20-F

     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 13, 2000
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 20-F
              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                          COMMISSION FILE NO. 0-28550

                             VISIBLE GENETICS INC.
    (Exact name of Registrant as specified in its charter and translation of
                        Registrant's name into English)

                                    ONTARIO
                (Jurisdiction of incorporation or organization)

                700 BAY STREET, TORONTO, ONTARIO, CANADA M5G 1Z6
                    (Address of principal executive offices)

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                      NONE

SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          COMMON SHARES, NO PAR VALUE
                                (Title of Class)

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                  of the Act:
                                      None

    Indicate the number of outstanding shares of each of the Registrant's
classes of capital or common stock as of the close of the period covered by the
annual report:

   As of December 31, 1999, the Registrant had outstanding 11,622,115 Common
                                    Shares.

    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

                               Yes /X/    No / /

    Indicate by check mark which financial statement item the Registrant has
elected to follow:

                           Item 17 / /    Item 18 /X/

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                             VISIBLE GENETICS INC.

                           ANNUAL REPORT ON FORM 20-F

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                               TABLE OF CONTENTS




                                                                         
PART I
          Item 1.   Description of Business.....................................      2
          Item 2.   Description of Property.....................................     35
          Item 3.   Legal Proceedings...........................................     36
          Item 4.   Control of Registrant.......................................     37
          Item 5.   Nature of Trading Market....................................     38
          Item 6.   Exchange Controls and Other Limitations Affecting Security
                    Holders.....................................................     38
          Item 7.   Taxation....................................................     39
          Item 8.   Selected Financial Data.....................................     46
          Item 9.   Management's Discussion and Analysis of Financial Condition
                    and Results of Operations...................................     47
          Item 9A.  Quantitative and Qualitative Disclosures About Market
                    Risk........................................................     53
          Item 10.  Directors and Officers of Registrant........................     54
          Item 11.  Compensation of Directors and Officers......................     56
          Item 12.  Options to Purchase Securities from Registrant or
                    Subsidiaries................................................     57
          Item 13.  Interest of Management in Certain Transactions..............     57
PART II
          Item 14.  Description of Securities to Be Registered..................     58
PART III
          Item 15.  Defaults Upon Senior Securities.............................     58
          Item 16.  Changes in Securities and Changes in Security for Registered
                    Securities..................................................     58
PART IV
          Item 17.  Financial Statements........................................     59
          Item 18.  Financial Statements........................................     59
          Item 19.  Financial Statements and Exhibits...........................     59


                                     PART I

    THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE KNOWN
AND UNKNOWN RISKS AND UNCERTAINTIES. THESE STATEMENTS RELATE TO OUR PLANS,
OBJECTIVES, EXPECTATIONS AND INTENTIONS. OUR ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED IN THESE STATEMENTS. FACTORS THAT COULD
CONTRIBUTE TO THESE DIFFERENCES INCLUDE THOSE DISCUSSED IN "DESCRIPTION OF
BUSINESS--RISK FACTORS" AND ELSEWHERE IN THIS ANNUAL REPORT.

ITEM 1. DESCRIPTION OF BUSINESS.

OVERVIEW

    We develop, manufacture and sell integrated DNA sequencing systems that
analyze genetic information to improve the treatment of selected diseases. Our
strategy is to become a leader in the emerging field of pharmacogenomics.
Pharmacogenomics is the science of individualizing therapy based on genetic
differences across patients. Our genotyping technology, which employs DNA
sequencing, enables the analysis in the clinical diagnostic laboratory of
individual genetic variations. DNA sequencing is generally considered the most
thorough and accurate method for genotyping diseases. We believe that
individualizing therapy through pharmacogenomics will improve the treatment of
many diseases, such as Human Immunodeficiency Virus, or HIV, hepatitis B,
hepatitis C, tuberculosis and eventually some cancers.

    Our OpenGene System consists of automated DNA sequencers, disposable gel
cassettes, related equipment and software and disease-specific GeneKits. Our
GeneKits contain the necessary chemicals, reagents, third-party licenses and
other consumables and materials required for sequencing specific
disease-associated genes. We have developed GeneKits for HIV and HLA (used for
tissue typing, for example, in organ transplants). We are developing GeneKits
for hepatitis B, hepatitis C and tuberculosis. We began selling our DNA
sequencers and related equipment and consumables to the research and clinical
research markets in the third quarter of 1996 and began selling GeneKits into
the same markets in the third quarter of 1997.

    The first clinical diagnostic application we are targeting is HIV. We have
developed our HIV GeneKit to enable clinicians to genotype the major HIV species
infecting patients in order to improve the management of patient treatment. HIV
is a highly variable virus with high rates of mutations, which may lead to drug
resistance. One of the central challenges in maintaining HIV patients on
long-term drug therapy is to adjust each patient's medication as drug-resistant
strains of the virus emerge.

    Two initial clinical trials, including one that we conducted, have shown
that patients whose drug therapy is managed using HIV genotyping had greater
reductions in viral load than HIV patients who were not genotyped. In June 1999,
we completed a European trial, which we call VIRADAPT, which showed, among other
things, that after six months patients who received standard of care treatment
and underwent periodic genotyping had a mean decrease in viral load of
approximately 93% as compared to a mean decrease in viral load of approximately
79% in the non-genotyping group. In addition, after 6 months, 32% of the
patients in the genotyping group had undetectable viral loads as compared to 14%
of patients in the non-genotyping group. The other trial, called GART, was
funded by the National Institutes of Health, or NIH, and was completed in the
United States in December 1998. It showed that, at the end of 8 weeks, patients
who received standard of care treatment and underwent periodic genotyping had a
mean decrease in viral load of approximately 93%, as compared to 76% to patients
in the non-genotyping group.

    Also in June 1999, we initiated a trial called SEARCH to test the clinical
utility of our HIV OpenGene System in genotyping HIV infected patients. Based on
the results from the VIRADAPT and GART clinical trials, the FDA has advised us
that we are not required to complete the SEARCH trial and has indicated that we
will not be required to demonstrate further the clinical utility of our HIV
OpenGene

                                       2

System in the treatment of HIV infected individuals. We plan to apply to the FDA
during 2000 for approval to sell our HIV OpenGene System to the clinical
diagnostic market.

SCIENTIFIC BACKGROUND

    DNA.  All cells contain DNA, a complex material that stores the genetic
blueprint, or makeup, of an organism. DNA is composed of four chemical building
blocks called nucleotides. Each nucleotide consists of, among other things, one
of four chemical bases: adenine (A), thymine (T), guanine (G) and cytosine (C).
These four bases are the genetic alphabet that is used to write messages and
instructions which direct the synthesis or expression of the proteins inside the
cell, required to make the cell function. A sequence is the particular order of
the nucleotides in the DNA. Changes in the DNA sequence, also called mutations,
may occur from time to time. These mutations may alter the function of the cell
proteins and affect cell functions.

    PHARMACOGENOMICS.  Different people often respond in different ways to the
same drug. A drug that is safe and effective in one patient may be toxic or
ineffective in another. We believe that some of these differences in response
may reflect underlying genetic differences between the individuals concerned.
Pharmacogenomics seeks to establish correlations between specific genetic
variations and specific responses to drugs. By establishing such correlations,
pharmacogenomics may permit both new and existing drugs to be targeted to those
patients in whom they are most likely to be both effective and safe.

    GENOTYPING.  Genotyping is the act of selecting and reading the sequence of
nucleotides in a specific strand of DNA in order to understand how changes in
the DNA may influence the onset and treatment of some diseases and medical
conditions.

    Genotyping is used by scientists, researchers and clinicians to identify:

    - genes as potential targets for therapeutic intervention;

    - mutations in a gene that may predispose an individual to a particular
      disease;

    - genetic variation among individuals that may cause different reactions to
      drug treatment; and

    - mutations in the genes of infectious organisms (such as viruses and
      bacteria) and tumors that may result in drug resistance, thereby
      influencing treatment methods.

    Genotyping is performed using tests that rely on either DNA probe or DNA
sequencing technologies.

    DNA PROBES.  A DNA probe is a single-stranded piece of DNA made to be
complementary to the unique base sequence of the target gene. These probes are
based on the principle that single strands of DNA seek out complementary strands
to form a chemical bond. The DNA probes are placed into prepared samples which
may include the target gene. If the target gene is present, the probe will bind
to the target, indicating its presence.

    DNA probes are highly specific, target single mutations, and require advance
knowledge of the target mutation. Probes are susceptible to producing erroneous
results because they are affected by variations in the sequence immediately
surrounding their targeted mutation. As a result, DNA probes are effective in
detecting diseases only when the disease-associated mutation is at a fixed,
known location within a gene or when the sequence within a particular gene is
stable. However, in diseases where the mutation causing the disease is not
known, probe-based technology is not as effective. Probes also may not
effectively provide genotypes for infectious pathogens, such as viruses, in
which the DNA sequence is highly variable or where mutations occur to evade
immune responses or to develop drug resistance.

    DNA SEQUENCING.  DNA sequencing identifies all the chemical bases of the DNA
strand to be examined, one-by-one, readily detecting variations or new mutations
within the DNA sequence. Unlike DNA probes, sequencing reads long segments of
DNA and can therefore detect new mutations, multiple mutations and insertions
and deletions of DNA within a sequence. DNA sequencing is also less sensitive

                                       3

than probes to surrounding variations in the sequence being examined. As a
result, sequencing is generally considered the most thorough and accurate method
for genotyping diseases, such as cancer, and certain viruses, such as HIV, which
have high rates of mutation or numerous strains. DNA sequencing is also used to
assess predisposition to many diseases and for tissue typing.

    The DNA sequencing process involves several steps, some of which must be
performed manually and are labor intensive. DNA first must be extracted from the
sample, which usually is blood, other body fluid or tissue. After the DNA is
extracted, it is amplified, or copied, in order to provide enough DNA so that
the DNA sequence can be easily detected. This process of extraction and
amplification typically requires the use of various reagents, primers and other
chemicals, as well as proprietary processes and technologies, some of which must
be licensed from third parties. Some laboratories prepare and use their own
homebrew reagents and chemicals which usually are not subject to standardized
procedures or quality control processes necessary to ensure reliable results.

    Once the DNA is extracted and amplified, a process called gel
electrophoresis is performed. This process involves placing the DNA on a gel
substance and running an electrical current through it. This separates the DNA
so that the DNA sequence can be read. While historically many scientists
performed the entire DNA sequencing process manually, automated DNA sequencers
using a number of disposable products have been developed which simplify and
expedite parts of this process.

