepared by the Tenant or its
solicitors in a form satisfactory to the Landlord and its solicitors and all
associated legal costs shall be paid by the Tenant.

(f)      The Tenant shall not be in default under this lease at the time it
requests the consent of the Landlord to any Transfer as herein provided.

7.04     Assignment by Landlord  The Landlord shall have the unrestricted right
to sell, lease, convey or otherwise dispose of all or any part of the Building
or Lands and this lease or any interest of the Landlord in this lease. To the
extent that the purchaser or assignee from the Landlord assumes the obligations
of the Landlord under this lease, the Landlord shall thereupon and without
further agreement be released from all liability under this lease.

7.05     "For Rent" Signs  The Landlord may within 4 months before the
expiration of the Term, unless the Term has been renewed, or within 3 months
before the expiration of the renewal term (if any) place on the Premises a
notice of reasonable dimensions stating that the Premises are for rent and the
Tenant shall not permit such notice to be removed.


                                  ARTICLE VIII

                                    DEFAULT


8.01     Default and Remedies

         If and whenever an Event of Default occurs, then without prejudice to
any other rights which it has pursuant to this lease or at law, the Landlord
shall have the following rights and remedies, which are cumulative and not
alternative:
<PAGE>
                                     - 13 -

(a)      to terminate this lease:

         (i)      10 days after written notice has been given to the Tenant of a
         financial default, which default has not been cured by the Tenant
         during such 10 day period; and

         (ii)     20 days after written notice has been given to the Tenant of a
         non-financial default, which default has not been cured by the Tenant
         during such 20 day period;

(b)      to enter the Premises as agent of the Tenant and to relet the Premises
for whatever term, and on such terms as the Landlord in its discretion may
determine and to receive the rent therefor and as agent of the Tenant to take
possession of any property of the Tenant on the Premises, to store such
property at the expense and risk of the Tenant or to sell or otherwise dispose
of such property in such manner as the Landlord may see fit without notice to
the Tenant; to make alterations to the Premises to facilitate their reletting;
and to apply the proceeds of any such sale or reletting first, to the payment
of any expenses incurred by the Landlord with respect to any such reletting or
sale; second, to the payment of any indebtedness of the Tenant to the Landlord
other than Rent; and third, to the payment of Rent in arrears; with the residue
to be held by the Landlord and applied in payment of future Rent as it becomes
due and payable. The Tenant shall remain liable for any deficiency to the
Landlord;

(c)      with prior written notice to the Tenant, to remedy or attempt to
remedy any default of the Tenant under this lease for the account of the Tenant
and to enter upon the Premises for such purposes. No notice of the Landlord's
intention to perform such covenants need be given the Tenant unless expressly
required by this lease. The Landlord shall not be liable to the Tenant for any
loss, injury or damage caused by acts of the Landlord in remedying or
attempting to remedy such default and the Tenant shall pay to the Landlord all
expenses incurred by the Landlord in connection with remedying or attempting to
remedy such default;

(d)      to recover from the Tenant all damages and expenses incurred by the
Landlord as a result of any breach by the Tenant including, if the Landlord
terminates this lease, any deficiency between those amounts which would have
been payable by the Tenant for the portion of the Term following such
termination and the net amounts actually received by the Landlord during such
period of time with respect to the Premises; and

(e)      to recover from the Tenant the full amount of the current month's Rent
together with the next 1 month's instalment of Rent, all of which shall accrue
on a day-to-day basis and shall immediately become due and payable as
accelerated rent.

8.02     Distress  Notwithstanding any provision of this lease or any provision
of applicable legislation, none of the goods and chattels of the Tenant on the
Premises at any time during the Term shall be exempt from levy by distress for
Rent in arrears, and the Tenant waives any such exemption. If the Landlord
makes any claim against the goods and chattels of the Tenant by way of
distress, this provision may be pleaded as an estoppel against the Tenant in
any action brought to test the right of the Landlord to levy such distress.

