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                                                                    EXHIBIT 10.5

                                     LEASE

       THIS LEASE is dated as of the 19th day of May, 1999.

BETWEEN:

                            ATLANTIS REAL ESTATE CORPORATION
                            as agents for the Owner,

                            (the "Landlord")

                                                        OF THE FIRST PART


                            HYDROGENICS CORPORATION INCORPORATED

                            (the "Tenant")

                                                        OF THE SECOND PART

       IN CONSIDERATION OF the mutual convenants and conditions herein
contained, the parties hereto agree as follows:

1.     DEMISE

       (a)    In consideration of the rents, covenants and agreements
              hereinafter reserved and contained on the part of the Tenant to be
              respectively paid, observed and performed, the Landlord hereby
              leases to the Tenant all and singular that certain parcel or tract
              of land and premises situate, lying and being in the City of
              Vaughan, in the Province of Ontario, and being more particularly
              described in Schedule A annexed hereto, together with all
              buildings and improvements (including all heating, ventilating,
              air conditioning, mechanical, sprinkler, electrical and utility
              equipment and machinery) erected thereon and used in connection
              therewith and all appurtenances thereto from time to time (all of
              which are collectively hereinafter referred to as the "Premises").
              The Premises are municipally known as 100 Caster Avenue,
              containing 13,600 sq. ft. more or less of space.

       (b)    INSPECTION: The Tenant acknowledges that it has examined the
              Premises and is familiar with the condition thereof and the
              permitted uses thereof. The Tenant accepts the Premises on an "as
              is" basis and agrees that the Landlord shall not be obligated or
              required to perform any work on or correct any condition of the
              Premises prior to the commencement of the Term or at any time
              thereafter, except as, provided herein.

       (c)    CONDITION: The Landlord warrants that all mechanical, electrical,
              air conditioning, heating and ventilation systems are in good
              working condition at the commencement of the lease term.

       (d)    OCCUPANCY: The Tenant may, in agreement with the existing tenant,
              Atlas Copco, take occupancy at an earlier date, prior to July 30,
              1999, as long as the Lease has been signed.

              Any rental fees and charges, such as proportionate Realty Tax
              payments, are subject to such an individual agreement between the
              parties. Occupancy while the Atlas Copco lease is still in effect
              is subject to the terms of said Lease. Terms and conditions agreed
              to in the new lease agreement between the Landlord and the Tenant
              will take effect as per August 1, 1999.

2.     TERM

       (a)    To have and to hold the Premises, unless such term shall be
              otherwise terminated as hereinafter provided, for and during the
              period of THREE (3) years, to be computed from and inclusive of
              the first day of AUGUST, 1999 (the "Commencement Date") and from
              thenceforth next ensuing and fully to be complete ended on the
              31st day of JULY, 2002 (the "Term")

       (b)    OPTION TO RENEW: The Landlord covenants with the Tenant that if
              the Tenant duly and regularly pays the Rent and any and all
              amounts required to be paid pursuant to this Lease and performs
              each and every covenant, proviso and agreement on the part of the
              Tenant to be paid, rendered, observed and performed, punctually
              and in accordance with the provisions of this Lease, the Landlord
              will at the expiration of the Term on written notice received by
              the Landlord not more than NINE (9) months and not less than SIX
              (6) months prior to the expiration of the initial Term, grant to
              the Tenant the right to renew the term for a further TWO (2) years
              (the "Renewal Term") on the same general terms and conditions as
              in the Lease then in force at the
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              commencement of the Renewal Term being used by the Landlord for
              the Premises, save and except for the right of further renewal and
              Minimum Rent. The Minimum Rent for the Renewal Term shall be the
              then current market rental for similar Premises in the area
              prevailing at the date the notice was given. The Minimum Rent
              shall be determined by and agreed upon by the Landlord and the
              Tenant between six (6) months and three (3) months prior to the
              expiry of the initial Term, failing which it shall be subject to
              arbitration between the parties in accordance with the Arbitration
              Act, Ontario, and the renewal of the Lease shall be completed by
              the parties prior to the commencement of the Renewal Term, but in
              no event shall the Minimum Rent per annum be less than the Minimum
              Rent for the last year of the Term just ending.

3.     MINIMUM RENT

       (a)    Yielding and paying therefor yearly and every year during the
              Term hereby granted the following sum of lawful money of Canada as
              an annual minimum rent (the "Minimum Rent"), together with
              Additional Rent hereinafter reserved for the period of the Term
              commencing on the 1st day of AUGUST, 1999 to the 31st day of JULY,
              2002, the sum of EIGHTY THOUSAND, NINE HUNDRED AND TWENTY DOLLARS
              AND ZERO CENTS ($80,920.00), payable in advance in equal
              consecutive monthly installments of SIX THOUSAND, SEVEN HUNDRED
              AND FORTY-THREE DOLLARS AND THIRTY-THREE CENTS ($6,743.33), on the
              first day of each month during such period.

       (b)    DEPOSIT: The Landlord acknowledges receipt from the Tenant of the
              sum of FOURTEEN THOUSAND, FOUR HUNDRED AND THIRTY DOLLARS AND
              SEVENTY-THREE CENTS ($14,430.73) to be applied on account of the
              Minimum Rent coming due and owing for the first and last months of
              the term.

       (c)    POSTDATED CHEQUES: The Tenant shall deliver to the Landlord on or
              before the Commencement Date a series of postdated cheques in
              respect of the monthly payments of Minimum Rent, and any other
              payments required by this lease to be paid by the Tenant monthly
              in advance for the first twelve months of the Term and shall, one
              month before each anniversary date, give twelve postdated cheques
              for the ensuing twelve months.

       (d)    All payments required to be made by the Tenant under or in
              respect of this Lease shall be made to the Landlord at the
              Landlord's office, or to such agent or agents of the Landlord or
              at such other place as the Landlord shall hereafter from time to
              time direct in writing to the Tenant.

4.     ADDITIONAL RENT

       (a)    Any and all sums of money or charges required to he paid by the
              Tenant under this Lease (except Minimum Rent), shall be deemed and
              paid as Additional Rent, whether or not the same are designated as
              Additional Rent hereunder, or whether or not the same are paid to
              the Landlord or otherwise, and all such sums are payable in lawful
              money of Canada without any deduction, setoff or abatement
              whatsoever. Additional rent is due and payable with the next
              monthly installment of Minimum Rent, unless otherwise provided
              herein, but in any event, such Additional Rent is not payable as
              part of Minimum Rent. Additional rent may be estimated by the
              Landlord from time to time and such estimated amount is payable in
              monthly installments in advance with annual adjustments, if
              necessary, and all Additional Rent is deemed to he accruing due on
              a day to day basis.

5.     USE OF PREMISES

       (a)    The Tenant shall not use or occupy the Premises for any purpose
              other than for offices and the manufacturing of data acquisitions
              and power source equipment. The Tenant, in the use and occupation
              of the Premises and in the prosecution or conduct of any business
              therein shall comply with all requirements of all laws, by-laws,
              zoning or otherwise, orders, ordinances, rules and regulations of
              any federal, provincial or municipal authorities and with any
              direction or certificate of occupancy issued pursuant to any law
              by any public officer or officers. The Tenant shall operate its
              business in a diligent, active and continuous manner in the whole
              of the Premises throughout the Term of this Lease.

       (b)    The Tenant will not do or omit to do or permit to be done or
              omitted to be done upon or in respect of the Premises anything the
              doing or omission of which is forbidden by law or would be or
              result in a nuisance, or use or operate any apparatus or appliance
              which may cause annoyance to the Landlord. The Tenant covenants
              that it will not use or permit to be used all or any part of the
              Premises for any dangerous, noxious or offensive trade or
              business, or cause or permit the Premises or any part thereof to
              be used for the purpose of any bankruptcy, liquidation or auction
              sale.

       (c)    ENVIRONMENT: The Tenant warrants that the Premises will not be
              used in any manner which would deposit in, add to, emit or
              discharge into the natural environment or into the Premises any
              contaminant, including any solid, liquid, gas, odour, heat, sound,
              vibration, radiation ("Contaminants"), or a combination thereof,
              resulting directly or indirectly from the activities of the Tenant
              or its agents, contractors, invitees, or licensees which:
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              (I)    impairs the quality of the natural environment or the
                     Premises;
              (ii)   causes damage to property, plant, or animal life;
              (iii)  causes material discomfort or harm to any person;
              (iv)   adversely impairs the health or safety of any person;
              (v)    renders any property, plant or animal life unfit for human
                     use; or
              (vi)   interferes with the normal conduct of business.

              The Tenant will neither construct, alter or replace any structure,
              equipment, apparatus, or mechanism which may emit or discharge any
              Contaminant into any part of the natural environment or the
              Premises nor alter any process or rate of production with the
              result that a Contaminant may be emitted or discharged into the
              natural environment or the Premises without first obtaining a
              Certificate of Approval for the methods or devices to be used to
              control the emission or discharge from a Director appointed by the
              Ministry of the Environment pursuant to Section 4 of the
              Environmental Protection Act, R.S.O. 1990, c. E. 19, as amended,
              and providing a copy and obtaining a receipt therefore from the
              Landlord.