DNA SEQUENCING MARKETS

    DNA sequencing is an important tool for the research, clinical research and
clinical diagnostic markets.

    THE RESEARCH MARKET.  The research market includes academic institutions,
hospitals, governmental agencies, life science companies and pharmaceutical
companies performing molecular genetics and molecular biology research.
Researchers generally use DNA sequencing equipment for gene discovery and other
large scale research projects which typically must analyze large numbers of
samples and sequence long DNA segments.

    THE CLINICAL RESEARCH MARKET.  The clinical research market includes
hospitals, life science companies, pharmaceutical companies, academic
institutions and clinical reference laboratories engaged in developing new
diagnostic tests, conducting clinical trials, developing drugs and researching
targeted therapeutics. Researchers in this sector often work both with DNA
probes and DNA sequencing. Researchers typically rely on repetitive sequencing
of relatively short DNA strands of targeted gene segments, for which sequencing
systems that are smaller in scale than those used in the research market are
generally considered most efficient.

    THE CLINICAL DIAGNOSTIC MARKET.  The clinical diagnostic market consists of
life science companies, hospitals, reference laboratories, medical clinics and
doctors offices which use clinical molecular genetic tests for the diagnosis and
management of diseases and for tissue typing. Current tests typically rely on
DNA probe-based and other technology including homebrew DNA sequencing tests.
Unlike the research market, genotyping for clinical diagnostic purposes
generally relies on the sequencing of relatively short DNA strands with high
degrees of accuracy. DNA sequencers and related instrumentation used for
diagnostic purposes should enable clinicians to rapidly and accurately sequence
and analyze a high volume of patient samples at relatively low costs, and fit
within the space constraints of a typical clinical laboratory.

LIMITATIONS OF EXISTING DNA SEQUENCING PRODUCTS

    Historically, automated DNA sequencers and related products used for
genotyping have been developed primarily to meet the needs of the research and
clinical research markets. We are not aware of

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any FDA approved DNA sequencing tests for the clinical diagnostic market.
Existing DNA sequencing products typically do not address the needs of the
clinical diagnostic market because:

    - they cannot sequence DNA strands quickly enough to satisfy diagnostic
      turnaround times;

    - they are designed to sequence long DNA segments and therefore may not be
      efficient for sequencing shorter DNA segments typical in clinical
      diagnostic testing;

    - they are expensive;

    - they are too large for most clinical laboratories;

    - they use gels usually prepared manually in a process that is time
      consuming and may result in exposure of laboratory technicians to
      dangerous chemicals; and

    - they use homebrew tests, reagents, chemicals and protocols that are not
      typically subject to the standardized procedures or quality control
      processes necessary for reliable results.

OUR SOLUTION

    Our OpenGene System consists of automated DNA sequencers, disposable gel
cassettes, related equipment and software and disease-specific GeneKits. Our
OpenGene System has been designed expressly to meet the needs of the clinical
diagnostic market. We believe that our integrated OpenGene System provides a
cost effective and efficient clinical diagnostic solution that will make DNA
sequencing a viable diagnostic tool for the management of selected diseases and
medical conditions because:

    - it reads DNA strands faster than existing sequencers designed for the
      research market;

    - it is designed to efficiently read and analyze the shorter DNA strands
      typically used for clinical diagnosis;

    - it is significantly less expensive than comparable sequencers designed for
      the research market;

    - it is small and lightweight;

    - it utilizes easy to use disposable gel cassettes;

    - it includes our proprietary software package designed for DNA analysis and
      patient data management;

    - our GeneKits include the reagents, primers and other chemicals,
      third-party licenses, software and other materials required to conduct
      tests for specific disease-associated genes; and

    - our GeneKits are standardized, validated and undergo quality control
      testing to provide reliable, reproducible results.

    We must obtain approval from the FDA and comparable foreign regulatory
authorities prior to selling our products for clinical diagnostic use.

    While our OpenGene System and GeneKits are designed to serve the clinical
diagnostic market, they also fulfill many important requirements within the
research and clinical research markets. Researchers in the clinical research
market also work with short DNA strands, rely on a repetitive sequencing of gene
segments and need quick and efficient sequencing systems. In the research
market, our products complement existing instruments by performing tasks such as
primer labeling, chemistry verification, short sample sequencing and other
preparatory and supportive functions for which speed, cost and efficiency are a
premium. We also have developed a sequencer that is able to read longer segments
required for some research applications.

    To date, a substantial portion of our revenues have been generated from
sales to the research and clinical research markets. We expect to continue to
sell to both of these markets even if we receive FDA approval for clinical
diagnostic use of our HIV OpenGene System and other products.

                                       5

OUR BUSINESS STRATEGY

    Our objective is to be a leader in the emerging field of pharmacogenomics.
Our goal is to enable clinicians to use genetic information to monitor and
customize treatment of diseases, initially for HIV and later for other diseases.
Key elements of our business strategy are to:

    - PROVIDE AN INTEGRATED GENOTYPING SOLUTION FOR THE CLINICAL DIAGNOSTIC
      MARKET. We intend to meet the needs of the clinical diagnostic market by
      providing an efficient, inexpensive, easy-to-use genotyping solution. Our
      integrated OpenGene System, which we believe incorporates these features,
      includes automated DNA sequencers, disposable gel cassettes, related
      equipment and software, and disease-specific GeneKits. We designed this
      system for the clinical diagnostic market.

    - TARGET THE HIV GENOTYPING MARKET. We are focusing initially on the HIV
      market because there is clinical evidence to suggest that genotyping may
      be effective in managing the treatment of this disease. By identifying
      mutations in HIV through genotyping and consistently countering these
      mutations with appropriate drug therapy, we believe drug treatment can be
      administered and monitored more effectively. We intend to seek approval
      from the FDA and other regulatory authorities to sell our HIV OpenGene
      System for clinical diagnostic use in the United States and elsewhere.

    - LEVERAGE OUR OPENGENE SYSTEM FOR ADDITIONAL APPLICATIONS. We are
      developing other disease-specific GeneKits that we believe have the
      potential to eliminate or reduce more time consuming and/or expensive
      tests and that may enable clinicians to better monitor and manage patient
      treatment. In addition to our HIV GeneKit, we have developed GeneKits for
      HLA (used for tissue typing, for example, in organ transplants), and are
      developing GeneKits for hepatitis B, hepatitis C, tuberculosis and other
      species of HIV not tested for in our current HIV GeneKit.

    - OFFER A WIDE RANGE OF TESTING AND SEQUENCING SERVICES. We maintain
      accredited reference testing laboratories that provide genotyping and
      other testing services for HIV, hepatitis B, hepatitis C, other infectious
      diseases and various genes associated with cancer. We believe that the
      data which we obtain in providing these services will also assist us in
      our efforts to develop new GeneKits and other technologies.

    - PROVIDE SOPHISTICATED SOFTWARE FOR THE CLINICAL RESEARCH AND DIAGNOSTIC
      MARKETS. Our GeneObjects Software operates our OpenGene System, analyzes
      the results, and prints out a report that shows the drugs to which a
      patient has become resistant. This software was designed to meet the needs
      of clinical research and clinical diagnostic markets. We are also
      developing an enhanced version of this software, called TRUGENE CMS, which
      is specifically targeted to the clinical diagnostic market and will
      simplify the work flow and report generation for disease specific
      applications.

    - TAILOR OUR MARKETING EFFORTS TO LOCAL MARKETS. We have established and are
      expanding our sales and marketing force in the United States, Canada,
      selected European countries and in other areas where we believe that the
      size of the market and our familiarity with regulatory and other local
      conditions justify the development of our own sales force. In selected
      geographic and product markets where we believe that regulatory and other
      market factors make it more prudent to rely on a third-party local sales
      and marketing effort, we seek to enter into distribution and marketing
      arrangements with leading distributors.

    - MAINTAIN OUR TECHNOLOGICAL LEADERSHIP IN GENOTYPING. We plan to continue
      to invest significant resources in research and development so that we may
      continue to provide customers with advanced genotyping technologies and
      products. Where we believe it is cost effective or otherwise appropriate,
      we will continue to license and acquire technologies and products to
      include in our OpenGene System and GeneKits. We will also seek to continue
      to collaborate with hospitals, academic institutions, pharmaceutical
      companies and life science companies to develop additional GeneKits and
      other products.

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OUR INTEGRATED OPENGENE SYSTEM

    Our integrated OpenGene System includes the following components:

    SEQUENCING SYSTEMS  Sequencing systems consist of automated DNA sequencers
and related equipment.

    SOFTWARE SYSTEMS.  Software systems consist of our proprietary GeneObjects
and TRUGENE CMS DNA analysis and data management software.

    GENEKITS AND OTHER CONSUMABLES.  GeneKits consist of various reagents,
enzymes, primers and other chemicals, and other consumables consist of
disposable gel cassettes, acrylamide and other materials.

SEQUENCING SYSTEMS

    LONG-READ TOWER AUTOMATED DNA SEQUENCER.  The Long-Read Tower is a two-dye
automated sequencer that can read 400 bases in approximately 40 minutes with
high accuracy, suitable for clinical diagnostic applications, and can also read
longer DNA sequences used in some research applications. Using our proprietary
Long-Read MicroCel cassettes, the Long-Read Tower can read 1,000 bases in under
4 hours with high accuracy. The Long-Read Tower can read 16 lanes and test up to
8 patient samples per gel cassette, and can be networked with other Long-Read
Towers or Clippers so that multiple units can run from a single workstation,
thereby allowing for a significantly greater number of patient samples to be
tested simultaneously. The Long-Read Tower is small (47cm x 39cm x 26cm) and
lightweight relative to competitive instruments, and sells at retail prices
significantly below comparable automated DNA sequencers. The Long-Read Tower can
be connected to almost any computer network, has no moving parts and consumes
only 300 watts of power.

    CLIPPER.  The MicroGene Clipper automated DNA sequencer is a smaller version
of our Long-Read Tower which, using our proprietary MicroCel cassettes, can read
300 bases in approximately 30 minutes with high accuracy, and is suitable for
clinical diagnostic applications. The Clipper can read 16 lanes and test up to 8
patient samples per gel cassette, and can be networked so that multiple units
can run from a single workstation, thereby allowing for a significantly greater
number of patient samples to be tested simultaneously. The Clipper is small (35
cm x 40 cm x 26 cm) and lightweight. The Clipper sells at retail prices
significantly below comparable automated DNA sequencers. The Clipper can be
connected to almost any computer network, has no moving parts and consumes only
300 watts of power.