8.03     Costs  The Tenant shall pay to the Landlord all damages and reasonable
costs (including, without limitation, all legal fees on a solicitor and his
client basis) incurred by the Landlord in enforcing the terms of this lease, or
with respect to any matter or thing which is the obligation of the Tenant under
this lease, or in respect of which the Tenant has agreed to insure, or to
indemnify the Landlord.

8.04     Allocation of Payments  The Landlord may at its option apply sums
received from the Tenant against any amounts due and payable by the Tenant
under this lease in such manner as the Landlord sees fit.

8.05     Survival of Obligations  If the Tenant has failed to fulfil its
obligations under this lease with respect to the maintenance, repair an
alteration of the Building and the Premises and removal of improvements and
fixtures from the Building during or at the end of the Term, such obligations
and the Landlord's rights in respect thereto shall remain in full force and
effect notwithstanding the expiration or sooner termination of the Term.

<PAGE>
                                     - 14 -

                                   ARTICLE IX

                 STATUS STATEMENT ATTORNMENT AND SUBORDINATION

9.01     Status Statement  Within 10 days after written request by the
Landlord, the Tenant shall deliver in a form supplied by the Landlord a
statement or estoppel certificate to the Landlord as to the status of this
lease, including as to whether this lease is unmodified and in full force and
effect (or, if there have been modifications that this lease is in full force
and effect as modified and identifying the modification agreements); the amount
of Net Rent and Additional Rent then being paid and the dates to which same
have been paid; whether or not there is any existing or alleged default by
either party with respect to which a notice of default has been served and if
there is any such default, specifying the nature and extent thereof; and any
other matters pertaining to this lease as to which the Landlord shall request
such statement or certificate.

9.02     Subordination  This lease and all rights of the Tenant shall be
subject and subordinate to any and all Mortgages and any ground, operating,
overriding or underlying leases, from time to time in existence against the
Lands and Building. On request, the Tenant shall subordinate this lease and its
rights under this lease to any and all such Mortgages and leases and to all
advances made under such Mortgages. The form of such subordination shall be as
required by the Landlord or any Mortgagee or the lessee under any such lease.
The Landlord shall use its best efforts to obtain a non-disturbance agreement
in favour of the Tenant from any Mortgagee of any Mortgage.

9.03     Attornment  The Tenant shall promptly on request attorn to any
Mortgagee, the owners of the Building and Lands, or the purchaser on any
foreclosure or sale proceedings taken under any Mortgage, and shall recognize
such Mortgagee, owner, lessor or purchaser as the landlord under this lease.

                                   ARTICLE X

                             ENVIRONMENTAL MATTERS

10.01    Environmental Covenants

(a)      Promptly after it becomes aware of the same, the Tenant shall give
written notice to the Landlord of any deposit, release or spill of a
Contaminant on the Premises by the Tenant, or those for whom the Tenant is at
law responsible, during the Term which constitutes a violation of, or is
reportable under, any environmental laws or regulations.

(b)      If an event referred to in Section 10.01(a) occurs, the Tenant shall
promptly comply with all orders or requests from any environmental governmental
authority or agency, relating to the event and shall promptly remove any
Contaminant that has been deposited, released or spilled on the Premises to the
reasonable satisfaction of the Landlord, provided that such removal shall be in
accordance with environmental laws and regulations.

(c)      The Tenant shall promptly comply with all environmental laws and
regulations affecting the Premises and shall, promptly after it becomes aware
of the same, advise the Landlord in writing of any orders or claims issued to
the Tenant pursuant to any environmental laws or regulations by any
governmental authority or agency with respect to the environmental state or
condition of the Premises and the Tenant's compliance or non-compliance with
environmental laws and regulations and any statutory or civil proceedings
commenced against the Tenant pursuant to any environmental laws or regulations
in connection with the Premises.

(d)      The Tenant shall permit the Landlord at any time on reasonable notice
to the Tenant to inspect the Premises during the Term and to take such samples
and perform such tests as may be necessary to determine the presence of
Contaminants on the Premises and the compliance of the Premises with
environmental laws and regulations, provided that all such activities shall be
conducted so as to cause as minimal disruption to the Tenant's business as is
possible in the circumstances.

