Exhibit
4.2


 


US and Canadian Holders


 


COMMON SHARE PURCHASE
WARRANT

LORUS THERAPEUTICS INC.


 


	
  Warrant Shares:
  [            ]

  	
  Issue Date:
  [            ],
  2010

  



 


THIS COMMON SHARE
PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
[                ]
(the “Holder”) is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time
on or after the Issue Date set forth above, (the “Initial Exercise Date”)
and on or prior to 5:00:00 p.m, Eastern time on ·, 2015 [the 5 year anniversary of the Issue Date]
(the “Termination Date”) but not thereafter, to subscribe for and
purchase from Lorus Therapeutics Inc., a corporation incorporated under the
laws of Canada (the “Company”), up to
[            ]
common shares (the “Warrant Shares”) in the capital of the Company. The
purchase price of one Common Share under this Warrant shall be equal to the
Exercise Price, as defined in Section 2(b).


 


Section 1.                                            Definitions. Except
as otherwise defined herein, the capitalized terms in this Warrant shall have
the meanings set forth in Section 6.


 


Section 2.                                            Exercise.


 


(a)                                  Exercise
of Warrant. Exercise of the purchase rights represented
by this Warrant may be made, in whole or in part, at any time or times on or
after the Initial Exercise Date and on or before the Termination Date by
delivery to the Company (or such other office or agency of the Company as it
may designate by notice in writing to the registered Holder at the address of
the Holder appearing on the books of the Company) of this Warrant a duly
executed facsimile copy of the Notice of Exercise in the form attached hereto;
and the payment of the aggregate Exercise Price of the shares thereby purchased
by wire transfer or cashier’s check drawn on a United States bank.


 


(b)                                 Exercise
Price.


 


(i)                                     The
initial exercise price per Common Share under this Warrant (as adjusted
pursuant to the terms hereof, the “Exercise Price”) shall be US$[125% of offering price].


 


(ii)                                  Effective ·, 2011 [first anniversary of the Issue Date],
the Exercise Price shall be US$[130% of offering price].


 


(iii)                               Effective ·, 2012 [the second anniversary of the Issue Date],
the Exercise Price shall be US$[135% of offering price].


 


(iv)                              Effective ·, 2013 [the third anniversary of the Issue Date],
the Exercise Price shall be US$[140% of offering price].


 

















 


(v)                                 Effective ·, 2014 [the fourth anniversary of the Issue Date],
the Exercise Price shall be US$[145% of offering price].


 


(c)                                  Mechanics
of Exercise.


 


(i)                                     Delivery
of Certificates Upon Exercise. Certificates for
shares purchased hereunder shall be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s prime broker with the
Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”)
system, provided that (A) the Transfer Agent is then a participant in such
system and (B) there is an effective Registration Statement permitting the
issuance of the Warrant Shares to the Holder, and otherwise by physical
delivery to the address specified by the Holder in the Notice of Exercise by
the date that is three (3) Trading Days after the latest of (A) the
delivery to the Company of the Notice of Exercise, (B) surrender of this
Warrant, and (C) payment of the aggregate Exercise Price as set forth above
(such date, the “Warrant Share Delivery Date”). This Warrant shall be
deemed to have been exercised on the first date on which all of the foregoing
have been delivered to the Company. The Warrant Shares shall be deemed to have
been issued, and the Holder or any other person so designated to be named
therein shall be deemed to have become a holder of record of such shares for
all purposes, as of the date the Warrant has been exercised.


 


(ii)                                  Delivery
of New Warrants Upon Exercise. If this Warrant shall
have been exercised in part, the Company shall at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder a
new Warrant evidencing the rights of the Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant.


 


(iii)                               No
Fractional Shares or Scrip. No fractional shares
or scrip representing fractional shares shall be issued upon the exercise of
this Warrant.  The Holder shall not be
entitled to any compensation or other right in lieu of a fractional Warrant
Share.