              The Tenant covenants with the landlord to notify the Landlord at
              once in the event any Contaminants are produced on or brought onto
              the Premises by the Tenant or its agents, contractors, suppliers,
              invitees or licensees, and to enter into a contract with a
              properly authorized disposal authority for the neutralizing or
              disposal of such Contaminants, and the Tenant shall leave the
              Premises at the termination of this Lease, free from all pollution
              by such Contaminants.

              The Tenant covenants that it will not store any Contaminants on
              the Premises and if such Contaminants are produced on the
              Premises, it will at once notify the Landlord and enter into a
              contract with a property authorized disposal authority for the
              neutralizing or disposal of such Contaminants.

              The Tenant will at the date of termination of this Lease, remove
              at its sole cost and expense any and all waste resulting from the
              Tenant's use and occupation of the Premises including, without
              limitation, ashes, garbage, refuse, industrial or domestic waste.

              The Tenant shall not carry on any business or operation or permit
              any thing to be done on the Premises which contravenes any
              Environmental Laws

              "Environmental Laws" means any treaties, laws, statutes, codes,
              ordinances, orders, decrees, rules, regulations and municipal
              by-laws, whether domestic, foreign or international, together with
              any order, decision, ruling, decree or award of any governmental
              or regulatory authority relating, in whole or in part, to the
              protection and enhancement of the Environment, occupational
              safety, product liability, public health, public safety and
              transportation of dangerous goods including, without limitation,
              the Environmental Protection Act, the Ontario Water Resources Act,
              the Clean Air Act, the Environmental Contaminants Act, the
              Pesticides Act and the Dangerous Goods Transportation Act.

              LANDLORD ACKNOWLEDGES THAT THE TENANT WILL BE USING INDUSTRIAL
              GASES, PAINTS, PETROLEUM BASED FLUIDS, ETC. IN ITS MANUFACTURING
              AND PRODUCT TESTING PROCESSES. THE TENANT SHALL NOT BE LIABLE FOR
              ANY COSTS OR DAMAGES ARISING FROM BREACH OF ENVIRONMENTAL LAWS BY
              ANOTHER PARTY INCLUDING, WITHOUT LIMITATION, THE LANDLORD, A
              PREVIOUS TENANT OR A PREVIOUS OCCUPIER OF THE PREMISES.

       (d)    The Tenant acknowledges that the landlord has made no
              investigation of the Tenant's proposed use of the Premises and no
              representation has been made as to the acceptability thereof.

       (e)    The Landlord and its agents, servants, employees and
              representatives including such experts and technical personnel as
              the Landlord deems necessary, shall have the right to inspect
              (including testing) the Premises at any time or times during the
              Term of any renewal thereof, upon reasonable prior notice to the
              Tenant, for the purpose of determining whether the operation of
              the Tenant complies with the above provisions. The Tenant shall
              pay as Additional Rent any costs incurred by the landlord in
              making such inspections. Such costs shall be paid forthwith upon
              demand. In the event that the Landlord, acting reasonably,
              determines that the Tenant is in breach of the above covenants,
              then the Landlord shall provide the Tenant with notice in writing
              of the breach and the Tenant shall after receipt of such notice
              immediately commence to rectify such breach at the Tenant's
              expense. In the event that the Tenant does not immediately
              commence to rectify such breach, then the Landlord at its option
              and in its sole discretion may terminate this Lease without any
              further notice or may rectify such breach at the cost of the
              Tenant, and the Tenant shall forthwith upon demand reimburse the
              Landlord for the cost of rectification and such sum shall be
              considered to be Additional Rent under this Lease and collectible
              as Additional Rent. Provided further that in the event the Tenant
              takes action to rectify such breach as noted above, the Tenant
              shall complete such rectification within thirty (30) days after
              receipt of notice given above by the Landlord. In every event, the
              Tenant shall be fully responsible for all damage which may be
              caused as a result of the breach of any provision contained in
              Sections 5(d) and 5(e) hereof by the Tenant, its agents, servants,
              employees, contractors, suppliers, invitees or licensees and
              shall indemnify the Landlord from all liability and claims of any
              nature arising therefrom. The covenant of indemnity contained
              herein shall survive the termination of this Lease notwithstanding
              anything herein to the contrary. The Tenant agrees that the making
              of inspections or remedial work by the Landlord pursuant to this
              Section 5(e) shall not constitute a reentry or a breach of any
              covenant for quiet enjoyment contained in this Lease.
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                          In addition, the Tenant shall during the Term and any
                          renewal thereof permit the Landlord, at the
                          Landlord's expense, to conduct a Phase 1 Audit and/or
                          Phase II Audit, commission a survey of the Premises
                          and commission and/or conduct such other reports,
                          plans and studies with respect to any facility
                          contained within the Premises (collectively, the
                          "Studies") as the Landlord shall require.  In
                          conducting or commissioning the Studies, the Landlord
                          shall use its reasonable best efforts not to interfere
                          with the operations of the Tenant.

                 (f)      DELETED

6.               TENANT'S COVENANTS

                 The Tenant hereby covenants and agrees with the Landlord as
                 follows:

                 (a)      COVENANT TO PAY: To pay Rent and Additional Rent
                          without deduction, abatement or setoff.

                 (b)      BUSINESS TAXES: The Tenant shall pay, in each and
                          every year during the Term, as Additional Rent, and
                          discharge within twenty (20) days after same shall
                          become due and payable, any or all taxes, rates,
                          duties, assessments and other charges that may now or
                          in the future be levied, rated, charged or assessed
                          against or in respect of all improvements, equipment
                          and facilities on or in the Premises (whether
                          installed by the Tenant or by the Landlord on behalf
                          of the Tenant) and every tax and license fee in
                          respect of any and every business carried thereon or
                          therein in respect of the use or occupancy thereof by
                          the Tenant (and every subtenant or licensee), whether
                          such taxes, rates, duties, assessments and license
                          fees are charged by any municipal, parliamentary,
                          school or other body during the Term hereby demised.
                          The tenant will indemnify and keep indemnified the
                          Landlord from and against payments of all loss,
                          costs, charges and expenses occasioned by or arising
                          from any and all such taxes, levies, rates, duties,
                          assessments, license fees (including all Realty Taxes
                          pursuant to Section 6(c) hereof), and any and all
                          taxes which may in future be levied in lieu of such
                          taxes; and any such loss, costs, charges and expenses
                          suffered by the Landlord pursuant to this Section
                          6(b) may be collected by the Landlord as Rent with
                          all rights of distress and otherwise as reserved to
                          the Landlord in respect of Rent arrears.  The Tenant
                          further covenants and agrees that upon written
                          request of the Landlord, the Tenant will promptly
                          deliver to the Landlord for inspection receipts for
                          payment of all taxes, rates, duties, assessments and
                          other charges payable by the Tenant pursuant to this
                          Section 6(b) which were due and payable up to one (1)
                          month prior to such request, and will furnish such
                          other information in connection therewith as the
                          Landlord may reasonably require.

                 (c)      REALTY TAXES:

                 (i)      The Tenant will, as Additional Rent, in each and
                          every year during the Term and within the time or
                          times hereinafter provided, pay directly to the
                          taxing authority or to the Landlord as the Landlord
                          may direct from time to time, and discharge all taxes
                          (including local improvement rates), rates, duties,
                          levies, fees, charges and assessments whatsoever
                          imposed, assessed, levied or charged now or in the
                          future by any municipal, regional, provincial,
                          federal, parliamentary or other governmental body,
                          corporate authority, agency or commission ("Realty
                          Taxes") against the Premises and/or the Landlord in
                          connection therewith during the Term hereby demised.
                          The Tenant agrees to provide the Landlord within ten
                          (10) days after demand therefor by the Landlord with
                          a copy of any real property tax bill and real
                          property assessment notice for the Premises.  The
                          Tenant will, upon request, promptly deliver to the
                          Landlord receipts for payment of all such Realty
                          Taxes paid to any such taxing authorities, as
                          aforesaid, and will furnish and deliver all such
                          other information in connection therewith as the
                          Landlord may reasonably require.