(e)      The Tenant shall indemnify and save harmless the Landlord from all
costs, expenses, fines, liabilities, obligations, judgments, suits, actions,
claims and proceedings of any and every nature and kind whatsoever suffered or
incurred by the Landlord which at any time or from time to time arise as a
result of the presence, release, spill or discharge of any Contaminant in, on,
under or from the Premises as a result of the business or activities of the
Tenant, or those for whom the Tenant is at law responsible, on the Premises
during the Term and which result in an obligation under any environmental laws
or regulations.
<PAGE>
                                     - 15 -

(f)      If the Tenant fails to comply with any of the obligations in this
Article X, such failure shall constitute an event of default under this lease
and shall entitle the Landlord to the same rights and remedies available with
respect to any other default, including, without limitation, the right of
terminating this lease and re-entering the Premises, all without releasing the
Tenant from its obligations. The Landlord may, at its option, elect to comply
with such obligations at the cost and expense of the Tenant (including
Landlord's legal fees on a solicitor and his own client basis) and the Tenant
shall pay all such costs and expenses to the Landlord forthwith on demand.

(g)      The covenants and agreements contained in this Article X shall survive
the expiry or earlier termination of this Lease.

                                   ARTICLE XI

                               GENERAL PROVISIONS

11.01    Delay  Except as expressly provided in this lease, whenever the
Landlord or Tenant is delayed in the fulfilment of any obligation under this
lease (other than the payment of Rent and surrender of the Premises on
termination) by an unavoidable occurrence which is not the fault of the party
delayed in performing such obligation, then the time for fulfilment of such
obligation shall be extended during the period in which such circumstances
operate to delay the fulfilment of such obligation.

11.02    Overholding  If the Tenant remains in possession of the Premises after
the end of the Term with the consent of the Landlord but without having
executed and delivered a new lease or an agreement extending the Term, there
shall be no tacit renewal of this lease, and the Tenant shall be deemed to be
occupying the Premises as a tenant from month to month at a monthly Net Rent
payable in advance on the first day of each month equal to one hundred and
fifty percent (150%) of the monthly amount of Net Rent payable during the last
month of the Term, and otherwise upon the same terms as are set forth in this
lease, so far as these are applicable to a monthly tenancy.

11.03    Waiver  If either the Landlord or Tenant excuses or condones any
default by the other of any obligation under this lease, no waiver of such
obligation shall be implied in respect of any continuing or subsequent default.

11.04    Registration  Neither the Tenant nor anyone claiming under the Tenant
shall register this lease or any Transfer without the prior written consent of
the Landlord. The Landlord and the Tenant agree that, forthwith after the
Commencement Date, the Tenant shall be entitled to cause to have prepared and
registered a short form of lease for the purposes of registration in such form
as approved by the Landlord and without disclosure of any terms which the
Landlord does not desire to have disclosed.

11.05    Notices  Any notice, consent or other instrument which may be or is
required to be given under this lease shall be in writing and shall be
delivered in person or sent by registered mail postage prepaid as follows:

(a)      if to the Landlord, at   36E Stoffel Drive, Toronto, Ontario M9W 1A8
                                  Attention:     Sergio Dalbo or Arrigo Rossi
                                  Facsimile No.  (416) 249-1457

(b)      if to the Tenant, at     the Premises
                                  Attention:     Vice-President Legal Affairs/
                                                 Corporate Secretary
                                  Facsimile No.  to be provided by Tenant
                                                 within 15 days of Commencement
                                                 Date

         Any such notice or other instrument shall be deemed to have been given
and received on the day upon which personal delivery is made or, if mailed,
then 48 hours following the date of mailing. Either party may give notice to
the other of any change of address and after the giving of such notice, the
address therein specified is deemed to be the address of such party for the
giving of notices. If postal service is interrupted or substantially delayed,
all notices or other instruments shall be delivered in person.