 


(iv)                              Charges,
Taxes and Expenses. Issuance of certificates for Warrant Shares
shall be made without charge to the Holder for any issue or transfer tax or
other incidental expense in respect of the issuance of such certificate, all of
which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event
certificates for Warrant Shares are to be issued in a name other than the name
of the Holder, the Notice of Exercise relating to the exercise of the Warrant
and issuance of such Warrant Shares shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder.


 


(v)                                 Closing of
Books. The Company will not close its shareholder books or records in any
manner which prevents the timely exercise of this Warrant pursuant to the terms
hereof.


 


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(vi)                              Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the
Holder a certificate or the certificates representing the Warrant Shares
pursuant to Section 2(c)(i) by the Warrant Share Delivery Date, then
the Holder will have the right to rescind such exercise.


 


(vii)                           Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In
addition to any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder a certificate or the
certificates representing the Warrant Shares, or fails to credit the account of
the Holder’s prime broker with the DTC through the DWAC system for such number
of Warrant Shares to which the Holder is entitled, pursuant to an exercise on
or by the Warrant Share Delivery Date, and if after such date the Holder is
required by its broker to purchase (in an open market transaction or otherwise)
or the Holder’s brokerage firm otherwise purchases, shares of Common Shares to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the
Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount by which (x) the
Holders total purchase price (including brokerage commissions, if any) for the
shares of Common Shares so purchased exceeds (y) the amount obtained by
multiplying (1) the number of Warrant Shares that the Company was required
to deliver to the Holder in connection with the exercise at issue times (2) the
price at which the sell order giving rise to such purchase obligation was
executed, and (B) at the option of the Holder, either reinstate the
portion of the Warrant and equivalent number of Warrant Shares for which such exercise
was not honored or deliver to the Holder the number of Warrant Shares that
would have been issued had the Company timely complied with its exercise and
delivery obligations hereunder. For example, if the Holder purchases Common
Shares having a total purchase price of US$11,000 to cover a Buy-In with
respect to an attempted exercise of the Warrant for Warrant Shares with an
aggregate sale price giving rise to such purchase obligation of US$10,000,
under clause (A) of the immediately preceding sentence the Company shall
be required to pay the Holder US$1,000. The Holder shall provide the Company
written notice indicating the amounts payable to the Holder in respect of the
Buy-In and evidence of the amount of such loss. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in
equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver
certificates representing Warrant Shares upon exercise of the Warrant as
required pursuant to the terms hereof.


 


(d)                                 Holder’s
Exercise Limitations.


 


(i)                                     The
Company shall not effect any exercise of this Warrant, and a Holder shall not
have the right to exercise any portion of this Warrant, pursuant to Section 2
or otherwise, to the extent that as a result of and after giving effect to such
issuance after exercise as set forth on the applicable Notice of Exercise, the
Holder (together with the Holder’s Affiliates, and any other Persons acting as
a group together with the Holder or any of the Holder’s Affiliates), would
beneficially own in excess of the Beneficial Ownership Limitation (as defined
below).


 


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(ii)                                  For
purposes of the foregoing sentence, the number of Warrant Shares beneficially
owned by the Holder and its Affiliates shall include the number of shares of
Common Shares issuable upon exercise of this Warrant with respect to which such
determination is being made, but shall exclude the number of Warrant Shares
which would be issuable upon:


 


(1)                                  exercise
of the remaining, nonexercised portion of this Warrant beneficially owned by
the Holder and any of its Affiliates; and


 


(2)                                  exercise
or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any other Common
Stock Equivalents) subject to a limitation on conversion or exercise analogous
to the limitation contained herein beneficially owned by the Holder or any of
its Affiliates.


 


(iii)                               Except as
set forth in subsection 2(d)(ii), for purposes of this Section 2(d),
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated thereunder, it being
acknowledged by the Holder that the Company is not representing to the Holder
that such calculation is in compliance with Section 13(d) of the
Exchange Act and the Holder is solely responsible for any schedules required to
be filed in accordance therewith.


 


(iv)                              To the
extent that the limitation contained in this Section 2(d) applies,
the determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable shall be in the sole discretion of the
Holder, and the submission of a Notice of Exercise shall be deemed to be the
Holder’s determination of whether this Warrant is exercisable (in relation to
other securities owned by the Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to verify or
confirm the accuracy of such determination. In addition, a determination as to
any group status as contemplated above shall be determined by the Holder in
accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder.