                 (ii)     The amount payable by the Tenant pursuant to Section
                          6(c)(i) may be estimated by the Landlord for such
                          period or periods as the Landlord may determine from
                          time to time, and upon written request from the
                          Landlord, the Tenant shall pay to the Landlord the
                          amount so estimated in monthly installments in
                          advance during such period, together with all other
                          rental payments provided for in this Lease.
                          Notwithstanding anything hereinbefore contained, if
                          the Landlord decides to be responsible in the first
                          instance for the payment of such Realty Taxes in
                          respect of the Premises in accordance with the
                          provisions of this Section 6(c) and if at any time
                          when payment by the Landlord of such Realty Taxes,
                          whether interim, installment or final is due, the
                          Landlord shall not have on deposit a sufficient sum
                          to pay the full amount of such Realty Taxes, the
                          Tenant shall forthwith, upon demand, pay, as
                          Additional Rent, the amount determined as aforesaid
                          of any such deficiency to the Landlord.  When the
                          final real property tax bill in any year has been
                          received, which relates to the period for which such
                          estimated payments have been made by the Tenant, as
                          aforesaid, the parties hereto agree to adjust all
                          payments made by the Tenant on account of such Realty
                          Taxes in accordance with such final real property tax
                          bill.  The Tenant shall pay any and all costs and
                          expenses incurred by the Landlord or the Tenant, as
                          the case may be, in respect of any appeal or
                          contestation conducted by the Landlord or the Tenant,
                          as the case may be, in respect of any appeal or
                          contestation conducted by the Landlord or the Tenant
                          (with the prior consent of the Landlord) of such
                          Realty Taxes levied or assessed against the Premises.

                 (d)      UTILITIES:  The Tenant shall be solely responsible
                          for and shall promptly pay all charges for water,
                          gas, electricity, telephone and any and all other
                          utilities used or consumed in, or any other charges
                          levied or assessed on or in respect of the Premises,
                          and for all fittings, machines, apparatus or other
                          things leased in respect thereof and for all work or
                          services performed by any corporation or commission
                          in connection with such public or private utilities.
                          In no event shall the Landlord be liable for, nor
                          have any obligation with respect to, any interruption
                          or cessation of, or any failure in the supply of any
                          such utilities, services or systems, including,
                          without limitation, the water and sewage systems, to
                          the Premises.
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                 (e)      MAINTENANCE AND REPAIR:  The Tenant shall, at its
                          sole cost and expense and at all times throughout the
                          Term, keep and maintain the whole of the Premises and
                          every part thereof (including, without limitation,
                          all equipment, machinery and fixtures therein and all
                          appurtenances thereof and improvements thereto) in
                          good order, repair and first class condition, as
                          would a prudent owner.  Without in any way limiting
                          the generality of the foregoing, the Tenant shall
                          promptly make all needed repairs or replacements in
                          and to the Premises, including, without limitation,
                          all repairs or replacements which are interior and
                          exterior and nonstructural, ordinary as well as
                          extraordinary, foreseen as well as unforeseen, it
                          being understood, confirmed and agreed by the Tenant
                          that the Landlord shall not at any time during the
                          Term of this Lease be required or called upon to make
                          any repairs or replacements in and to the Premises of
                          any nature or kind whatsoever, except that the
                          Landlord shall be responsible, at Landlord's expense,
                          for all repairs to the structure including
                          foundations, roof structure and walls.  Provided that
                          any repairs or replacements performed by the Tenant
                          which involve work on the roof of the Building,
                          including, without limitation, repairs or replacement
                          to the HVAC system, shall be performed by a roofing
                          contractor appointed by the Landlord or under the
                          supervision of the Landlord's engineer.  The Tenant's
                          obligation to maintain and repair and, where
                          necessary, replace, shall extend to all driveways,
                          sidewalks, parking areas and landscaping generally.
                          The Tenant shall be responsible at its own cost and
                          expense for all snow removal.

                 (f)      ENTRY BY LANDLORD:  It shall be lawful for the
                          Landlord and its agents, at all reasonable times
                          during the Term upon reasonable notice to the Tenant,
                          to enter the Premises to inspect the condition
                          thereof.  Where an inspection reveals repairs or
                          replacements are necessary, the Landlord shall give
                          the Tenant notice in writing that such repairs are to
                          be commenced and thereupon the Tenant will make the
                          necessary repairs in a good and workmanlike manner
                          and to the satisfaction of the Landlord.  The failure
                          by the Landlord to give notice shall not relieve the
                          Tenant from any of its obligations to repair or
                          replace in accordance with the provisions hereof.
                          Upon the Tenant's failure to repair upon notice as
                          herein provided, the Landlord may, but shall not be
                          obligated to, make such repairs or replacements, and
                          the Tenant shall forthwith pay upon demand the
                          Landlord's costs for making any such repairs or
                          replacements plus a sum equal to fifteen percent
                          (15%) thereof for overhead, as Additional Rent.  The
                          Tenant agrees that the making of any repairs or
                          replacements by the Landlord pursuant to this Section
                          6(f) is not a reentry or a breach of any covenant for
                          quiet enjoyment contained in this Lease.

                 (g)      LIENS:  The Tenant covenants that it will not suffer
                          or permit any construction liens, or other liens or
                          orders for the payment of money to be registered
                          against the Premises during the Term by reason, or
                          arising out of any labour or material, work or
                          service tarnished to the Tenant or to anyone claiming
                          through the Tenant and should any such lien or order
                          be so registered the Tenant shall satisfy and
                          discharge the same forthwith, and should the Tenant
                          fail or neglect so to do within fifteen (15) days
                          after written notice thereof from the Landlord, tile
                          Landlord may, but without obligation so to do,
                          satisfy and discharge such lien and may add to the
                          next ensuing installment of Rent the amount of such
                          lien and all legal and other expenses including
                          solicitors' fees and bond premiums, together with
                          interest thereon from the date of payment, which
                          shall thereupon become due and payable as additional
                          Rent.  The Tenant shall defend all suits to enforce
                          such lien or order whether against the Landlord or
                          the Tenant at the Tenant's sole cost and expense.
                          The Tenant hereby indemnifies the Landlord against
                          any expense incurred by the Landlord as a result of
                          such lien or order.

                 (h)      SURRENDER OF THE PREMISES:  The Tenant will, at the
                          expiration or sooner determination of the Term,
                          peaceably surrender and yield up unto the Landlord,
                          the Premises, with the appurtenances, together with
                          all buildings and erections which at any time during
                          the Term shall be made therein or thereon, in a
                          broom-swept condition and in as good condition and
                          repair as the Tenant is required to maintain the
                          Premises hereunder and shall surrender all keys for
                          the Premises to the Landlord at the place then fixed
                          for the payment of Rent and shall inform the Landlord
                          of all combinations on all locks, safes and vaults in
                          the Premises.

                 (i)      HEAT (AND AIR-CONDITIONING, IF APPLICABLE):

                          (a)     The Tenant shall heat (and air-condition if
                                  the Premises contain air-conditioning
                                  equipment) the Premises in a reasonable
                                  manner at its own expense from existing
                                  heating equipment supplied by the Landlord
                                  (and from existing air-conditioning
                                  equipment, if any) so as to prevent damage by
                                  cold or frost to the Premises and to maintain
                                  and keep in good repair the heating equipment
                                  (and air-conditioning, equipment if any)
                                  including, without limitation, repairs and
                                  maintenance occasioned by every day wear and
                                  tear, and replacements required to maintain
                                  such heating equipment (and air-conditioning
                                  equipment, if any) and all other expenses in
                                  connection therewith.

                          (b)     In this regard the Tenant shall at its own
                                  expense, obtain and keep in good standing
                                  during the Term of the Lease a maintenance
                                  and service contract on the heating equipment
                                  (and air conditioning equipment, if any)
                                  issued by mechanical contractor approved by
                                  the Landlord and shall supply the Landlord
                                  with a copy of such contract.

                 (j)      COMPLIANCE WITH LAWS:  The Tenant shall, at its sole
                          cost and expense, comply with all statutes, by-laws,
                          rules, regulations, ordinances, orders and other
                          requirements of any federal, provincial, municipal or
                          other competent authority or of any of their
                          departments, and with all rules, regulations and
                          recommendations of the Insurance Advisory
                          Organization of Canada or any body having a similar
                          function, or of any liability or fire insurance
                          company by which the

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                          Landlord and the Tenant or either of them may be
                          insured at any time during the Term hereof, from
                          time to time in force applicable to the Premises and
                          to the business from the time being carried on by
                          the Tenant upon the Premises or to the use or
                          occupation of the Premises by the Tenant or anyone
                          claiming under the Tenant.

                 (k)      SIGNS:  The Tenant will not paint, fix, display, or
                          cause to be painted, fixed or displayed any sign,
                          picture, advertisement, notice, lettering, or
                          decoration (the "Sign") on any part of the exterior
                          of the Premises without in each instance, the prior
                          written approval of the Landlord, such approval not
                          to be unreasonably withheld.  Any Sign shall comply
                          to all applicable laws.  The Tenant, on ceasing to be
                          the Tenant of the Premises, will, before leaving
                          them, cause any Sign to be removed at its own expense
                          and shall promptly repair any and all damage caused
                          by such installation or removal.

                 (l)      DAMAGE TO PREMISES:  If any damage occurs to the
                          Premises by any cause, the Tenant will give notice to
                          the Landlord of such damage forthwith upon the same
                          becoming known to the Tenant.