11.04    Successors  The rights and liabilities created by this lease extend to
and bind the successors and assigns of the Landlord and the heirs, executors,
administrators and permitted successors and assigns of the Tenant. No rights,
however, shall enure to the benefit of any Transferee unless the provisions of
Article VII are complied with.
<PAGE>
                                     - 16 -

11.07    Joint and Several Liability  If there is at any time more than one
Tenant or more than one Person constituting the Tenant, their covenant shall be
considered to be joint and several and shall apply to each and every one of
them. If the Tenant is or becomes a partnership, each Person who is a member,
or shall become a member, of such partnership or its successors shall be and
continue to be jointly and severally liable for the performance of all
covenants of the Tenant pursuant to this lease, whether or not such Person
ceases to be a member of such partnership or its successor.

11.08    Captions and Section Numbers  The captions, section numbers, article
numbers and table of contents appearing in this lease are inserted only as a
matter of convenience and in no way affect the substance of this lease.

11.09    Extended Meanings  The words "hereof", "hereto" and "hereunder" and
similar expressions used in this lease relate to the whole of this lease an not
only to the provisions in which such expressions appear. This lease shall be
read with all changes in number and gender as may be appropriate or required by
the context. Any reference to the Tenant includes, where the context allows,
the employees, agents, invitees and licensees of the Tenant and all others over
whom the Tenant might reasonably be expected to exercise control.

11.10    Partial Invalidity  All of the provisions of this lease are to be
construed as covenants even though not expressed as such. If any such provision
is held or rendered illegal or unenforceable it shall be considered separate
and severable from this lease and the remaining provisions of this lease shall
remain in force and bind the parties as though the illegal or unenforceable
provision had never been included in this lease.

11.11    Entire Agreement  This lease and the Schedules and riders, if any,
attached hereto set forth the entire agreement between the Landlord and Tenant
concerning the Premises and there are no agreements or understandings between
them other than as are herein set forth. This lease and its Schedules and riders
may not be modified except by agreement in writing executed by the Landlord and
Tenant.

11.12    Governing Law  This lease shall be construed in accordance with and
governed by the laws of the Province of Ontario.

11.13    Time of the Essence  Time is of the essence of this lease.

11.14    Quiet Enjoyment  If the Tenant pays Rent, fully performs all of its
obligations under this lease, and there has been no Event of Default, the Tenant
shall be entitled to peaceful and quiet enjoyment of the Premises for the Term
without interruption or interference by the Landlord or any Person claiming
through the Landlord.

11.15    Access by Landlord  The Landlord and its representatives shall, upon
24 hours prior written notice, be permitted to enter the Building and the Lands
for the purposes of doing any work which the Landlord may require or be
obligated to perform by this lease. Entry by the Landlord shall be restricted
to the normal business hours of the Tenant, except in cases of emergency, in
which case the Landlord shall not be required to give the Tenant any notice but
the Landlord shall attempt to give the Tenant as much notice as the
circumstances permit.

11.16    Adjustment  The Landlord and Tenant shall adjust between themselves on
the commencement and termination of this lease, all taxes, water rates,
insurance premiums and other charges relating to the Premises with the
intention that the Landlord shall bear such charges until commencement of this
lease and the Tenant shall bear such charges thereafter and until it delivers
possession of the Premises to the Landlord in accordance with the provisions of
this lease.

11.17    Impossibility of Performance  If either party 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, riots, insurrection, sabotage,
rebellion, war, act of God or other reason whether of a like nature or not,
which is not the fault of the party delayed in performing work or doing acts
required hereunder, then performance of such term, covenant or act shall be
excused for a period equivalent to the period of such delay. Notwithstanding
the foregoing, the Tenant shall not be excused from any obligation for the
prompt payment of Rent pursuant to this lease.


<PAGE>
                                     - 17 -

11.18    Option to Extend  Provided that there is not an Event of Default which
is continuing and the Tenant has given written notice to the Landlord at least
120 days prior to the expiration of the Term of its intention to exercise the
following option to extend, then the Tenant shall the right to extend the Term
on an "as is" basis for a further period of three (3) years and all of the
terms of this lease shall apply to such extension term, except that:

(a)      there shall be no further option to extend; and

(b)      during the extension term, the Tenant shall pay Net Rent to be agreed
upon in bona fide negotiations between the Landlord and the Tenant, provided
that the Net Rent for the extension term shall not be less than the Net Rent
payable during the last year of the Term. In the event that such Net Rent has
not been agreed upon by the parties at least 60 days prior to the expiration of
the Term, then this option to extend will be at an end.