 


(v)                                 For
purposes of this Section 2(d), in determining the number of outstanding
shares of Common Shares, a Holder may rely on the number of outstanding shares
of Common Shares as reflected in (A) the Company’s most recent periodic or
annual report filed with the Commission as the case may be, (B) a more
recent public announcement by the Company or (C) a more recent written
notice by the Company or the Transfer Agent setting forth the number of shares
of Common Shares outstanding.  In any
case, the number of outstanding shares of Common Shares shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its Affiliates 


 


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since the date as of which such number
of outstanding shares of Common Shares was reported.


 


(vi)                              The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common
Shares outstanding immediately after giving effect to the issuance of Warrant
Shares issuable upon exercise of this Warrant. The Holder may decrease or, upon
not less than 61 days’ prior notice to the Company, may increase the Beneficial
Ownership Limitation provisions of this Section 2(d). Any such increase
will not be effective until the 61st day after such notice is delivered to the Company.
The provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 2(d) to
correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained
or to make changes or supplements necessary or desirable to properly give
effect to such limitation.


 


(vii)                           The
limitations contained in this Section 2(d) shall apply to a successor
holder of this Warrant.


 


(e)                                  Cancellation
of Warrant; Exercise of Warrant Prior to Cancellation.  If at any time following ·, 2011 [the first anniversary of the Issue Date],
the closing price of the Common Shares on Principal Market upon which the
Common Shares may be listed or traded has equaled or exceeded $[225% of offering price] for five consecutive Trading Days,
the Company may, within five Business Days of such fifth consecutive Trading
Day, call this Warrant for cancellation by giving not less than 30 days prior
notice to the Holder of such cancellation. Notice of cancellation of the
Warrant shall be given at least 30 days prior to the date fixed by the Company
for cancellation (the “Cancellation Date”) by mailing, by registered or
certified mail, return receipt requested, a copy of such notice to the Holder
at its address appearing on the Warrant Register, or at such other address or
addresses as may have been furnished to the Company in writing not less than 40
days prior to the Cancellation Date. This Warrant shall continue to be
outstanding and exercisable by the Holder in accordance with its terms until
the Cancellation Date, and if not exercised prior to the Cancellation Date, all
rights of the Holder with respect to the Warrant shall terminate on the
Cancellation Date. Any notice given by the Company pursuant to this Section 2(e) shall
set forth the applicable Exercise Price and the number of shares issuable upon
exercise of this Warrant, and state that this Warrant may be exercised by the
Holder in accordance with its terms at any time prior to the Cancellation Date.


 


Section 3.                                            Certain
Adjustments.


 


(a)                                  Stock
Dividends and Splits. If the Company, at any time while this
Warrant is outstanding:


 


(i)                                     pays a
stock dividend or otherwise makes a distribution or distributions on Common
Shares or any other equity or equity equivalent securities payable Common
Shares (which, for avoidance of doubt, shall not include any Warrant Shares,
issued by the Company upon exercise of this Warrant);


 


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(ii)                                  subdivides
outstanding Common Shares into a larger number of shares;


 


(iii)                               combines
(including by way of reverse stock split) outstanding Common Shares into a
smaller number of shares; or


 


(iv)                              issues by
reclassification of Common Shares any shares of the Company,


 


then in each case the Exercise Price shall be multiplied by a fraction of
which the numerator shall be the number of Common Shares (excluding treasury
shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of Common Shares outstanding immediately after
such event, and the number of shares issuable upon exercise of this Warrant
shall be proportionately adjusted such that the aggregate Exercise Price of
this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.