7.               INSURANCE

                 (a)  LANDLORD'S INSURANCE:

                          (i)     The Tenant shall pay within ten (10) days of
                                  demand by the Landlord, as Additional Rent,
                                  all premiums with respect to the insurance
                                  covering:

                                  (1)      the Premises (excluding the
                                           foundations and excavations) and the
                                           machinery, boilers and equipment
                                           contained therein and owned by the
                                           Landlord (specifically excluding any
                                           property with respect to which the
                                           Tenant is obligated to insure
                                           pursuant to Section 7(b) hereof)
                                           against damage by fire, explosion,
                                           impact by aircraft or vehicles,
                                           lightning, riot, vandalism,
                                           malicious acts, smoke, leakage from
                                           fire protective equipment, windstorm
                                           or hail and other perils now or
                                           hereafter from time to time embraced
                                           by or defined in a standard fire
                                           insurance policy with extended or
                                           additional perils supplemental
                                           coverage and by-law endorsement;

                                  (2)      boiler and pressure vessel insurance
                                           which shall include, without
                                           limitation, loss or damage of
                                           whatsoever kind or nature by reasons
                                           of explosion or collapse by vacuum
                                           or cracking, burning, or bulging of
                                           any steam or hot water boilers,
                                           pipes and accessories in an amount
                                           as the Landlord shall from time to
                                           time reasonably require, having
                                           regard to the nature of the boilers
                                           and the pressure vessels, if any, in
                                           the Premises;

                                  (3)      loss of insurable gross profits
                                           attributable to all perils insured
                                           against by the Landlord or commonly
                                           insured against by prudent
                                           landlords, including loss of all
                                           rentals receivable from the Tenant,
                                           including Minimum Rent and
                                           Additional Rent in such amount as
                                           the Landlord or the Landlord's
                                           mortgagee from time to time
                                           requires;

                                  (4)      public liability and property damage
                                           insurance in such reasonable amounts
                                           as would be carried by a prudent
                                           owner of similar premises; and

                                  (5)      any other form of such reasonable
                                           insurance the Landlord or the
                                           landlord's mortgagee reasonably
                                           consider advisable.

                          (ii)    Notwithstanding any contribution by the
                                  Tenant to the cost of insurance premiums in
                                  respect of the insurance maintained by the
                                  Landlord for the Premises as herein provided,
                                  the Tenant acknowledges and agrees that no
                                  insurable interest is conferred upon the
                                  Tenant under any policies of insurance
                                  carried by the Landlord and the Tenant has no
                                  right to receive any proceeds of any
                                  insurance policies carried by the Landlord.

                          (iii)   The Tenant will pay upon demand, as
                                  Additional Rent, the amount of any increase
                                  in insurance premiums on the Premises if such
                                  increase is caused by the Tenant's occupancy,
                                  operations in, use or possession of the
                                  Premises whether or not the Landlord has
                                  consented to same.

                          (iv)    The Tenant covenants that nothing will be
                                  done or omitted to be done whereby any policy
                                  of insurance shall be canceled or the
                                  Premises rendered uninsurable. If notice of
                                  cancellation shall be given respecting any
                                  insurance policy or any part thereof shall be
                                  canceled or refused to be renewed by any
                                  insurer by reason of the use or occupation of
                                  the Premises by the Tenant, whether or not
                                  the Landlord has consented to such use and
                                  occupation, the Tenant shall within
                                  forty-eight (48) hours after written notice
                                  remedy or rectify such use or occupation, and
                                  if the Tenant shall fail to do so within such
                                  period, the Landlord may, at its option,
                                  determine this Lease forthwith by leaving
                                  upon the Premises notice in writing of
                                  termination and thereupon Rent and any other
                                  payment for which the Tenant is liable under
                                  this Lease shall be apportioned and paid up
                                  in full to the date of such determination of
                                  the Lease, and the Tenant shall immediately
                                  deliver up vacant possession of the Premises
                                  to the Landlord.
<PAGE>   7
                                      -7-


       (b)    TENANT'S INSURANCE

              (i)     The Tenant shall, throughout the Term of the Lease, at its
                      sole cost and expense, take out and keep in full force and
                      effect, in the names of the Tenant, the Landlord and the
                      Landlord's mortgagee (if applicable), as their respective
                      interest may appear, the following insurance:

                      (1)     property damage and public liability insurance
                              including personal liability, contractual
                              liability, tenants' legal liability, and owners'
                              and contractors' protective and non-owned
                              automobile liability insurance coverage with
                              respect to the Premises, including the business
                              operations conducted from the Premises. Such
                              policies shall be written on a comprehensive
                              occurrence basis with limits of not less than Two
                              Million Dollars ($2,000,000.00) for bodily injury
                              to any one or more persons, or property damage,
                              and such higher limits as the Landlord or its
                              mortgagees may reasonably require from time to
                              time.

                      (2)     insurance upon property of every description and
                              kind owned by the Tenant, or for which the Tenant
                              is legally liable, or installed by or on behalf of
                              the Tenant and which is located within the
                              Premises including without limitation
                              stock-in-trade, chattels, furniture and equipment
                              in an amount not less than the cost of replacement
                              thereof without deduction for depreciation.

              (ii)    All property damage policies written on behalf of the
                      Tenant shall contain a waiver of any subrogation rights
                      which the Tenant's insurers may have against the Landlord
                      and against the Landlord's employees, servants, agents and
                      those for whom the Landlord is, in law, responsible
                      whether any such damage is caused by the act, omission or
                      negligence of the Landlord or by the Landlord's employees,
                      servants, agents or those for whom the Landlord is in law
                      responsible and shall contain the standard mortgage clause
                      of the Landlord's mortgagee. All liability policies taken
                      out by the Tenant shall be taken out in the names of the
                      Tenant, the Landlord and the Landlord's mortgagee (if
                      applicable) and shall contain a severability of interest
                      clause, a cross liability clause and shall be primary and
                      not call into contribution any other insurance available
                      to the Landlord.

              (iii)   All policies will be taken out with insurers acceptable to
                      the Landlord, acting reasonably, and on policies in form
                      satisfactory from time to time to the Landlord. The Tenant
                      agrees that certificates of insurance or, if required by
                      the Landlord or the Landlord's mortgagee, certified copies
                      of each such insurance policy will be delivered to the
                      Landlord prior to taking possession of the Premises and
                      every renewal date thereafter. All policies will contain
                      an undertaking by the insurers to notify the Landlord and
                      the Landlord's mortgagee in writing not less than thirty
                      (30) days' prior to any material change, cancellation, or
                      other termination thereof.

              (iv)    The Tenant agrees that if the Tenant fails to take out or
                      keep in force any such insurance referred to in this
                      Section 7(b) hereof, or should any such insurance not be
                      approved by either the Landlord or the Landlord's
                      mortgagee, and should the Tenant not rectify the situation
                      within fourty-eight (48) hours after written notice by the
                      Landlord to the Tenant (stating if the Landlord or the
                      Landlord's mortgagee 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 and expense of the Tenant
                      and all outlays by the Landlord shall be immediately paid
                      by the Tenant to the Landlord as Additional Rent on the
                      first day of the next month following such payment by the
                      Landlord, without prejudice to any other rights and
                      remedies of the Landlord under this Lease.

              (v)     If any insurance policy upon the Premises or any part
                      thereof shall be canceled or shall be threatened by the
                      insurer to be canceled, or the coverage thereunder reduced
                      in any way by the insurer by reason of the use and
                      occupation of the Premises or any part thereof by the
                      Tenant or by any assignee or subtenant of the Tenant, or
                      by anyone permitted by the Tenant to be upon the Premises,
                      and if the Tenant fails to remedy the conditions giving
                      rise to the cancellation, threatened cancellation or
                      reduction of coverage within fourty-eight (48) hours after
                      notice thereof by the Landlord, the Landlord may, at its
                      option, in addition to all other rights and remedies
                      under the terms of this Lease enter upon the Premises and
                      remedy the conditions giving rise to such cancellation,
                      threatened cancellation or reduction, and the Tenant shall
                      forthwith pay the cost thereof to the Landlord, which cost
                      may be collected by the Landlord as Additional Rent. The
                      Tenant agrees that any such entry by the Landlord is not a
                      re-entry or a breach of any covenant for quiet enjoyment
                      contained in this Lease.

       (c)    LOSS OR DAMAGE: The Landlord shall not be liable or responsible in
              any way for any injury or death arising from or out of any
              occurrence in, upon, at or relating to the Premises, or damage to
              property of the Tenant or of others located on the Premises, nor
              shall the Landlord be responsible for any loss of or damage to any
              property of the Tenant or others from any cause whatsoever,
              whether or not any such death, injury, loss or damage results from
              the negligence of the Landlord, its agents, servants, employees or
              any other parties for whom the Landlord may in law be responsible.
              Without limiting the generality of the foregoing, the Landlord
              shall not be liable for any damage to persons or property
              resulting form fire, explosion, falling plaster, steam, gas,
              electricity, water, rain or snow from any part of the Premises or
              from the pipes, appliances, plumbing works, roof, or subsurface of
              any floor or ceiling or from the street or any other place or

<PAGE>   8
                                     - 8 -



              by dampness or by any cause of whatsoever nature. The Landlord
              shall not be liable for any such damage caused by persons in the
              Premises or by occupants of adjacent property or the public, or
              caused by construction or by any private, public or quasi-public
              work. All property of the Tenant kept or stored on the Premises
              shall be so kept or stored at the risk of the Tenant only and the
              Tenant shall hold the Landlord harmless from and against any
              claims arising out of damages to the same, including subrogation
              claims by the Tenant's insurers.