11.20    Paramountcy  In the event of any conflict or inconsistency between the
terms of this lease and the terms of any other agreement, oral or written,
between the parties hereto in respect of the Premises, the terms of this lease
shall in any event prevail.

         IN WITNESS WHEREOF the Landlord and Tenant have executed this lease as
of the date first above written.



                                   565991 ONTARIO LIMITED


                                   By: /s/ Sergio Dalbo
                                       ---------------------------------
                                       Sergio Dalbo, President
                                   I have authority to bind the Corporation.



                                   LORUS THERAPEUTICS INC.


                                   By: /s/ James Parsons
                                       ---------------------------------
                                       Name/Title: James Parsons, VP Finance &
                                                   Administration & CFO


                                   By: /s/ Jim Wright
                                       ---------------------------------
                                       Name/Title: Dr. Jim Wright, President
                                   We have authority to bind the Corporation.
<PAGE>
                                  SCHEDULE "A"

                               LEGAL DESCRIPTION


All and Singular that certain parcel or tract of land and premises, situate,
lying and being in the City of Toronto (formerly in the City of Etobicoke), and
Province of Ontario, and being composed of part of Lot 20, Concession 3,
fronting the Humber in the said City, the boundaries of the said parcel of land
being more particularly described as follows:

PREMISING that the bearing herein are assumed and are referred to the bearing
North seventy-two (72) degrees, twenty-one (21) minutes, twenty (20) seconds
East of the North limit of Richview Road as established by By-law Number 3988
for the Borough of Etobicoke fronting Lot 17, Concession 2, fronting the Humber;

COMMENCING at an iron bar in the Northerly limit of Meridian Road as opened by
By-law Number 13947 for the Borough of Etobicoke, which said iron bar may be
located as follows:

BEGINNING at a cut stone monument marking the Northeasterly angle of the said
Lot 20;

THENCE South eighteen (18) degrees, eleven (11) minutes, forty (40) seconds
East along the Easterly limit of the said Lot 20 a distance of eight hundred
and forty-seven and forty-nine hundredths (847.49) feet to its intersection
with the said Northerly limit of Meridian Road;

THENCE South seventy-one (71) degrees, forty-eight (48) minutes, twenty (20)
seconds West along the last mentioned limit a distance of two hundred and five
(205.00) feet to the point of commencement;

THENCE South seventy-on (71) degrees, forty-eight (48) minutes, twenty (20)
seconds West


and continuing along the said Northerly limit of Meridian Road a
distance of one hundred and fifty and fifty-five hundredths (150.55) feet to
the beginning of a curve to the right;

THENCE on the said curve to the right having a radius of thirty (30.00) feet,
the chord of which has a bearing of North seventy-one (71) degrees, fifty-eight
(58) minutes, twenty (20) seconds West and a length of thirty-five and
forty-six hundredths (35.46) feet, an arc distance of thirty-seven and
ninety-three hundredths (37.93) feet to the end of the said curve;

THENCE North thirty-five (35) degrees, forty-five (45) minutes West along the
Easterly limit of Skyway Avenue as opened by the said By-Law Number 13947 a
distance of three hundred and ninety-seven and fifty-seven hundredths (397.57)
feet to an iron bar therein;

THENCE North seventy-one (71) degrees, forty-eight (48) minutes, twenty (20)
seconds East and parallel to the aforesaid Northerly limit of Meridian Road a
distance of two hundred and ninety-nine and Six hundredths (299.06) feet to an
iron bar;

THENCE South eighteen (18) degrees, eleven (11) minutes, forty (40) seconds
East and parallel to the said Easterly limit of Lot 20 a distance of four
hundred (400.00) feet more or less to the point of commencement;

The said parcel of land containing an area of two and one hundred and
sixty-three thousandths (2.163) acres, more or less.