 


(b)                                 Rights
Offering.  If and
whenever during the Adjustment Period the Company shall fix a record date for
the issuing of rights, options or warrants to all or substantially all of the
holders of the Common Shares entitling them for a period expiring not more than
forty-five (45) days after such record date (the “Rights Period”) to
subscribe for or purchase Common Shares (or securities convertible into or
exchangeable for Common Shares) at a price per share (or having a conversion or
exchange price per share) which is less than 95% of the Current Market Price
per Common Share on the record date for such issue (any of such events being
called a “Rights Offering”), then effective immediately after such
record date the Exercise Price shall be adjusted to a price determined by multiplying
the applicable Exercise Price in effect as of the record date for the Rights
Offering by a fraction the numerator of which shall be the sum of:


 


(i)                                     the number
of Common Shares outstanding as of the record date for the Rights Offering; and


 


(ii)                                  a number
determined by dividing (A) either (i) the product of the number of
Common Shares offered for subscription or purchase during the Rights Period
upon exercise of the rights, warrants or options under the Rights Offering and
the price at which such Common Shares are offered, or (ii) as the case may
be, the product of the number of Common Shares for or into which the
convertible or exchangeable securities offered during the Rights Period upon
exercise of the rights, warrants or options under the Rights Offering are
exchangeable or convertible and the exchange or conversion price of the
convertible or exchangeable securities so offered, by (B) the Current
Market Price per Common Share as of the record date for the Rights Offering,
and


 


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the denominator of
which shall be the aggregate of the number of Common Shares outstanding on such
record date and the number of Common Shares offered for subscription or
purchase during the Rights Period upon exercise of the rights, warrants or
options under the Rights Offering or which would be outstanding upon the
conversion or exchange of all convertible or exchangeable securities offered
during the Rights Period upon exercise of the rights, warrants or options under
the Rights Offering, as applicable, in each case after giving effect to the
Rights Offering.


 


Any Common Shares owned
by or held for the account of the Company shall be deemed not to be outstanding
for the purpose of any computation.  If
all the rights, options or warrants are not so issued or if all rights, options
or warrants are not exercised prior to the expiration thereof, the Exercise
Price shall be readjusted to the Exercise Price in effect immediately prior to
the record date and the Exercise Price shall be further adjusted based upon the
number of Common Shares (or securities convertible or exchangeable for Common
Shares) actually delivered upon the exercise of the rights, options or
warrants, as the case may be, but subject to any other adjustment required
hereunder by reason of any event arising after that record date.


 


(c)                                  Pro Rata
Distributions. If the Company, at any time while this
Warrant is outstanding, shall distribute to all holders of Common Shares (and
not to the Holders) evidences of its indebtedness or assets (including cash and
cash dividends) or rights or warrants to subscribe for or purchase any security
other than Common Shares (which shall be subject to Section 3(b)), then in
each such case the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the
denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then
per share fair market value at such record date of the portion of such assets
or evidence of indebtedness or rights or warrants so distributed applicable to
one outstanding Common Share as determined by the Board of Directors of the
Company in good faith. In either case the adjustments shall be described in a
statement provided to the Holder of the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one
Common Share.  Such adjustment shall be
made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.


 


(d)                                 Fundamental
Transaction. If, at any time while this Warrant is outstanding,
a Fundamental Transaction occurs, then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share
that would have been issuable upon such exercise immediately prior to the
occurrence of such Fundamental Transaction, at the option of the Holder
(without regard to any limitation in Section 2(d) on the exercise of
this Warrant), the number of shares of Common Shares of the successor or
acquiring corporation or of the Company, if it is the surviving corporation,
and any additional consideration (the “Alternate Consideration”)
receivable as a result of such Fundamental Transaction by a holder of the
number of shares of Common Shares for which this Warrant is exercisable
immediately prior to such Fundamental Transaction (without regard to any
limitation in Section 2(d) on the exercise of this Warrant). For
purposes of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such 


 