        (d)   INDEMNIFICATION OF LANDLORD:  Notwithstanding anything contained
              in this Lease to the contrary, the Tenant will indemnify the
              Landlord and save the Landlord harmless from all loss (including
              loss of Rent payable by the Tenant under this Lease), claims,
              actions, damages, liability and expenses in connection with loss
              of life, personal injury, damage to property or any other loss or
              injury arising from this Lease, or any occurrence in, on, or at
              the Premises, or the occupancy or use by the Tenant of the
              Premises or any part of them, or occasioned wholly or in part by
              an act or omission of the Tenant or by anyone permitted to be on
              the Premises by the Tenant. The Tenant will also pay all costs,
              expenses and legal fees incurred by the Landlord in enforcing
              the covenants and agreements of this Lease.


8.      IMPROVEMENTS, ALTERATIONS, PARTITIONS

        (a)   If the Tenant shall during the Term desire to make alterations,
              decorations, additions or improvements (sometimes hereinafter
              collectively called "Alterations") to any part of the Premises,
              it may do so at its own expense at any time and from time to
              time, provided that such Alterations, shall be made by
              contractors approved by the Landlord and, provided further, that
              the Tenant's rights to make such Alterations to the Premises
              shall be subject to the following conditions:

              (1)   Before undertaking any such Alterations, the Tenant shall
                    submit to the Landlord a plan showing the proposed
                    Alterations and shall obtain the written approval and
                    consent of the Landlord to the same and such approval and
                    consent shall not be unreasonably withheld, provided such
                    Alterations are of a nonstructural nature, and further
                    provided no such Alterations shall commence until the
                    Tenant has delivered to the Landlord all requisite permits
                    with respect thereto;

              (2)   All such Alterations shall conform to all building by-laws,
                    if any, then in force affecting the Premises and such
                    Alterations or improvements shall be completed in a good
                    and workmanlike manner; and

              (3)   Such Alterations will not be, in the sole opinion of the
                    Landlord, of such kind or extent as to in any manner weaken
                    the structure of the Building after the Alterations are
                    completed or reduce the value of the Premises, in which
                    case the Landlord may arbitrarily withhold its consent to
                    same.

        (b)   All Alterations made by the Tenant, or made by the Landlord on
              the Tenant's behalf (other than the Tenant's trade fixtures)
              shall immediately become the property of the Landlord without
              compensation therefor to the Tenant. Such Alterations shall not
              be removed from the Premises either during or at the expiration
              of the Term or sooner determination of this lease except that:

              (1)   The Tenant may at the end of the Term, if not in default,
                    remove its trade fixtures at its own cost;

              (2)   the Tenant shall, at the end of the Term, at its own cost
                    remove such of its leasehold improvements and fixtures as
                    the Landlord may require to be removed; and

              (3)   the Tenant may remove its trade fixtures at the end of the
                    Term and also during the Term in the usual and normal
                    course of its business or if such trade fixtures are excess
                    for the Tenant's purpose or the Tenant is substituting
                    therefor new and similar trade fixtures, provided the
                    Tenant is not in default and provided the Tenant first
                    notifies the Landlord thereof.

        (c)   The Tenant shall, in the case of every such removal, either
              during or at the end of the Term, make good any damage caused to
              the Premises by the installation and removal of any such
              Alterations.

        (d)   It is understood and agreed that the Tenant will not remove or
              carry away from the Premises any plumbing, heating, ventilating
              and air-conditioning plant or equipment or other building service
              or services; the Tenant shall leave the plumbing, heating,
              ventilating and air-conditioning equipment and systems in good
              operating condition subject to the Tenant's repair obligations
              hereunder at the expiration of the Term.

9.      DEFAULT

        (a)   INTEREST ON RENT PAST DUE: The Tenant shall pay to the Landlord
              interest at a rate equal to 4% per annum over the prime rate
              charged by the Landlord's principal banker to the Landlord,
              calculated and compounded monthly, upon all Rent required to be
              paid hereunder from the due date for payment thereof until the
              same is fully paid and satisfied. The Tenant shall indemnify the
              Landlord against all costs and charges (including legal fees)
              lawfully and reasonably incurred in enforcing payment thereof,
              and in obtaining possession of the Premises after default of the
              Tenant
<PAGE>   9
                                     - 9 -



              or upon expiration or earlier termination of the Term of this
              Lease, or in enforcing any covenant, proviso or agreement of the
              Tenant herein contained.

        (b)   RIGHT OF LANDLORD TO PERFORM COVENANTS:  All covenants and
              agreements to be performed by the Tenant under any of the terms
              of this Lease shall be performed by the Tenant, at the Tenant's
              sole cost and expense, and without abatement of Rent. If the
              Tenant shall fail to perform any act on its part to be performed
              hereunder, and such failure shall continue for 10 days after
              notice thereof from the Landlord, the Landlord may (but shall not
              be obligated so to do) perform such act without waiving or
              releasing the Tenant from any of its obligations relative
              thereto. All sums paid or costs incurred by the Landlord in so
              performing such acts under this paragraph 9(a), together with
              interest thereon at the rate set out in paragraph 9(a) from the
              date each such payment was made or each such cost incurred by the
              Landlord, shall be payable by the Tenant to the Landlord on
              demand.

        (c)   EVENTS OF DEFAULT: If and whenever:

              (1)   part or all of the Rent hereby reserved is not paid when
                    due, and such default continues for five days after the due
                    date thereof; or

              (2)   the remaining Term of this Lease, or any goods, chattels or
                    equipment of the Tenant is taken or exigible in execution or
                    in attachment or if a writ of execution is issued against
                    the Tenant; or

              (3)   the Tenant becomes insolvent or commits an act of
                    bankruptcy or becomes bankrupt or takes the benefit of any
                    statute that may be in force for bankrupt or insolvent
                    debtors or becomes involved in voluntary or involuntary
                    winding-up proceedings or if a receiver shall be appointed
                    for the business, property, affairs or revenues of the
                    Tenant; or

              (4)   the Tenant makes a bulk sale of its goods or moves or
                    commences, attempts or threatens to move its goods,
                    chattels and equipment out of the Premises (other than in
                    the normal course of its business) or ceases or fails to
                    conduct business from the Premises; or

              (5)   the Tenant fails to observe, perform and keep each and
                    every one of the covenants, agreements, provisions,
                    stipulations and conditions herein contained to be
                    observed, performed and kept by the Tenant (other than
                    payment of Rent) and persists in such failure after 10 days
                    notice by the Landlord requiring that the Tenant remedy,
                    correct, desist or comply (or if any such breach would
                    reasonably require more than 10 days to rectify, unless the
                    Tenant commences rectification within the 10 days notice
                    period and thereafter promptly and effectively and
                    continuously proceeds with the rectification of the
                    breach); or

              (6)   the Tenant effects a Transfer as defined in paragraph 11(a)
                    without the Landlord's consent; or

              (7)   the Premises become and remain vacant or not used for a
                    period of ten (10) consecutive days while the same are
                    suitable for use by the Tenant or if the Tenant attempts to
                    or abandons the Premises or the Premises are used by any
                    person other than the Tenant without the prior written
                    consent of the Landlord; or

              (8)   re-entry is permitted under any other provisions of the
                    Lease;

              then and in any of such cases, at the option of the Landlord, the
              full amount of the current month's and the next ensuing three
              months' installments of Minimum Rent shall immediately become due
              and payable and the Landlord may immediately distrain for the
              same, together with any arrears then unpaid, and the Landlord may
              without notice or any form of legal process forthwith re-enter
              upon and take possession of the Premises or any part thereof in
              the name of the whole and remove and sell the Tenant's goods,
              chattels and trade fixtures therefrom, any rule of law or equity
              to the contrary regarding the Landlord's right of distress
              notwithstanding, and the Landlord may seize and sell such goods,
              chattels and equipment of the Tenant as are in the Premises and
              may apply the proceeds thereof to all Rent and other payments to
              which the Landlord is then entitled under this Lease. Any such
              sale may be effected in the discretion of the Landlord by public
              auction or otherwise, and either in bulk or by individual item,
              or partly by one means and partly by another, all as the
              Landlord in its entire discretion may decide. If any of the
              Tenant's property is disposed of as provided in this paragraph
              9(c), 10 days' prior notice to the Tenant of disposition shall be
              deemed to be commercially reasonable.