    SEQ4X4.  The Seq4x4 automated DNA sequencer is marketed by Amersham as the
Amersham Pharmacia Biotech Seq4x4-TM- built to Amersham's specifications to work
with Amersham's one color Cy 5.5 terminator chemistry and ThermoSequenase-TM-
Kits. The Seq4x4 is a less expensive version of the Clipper that includes many
of the features of the Clipper; however, it is a 16 lane one-dye sequencer, and
cannot be networked with other sequencers. The Seq4x4 is sold to the research
market where it can be used to complement or replace significantly slower manual
DNA sequencing methods and to complement currently available, more expensive
automated DNA sequencers.

    GEL TOASTER.  The Gel Toaster is a compact (47 cm x 39 cm x 26 cm),
lightweight device that uses ultraviolet light to polymerize, or cure, liquid
acrylamide that has been injected into the Long-Read MicroCel. The acrylamide
gel is the medium through which the DNA is separated for sequencing. We also
sell a toaster for use with the Seq4x4. This toaster's dimensions are 33 cm x
11.4 cm x 30.5 cm.

SOFTWARE SYSTEMS

    GENEOBJECTS.  GeneObjects is our DNA analysis and data management software
package which we have designed for use with our sequencing systems. It automates
portions of the test process and facilitates analysis and diagnosis. It also
automates certain laboratory management tasks. GeneObjects software is able to
sort, analyze and store data by patient (regardless of the test or gel source
from which the data is

                                       7

derived) or by the test performed. GeneObjects can also be used to control
multiple sequencers over the network from a single workstation. It can use
existing microcomputers and sequencers, or be installed as a turnkey system with
state-of-the-art hardware.

    TRUGENE CMS.  TRUGENE CMS, an enhanced version of our GeneObjects software,
is a software system we are developing for genotypic analysis of large
quantities of patient samples in a clinical diagnostic setting. The first
application will be for HIV. The software design is based on the assembly line
concept. A sample, once received by a laboratory for processing, will be
registered with TRUGENE CMS. The new sample will be placed on the assembly
line's conveyer so that it can be passed along from stage to stage in a specific
order. The final product of this assembly line is a report for the registered
sample. TRUGENE CMS is being designed to work with various protocols, each of
which defines how many stages are on the assembly line, what each stage should
do, and what information the final report should contain.

GENEKITS AND OTHER CONSUMABLES

    GENEKITS.  We sell to the research and clinical research markets a series of
GeneKits which assist in identifying disease-associated genetic mutations and
gene sequences. Our HIV GeneKit, is described in the section of this prospectus
entitled "--Applications For Our OpenGene System--HIV." Other GeneKits which we
sell or are developing are described in the section of this annual report
entitled "--Applications For Our OpenGene System."

    GENEKIT TECHNOLOGIES.  We developed and are developing GeneKits with
features designed to make our GeneKits suitable for the clinical diagnostic
market. We use certain technologies proprietary to us, and other technologies
licensed to us, to ensure that our GeneKits will meet the needs of this market.
These technologies include our stratified matrix testing method, CLIP and CAS
technology, polymerase chain reaction technology, or PCR, and an extraction
technology referred to as Boom technology. We have U.S. patents covering our
stratified matrix testing method and CLIP technology. We license the PCR
technology from Roche Molecular Systems, Inc. and F. Hoffmann-LaRoche Ltd., the
CAS technology from Genassiance Pharmaceuticals, Inc. and the Boom technology
from Organon Teknika.

    Our proprietary CLIP technology enables DNA samples to be prepared in a
single test-tube, single-step process that replaces the multiple individual
steps currently required to prepare a sample for DNA sequencing. This technology
saves time and reduces the cost of DNA sequence-based diagnostic testing, which
is important to the clinical diagnostic market. Our CLIP technology is also more
sensitive than traditional techniques, which is especially useful for managing
viral diseases because it permits the genotyping of patients with very low viral
loads that other methods cannot detect. As a result, using CLIP, HIV patients
with low viral loads can be genotyped and treated before drug resistance
develops and their viral loads increase. Our exclusive license from Genassiance
Pharmaceuticals permits us to use CAS technology solely for diagnostic
applications. CAS technology performs similar functions to CLIP technology,
using different enzyme chemistry on DNA.

    PCR is a powerful laboratory technique that can detect, copy and amplify
specific DNA sequences. Amplifying the DNA is an essential part of DNA
sequencing because it allows the technician to start with minute amounts of DNA
and finish with at least a million-fold increase in the number of DNA molecules,
ensuring that a sufficient amount of DNA is available to obtain the sequence.

    Boom technology enables sensitive, reproducible and accurate extractions of
RNA and DNA from blood plasma samples, and from body fluids such as semen and
cerebral spinal fluid. The Boom method is especially valuable in HIV genotyping
for patients with low viral load. In connection with obtaining the Boom
technology license, we granted Organon Teknika a right of first refusal to
certain improvements we may develop to DNA sequencing and extraction technology
and to some of our reagents and uses of our CLIP technology.

                                       8

    MICROCEL CASSETTE.  The MicroCel Cassette is a disposable, polyacrylamide
electrophoretic gel cassette which acts as the detection medium for the
Long-Read Tower, Clipper and the Seq4x4. The gel is injected into the cassette.
After the cassette is cured, it is placed into the sequencer for DNA sequencing
and other tests. The cassette is comprised of two small glass plates, has a 50
micron gap and can be filled with acrylamide and cured in three minutes through
a semi-automated process which uses our Gel Toaster and SureFill products.
Competitive sequencers typically use significantly thicker (200-500 micron gap)
gel systems which are assembled manually by technicians and must be disassembled
and cleaned after use. We manufacture the MicroGel cassette in three sizes for
use with our different DNA sequencers.

    SUREFILL CARTRIDGE.  The acrylamide injected into the MicroCel cassettes is
supplied in a 10 cm long disposable syringe-based SureFill cartridge that
contains necessary ingredients to fill 10 MicroCels. SureFill protects the
technician from directly handling potentially dangerous chemicals and simplifies
the gel preparation process.

TESTING, SEQUENCING AND OTHER SERVICES

    We provide DNA testing, sequencing and other services for HIV, hepatitis B,
hepatitis C, and other infectious diseases as well as for certain cancers.

    We operate an accredited reference testing laboratory in Norcross, Georgia,
that specializes in high resolution genotyping of HIV and other viruses
associated with secondary opportunistic infections of patients with AIDS. This
facility also provides high resolution DNA sequencing of hepatitis B,
cytomegalovirus and other viruses that commonly infect AIDS patients. Our
facility in Evry, France, carries out DNA diagnostic testing and sequencing
services in Europe, including genotyping tests for HIV, hepatitis C and other
tests.

    We also maintain a library of cultures of HIV strains with known drug
resistant mutations and a patient database on viral drug resistance and high
resolution DNA sequencing data. This data may be used to screen new drugs for
possible viral resistance and to identify patterns of cross resistance to new
drugs as well as for the development of new AIDS treatment strategies.

APPLICATIONS FOR OUR OPENGENE SYSTEM

HIV

    Our HIV OpenGene System will enable physicians to genotype the major HIV
species infecting patients and to diagnose and treat HIV based upon the
mutations present in the virus. Our GeneKit contains all of the reagents,
chemicals, third-party licenses and other materials required to sequence the DNA
from the protease and reverse transcriptase regions of the virus, which are
known to develop mutations that make the virus resistant to drugs. We initiated
the sale of our HIV GeneKit, which we call the TRUGENE HIV-1 Genotyping Kit, for
use in the clinical research market in the fourth quarter of 1998. We have a
patent application pending in the United States and in some foreign countries
covering various aspects of our HIV GeneKit.

    HIV OVERVIEW.  HIV is a virus that attacks the cells in the human immune
system. Without effective treatment, HIV significantly weakens the immune
system, which results in opportunistic infections, neurological dysfunctions,
malignant tumors and eventually death. HIV infected patients may develop
Acquired Immune Deficiency Syndrome, or AIDS, which is a syndrome of infections,
diseases and medical conditions resulting from a weakened immune system. Since
the early 1980's, when the HIV epidemic was first identified, it is estimated
that more than 14 million people worldwide have died as a result of
complications from AIDS. Approximately 900,000 people in North America, 750,000
in Europe and Central Asia and a total of 33 million people worldwide are
infected with HIV. In 1998 alone, there were approximately 5.8 million new HIV
infections, including 44,000 in North America, and 2.5 million deaths as a
result of complications from AIDS.

                                       9

    HIV is a highly variable virus with a high rate of mutations. Because of
HIV's high mutation rate, drugs used to treat the virus, while generally
effective for a period of time, often result in the survival of a virus with
mutations that confer resistance to those drugs. Today, there are more than 140
known HIV mutations associated with drug resistance.

    Currently, there are 14 approved anti-HIV drugs. These drugs specifically
target the protease and reverse transcriptase enzymes to interfere with and
reduce HIV replication. Mutations in the genetic information of the virus that
codes for these two enzymes can result in the development of drug resistance.
Current drug therapy usually relies on the use of drug cocktails of two or more
antiviral drugs, targeting different stages of the HIV life cycle. A number of
studies have shown that drugs given in various combinations reduce the viral
load in most patients and can significantly improve these patients' overall
health. Viral load is a generally used measurement of the concentration of virus
in a patient's blood. HIV patients fail drug therapy in many cases either
because the virus mutates and develops resistance to drugs, or because the side
effects of drugs or the strict dosing regimens are intolerable, leading patients
to skip doses or discontinue using the drugs.

    One of the central challenges in maintaining HIV patients on long-term drug
therapy is to adjust each patient's medication as drug-resistant strains of the
virus emerge. Because they rely only on viral load, current disease management
methods usually provide a warning that the drugs are no longer working only
after the drug-resistant virus has asserted itself and viral load has increased.
These methods usually do not tell clinicians which drugs are failing due to
emerging resistance or to which drugs the patient should be switched. As a
result, there is a need to provide doctors and clinicians with information about
HIV drug resistance to enable clinicians to better manage HIV drug therapy.

    GENOTYPING AND HIV.  Genotyping HIV enables clinicians to identify mutations
in the genetic material in the virus. Two initial clinical trials, one of which
we conducted, suggest that by sequencing the patient's HIV, clinicians may be
able to detect early in the process that a resistant mutant has emerged and make
appropriate changes in medication to manage viral load. Sustaining a low viral
load is believed to be a key factor in prolonging the life of an HIV patient.
Achieving and maintaining low viral loads may also significantly reduce medical
costs because patients with low or undetectable viral loads have fewer
opportunistic infections and other symptoms and, therefore, require fewer and
shorter hospital stays and fewer other medical services.