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Alternate Consideration based on the
amount of Alternate Consideration issuable in respect of one share of Common
Shares in such Fundamental Transaction, and the Company shall apportion the
Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Shares are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction.  The Company shall cause any
Successor Entity in a Fundamental Transaction to assume in writing all of the
obligations of the Company under this Warrant in accordance with the provisions
of this Section 3(e) pursuant to written agreements in form and
substance reasonably satisfactory to the Holder and approved by the Holder
(without unreasonable delay) prior to such Fundamental Transaction and shall,
at the option of the holder of this Warrant, deliver to the Holder in exchange
for this Warrant a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Warrant which is
exercisable for a corresponding number of shares of capital stock of such
Successor Entity (or its Parent Entity) equivalent to the shares of Common
Shares acquirable and receivable upon exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative
value of the shares of Common Shares pursuant to such Fundamental Transaction
and the value of such shares of capital stock, such number of shares of capital
stock and such exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to the
Holder. Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the
date of such Fundamental Transaction the provisions of this Warrant referring
to the “Company” shall refer instead to the Successor Entity), and may exercise
every right and power of the Company and shall assume all of the obligations of
the Company under this Warrant with the same effect as if such Successor Entity
had been named as the Company herein.


 


(e)                                  Calculations.  All calculations under this Section 3
shall be made to the nearest cent and rounded down to the nearest whole Common
Share, as the case may be. For purposes of this Section 3, the number of
shares of Common Shares deemed to be issued and outstanding as of a given date
shall be the sum of the number of shares of Common Shares (excluding treasury
shares, if any) issued and outstanding.


 


(f)                                    Limits on
Adjustments.  No
adjustment to an Exercise Price shall be required unless such adjustment would
result in a change of at least 1% in the prevailing Exercise Price and no
adjustment in the number of Warrant Shares will be required to be made unless
the cumulative effect of such adjustment or adjustments would change the number
of Warrant Shares by at least one Warrant Share and, for greater clarity, any
adjustment which, except for the qualification of this section, would otherwise
have been required to be made shall be carried forward and taken into account
in any subsequent adjustment; provided, however, that in no event shall the
Company be obligated to issue fractional Warrant Shares or fractional interests
in Warrant Shares upon exercise of a Warrant or pay any amount in cash in lieu
of issuing fractional Warrant Shares.


 


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(g)                                 Disputes.  If a dispute shall at any time arise with
respect to adjustments to the Exercise Price or the number of Warrant Shares
purchasable pursuant to the exercise rights represented by a Warrant, such
disputes shall be conclusively determined by the Company’s auditors or, if they
are unable or unwilling to act, by such other firm of independent chartered
accountants as may be selected by action by the directors and any such
determination, absent manifest error, shall be conclusive evidence of the correctness
of any adjustments made.


 


(h)                                 Record
Date.  If the Company shall set a
record date to determine the holders of its Common Shares for the purpose of
entitling them to receive any dividend or distribution or any subscription or
purchase rights, options or warrants and shall thereafter and before the
distribution to such shareholders of any such dividend, distribution or
subscription or purchase rights legally abandon its plan to pay or deliver such
dividend, distribution or subscription or purchase rights, then no adjustment
in the Exercise Price or the number of Warrant Shares shall be required by
reason of the setting of such record date.


 


(i)                                     Deferral
of Adjustment.  In any
case in which this Warrant Certificate requires that an adjustment become
effective immediately after a record date for an event referred to in
subsection 2.2 hereof, the Company may defer, until the occurrence of such
event:


 


(i)                                     issuing to
the Holder, to the extent that the Warrants are exercised after such record
date and before the occurrence of such event, the additional Warrant Shares
issuable upon such exercise by reason of the adjustment required by such event;
and


 


(ii)                                  delivering
to the Holder any distribution declared with respect to such additional Warrant
Shares after such record date and before such event;


 


provided, however, that
the Company delivers to the Holder an appropriate instrument evidencing the
right of the Holder, upon the occurrence of the event requiring the adjustment,
to an adjustment in the Exercise Price and/or the number of Warrant Shares.


 


(j)                                     Notice to
Holder.