        (d)   WAIVER OF EXEMPTION AND REDEMPTION: Notwithstanding anything
              contained in any statute now or hereafter in force limiting or
              abrogating the right of distress, none of the Tenant's goods,
              chattels or trade fixtures on the Premises at any time during the
              continuance of the Term shall he exempt from levy by distress for
              Rent in arrears, and upon any claim being made for such exemption
              by the Tenant or on distress being made by the Landlord this
              agreement may he pleaded as an estoppel against the Tenant in any
              action brought to test the right to levying upon any such goods
              as are named as exempted in any such statute, the Tenant hereby
              waiving all and every benefit that could or might have accrued to
              the Tenant under and by virtue of any such statute but for this
              Lease. The Tenant covenants not to encumber assets on the
              Premises otherwise eligible for distress.
<PAGE>   10

                                      -10-

       (e)    SURRENDER: If and whenever the Landlord is entitled to or does
              re-enter, the Landlord may terminate this Lease by giving notice
              thereof, and in such event the Tenant shall forthwith vacate and
              surrender the Premises.

       (f)    PAYMENTS: If the Landlord shall re-enter or if this Lease shall
              be terminated hereunder, the Tenant shall pay to the Landlord on
              demand:

              (1)    Rent up to the time of reentry or termination, whichever
                     shall be the later, plus accelerated Rent as herein
                     provided;

              (2)    all expenses incurred by the Landlord including, without
                     limitation, the costs incurred in performing any of
                     the Tenant's obligations under this Lease, re-entering or
                     terminating and re-letting, collecting sums due or payable
                     by the Tenant, realizing upon assets seized (including
                     brokerage, legal fees and disbursements), and the expense
                     of keeping the Premises in good order repairing the same
                     and preparing them for re-letting; and

              (3)    as damages for the loss of income of the Landlord expected
                     to be derived from the Premises, the amounts (if any) by
                     which the Rent which would have been payable under this
                     Lease exceeds the payments (if any) received by the
                     Landlord from other tenants of the Premises payable on the
                     first day of each month during the period which would have
                     constituted the unexpired portion of the Term had it not
                     been terminated, or if elected by the Landlord by notice to
                     the Tenant at or after re-entry or termination, a lump sum
                     amount equal to the Rent which would have been payable
                     under this Lease from the date of such election during the
                     period which would have constituted the unexpired portion
                     of the Term had it not been terminated, reduced by the
                     rental value of the Premises for the same period,
                     established by reference to the terms and conditions upon
                     which the Landlord re-lets them if such re-letting is
                     accomplished within a reasonable period after termination
                     and otherwise established by reference to market and other
                     relevant circumstances. Rent and rental value shall be
                     reduced to present worth at an assumed interest rate of 10%
                     on the basis of the Landlord's estimates and assumptions
                     of fact which shall govern.

       (g)    RIGHT TO RELET: If the Landlord elects to re-enter the Premises
              as hereinbefore provided, or if it takes 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 to the
              Premises as are necessary in order to relet the Premises or any
              part thereof for such term or terms (which may be for a term
              extending beyond the Term) and at such Rent and upon such other
              terms, covenants and conditions as the Landlord in its sole
              discretion considers advisable. Upon each such reletting all
              Rent received by the Landlord from such reletting shall be
              applied in accordance with the provisions of paragraph 9(h). If
              such rent received from such reletting during any month is less
              than that to be paid during that month by the Tenant hereunder,
              the Tenant shall pay any such deficiency, which shall be
              calculated and paid monthly in advance on or before the first day
              of each and every month. No such reentry or taking of possession
              of the Premises by the Landlord shall be construed as an election
              on the Landlord's part to terminate this Lease unless a written
              notice of such intention is given to the Tenant. Notwithstanding
              any such reletting without termination, the Landlord may at any
              time thereafter elect to terminate this Lease for such previous
              breach.

       (h)    REMEDIES CUMULATIVE: No reference to nor exercise of any specific
              right or remedy by the Landlord or the Tenant shall prejudice or
              preclude the Landlord or the Tenant from exercising or invoking
              any other remedy in respect thereof, whether allowed at law or in
              equity or expressly provided for herein. No such remedy shall be
              exclusive or dependent upon any other such remedy, but the
              Landlord or the Tenant may from time to time exercise any one or
              more of such remedies independently or in combination.

10.    DAMAGE OR DESTRUCTION

       (a)    Provided it is hereby expressly agreed that if and whenever
              during the Term hereby demised the Building shall be destroyed or
              damaged, then and in every such event:

              (1)    If the damage or destruction of the Building renders
                     TWENTY-FIVE percent (25%) or more of the area of the
                     Building wholly unfit for occupancy or impossible or
                     unsafe for use and occupancy, the Landlord may at its
                     option, terminate this Lease by giving to the Tenant
                     notice in writing of such termination, in which event,
                     this Lease and the Term hereby demised shall cease and be
                     at an end as of the date of such destruction or damage and
                     the Rent and all other payments for which the Tenant is
                     liable under the terms of this Lease shall be apportioned
                     and paid in full to the date of such destruction or
                     damage.

              (2)    If the damage or destruction is such that the damage to
                     the Premises, in the reasonable opinion of the Landlord to
                     be given to the Tenant within twenty (20) days of the
                     happening of such damage or destruction, cannot be
                     repaired with reasonable diligence within one hundred and
                     twenty (120) days from the happening of such damage or
                     destruction, then the Landlord may, within five (5) days
                     next succeeding the giving of the Landlord's opinion as
                     aforesaid, terminate this Lease by giving to the Tenant
                     notice in writing of such termination, in which event this
                     Lease and the Term hereby demised shall cease and be at
                     an end as of the date of such destruction or damage and
                     the Rent and all
<PAGE>   11

                                      -11-

                     other payments for which the Tenant is liable under the
                     terms of this Lease shall be apportioned and paid in full
                     to the date of such destruction or damage; in the event
                     that the Landlord does not terminate this Lease, then the
                     Landlord shall repair the Premises, except for the
                     Tenant's furnishings, fixtures, improvements and
                     alterations, with all reasonable speed.

              (3)    If in the reasonable opinion of the Landlord the damage
                     can be made good as aforesaid within one hundred and
                     twenty (120) days of the happening of such destruction or
                     damage or if the Landlord has not terminated this Lease as
                     aforesaid, and the damage is such that the Premises are
                     capable of being partially used for the purposes for which
                     they are hereby leased, then until such damage has been
                     repaired, Rent shall abate in the proportion that the part
                     of the Premises which is rendered unfit for occupancy
                     bears to the whole of the Premises and the Landlord shall
                     repair the damage, except for the Tenant's furnishings,
                     fixtures, improvements, and alterations, with all
                     reasonable speed, provided that in the event that the
                     repairs are not completed within 120 days of the happening
                     of such destruction or damage, the Tenant may termination
                     this lease.

       (b)    ABATEMENT OF RENT: Except as provided in Subsections 10(a)(2) and
              (3) hereof, there shall be no abatement from or reduction of the
              rent due hereunder. The Tenant shall not be entitled to damages,
              losses, costs; or disbursements from the Landlord during the Term
              hereby created, caused or contributed by or on account of any
              cause whatsoever including without limitation fire, water,
              sprinkler systems, failure or stoppage of heat, air-conditioning,
              light, elevator, live steam or plumbing service in or to the
              Premises, whether due to acts of God, strikes, accidents, the
              making of alterations, repairs, improvements, structural changes
              to the Premises or the equipment or system supplying the said
              services, or from any cause whatsoever.

11.    ASSIGNMENT AND SUBLETTING

       (a)    CONSENT NEEDED: The Tenant will not, during the said Term or any
              renewals thereof:

              (1)    assign this Lease in whole or in part; nor

              (2)    sublet, share, part with possession or license all or any
                     part of the Premises; nor

              (3)    mortgage or encumber this Lease or the Premises

              to or in favour of any person (collectively a "Transfer") without
              the prior written consent of the Landlord, such consent not to be
              unreasonably withheld. The Landlord will consent to any assignment
              or sublease intended as security only to a bona fide lender
              provided such lender agrees to be bound by the terms of this lease
              upon enforcement of its security and agrees to require any further
              assignee or sublessee to covenant directly with the Landlord to be
              bound by the terms and conditions of this Lease.

       (b)    HOW CONSENT OBTAINED: In requesting the Landlord's consent
              pursuant to Section 11(a) herein, the Tenant shall provide the
              Landlord with all information that it may reasonably require, as
              set out above, including a true copy of any agreement to assign,
              or agreement to sublease. Such information may pertain to the
              identity to the proposed assignee, licensee or sublessee
              (collectively the "Transferee"), the nature of its business, and
              information pertaining to the financial strength of its covenant,
              and such other information as the Landlord shall, from time to
              time, acting reasonably, require. The Landlord shall maintain
              confidentially in respect of all such information received. The
              Landlord will, within thirty (30) days after having received such
              notice and all such necessary information, notify the Tenant in
              writing either that it consents to the Transfer, or it does not
              consent to the Transfer.

       (c)    TENANT'S OBLIGATIONS CONTINUED: No assignment, sublease, or other
              disposition by the Tenant of the Lease or of any interest under
              this Lease or its right to the use and occupancy of the Premises
              shall relieve the Tenant from the obligation for the performance
              of the covenants, obligations, and agreements contained in this
              Lease. Such assignment or disposition shall render null and void
              at the time of such assignment or other disposition any options to
              renew this Lease, options or rights to additional area and options
              and rights to car parking areas unless the Landlord shall have
              otherwise agreed in writing.