    To test the clinical usefulness of genotyping HIV to manage a patient's drug
therapy, the Community Programs for Clinical Research on AIDS, in conjunction
with several universities and funded by the NIH, conducted a 12-week prospective
trial in the United States of 100 HIV positive patients. This trial, completed
in December 1998, is known as GART, which stands for Genotypic Antiretroviral
Resistance Testing. To be eligible, each patient had to have a minimum viral
load of 10,000 copies per milliliter. The patients were randomly split into two
groups. One group received accepted standard of care treatment, but did not
undergo HIV genotyping. The other group received accepted standard of care
treatment plus HIV genotyping. Physicians of patients in the genotyping group
were able, at their discretion, to adjust medication in response to the
genotyping results. The study results showed that the patients treated in the
genotyping group had a mean decrease in viral load of approximately 93% at the
end of eight weeks, compared to an approximately 76% decrease in patients in the
non-genotyping group. This difference was found to be statistically significant.

    OUR CLINICAL TRIALS.  In December 1998, the FDA allowed us to initiate human
clinical trials of our HIV OpenGene System under our Investigational Device
Exemption, or IDE, application. In June 1999, we completed a clinical trial in
Europe called VIRADAPT, which demonstrated that patients who received standard
of care treatment and whose drug treatments were selected using periodic
genotyping had lower viral loads than patients who received standard of care
treatment but whose drug treatments were selected without the use of genotyping.
This trial was not part of our IDE, but results from this trial will be
submitted to support our market approval application. In June 1999, we initiated
a trial called under our

                                       10

IDE called SEARCH to test the clinical utility of our HIV OpenGene System in
genotyping HIV infected patients. Based on positive clinical trial results to
date, the FDA has advised us that we are not required to complete the SEARCH
trial. We began our proficiency trials, under our IDE, in the third quarter of
1999. In January 2000, we also began a large-scale trial called Vigilance II
which will be an open label, cost recovery HIV genotyping study conducted under
our IDE.

    The following is a summary of each of these trials:

    - VIRADAPT. In March 1997, prior to our IDE allowance, we sponsored a
      prospective trial in Europe called VIRADAPT to determine the usefulness of
      genotyping in managing the treatment of HIV infected patients. The
      VIRADAPT trial involved 108 HIV infected patients and was scheduled to
      last 12 months. To be eligible, each patient had to have a minimum viral
      load of 10,000 copies per milliliter. The patients were randomly split
      into two groups. The control group received standard of care treatment,
      but did not undergo periodic genotyping. The genotyping group received
      standard of care treatment and underwent periodic genotyping allowing the
      physicians, at their discretion, to adjust medication in response to the
      genotyping results. Genotypes were done using either homebrew DNA testing
      methods or an early version of our HIV GeneKit. At the end of six months,
      interim results showed that patients treated in the genotyping group of
      the study had a mean decrease in their viral loads of approximately 93%
      (32% of patients in the genotyping group had undetectable viral loads), as
      compared to an approximately 79% decrease in viral loads in the
      non-genotyping group (14% of patients in the non-genotyping group had
      undetectable viral loads). This difference was found to be statistically
      significant. In January 1999, on the recommendation of the data safety
      management committee for the VIRADAPT trial, the control group was stopped
      on ethical grounds. The committee decision was based in part on the
      interim results of the VIRADAPT trial and in part on the release of the
      results of the GART trial in December 1998 which showed decreases in viral
      loads for the genotyping patients consistent with the VIRADAPT trial. As a
      result, beginning in January 1999, all patients received standard of care
      treatment and underwent periodic genotyping. At the end of 12 months,
      results showed that 28.4% of patients in the original genotyping arm had
      undetectable viral loads. The mean viral loads for this group were
      maintained at substantially the same level that existed after six months.
      The data also showed that of those patients who were switched from
      standard of care treatment only to standard of care treatment and
      genotyping, 26% had undetectable viral loans as compared to 14% of
      patients in this group at the end of six months before the treatment was
      switched. We are reanalyzing the samples collected in the GART and the
      VIRADAPT trials using our HIV GeneKit and OpenGene System and plan to
      include those results in support of our market approval application.

    - SEARCH. The SEARCH trial was intended to test whether patients whose
      doctors rely on genotyping using our HIV OpenGene System would experience
      greater reductions in viral load than those patients whose doctors rely
      only on standard of care treatment. This trial was intended to demonstrate
      the clinical utility of our system. We began the SEARCH trial in June
      1999. To be eligible, each patient must have had a minimum viral load of
      1,000 copies per milliliter. Like GART and VIRADAPT, the patients were
      randomly split into two groups. The control group received standard of
      care treatment without genotyping, and the genotyping arm received
      standard of care treatment plus genotyping. In November 1999, the FDA
      advised us that we are not required to complete the SEARCH trial. The FDA
      has indicated that it will not require us to demonstrate further the
      clinical utility of our HIV OpenGene System in the treatment of HIV
      infected individuals. Based on the FDA's position, we will continue to
      provide genotyping to all 128 patients currently enrolled in the SEARCH
      trial. However, enrollment of new patients into SEARCH has been closed.

    - PROFICIENCY TRIAL. The proficiency trial is intended to demonstrate the
      reliability and performance characteristics of our HIV GeneKits and
      OpenGene System, which is required by the FDA. We are genotyping
      approximately 500 plasma samples. We are genotyping the samples using our
      HIV

                                       11

      OpenGene System at our subsidiary, Applied Sciences, and at six other U.S.
      sites with certified technicians. To demonstrate the reproducibility of
      results produced using our GeneKits, samples from the same patients are
      tested at multiple sites. Multiple technicians test the same samples and
      multiple batches of our GeneKits are used to test the same samples. In
      addition, various interfering drugs or chemical agents are introduced to a
      series of samples to test the effect of those drugs and agents on the
      results produced with our GeneKits. We began this trial in the third
      quarter of 1999 and expect this trial to be completed during the second
      quarter of 2000.

    - VIGILANCE II. Vigilance II is a prospective, open label, trial with an
      enrollment of up to 30,000 patients located throughout the United States.
      We began this trial in January 2000. Testing will be performed at
      approximately 50 to 100 sites. All patients will undergo HIV genotyping
      and the genotyping results will be provided to their physicians. Doctors
      who choose not to change drug treatment based on the genotyping results
      will be required to so inform us, and results on these patients will be
      separately recorded. We plan to use the data collected in Vigilance II in
      two ways. First, we hope to compile data showing the prevalence of certain
      mutations in patients from different areas of the country. We believe that
      this data may be useful in directing doctors in a particular region to use
      certain drugs because of the prevalence of certain mutations identified in
      that region. Second, we intend to create a database of the clinical
      outcome from changes made in drug therapy. Under our IDE, we intend to
      charge patients for the use of our HIV OpenGene System to recover the
      costs of conducting this trial. We do not intend to submit the results of
      this clinical trial as part of our FDA application.

    MARKETING OF THE HIV OPENGENE SYSTEM.  Our marketing strategy for the HIV
OpenGene System consists of several components. In the United States, should we
obtain FDA approval, we intend to establish relationships with leading doctors,
laboratories and healthcare providers in the HIV diagnostics market and train
them to use our products. We believe that the use of our products by these
industry leaders will facilitate our marketing efforts in the rest of the HIV
clinical diagnostic market. In addition, we believe that these industry leaders
will help shape reimbursement policies of insurance companies and other
third-party payors for HIV genotyping.

    We have begun to establish a dedicated team to work closely with insurance
companies and other third-party payors who will determine whether to reimburse
users of HIV GeneKits and related products in the management of their drug
therapies. We are also forming a dedicated sales force to sell our HIV OpenGene
System to major pharmaceutical companies engaged in research and development of
HIV drugs and treatments.

    Outside North America, some European countries and other selected areas, we
seek to enter into distribution arrangements with leading distributors of HIV
products to sell our HIV OpenGene System for clinical diagnostic purposes. If
government approval is required for sales in those markets, we intend to rely on
our local partners to obtain the required authorizations.

    We intend to continue to market and sell our HIV OpenGene System to
hospitals, pharmaceutical companies, academic institutions and clinical
reference laboratories for research and clinical research purposes. We expect to
continue to service this market regardless of whether the FDA authorizes us to
sell our HIV products for clinical diagnostic purposes.

HLA

    Successful transplants of bone marrow, tissue and organs generally require
that the human leukocyte antigens, known as HLA, of the donor and the recipient
be matched as precisely as possible. HLAs are proteins that exist on the surface
of the cell and are vital for determining whether a transplant will be accepted
or rejected. In 1998, there were approximately 21,000 organ transplants in the
United States and approximately 1,300 bone marrow transplants. DNA sequencing of
HLA is increasingly being recognized as the most reliable method of HLA
matching. For example, recent statistics show approximately 500,000

                                       12

potential bone marrow donors are genotyped every month worldwide. By sequencing
the particular genes in the multi-gene HLA complex, a clinician can determine
whether the donor's and recipient's HLA match. It is widely believed that
matching significantly increases the chances of success of the transplant. We
have developed four GeneKits for research use only for the A, B and C loci for
Class I and for DRB1 for Class II genes. We began selling this GeneKit for
research purposes in October 1997. We have two U.S. patents covering various
aspects of this GeneKit. This GeneKit is currently being sold only to the
research and clinical research markets.

HEPATITIS B

    We have developed and are currently testing a GeneKit for Hepatitis B.
Hepatitis is an inflammation of the liver. Hepatitis B is one type of virus that
causes this inflammation. There are more than 350 million people worldwide that
are chronically infected with hepatitis B, of which approximately one million
are located in the United States. Hepatitis B is treated with interferon, drugs
or certain reverse transcriptase inhibitors. Genotyping may be used to identify
the type of hepatitis virus present (e.g., B or C) and to detect mutations in
the virus that cause the disease to become resistant to anti-viral drugs.

HEPATITIS C

    We are currently developing a GeneKit for hepatitis C. Hepatitis C is a
second type of virus that causes inflammation of the liver. There are
approximately 175 million people worldwide that are chronically infected with
hepatitis C, of which approximately 3.2 million are in the United States. Unlike
hepatitis B, interferon drugs work with only certain hepatitis C genotypes. We
have developed and are currently testing a Hepatitis C GeneKit that can be used
to identify the genotypes of the virus, so that the appropriate drug treatment
may be prescribed. Protease inhibitors are also being used experimentally to
treat hepatitis C. Our Hepatitis C GeneKit can also be used to detect mutations
that may confer resistance to these anti-viral drugs.