 


At least seven days prior to the effective date or
record date, as the case may be, of any event that requires or that may require
an adjustment in any of the exercise rights of the Holder under this Warrant
Certificate, including the number of Warrant Shares, the Company shall deliver
to the Holder  a certificate of the
Company specifying the particulars of such event and, if determinable, the
required adjustment and the computation of such adjustment.  In case any adjustment for which a
certificate has been given is not then determinable, the Company shall promptly
after such adjustment is determinable deliver to the Holder hereof a
certificate of the Company showing how such adjustment was computed.  The Company
hereby covenants and agrees that the register of transfers and share transfer
books for the Common Shares shall be open during normal business hours for
inspection by the Holder, and that the Company will not take any action which might
deprive the Holder of the opportunity of exercising the rights of subscription
contained in this Warrant Certificate, during such seven day period.


 


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Section 4.                                            Transfer
of Warrant.


 


(a)                                  Transferability. Subject
to compliance with any applicable securities laws, this Warrant and all rights
hereunder (including, without limitation, any registration rights) are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of the Company or its designated agent, together with a
written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney. Upon such surrender and,
if required, such payment, the Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees, as applicable, and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant evidencing the portion of this
Warrant not so assigned, and this Warrant shall promptly be cancelled. The
Warrant, if properly assigned in accordance herewith, may be exercised by a new
holder for the purchase of Warrant Shares without having a new Warrant issued.


 


(b)                                 New Warrants. This
Warrant may be divided or combined with other Warrants upon presentation hereof
at the principal office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a),
as to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
All Warrants issued on transfers or exchanges shall be dated as of the original
Issue Date and shall be identical with this Warrant except as to the number of
Warrant Shares issuable pursuant thereto.


 


(c)                                  Warrant
Register. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the
absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual notice to
the contrary.


 


Section 5.                                            Miscellaneous.


 


(a)                                  No Rights
as Stockholder Until Exercise. This Warrant does not
entitle the Holder to any voting rights, dividends or other rights as a
shareholder of the Company prior to the exercise hereof.


 


(b)                                 Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants
that upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.


 


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(c)                                  Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall not be a Business Day, then, such action may be taken or such right may
be exercised on the next succeeding Business Day.


 


(d)                                 Authorized
Shares.  The Company covenants that,
during the period the Warrant is outstanding, it will reserve from its
authorized and unissued Common Shares that number of Common Shares to provide
for the issuance of the Warrant Shares as are then issuable upon the exercise
of any purchase rights under this Warrant. The Company further covenants that
its issuance of this Warrant shall constitute full authority to its officers
who are charged with the duty of executing stock certificates to execute and
issue the necessary certificates for the Warrant Shares upon the exercise of
the purchase rights under this Warrant. The Company will take all such
reasonable action as may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable law or
regulation, or of any requirements of the Principal Market upon which the
Common Shares may be listed or traded. The Company covenants that all Warrant
Shares which may be issued upon the exercise of the purchase rights represented
by this Warrant will, upon exercise of the purchase rights represented by this
Warrant and payment for such Warrant Shares in accordance herewith, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges created by the Company in respect of the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue).


 


Except and to the
extent as waived or consented to by the Holder, the Company shall not by any
action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of
this Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant
against impairment. Without limiting the generality of the foregoing, the
Company will (i) take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this Warrant and (ii) use
reasonable commercial efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof, as may
be, necessary to enable the Company to perform its obligations under this
Warrant.


 


Before taking any
action which would result in an adjustment in the number of Warrant Shares for
which this Warrant is exercisable or in the Exercise Price, the Company shall
obtain all such authorizations or exemptions thereof, or consents thereto, as
may be necessary from any public regulatory body or bodies having jurisdiction
thereof.


 


(e)                                  Jurisdiction. All
questions concerning the construction, validity, enforcement and interpretation
of this Warrant shall be determined in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law
thereof.


 


11

















 


(f)                                    Nonwaiver
and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of Holder shall operate as a waiver
of such right or otherwise prejudice the Holder’s rights, powers or remedies.
If the Company willfully and knowingly fails to comply with any provision of
this Warrant, which results in any material damages to the Holder, the Company
shall pay to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys’ fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.