       (d)    CHANGE IN CORPORATE CONTROL: If the sale, assignment, transfer or
              other disposition of any of the issued and outstanding capital
              stock, of the Tenant (or any successor or assignee of the Tenant
              which is a corporation), shall result in changing the control of
              the Tenant, such sale, assignment, transfer or other disposition
              shall be deemed a Transfer of this Lease and shall be subject to
              all of the provisions of this Lease with respect to assignments by
              the Tenant. Provided, however, that the Landlord's consent shall
              not be required to any assignment or transfer of the issued and
              outstanding capital stock of the Tenant:



<PAGE>   12
                                     - 12 -

             (1)    to a corporation controlled by or subject to the same
                    control as the assignor or transferor;

             (2)    to a member or members of the family of the assignor or
                    transferor; or

             (3)    in the case of devolution through death.

             For the purposes of this section, "control" of any corporation
             shall be deemed to be vested in the person or persons owning more
             than fifty (50%) percent of the voting power for the election of
             the Board of Directors of such corporation and a "member or
             members" of the family of any assignor or transferor shall include
             his spouse, parents, brothers, sisters and issue.

      (e)    ADVERTISING: The Tenant shall not advertise or allow the Premises
             or a portion thereof to be advertised as being available for
             assignment, sublease, or otherwise without the prior written
             approval of the Landlord as to the form and content of such
             advertisement, provided that no such advertisement shall contain
             any reference to the rental rate of the Premises or any part
             thereof.

12.   STATUS STATEMENT, SUBORDINATION AND ATTORNMENT

      (a)    SALE, CONVEYANCE AND ASSIGNMENT: Nothing in this Lease shall
             restrict  the right of the Landlord to sell, convey, assign or
             otherwise deal with the Premises, subject only to the rights of the
             Tenant under this Lease.

      (b)    EFFECT OF SALE, CONVEYANCE OR ASSIGNMENT: A sale, conveyance or
             assignment of the Premises by the Landlord where the purchaser
             enters into an agreement with the Tenant to be bound by this Lease
             and to assume the obligations of the Landlord hereunder shall
             operate to release the Landlord from liability from and after the
             effective date thereof upon all of the covenants, terms and
             conditions of this Lease, express and/or implied, except as such
             may relate to the period prior to such effective date, and the
             Tenant shall thereafter look solely to the Landlord's successor in
             interest in and to this Lease. This Lease shall not be affected by
             any such sale, conveyance or assignment, and the Tenant shall
             attorn to the Landlord's successor in interest thereunder provided
             such successor in interest has entered into the agreement with the
             Tenant as aforesaid.

      (c)    SUBORDINATION: This Lease is and shall be subject and subordinate
             in all respects to any and all mortgages, development agreements
             and site plan agreements now or hereafter placed on the Premises,
             and to all renewals, modifications, consolidations, replacements
             and extensions thereof.

      (d)    ATTORNMENT: If the interest of the Landlord is transferred to any
             person (herein called the "Purchaser") by reason of foreclosure or
             other proceedings for enforcement of any mortgage, or by delivery
             of a deed in lieu of such foreclosure or other proceedings, the
             Tenant shall immediately and automatically attorn to the Purchaser.

      (e)    EFFECT OF ATTORNMENT: Upon attornment under paragraph 12(d), this
             Lease shall continue in full force and effect as a direct lease
             between the Purchaser and the Tenant, upon all of the same terms,
             conditions and covenants as are set forth in the Lease.

      (f)    EXECUTION OF INSTRUMENTS: The subordination and attornment
             provisions of this Section 12 shall be self-operating and no
             further instrument shall be required. Nevertheless the Tenant, on
             request by and at the expense of the Landlord or any successor in
             interest, shall execute and deliver any and all instruments further
             evidencing such subordination and (where applicable hereunder)
             attornment.

      (g)    STATUS STATEMENT: Each of the parties hereto shall at any time and
             from time to time upon not less than ten (10) days prior notice
             from the other execute, acknowledge and deliver a written statement
             certifying, if such is the case:

            (1)     that this Lease is in full force and effect, subject only
                    to such modification (if any) as may be set out therein;

            (2)     that the Tenant is in possession of the Premises and paying
                    Rent as provided in this Lease;

            (3)     the dates (if any) to which Rent is paid in advance;

            (4)     that there are not, to such party's knowledge any uncured
                    defaults on the part of the other party hereunder, or
                    specifying such defaults if any are claimed;

            (5)     that all work to be completed by the Landlord has been
                    completed;

            (6)     that any option to renew has been exercised;

            (7)     whether there exist any claims or deductions from, or
                    defenses to, the payment of Rent; and

            (8)     such other matters as may reasonably requested by the
                    Landlord.

            Any such statement may be relied upon by any prospective transferee
            or encumbrancer of all or any portion of the Premises, or any
            assignee of any such persons. If the Tenant fails to deliver such
            statement in a timely manner, the Tenant shall be deemed to have
            acknowledged that this Lease is in full force and effect, without
            modification except as may be represented by the Landlord, and that
            there are no uncured defaults in the Landlord's performance.

      (h)   AUTHORITIES FOR ACTION: The Landlord may act in any matter
            provided for herein by its property manager and other person who
            shall from time to time be designated by the Landlord by notice to
            the Tenant. The Tenant shall designate in writing one or more
            persons to act on its














<PAGE>   13
                                      -13-

          behalf in any matter provided for herein may from time to time change,
          by notice to the Landlord, such designation. In the absence of any
          such designation, the person or persons executing this Lease for the
          Tenant shall be deemed to be authorized to act on behalf of the Tenant
          in any matter provided for herein.

13.  MISCELLANEOUS

     (a)  WAIVER OF BREACH: The failure of the Landlord to insist upon a strict
          performance of any of the agreements, terms, covenants and conditions
          hereof shall not be deemed a waiver of any rights or remedies that the
          Landlord may have and shall not be deemed a waiver of any subsequent
          breach or default in any of such agreements, terms, covenants and
          conditions. No waiver by the Landlord hereunder shall be effective
          unless such waiver is in writing signed by the Landlord.

     (b)  HOLDING OVER: If the Tenant shall continue to occupy the Premises
          after the expiration of this Lease, with or without the consent of the
          Landlord and without any further written agreement, the Tenant shall
          be a monthly tenant at the monthly Rent herein reserved and otherwise
          on the terms and conditions herein set forth, except as to the length
          of tenancy.

     (c)  PAYMENTS DEEMED RENT: All payments and charges payable by the Tenant
          pursuant to this lease shall, for all purposes hereunder, be deemed to
          be Rent. If the Tenant fails to pay any Realty Taxes, rates, insurance
          premiums or other charges which it has herein covenanted to pay, the
          Landlord may pay the same and shall be entitled to charge the sums so
          paid to the Tenant who shall pay them forthwith on demand; and the
          Landlord, in addition to any other rights, shall have the same
          remedies and may take the same steps for the recovery of all such sums
          as it might have and take for the recovery of Rent in arrears under
          the terms of this Lease.

     (d)  EVIDENCE OF PAYMENTS BY TENANTS: The Tenant shall from time to time
          at the request of the Landlord produce to the Landlord satisfactory
          evidence of the due payment by the Tenant of all payments required to
          be made by the Tenant under this Lease.

     (e)  ADJUSTMENTS OF TAXES: The rentals, Realty Taxes, and local improvement
          rates and other charges herein provided in respect of the first and
          last years of the Term hereby demised and portion of any months and
          any period or over holding shall be adjusted between the Landlord and
          the Tenant on a per diem basis.

     (f)  OVERLOADING: The Tenant will not bring upon the Premises or any part
          thereof any machinery, equipment, article or thing that by reason of
          its weight, size or use might damage the floors of the Premises and
          that if any damage is caused to the Premises by any machinery,
          equipment, article or thing or by overloading or by any act, neglect
          or misuse on that part of the Tenant or any of its servants, agents or
          employees or any person having business with the Tenant, the Tenant
          will forthwith repair the same or pay to the Landlord the cost of
          making good the same.

     (g)  REFUSE: It is hereby expressly agreed that the Tenant will keep the
          Premises and every part thereof in a clean and tidy condition and will
          not permit waste paper, garbage, ashes or waste or objectionable
          material to accumulate thereon.

     (h)  NET LEASE: It is the purpose and intent of the Landlord and the
          Tenant that the Minimum Rent shall be absolutely net carefree to the
          Landlord, so that save as hereinbefore set out, this Lease shall
          yield, net carefree to the Landlord, the Minimum Rent specified in
          Section 3(a) hereof, in each year during the Term of this Lease
          without notice or demand, and free of any charges, assessments,
          impositions or deductions of any kind and without abatement, deduction
          of setoff and under no circumstances or conditions whether now
          existing or hereafter arising whether beyond the present contemplation
          of the parties is the Landlord to be expected or required to make any
          payment of any kind whatsoever or to be under any obligation or
          liability hereunder. All expenses and obligations of every kind and
          nature whatsoever relating to the Premises which may arise or become
          due during the Term of this Lease shall be paid by the Tenant and the
          Landlord shall be indemnified and saved harmless by the Tenant for all
          costs of same.