TUBERCULOSIS

    We are currently developing a GeneKit for tuberculosis. Tuberculosis,
commonly known as TB, is a highly contagious bacterial disease of the
respiratory system. There are approximately three million deaths per year
worldwide caused by TB and eight million new infections per year worldwide. In
addition, there is an increase in the number of TB infections which are
multi-drug resistant. In order to be infected with TB, a patient must carry a
certain mycobacterium. People who test positive for non-TB mycobacterium can be
treated at home with certain drugs. Due to the highly contagious nature of TB,
people who test positive for TB mycobacterium must be kept in isolation during
the early stage of treatment. Current testing methods can take from several days
to several weeks to identify whether a patient's mycobacterium is TB or non-TB,
forcing hospitals to quarantine both TB and non-TB patients during this period.
Quarantining patients for any prolonged period uses significant medical
resources. We are developing and currently testing a TB GeneKit designed to
genotype the genetic material in the mycobacterium within approximately one day
to identify the presence of TB or non-TB mycobacterium. Our TB GeneKit can also
be used to detect mutations that confer resistance to drugs used to treat TB. We
intend to market and sell our TB GeneKit in those geographic areas where TB
poses significant health threats, including Asia, Central Europe, parts of the
former Soviet Union and Africa.

OTHER HIV

    We are developing additional HIV GeneKits for HIV species not covered by our
existing HIV GeneKit.

                                       13

REGULATION BY THE FDA AND OTHER GOVERNMENT AGENCIES

    We currently sell our products for research and clinical research purposes.
In the future, we intend to sell products for clinical diagnostic purposes. We
do not believe we need authorization from the FDA or health authorities in
foreign countries to sell our products for research purposes, as long as they
are properly labeled. We will, however, require authorization to sell our
products for clinical diagnostic purposes.

    FDA APPROVAL PROCESS.  Products that are used to diagnose diseases in people
are considered medical devices, which are regulated by the FDA. To obtain FDA
authorization for a new medical device, a company may have to submit data
relating to safety and efficacy based on extensive testing. This testing, and
the preparation of necessary applications and the processing of those
applications by the FDA, are expensive and may take several years to complete.
The following describes several important aspects of the FDA authorization
process.

    The FDA has three classes for medical devices:

       - Class I devices (for example, bandages, manual wheelchairs and ice
         bags) are the least regulated, but they must still comply with the
         FDA's labeling, manufacturing, recordkeeping, and other basic
         requirements. Most Class I devices do not require premarket
         authorization from the FDA.

       - Class II devices (for example, portable oxygen generators and
         hypodermic needles) may be subject to additional regulatory controls,
         such as performance standards and postmarket surveillance.

       - Class III devices (for example, cardiac pacemakers) require specific
         FDA approval prior to marketing and distribution, and are, as well,
         subject to the FDA's basic requirements.

    To sell a Class II medical device, a company must first obtain permission of
the FDA by submitting a 510(k) premarket notification, commonly known as a
510(k), showing that the device is similar to a device already on the market. To
sell a Class III medical device, a company must first get specific approval of
the FDA for the device by submitting a premarket approval application, commonly
known as a PMA application. A company may have to include test data in a 510(k)
the notification, including human test data. It will almost always have to
include such test data in a PMA application.

    If human test data are required for either a 510(k) or a PMA application,
and if the device presents a significant risk, the manufacturer must first file
an Investigational Device Exemption submission, or IDE, with the FDA. The IDE
must contain data, such as animal and laboratory testing, showing that the
device is safe for human testing. If the IDE is granted, human testing may
begin.

    Generally, a 510(k) notification to the FDA that a new device is similar to
an existing device requires less data and takes less time for the FDA to process
than a PMA. The FDA is supposed to act on a 510(k) notification within 90 days.
According to the most recent FDA data available, the FDA completes its review of
more than 66% of 510(k)s within 90 days. By contrast, a PMA application must be
supported by more extensive data to prove the safety and efficacy of the device,
and review of a PMA application involves a lengthier FDA process. The FDA
conducts a preliminary review of the PMA application. If complete, the PMA
application is filed by the FDA. Officially, the FDA then has 180 days to review
the PMA application, however, as a practical matter, PMA reviews usually take
much longer, up to one-and-a-half years or more from filing. The FDA may grant
expedited (fast-track) review of a PMA application if certain criteria relating
to public health importance are met, but that decision is within the FDA's
discretion and affects only the timing of the review process, not the outcome.

    NEED FOR FDA APPROVAL OF SOME OF OUR PRODUCTS.  We intend to market some of
our products in the U.S. for clinical diagnostic purposes, and therefore we will
have to obtain prior FDA authorization, as described above. We believe our HIV
GeneKit is currently considered by the FDA as a Class III medical

                                       14

device. However, the FDA recently asked an advisory committee of experts whether
HIV genotyping tests should be reclassified from Class III to Class II. The
advisory committee recommended reclassification subject to certain controls
including post-market surveillance of the performance of these products. If the
FDA reclassifies HIV genotyping tests from Class III to Class II, we will be
able to obtain FDA permission to market our HIV OpenGene System by submitting a
510(k), rather than a PMA. A 510(k) generally contains less data than a PMA and
is usually reviewed and approved by the FDA more quickly than a PMA. Although it
is likely that the FDA will follow the recommendation of its advisory committee,
to do so the FDA is required to issue a proposed regulation, allow the
opportunity for public comment and then publish a final regulation reclassifying
HIV genotyping tests. This process could take several years to complete.

    Under the Food and Drug Administration Modernization Act of 1997, there is
an alternative option for us to obtain faster reclassification of our HIV
OpenGene System. Under this new procedure we can ask the FDA to classify our HIV
OpenGene System based upon an evaluation of the risks presented by the device to
patients. The FDA has 60 days to make a decision on this request. However, in
order for us to use this new procedure, we would first have to submit a 510(k)
to the FDA and have the FDA reject the 510(k), which would occur because the
device is still in Class III. Once the FDA rejects our 510(k), we would then
immediately submit our request for classification of our HIV OpenGene System in
Class II. This option is likely to be faster than waiting for the FDA to go
through its normal reclassification procedures.

    We currently plan to follow this alternate option. However, since this
process is new and is used very infrequently, there is no assurance that the FDA
would grant our request for reclassification. If the FDA does not grant our
request to reclassify our HIV GeneKit under this procedure, we will either have
to submit a PMA Application or wait until the FDA acts to reclassify HIV
Genotyping tests as recommended by its advisory committee.

    We believe that some of our other products will be regulated as Class II or
Class III medical devices.

    OTHER FDA REQUIREMENTS.  In addition to government requirements relating to
marketing authorization for medical device products, we will also be subject to
other FDA requirements. We will have to be registered as a medical device
manufacturer with the FDA. We will be inspected on a routine basis by the FDA
for compliance with the FDA's quality system regulations, which prescribe
standards for manufacturing, testing, distribution, storage, design control and
service activities. In addition, because we will manufacture some of our
products in Canada, the FDA, in conjunction with the U.S. Customs Service, could
impose a ban on our products if the FDA were to conclude that the products
appeared to be in violation of the FDA's regulatory requirements, including
restrictions that apply to the sale of research-use only products. Also, the
FDA's medical device reporting regulation will require us to provide information
to the FDA on deaths or serious injuries associated with the use of our devices,
as well as product malfunctions that are likely to cause or contribute to death
or serious injury if the malfunction were to recur.

    Finally, the FDA prohibits promoting a device for unauthorized uses and
reviews company labeling for accuracy. The FDA has become aware that certain
products being sold by other companies for research purposes only, were in fact
being used by some customers for clinical diagnostic purposes. The FDA recently
issued a policy statement describing the conditions under which companies may
sell research-use only products. These conditions may restrict our ability to
sell research-use only products in the United States. We do not believe these
conditions will have any negative effect on our sale of GeneKits for legitimate
scientific research.

    REGULATORY APPROVAL OUTSIDE THE UNITED STATES.  We plan to market our
products outside the United States, initially in Canada, Japan, countries in
Europe and South America. Government authorization requirements similar to the
FDA's exist in some of these and many other foreign countries. Therefore,
authorization to sell our products for clinical diagnostic purposes in Canada,
Japan, Europe and South

                                       15

America may also require lengthy and costly testing procedures. In addition, the
regulatory bodies in other countries may be affected or influenced by
significantly different criteria than those used by the FDA. Sale of our
products in these areas may be materially affected by the policies of these
regulatory bodies or the domestic politics of the countries involved.

    OTHER GOVERNMENT REGULATIONS.  We are or may become subject to various
federal, state, provincial and local laws, regulations and recommendations,
including those relating to workers compensation, safe working conditions, and
laboratory and manufacturing practices used in connection with our research and
development activities.

    In addition, our reference laboratory in Norcross, Georgia, is subject to
stringent regulation under the Clinical Laboratory Improvement Amendments of
1988, known as CLIA. Under CLIA, laboratories must meet various requirements,
including requirements relating to the validation of tests, training of
personnel, and quality assurance procedures. The laboratory must also be
certified by a government agency. Our Norcross laboratory performs high
complexity tests, and is therefore subject to the most stringent level of
regulation under CLIA. This laboratory is certified under CLIA and by the state
of Georgia.

    We are also subject to various laws and regulations in Canada, the United
States and Europe, including those relating to product emissions use and
disposal of hazardous or toxic chemicals or potentially hazardous substances,
infectious disease agents and other materials, workers compensation, safe
working conditions, and laboratory and manufacturing practices used in
connection with our research and development activities.

SALES AND MARKETING

    We market our OpenGene System in North America and in many European
countries to the research and clinical research markets through our direct sales
force. We have a sales and marketing force of 58 people. Many members of our
sales force have scientific backgrounds. Our marketing force includes a team of
trained application specialists who provide intensive on-site training,
after-sales support and site-by-site trouble shooting. We offer service
contracts to our customers on our sequencers, certain equipment and software. We
have established a toll-free telephone number in North America for customer
service. The members of our internal sales force are compensated on a commission
and salary basis.

    For other areas of the world and in selected product markets, our strategy
is to establish relationships with leading distributors to market and sell our
products. We granted Amersham the exclusive worldwide license to use and sell
the Seq4x4 and related products used and sold with the sequencer, which is
designed for the research market. In November 1999, we granted
Amersham-Pharmacia Biotech K.K. the exclusive right to distribute our products
to the research market in Japan. During 1999 approximately 21% of our revenues
were derived from sales of sequencers and other products to Amersham.