 


(g)                                 Notices. Any and
all notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of: (a) the date of transmission, if such notice or
communication is delivered via facsimile prior to 5:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile on a
day that is not a Trading Day or later than 5:30 p.m. (New York City time)
on any Trading Day, (c) the second (2nd) Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon
actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:


 


if to the Company, to:


 


2 Meridian Road

Toronto, Ontario

M9W 4Z7


 


Facsimile:
416-798-2200


 


if to the Holder, at its address
appearing on the Warrant Register, or at such other address or addresses as may
have been furnished to the Company in writing.


 


(h)                                 Limitation
of Liability. No provision hereof, in the absence of any
affirmative action by Holder to exercise this Warrant to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common
Shares or as a shareholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.


 


(i)                                     Remedies. The
Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would be
adequate.


 


(j)                                     Successors
and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding 


 


12

















 


upon the successors and permitted
assigns of the Company and the successors and permitted assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of any Holder
from time to time of this Warrant and shall be enforceable by the Holder or
holder of Warrant Shares.


 


(k)                                  Amendment. This
Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Required Holders.


 


(l)                                     Severability. Wherever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provisions or the remaining provisions of
this Warrant.


 


(m)                               Headings. The
headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.


 


(n)                                 Tax. Notwithstanding any other provision hereof (other
than Section 2(d)(iv)), the Company shall be entitled to deduct, withhold,
and recover from any amounts payable pursuant to this Warrant all local,
domestic, foreign, or other taxes of any kind which it may be required or
permitted to deduct and withhold in accordance with applicable law.  All such withheld amounts shall be timely
remitted to the relevant governmental authority and all such remitted amounts
shall be treated as having been paid to the Holder.  The Holder shall provide such tax
representations, information, or other documentation to the Company which may
reasonably be considered by the Company to be required or advantageous in the
context of full or partial exercise of a Warrant.


 


Section 6.                                            Certain
Definitions. For purposes of this Warrant, the following
terms shall have the following meanings:


 


“Affiliate”
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person, as such terms are used in and construed under Rule 405 under the
Securities Act.


 


“Bloomberg”
means Bloomberg Financial Markets.


 


“Business Day”
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain
closed.


 


“Commission”
means the United States Securities and Exchange Commission.


 


“Common
Shares” means (i) Common Shares in the capital of the Company
and (ii) any share capital into which such Common Shares shall have been
changed or any share capital resulting from a reclassification of such Common
Shares.


 


“Common Stock
Equivalents” means, collectively, Options and Convertible
Securities.


 


13

















 


“Convertible
Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exercisable or exchangeable for
shares of Common Shares.


 


“Eligible
Market” means the Principal Market, the NYSE Amex Equities, The New
York Stock Exchange, Inc., The NASDAQ Global Market, The NASDAQ Global
Select Market or The NASDAQ Capital Market.


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.


 


“Fundamental
Transaction” means that (A) the Company shall directly or
indirectly, in one or more related transactions, (i) consolidate or merge
with or into (whether or not the Company is the surviving corporation) another
Person, or (ii) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company to another
Person, or (iii) allow another Person to make a purchase, tender or
exchange offer that is accepted by the holders of more than the 50% of either
the outstanding shares of Common Shares (not including any shares of Common
Shares held by the Person or Persons making or party to, or associated or
affiliated with the Persons making or party to, such purchase, tender or
exchange offer), or (iv) consummate a stock purchase agreement or other
business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person
whereby such other Person acquires more than the 50% of the outstanding shares
of Common Shares (not including any shares of Common Shares held by the other
Person or other Persons making or party to, or associated or affiliated with
the other Persons making or party to, such stock purchase agreement or other
business combination), or (v) reorganize, recapitalize or reclassify its
Common Shares, or (B) any “person” or “group” (as these terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act) becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 50% of the aggregate ordinary voting power
represented by issued and outstanding Common Shares.


 


“Options”
means any rights, warrants or options to subscribe for or purchase shares of
Common Shares or Convertible Securities.


 


“Person”
means an individual, a limited liability company, a partnership, a joint
venture a corporation, a trust, an unincorporated organization, any other
entity and a government or any department or agency thereof.