     (i)  SALES TAXES: Notwithstanding any other section or clause of the
          Lease, the Tenant shall pay to the Landlord an amount equal to any and
          all goods and services taxes, sales taxes, value added taxes, or any
          other taxes imposed on the Landlord with respect to Rent payable by
          the Tenant to the Landlord under this Lease, whether characterized as
          a goods and services tax, sales tax, value added tax or otherwise
          (herein called "Sales Taxes"), it being the intention of the parties
          that the Landlord shall be fully reimbursed by the Tenant with respect
          to any and all Sales Taxes payable by the Landlord. The amount of the
          Sales Taxes so payable by the Tenant shall be calculated by the
          Landlord in accordance with the applicable legislation and shall be
          paid to the Landlord at the same time as the amounts to which such
          Sales Taxes apply are payable to the Landlord under the terms of this
          Lease or upon demand at such other time or times as the Landlord from
          time to time determines. Notwithstanding any other section or clause
          in this Lease, the amount payable by the Tenant under this paragraph
          shall be deemed not to be Rent, but the Landlord shall have all of the
          same remedies for any rights of recovery of such amount as it has for
          recovery of Rent under this Lease.

     (j)  INSPECT PREMISES: Provided that during the Term hereby created any
          person or persons may inspect the Premises and all parts thereof at
          all reasonable times, on producing a written order to that effect
          signed by the Landlord or its agents.





<PAGE>   14
                                      -14-

     (k)  NOTICE FOR SALE OR TO LET: Provided that the Landlord shall have the
          right during the Term of this Lease to place upon the Premises a
          notice stating that the Premises are for sale and shall, within six
          (6) months prior to the termination of the Term, have the right to
          place upon the Premises a notice stating that the Premises are for
          rent and, further provided that the Tenant will not remove such notice
          or permit the same to be removed.

     (l)  EXPROPRIATION:

          (1)  If during the Term any expropriation of all or any part of the
               Premises takes place, neither of the parties shall have any claim
               against the other for the value of any unexpired portion of the
               Term of this Lease or for damages or otherwise.

          (2)  Each party shall have the right to claim and recover from the
               expropriating authorities such compensation as may be separately
               awarded or recoverable.

          (3)  The Landlord and the Tenant agree to inform each other fully as
               to their respective claims for compensation made by them in the
               event of any expropriation and not to claim compensation on any
               basis inconsistent with this Lease and to reasonably cooperate
               with each other in the prosecution of any proper separate claims.
               Neither party shall compromise the claim of the other party
               without its consent.

     (m)  FORCE MAJEURE: Notwithstanding any other provision of this Lease, if
          the Landlord or the Tenant is, in good faith, delayed or prevented
          from doing anything required by this Lease because of a strike, labour
          trouble, inability to get materials or services, power failure,
          restrictive governmental laws or regulations, riots, insurrection,
          sabotage, rebellion, war, act of God, or any other similar reason that
          is not the fault of the party delayed, the doing of the thing is
          excused for the period of the delay and the party delayed will do what
          was delayed or prevented within the appropriate period after the
          delay. The preceding sentence does not excuse the Tenant from payment
          of Rent or the Landlord from payment of amounts that it is required to
          pay, in the amounts and at the times specified in this Lease.

     (n)  PLANNING ACT: It is a condition of this Lease that the subdivision
          control provisions of the Planning Act (Ontario), and amendments
          thereto, be complied with if they apply. If the provisions of the
          Planning Act do apply, then until any necessary consent to the Lease
          is obtained, the Term (including any extensions thereof) and the
          Tenant's rights and entitlement granted by this Lease are deemed to
          extend for a period not exceeding twenty-one (21) years less one (1)
          day from the commencement of the Term.

     (o)  ENTIRE AGREEMENT: This Lease and the Schedules annexed hereto
          constitute the entire agreement between the parties hereto with
          respect to the Premises and may be amended only by an agreement in
          writing signed by the Landlord and the Tenant and no party hereto is
          bound by any representations, warranties, promises or agreements or
          inducements not embodied herein and in particular, no warranties of
          the Landlord not expressed herein are to be implied.

     (p)  PARTIAL INVALIDITY: If any term, covenant or condition of this Lease
          or the application thereof to any person or circumstance shall, to any
          extent, be invalid or unenforceable, the remainder of this Lease, or
          the application of such term, covenant or condition to persons or
          circumstances other than those as to which it is held invalid or
          unenforceable, shall not be affected thereby and each term, covenant
          or condition of this Lease shall be valid and enforced to the fullest
          extent permitted by law.

     (q)  REGISTRATION: The Tenant shall not register this Lease, but may
          register a Notice of Lease. Such Notice of Lease shall describe the
          parties, the Premises, the Term of this Lease and any renewals and
          shall be prepared by the Tenant's solicitors, subject to the prior
          written approval of the Landlord and its solicitors, at the Tenant's
          expense, and shall be registered at the Tenant's expense.

     (r)  NOTICE:

          (1)  Any notice, request or demand herein provided for or given
               hereunder if given by the Tenant to the Landlord shall be
               sufficiently given if hand delivered or mailed by registered
               mail, postage prepaid, return receipt requested, addressed to the
               Landlord at 1131 Leslie St., Toronto, Ontario M3C 2K6. Any notice
               herein provided for or given hereunder if given by the Landlord
               to the Tenant shall be sufficiently given if hand delivered or
               mailed as aforesaid addressed to the Tenant at the Premises.

          (2)  Any notice mailed as aforesaid shall be conclusively deemed to
               have been given on the third business day following the day on
               which such notice is mailed as aforesaid or if hand delivered on
               the date of delivery. Either party may at any time notify the
               other in writing of a change of address and the address specified
               in the notice will be considered the address of the party for the
               giving of notices under this Lease. If the postal service shall
               be interrupted or substantially delayed, any notice, request,
               demand or other communication will only be delivered in person. A
               notice given by or to one Tenant is a notice by or to all of the
               persons who are the Tenants under this Lease.
<PAGE>   15

                                     - 15 -

      (s)  QUIET ENJOYMENT: The Landlord covenants with the Tenant for quiet
           enjoyment, without hindrance or interruption by the Landlord, or any
           other person or persons lawfully claiming by, through or under the
           Landlord.

      (t)  GENDER AND NUMBER: Words importing the singular number only shall
           include the plural and vice-versa and words importing the masculine
           gender shall include the feminine gender and words importing persons
           shall include firms and corporations and vice-versa. The captions are
           descriptive only and do not form part of this lease.

      (u)  GOVERNING LAW: This Lease shall be governed and shall be construed in
           accordance with the laws of the Province of Ontario.

      (v)  TIME OF THE ESSENCE: Time shall be of the essence of this Lease and
           of every part hereof.

      (w)  BINDING: This agreement and everything herein contained shall be
           binding upon the parties hereto and their respective heirs,
           executors, administrators, successors and assigns and enure to the
           benefit of the parties hereto and their respective heirs, executors,
           administrators, successors and permitted assigns. All the Tenant's
           covenants herein contained shall be deemed joint and several and all
           rights and powers reserved to the Landlord may be exercised by either
           the Landlord or its agents or representatives.


      IN WITNESS WHEREOF the Parties hereto have executed this Lease as of the
date above first written.

<TABLE>
<S>                                             <C>
SIGNED, SEALED AND DELIVERED
 in the presence of:                         )
                                             )   ATLANTIS REAL ESTATE CORPORATION
                                             )   on behalf of the owners
                                             )
                                             )
                                             )   Per:  XXXXXXXXXXXXX               Date: June 8/99
------------------------------------         )       ----------------------------        ------------
Witness                                      )
                                             )
                                             )   HYDROGENICS CORPORATION
                                             )   INCORPORATED
                                             )
                                             )
/s/ RAY CANDIDO                              )   Per: /s/ BOYD TAYLOR              Date: June 7/99
------------------------------------         )       ----------------------------        ------------
Witness   Ray Candido                        )       Boyd Taylor - Director
                                             )
                                             )
                                             )
/s/ DR. JEAN HAMELIN                         )   Per: /s/ PIERRE RIVARD            Date: June 7/99
------------------------------------         )       ----------------------------        ------------
Witness   Dr. Jean Hamelin                   )       Pierre Rivard - President

</TABLE>
<PAGE>   16
                                      -16-


                                  SCHEDULE "A"



ALL AND SINGULAR that certain parcel or tract of land situate, lying and being
in the Township of Vaughan in the Regional Municipality of York, described as
lot 36 on registered Plan 65-M-2309, having a frontage of 131 feet and a depth
of 255 feet, more or less, bearing civic address of 100 Caster Avenue, having a
net rentable area of approximately 13,600 square feet.