    In 1999, we granted exclusive rights to distribute our GeneKits and OpenGene
System to Werfen Medical S.A. in Argentina and Diagnostic Technology Pty Ltd. in
Australia and New Zealand. We also entered into an agreement in 1999 with Roche
Diagnostics, S.L. to act as our exclusive agent in Spain and Portugal in the
clinical diagnostic market. These agreements expire at various times from
April 2000 through April 2002, and in certain cases, are subject to automatic
renewal. Certain of the agreements may also be terminated by either party upon
specified notice periods and may require us to make termination payments under
certain circumstances. Certain of the agreements also provide for minimum annual
purchases for specified periods.

    Our marketing efforts also include product advertisement and participation
in trade shows and product seminars.

                                       16

RESEARCH AND DEVELOPMENT

    We currently conduct research and development through our own staff and
through collaborations with researchers at scientific and academic institutions
and hospitals. Our current research and development activities are focused on:

    - developing additional GeneKits, including additional HIV GeneKits for
      different HIV species, and GeneKits for hepatitis B, hepatitis C and
      tuberculosis;

    - developing new technology for our sequencers and related equipment and
      software;

    - refining existing proprietary, disposable gel cassette technology in order
      to improve performance of our sequencers; and

    - exploring new technologies for future commercial products.

    As of February 29, 2000, our research and development staff consisted of 60
people. This includes a team of software developers who have developed our
GeneObjects software and are developing our TRUGENE CMS software. Our software
developers are working on an advanced version of our GeneObjects software as
well as additional software applications for the clinical diagnostic market. Our
research and development staff is also working to prepare our planned
application to the FDA to sell our HIV OpenGene System to the clinical
diagnostic market.

    We incurred $7.9 million of research and development expenses in 1999, $6.3
million in 1998 and $4.1 million in 1997. We have four facilities in the United
States and Canada where we conduct research and development.

MANUFACTURING

    We assemble our DNA sequencers and related equipment at a manufacturing
facility in Toronto, Canada. Component parts are manufactured by third parties
in accordance with our design specifications. We manufacture our disposable gel
cassettes at our second manufacturing facility in Toronto. We make GeneKits in
our Pittsburgh, Pennsylvania facility. We also plan to make GeneKits at a new
facility in Atlanta, Georgia, which is in the process of being built. We
manufacture certain chemicals and other components included in the GeneKits.
Other GeneKits components are manufactured by, or licensed from, third parties.

    Our new facility in Atlanta is being designed to enable us to increase
significantly our production of GeneKits. Based upon our experience with our
Pittsburgh facility, we believe that we will be in a position to qualify our
Atlanta facility under applicable FDA standards. We expect that this new
approximately 100,000 square foot facility will become available to us in stages
and that we will be in a position to commence commercial production at this
facility in the first quarter of 2001.

    We have documented and installed design and production practices in our
Toronto facilities to comply with the FDA's quality system regulations. We are
in the process of documenting and installing design and production practices in
our Pittsburgh facility to comply with the FDA's quality system regulations. We
have implemented a quality management system at these manufacturing facilities
in order to ensure product performance, reliability and quality. We intend to
take the same actions at our new Atlanta facility. We also are seeking
certification of compliance to ISO 9001 for our Toronto facilities. In addition
to adhering to ISO goals and FDA quality standards, we have implemented our own
quality control and quality assurance standards and programs.

    We provide one year warranty coverage for product defects on the instrument
component of our sequencers. All product repairs are performed by our employees
at one of our manufacturing facilities.

    In connection with our GeneKits, sequencers and related equipment, we use
certain dyes and custom-designed component parts supplied by third parties. We
believe that some dyes supplied by

                                       17

Amersham under our exclusive worldwide license to use and sell Amersham dyes
within our GeneKits, may not be available from other suppliers, although our
customers might be able to purchase some, but not all, dyes directly from
Amersham. In addition, certain reagents and other chemicals that we use and
include in our GeneKits are available only under license from their
manufacturers. While we believe that alternative reagents and chemicals are
available, alternate supplies may not be as effective as certain of the products
that we presently use. In addition, we believe that there are alternative
suppliers for our custom-designed DNA sequencer parts, but that we would incur
costs in switching to alternative suppliers and would likely experience delays
in production of the products that use any of these parts until such time as we
were able to locate alternate suppliers or parts.

PROPRIETARY RIGHTS

    We rely on patents, licenses from third parties, trade secrets, trademarks,
copyright registrations and non-disclosure agreements to establish and protect
our proprietary rights in our technologies and products.

    We own or jointly own 33 U.S. patents. We own or jointly own additional 31
U.S. patent applications pending, of which seven have been allowed. We own 12
foreign patents. We own or jointly own foreign applications presently pending as
PCT applications, or as national phase PCT applications, designating
intergovernmental agencies and multiple countries including the European Patent
Office, Australia, Canada and Japan. Our issued and allowed patents and patent
applications cover various aspects of our products and technologies, including
viral load testing, several of our GeneKits and various DNA sequencing and
GeneKit technologies, including the stratified matrix testing technology, the
MicroCel technology, basecalling technology, and the CLIP technology.

    Our competitive position is also dependent upon unpatented trade secrets. We
are developing a substantial database of information concerning our research and
development and have taken security measures to protect our data. However, trade
secrets are difficult to protect. In an effort to protect our trade secrets, we
have a policy of requiring our employees, consultants and advisors to execute
non-disclosure agreements. These agreements provide that confidential
information developed or made known to an individual during the course of their
relationship with us must be kept confidential, and may not be used, except in
specified circumstances.

    On December 27, 1999, Perkin-Elmer Corporation, PE Biosystems Group filed a
lawsuit against our company in the United States District Court for the Northern
District of California claiming that our DNA sequencing equipment and products
infringe patents licensed to Perkin-Elmer by the California Institute of
Technology. The complaint offers no details to support the allegation of
infringement. The suit requests among other remedies that the court enjoin us
from continuing to infringe these patents and an unspecified amount of damages.
We have previously studied these patents and have received legal advice that we
are not liable for any claims of infringement. We believe that Perkin-Elmer's
claim is without merit and we plan to vigorously defend the suit. Dr. Lloyd M.
Smith, one of our directors, is a named inventor on the patents that we are
alleged to have infringed. Dr. Smith indirectly receives royalty payments for
those patents from Perkin-Elmer through the California Institute of Technology.
Dr. Smith is a co-founder of Third-Wave Technologies Inc., which has announced
that it will be acquired by PE Biosystems in a stock-for-stock transaction.
After the closing of that transaction, Dr. Smith expects to be a consultant to
PE Biosystems.

    From time to time, we receive notice from third parties claiming that we may
infringe their patents.

COMPETITION

    The biotechnology industry is highly competitive. We compete with entities
in the United States and abroad that are engaged in the development and
production of products that analyze genetic information. They include:
biotechnology, pharmaceutical, chemical and other companies; academic and
scientific institutions; governmental agencies; and public and private research
organizations.

                                       18

    Some of our major competitors include:

    - manufacturers and distributors of DNA sequencers such as the PE Biosystems
      Group, Amersham and its Molecular Dynamics subsidiary, LI-COR, Inc.,
      Hitachi, Ltd. and Molecular and Genetic BioSystems, Inc.;

    - manufacturers and distributors of DNA probe-based diagnostic systems such
      as Abbott Laboratories, Chiron Corp., Roche Diagnostics, Gene Probe Inc.,
      Innogenetics NV, Digene Corporation and Johnson & Johnson;

    - manufacturers of new technologies used to analyze genetic information,
      such as chip-based and assay-based technologies, including, Hyseq Inc.,
      Affymetrix Inc., ChemCore Inc., CuraGen Corp., Nanogen, Inc.; and

    - manufacturers of cell cultured assays, including ViroLogic, Inc. and
      VIRCO.

    Many of these companies and many of our other competitors have much greater
financial, technical and research and development resources and production and
marketing capabilities than we do.

    Our GeneKits also compete with homebrew genetic tests for HIV and other
diseases designed by laboratories and some of the companies listed above.
Homebrew tests include a variety of small-scale genotyping tests which typically
have not undergone clinical validation and have not been approved by the FDA or
other regulatory agencies.

    We believe that we are able to compete primarily on the basis of the
following:

    - our ability to provide an integrated DNA sequencing system;

    - ease of use;

    - speed of sequencing;

    - cost-effectiveness;

    - clinical data with respect to the HIV market; and

    - with respect to the HIV market, FDA approval of our HIV OpenGene System,
      if and when we obtain it.

EMPLOYEES

    As of February 29, 2000, we employed 248 full-time employees (including
executive officers) and 21 independent contractors, of whom:

    - 60 are engaged in research and development;

    - 58 are involved in sales and marketing activities;

    - 84 in manufacturing and operations; and

    - 67 are involved in finance, legal and administrative functions.

    Our employees are not represented by a union or other collective bargaining
unit and we have never experienced a work stoppage. We believe that our employee
relations are good.

                                       19

RISK FACTORS

OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR FUTURE
PROSPECTS AND OUR PROSPECTS MUST BE CONSIDERED IN LIGHT OF THE DIFFICULTIES
FREQUENTLY ENCOUNTERED BY COMPANIES IN THE EARLY STAGES OF COMMERCIAL
MANUFACTURING AND MARKETING.

    Although we began operations in 1993, we are only in the early stages of
commercially manufacturing and marketing our products. In late 1996, we began
manufacturing and selling to the research and clinical research markets, the
initial versions of our automated DNA sequencers and related products. Our
limited operating history makes it difficult to evaluate our business and our
prospects for future profitability. Our prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in the
early stages of commercial manufacturing and marketing. Sales for our fiscal
year ended December 31, 1999 were $13.6 million. In the future, sales may not
increase or they may decrease.

WE HAVE A HISTORY OF LOSSES, WE ANTICIPATE ADDITIONAL LOSSES AND WE MAY NEVER
  BECOME PROFITABLE.