 


“Principal
Market” means the Toronto Stock Exchange, or if the Common Shares is
not then listed on the Toronto Stock Exchange, the Eligible Market on which the
Common Shares is listed on which the greatest volume of Common Shares is traded
during the period referenced below or, if the Common Shares is not so listed on
any Eligible Market, then on the over-the-counter market on which the Common
Shares is traded as selected by the Board of Directors of the Company in good
faith.


 


“Registration
Statement” means a registration statement with respect to the
issuance of the Warrant and the Warrant Shares, as contemplated in the Subscription
Agreement.


 


“Required
Holders” means the holders of the Warrants representing at least
66-2/3% of shares of Common Shares underlying the Warrants then outstanding.


 


14

















 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.


 


“Successor
Entity” means the Person formed by, resulting from or surviving any
Fundamental Transaction or the Person with which such Fundamental Transaction
shall have been entered into.


 


“Trading Day”
means any day on which the Common Shares is traded on the Principal Market, or,
if the Principal Market is not the principal trading market for the Common
Shares, then on the principal securities exchange or securities market on which
the Common Shares is then traded; provided that “Trading Day” shall not include
any day on which the Common Shares is scheduled to trade on such exchange or
market for less than 4.5 hours or any day that the Common Shares is suspended
from trading during the final hour of trading on such exchange or market (or if
such exchange or market does not designate in advance the closing time of trading
on such exchange or market, then during the hour ending at 4:00:00 p.m.
New York City time).


 


“Transfer
Agent” means Computershare Investor Services Inc., the current
transfer agent of the Company, and any successor transfer agent of the Company.


 


“VWAP”
means, for any security as of any date, the dollar volume-weighted average
price for such security on the Principal Market during the period beginning at
9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New
York City time, as reported by Bloomberg through its “Volume at Price” function
or, if the foregoing does not apply, the dollar volume-weighted average price
of such security in the over-the-counter market on the electronic bulletin
board for such security during the period beginning at 9:30:01 a.m., New
York City time, and ending at 4:00:00 p.m., New York City time, as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market
makers for such security as reported in the “pink sheets” by Pink Sheets
LLC.  If the VWAP cannot be calculated
for such security on such date on any of the foregoing bases, the VWAP of such
security on such date shall be the fair market value as mutually determined by
the Company and the Holder.  All such
determinations shall be appropriately adjusted for any share dividend, share
split or other similar transaction during such period.


 


********************


 


(Signature Pages Follow)


 


15

















 


IN WITNESS WHEREOF, the
Company has caused this Warrant to be executed by its officer thereunto duly
authorized as of the date first indicated above.


 


 


	
   

  	
  LORUS THERAPEUTICS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


16

















 


NOTICE OF EXERCISE


 


TO:                            [                                              ]


 


(1)                                  The
undersigned hereby elects to purchase
              
Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the Exercise Price
with respect to such election. Payment shall be in the form of lawful money of
the United States


 


(2)                                  Please
issue a certificate or certificates representing said Warrant Shares in the
name of the undersigned or in such other name as is specified below:


 


	
  Name:

  	
   

  	
   

  



 


The Warrant Shares
shall be delivered to the following DWAC Account Number:


 


Account Number:


 


or by physical delivery
of a certificate to:


 


Address:


 


 


 


 


DATED
this                          day
of                           ,
20          .


	
   

  	
   

  
	
   

  	
  (Signature of registered
  holder)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Name of registered holder)

  



 

















 


ASSIGNMENT FORM


 


(To assign the
foregoing warrant, execute this form and supply required information. Do not
use this form to exercise the warrant.)


 


FOR VALUE RECEIVED,
[            ] all
of or
[                  ]
shares of the foregoing Warrant and all rights evidenced thereby are hereby
assigned to


 


whose address is


 


.


 


 


.


 


	
  Dated:

  	
   

  	
   

  
	
   

  
	
  Holders Signature:

  	
   

  	
   

  
	
   

  
	
  Holders Address:

  	
   

  	
   

  
	
   

  
	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  
					



 


NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank or trust company. Officers of corporations and those acting in a fiduciary
or other representative capacity should file proper evidence of authority to
assign the foregoing Warrant.