    We incurred a net loss of $25.3 million in the year ended December 31, 1999.
As of December 31, 1999, our accumulated deficit was $59.4 million. Our losses
have resulted principally from expenses incurred in research and development of
our technology and products, and from expenses that we have incurred while
building our business infrastructure. We expect to continue to incur significant
operating losses in the future as we continue our research and development
efforts and clinical trials and expand our sales and marketing force and
business infrastructure, in an effort to achieve greater sales and expand our
business. It is uncertain when, if ever, we will become profitable. Our ability
to become profitable will depend on many factors including, among others:

    - whether we obtain regulatory approval to sell our HIV OpenGene System and,
      in the future, OpenGene Systems for other diseases, to the clinical
      diagnostic market in the United States and abroad;

    - the decision of third-party payors to reimburse clinicians and patients
      for use of our HIV GeneKit and, in the future, our other products;

    - our ability to successfully market and sell our HIV OpenGene System and,
      in the future, OpenGene Systems for other diseases, to the clinical
      diagnostic market;

    - our ability to increase sales of our products to the research and clinical
      research markets;

    - our ability to effectively manage the growth of our business;

    - our ability to continue to develop advanced versions of our products and
      technologies and new products and technologies in a timely manner; and

    - our ability to manufacture our products according to schedule and within
      budget.

OUR OPERATING RESULTS MAY FLUCTUATE FROM QUARTER TO QUARTER DUE TO MANY FACTORS
AND, THEREFORE, YOU SHOULD NOT RELY ON PERIOD TO PERIOD COMPARISONS OF OUR
OPERATING RESULTS AS AN INDICATION OF FUTURE PERFORMANCE.

    Our operating results have varied on a quarterly basis in the past and may
fluctuate significantly in the future as a result of a variety of factors, many
of which are outside our control. Factors that may affect our quarterly
operating results include, among others:

    - unanticipated costs or delays in carrying out our clinical trials;

    - the amount and timing of operating costs and capital expenditures relating
      to research and development, and the expansion of our business, operations
      and infrastructure;

                                       20

    - our decision to increase or decrease sales of equipment, GeneKits and
      other consumables at reduced prices;

    - our decision to reduce prices of our products in response to price
      reductions by competitors;

    - general economic conditions, as well as economic conditions specific to
      the biotechnology industry; and

    - unanticipated costs or delays in manufacturing our products.

    We believe that period to period comparisons of our operating results may
not be meaningful and you should not rely on any such comparisons as an
indication of our future performance. In addition, it is likely that in one or
more future quarters our operating results will fall below the expectations of
securities analysts and investors. In such event, the market price of our common
shares is likely to fall.

WE MAY NOT RECEIVE APPROVAL OF THE FDA OR FOREIGN REGULATORY AUTHORITIES FOR OUR
HIV OPENGENE SYSTEM AND, IN THE FUTURE, OTHER HIV PRODUCTS, AND, THEREFORE, WE
MAY NOT BE ABLE TO SELL OUR HIV PRODUCTS TO THE CLINICAL DIAGNOSTIC MARKET IN
THE UNITED STATES OR ABROAD.

    We intend to seek FDA approval to sell our HIV OpenGene System for clinical
diagnostic purposes in the United States. In the future, we may seek FDA
approval to sell other HIV products for clinical diagnostic purposes in the
United States.

    In order to obtain FDA approval for our HIV OpenGene System we must submit
an application supported by extensive human test data demonstrating the utility,
reliability and performance of our HIV GeneKit and OpenGene System. The FDA must
also confirm that we maintain good laboratory, clinical and manufacturing
practices. The FDA approval process is lengthy and expensive. You should be
aware of the following possibilities:

    - we may never obtain approval from the FDA to sell our HIV products to the
      clinical diagnostic market;

    - it may be more expensive and time consuming than we anticipate to develop
      the test data needed for the FDA;

    - the FDA may disagree with us that the data are adequate, and we may
      therefore have to do additional testing;

    - the testing may show that our HIV products do not work at all or are not
      reliable enough, and therefore cannot be authorized by the FDA, or the
      testing may show that our HIV products do not work as well as they need to
      for successful marketing, even if marketing is authorized by the FDA;

    - the testing may be too costly to carry out, either because we lack
      adequate funds or because the market potential for our HIV products does
      not justify the costs;

    - we may choose or be required to discontinue our clinical trials for a
      number of reasons, including unanticipated interim trial reports, changes
      in regulations or the adoption of new regulations, unexpected
      technological developments by our competitors or problems or delays with
      patient enrollment in our trials;

    - there may be significant delays in the FDA review process;

    - the FDA may approve the sale of our HIV products with conditions that
      could limit the market for these products or make them more difficult or
      expensive to sell than we anticipate; and

    - the FDA can revoke marketing authorization for our products for a variety
      of reasons, such as our failure to comply with the FDA's device
      requirements or poor product performance in terms of safety and
      effectiveness.

                                       21

    If we fail to receive FDA approval, if FDA approval is delayed or if the FDA
imposes conditions that make it difficult to sell or market our products, we
will be unable to carry out our business plan to sell our HIV OpenGene System
for clinical diagnostic use in the United States and our business, financial
condition and results of operations will be materially harmed.

    We also may be required to obtain approval from some foreign regulatory
authorities to sell our HIV products to the clinical diagnostic market in
countries outside of the United States. In some cases, we will face an approval
process similar to that required by the FDA. We cannot be certain that we will
obtain the necessary approvals to sell our HIV products to the clinical
diagnostic market in these countries. In some cases, the failure to obtain
approval could materially harm our business, financial condition and results of
operations.

WE PLAN TO SEEK FDA APPROVAL TO MARKET OUR HIV OPENGENE SYSTEM TO THE CLINICAL
DIAGNOSTIC MARKET THROUGH AN APPLICATION PROCESS THAT IS NEW AND INFREQUENTLY
USED, AND IF THE FDA DOES NOT GRANT OUR REQUEST, OUR ABILITY TO SELL OUR HIV
OPENGENE SYSTEM TO THE CLINICAL DIAGNOSTIC MARKET COULD BE DELAYED
SIGNIFICANTLY.

    Our HIV OpenGene System is currently regulated as a Class III medical
device. To sell a Class III medical device a company must first get specific
approval of the FDA for the device by submitting a premarket approval
application, commonly known as a PMA. However, an FDA advisory committee
recently recommended that the FDA reclassify HIV genotyping tests from
Class III medical devices to Class II medical devices. To sell a Class II
medical device, a company must first obtain permission of the FDA by submitting
a 510(k) premarket notification, commonly known as a 510(k), showing that the
device is similar to a device already on the market. Generally, a 510(k)
notification to the FDA that a new device is similar to an existing device
requires less data and takes less time for the FDA to process than a PMA. The
FDA is supposed to act on a 510(k) notification within 90 days. By contrast, a
PMA application must be supported by more extensive data to prove the safety and
efficacy of the device, and a review of a PMA application involves a lengthier
process which may take one and one-half years or more from filing.

    The FDA usually follows the advice of its advisory committees. However, to
reclassify a device from Class III to Class II, the FDA's administrative process
that could take several years. Therefore, it is unlikely that reclassification
of HIV genotyping tests by the FDA would be effected for several years.

    We currently plan to attempt to accelerate the reclassification process by
using an alternative provision of the 1997 Food and Drug Administration
Modernization Act. Under this alternative, we will submit a 510(k) notification
to the FDA, which the FDA will reject because our HIV OpenGene System is still a
Class III device. After receipt of the rejection, we will have 30 days to seek
reclassification of our HIV OpenGene System, and the FDA will have 60 days to
rule on this request. If the FDA grants our request, we will be able to
immediately market our HIV OpenGene System to the clinical diagnostic market.

    We cannot guarantee that this alternative procedure will be successful in
shortening the time for FDA approval of our HIV OpenGene System. This process is
new and is used very infrequently, and, therefore, there is no assurance that
the FDA will grant our request for reclassification. If the FDA does not grant
our request to reclassify our HIV OpenGene System under this new
reclassification procedure, we either will have to submit a PMA application or
wait until the FDA acts to reclassify HIV genotyping tests as recommended by its
advisory committee. In either event, our ability to sell our HIV OpenGene System
for clinical diagnostic use will be delayed, and our business, financial
condition, and results of operations could be materially harmed.

                                       22

WE MAY NOT RECEIVE REGULATORY APPROVAL FOR OUR OTHER PRODUCTS AND THEREFORE MAY
NOT BE ABLE TO SELL THESE PRODUCTS FOR CLINICAL DIAGNOSTIC PURPOSES IN THE
UNITED STATES OR ABROAD.

    In addition to our HIV OpenGene System, we have also developed and are
continuing to develop GeneKits for other clinical diagnostic applications. In
order to sell these GeneKits to the clinical diagnostic market, we may be
required to obtain the approval of the FDA and of foreign regulatory authorities
through approval procedures that are the same or similar to those required for
our HIV OpenGene System. Our failure to obtain necessary approvals to sell our
products for clinical diagnostic use in one or more significant markets could
cause material harm to our business, financial condition and results of
operations.

EACH TIME WE MAKE ALTERATIONS TO ANY FDA APPROVED PRODUCTS, WE MAY NEED TO SEEK
ADDITIONAL FDA APPROVAL, WHICH WILL LENGTHEN THE TIME AND INCREASE THE COST OF
BRINGING UPGRADED OR NEW PRODUCTS TO MARKET.

    We may need to seek additional FDA approval if we make changes to a product
specifically approved by the FDA. Our HIV OpenGene System, as submitted to the
FDA, will contain specific reagents, dyes, enzymes, chemicals, software and
other materials. If we obtain approval through the premarket notification or
510(K) process, we will be required to obtain prior clearance from the FDA for
those product changes that could significantly affect safety or effectiveness.
If our HIV OpenGene System is approved through the PMA, process, the FDA would
require that we obtain additional approval for any change to the kit's
components that could alter the performance of the kit, such as changing certain
enzymes or reagents. We also may be required to obtain similar foreign
regulatory approval. To obtain additional approval, we may have to conduct
additional human clinical trials to demonstrate that the altered GeneKit will
produce at least the same results as the approved GeneKit or will be as safe and
effective as the approved product. Obtaining additional FDA or foreign
regulatory approval is likely to be time consuming and costly and, as a result,
we may experience delays in bringing these upgraded or new products to market.

OUR BUSINESS IS, AND IN THE FUTURE MAY BECOME, SUBJECT TO ADDITIONAL REGULATIONS
AND IF WE ARE UNABLE TO COMPLY WITH THEM OUR BUSINESS MAY BE MATERIALLY HARMED.

    Our reference laboratory in Norcross, Georgia, is subject to stringent
regulation under the Clinical Laboratory Improvement Amendments of 1988, known
as CLIA. Under CLIA, laboratories must meet various requirements, including
requirements relating to the validation of tests, training of personnel, and
quality assurance procedures. The laboratory must also be certified by a
government agency. Our Norcross laboratory is certified under CLIA and licensed
by the state of Georgia. Our failure to comply with state or CLIA requirements
can result in various penalties, including loss of certification. The imposition
of such penalties could have an adverse impact on us. In addition, some states
regulate out-of-state laboratories. The failure to comply with these state
requirements could also adversely affect us.

    We are or may become subject to various other federal, state, provincial and
local laws, regulations and recommendations. We are subject to various laws and
regulations in Canada, the United States and Europe, relating to product
emissions, use and disposal of hazardous or toxic chemicals or potentially
hazardous substances, infectious disease agents and other materials, and
laboratory and manufacturing practices used in connection with our research and
development activities. If we fail to comply with these regulations, we could be
fined, we may not be able to operate certain of our facilities or certain
portions of our business, and we may suffer other consequences that could
materially harm our business, financial condition or results of operations.

    We are unable to predict the extent of future government regulations or
industry standards. You should assume that in the future there may be more
government regulations or standards. New regulations or standards may result in
increased costs, including costs for obtaining permits, delays or fines
resulting from loss of permits or failure to comply with regulations.

                                       23

THE MARKET FOR GENOTYPING PRODUCTS IS NEW AND GENOTYPING MAY NOT BECOME AN
ACCEPTED METHOD OF MANAGING DRUG TREATMENT.

    An important part of our business strategy is our plan to sell our products
to the clinical diagnostic market. Our ability to do so will depend on the
widespread acceptance and use by doctors and clinicians of genotyping to manage
drug treatment of certain diseases or other medical conditions. The use of
genotyping by doctors and clinicians for this purpose is relatively new.
Existing DNA sequencing systems have been designed primarily for research
purposes and we are not aware of any DNA sequencing products that have been
approved by the FDA for clinical diagnostic purposes. We cannot be certain that
doctors and clinicians will want to use DNA sequencing systems designed for
these purposes. If genotyping is not accepted by this market, we will not be
able to carry out our business plan and our business, financial condition and
results of operations will be materially harmed.

IF GENOTYPING IS ACCEPTED AS A METHOD TO MANAGE DRUG TREATMENT, WE CANNOT BE
CERTAIN THAT OUR PRODUCTS WILL BE ACCEPTED IN THE CLINICAL DIAGNOSTIC MARKET.

    If genotyping becomes widely accepted in the clinical diagnostic market, we
cannot predict the extent to which doctors and clinicians may be willing to
utilize our OpenGene System to manage drug treatment of selected diseases or
other medical conditions. Doctors and clinicians may prefer competing
technologies and products that can be used for the same purposes as our products
such as other DNA sequencers, DNA probe-based diagnostic systems, chip-based and
assay-based technologies, or homebrew genetic tests. If our products are not
accepted by the clinical diagnostic market, our business, financial condition
and results of operations will be materially harmed.

IF INSURANCE COMPANIES AND OTHER THIRD-PARTY PAYORS DO NOT REIMBURSE DOCTORS AND
PATIENTS FOR OUR PRODUCTS, OUR ABILITY TO SELL OUR PRODUCTS TO THE CLINICAL
DIAGNOSTIC MARKET WILL BE IMPAIRED.

    Our ability to successfully sell our HIV GeneKit and other GeneKits to the
clinical diagnostic market will depend partly on the willingness of insurance
companies and other third-party payors to reimburse doctors and patients for use
of our products. Physicians' recommendations to use genotyping, as well as
decisions by patients to pursue genotyping, are likely to be influenced by the
availability of reimbursement for genotyping by insurance companies or other
third-party payors. Government and private third-party payors are increasingly
attempting to contain health care costs by limiting both the extent of coverage
and the reimbursement rate for testing and treatment products and services. In
particular, services that are determined to be investigational in nature or that
are not considered "reasonable and necessary" for diagnosis or treatment may be
denied reimbursement coverage. If adequate reimbursement coverage is not
available from insurers or other third-party payors, we expect that few, if any,
patients would be willing to pay for genotyping. In this case, our anticipated
revenues will be substantially reduced, our ability to achieve profitability
will be significantly impaired and our business, financial condition and results
of operations will be materially harmed.

WE DO NOT HAVE MARKETING EXPERIENCE IN THE CLINICAL DIAGNOSTIC MARKET, WE CANNOT
BE CERTAIN WE WILL SUCCESSFULLY DEVELOP THE MARKETING CAPABILITIES REQUIRED TO
SELL OUR PRODUCTS TO THIS MARKET AND IN SOME MARKETS WE WILL BE DEPENDENT ON THE
EFFORTS OF DISTRIBUTORS TO SELL OUR PRODUCTS.

    We have no experience marketing products to the clinical diagnostic market.
If the FDA approves the sale of our HIV OpenGene System and, in the future,
other products, to the clinical diagnostic market in the United States, we
intend to expand our internal sales force to sell products to these markets in
North America and selected other countries. It will take significant time, money
and resources to expand our sales force. We cannot be certain that we will
develop the marketing capabilities necessary to successfully market and sell our
products to the clinical diagnostic market.

                                       24

    In selected geographic markets outside North America and certain European
countries, beginning in 1999, we entered into distribution and marketing
arrangements with leading distributors to sell our products to the research and
clinical diagnostic markets. These agreements expire at various times from
April 2000 through April 2002, and, in certain cases, are subject to automatic
renewal. Certain of the agreements may also be terminated by either party upon
specified notice periods and may require us to make termination payments under
certain circumstances. Our ability to successfully sell products to the research
and clinical diagnostic markets in countries in which we rely on distribution
agreements will depend to a great extent on the efforts of the distributors.

    Failure to successfully market our products will impede our ability to
generate significant revenues and become profitable.

IF WE ARE UNABLE TO CONTINUE DEVELOPING ADVANCED TECHNOLOGY, ADVANCED VERSIONS
OF OUR EXISTING PRODUCTS AND NEW PRODUCTS IN A TIMELY AND COST-EFFECTIVE MANNER,
OUR ABILITY TO GENERATE REVENUE AND BECOME PROFITABLE WILL BE IMPAIRED.

    We believe that if we are to generate additional revenue and become
profitable, we must continue to develop advanced technology, advanced versions
of our existing products and new products. These technology and products must be
developed and introduced to the market in a timely and cost-effective manner to
meet both changing customer needs and technological developments. We cannot
assure you that we will be able to successfully or timely develop any new
technology, products or advanced versions of existing products, or that any new
technology, products or advanced versions of existing products will achieve
acceptance in the market. If we are unable to successfully develop new
technology, products or advanced versions of existing products in the future or
if those technologies or products are not accepted in the market, our ability to
generate significant revenues will be significantly impaired, we could
experience additional significant losses and our business, financial condition
and results of operations will be materially harmed.

MANUFACTURING PROBLEMS COULD HAMPER OR DELAY OUR ABILITY TO INTRODUCE OUR
PRODUCTS TO THE MARKETPLACE.

    We have limited experience in large-scale assembly and manufacturing of our
products. Since we started assembling and manufacturing operations in 1996, we
have experienced delays, quality control problems and capacity constraints from
time to time. Our plant in Pittsburgh which manufactures our HIV GeneKit
currently has a limited production capacity. Our new facility in Atlanta,
Georgia is in the process of being built and equipped in accordance with our
specifications. Construction may take longer than expected, and the planned and
actual construction costs of building and qualifying the facility for regulatory
compliance may be higher than expected.

    Any significant delay in making the Atlanta facility operational will limit
our ability to increase production. When we are in a position to increase
production and begin manufacturing and assembling new products, additional
problems may arise. These may include technological, engineering, quality
control and other production difficulties. We may also have difficulty complying
with FDA quality system regulations at each of our facilities. If we experience
these problems, we could be delayed in filling orders, shipping existing
products and introducing new products to the marketplace. These problems could
also adversely affect customer satisfaction and the market acceptance of our
products.

IF WE ARE UNABLE TO SUCCESSFULLY PROTECT OUR INTELLECTUAL PROPERTY OR OBTAIN
CERTAIN LICENSES, OUR COMPETITIVE POSITION WILL BE HARMED.

    Our success will partly depend on our ability to obtain patents and licenses
from third parties and protect our trade secrets. We own or jointly own 33 U.S.
patents. We own an additional 31 U.S. patent applications pending, of which
seven have been allowed. We own or jointly own 12 foreign patents. We

                                       25

own or jointly own foreign applications presently pending as PCT applications,
or as national phase PCT applications, designating intergovernmental agencies
and multiple countries including the European Patent Office, Australia, Canada
and Japan. We cannot assure you that our patent applications will result in
patents being issued in the United States or foreign countries. In addition, the
U.S. Patent and Trademark Office may reverse its decision or delay the issuance
of patents that have been allowed. We also cannot assure you that any
technologies or products that we may develop in the future will be patentable.
In addition, competitors may develop products similar to ours that do not
conflict with our patents. Others may challenge our patents and, as a result,
our patents could be narrowed or invalidated. From time to time, we may be
required to obtain licenses from third parties for some of the technology or
components used or included in certain of our GeneKits or other products. We
cannot be certain that we will be able to obtain these licenses on acceptable
terms or at all. In certain instances, if we are unable to obtain a required
license, our ability to sell or use certain products may be impaired.

    To help protect our proprietary rights in unpatented trade secrets, we
generally require our employees, consultants and advisors to sign
confidentiality agreements. However, we cannot guarantee that these agreements
will provide us with adequate protection if confidential information is used or
disclosed improperly. In addition, in some situations, these agreements may
conflict with, or be limited by, the rights of third parties with whom our
employees, consultants or advisors have prior employment or consulting
relationships. Further, others may independently develop similar proprietary
information and techniques, or otherwise gain access to our trade secrets.

OTHERS COULD CLAIM THAT WE INFRINGE ON THEIR INTELLECTUAL PROPERTY RIGHTS, WHICH
MAY RESULT IN COSTLY AND TIME CONSUMING LITIGATION.

    Our success will also depend partly on our ability to operate without
infringing upon the proprietary rights of others, as well as our ability to
prevent others from infringing on our proprietary rights. We may be required at
times to take legal action in order to protect our proprietary rights. Also,
from time to time, we receive notice from third parties claiming that we may
infringe their patent or other proprietary rights. Despite our best efforts, we
may be sued for infringing on the patent or other proprietary rights of others.
Such litigation is costly, and, even if we prevail, the cost of such litigation
could harm us. If we do not prevail, in addition to any damages we might have to
pay, we could be required to stop the infringing activity or obtain a license.
We cannot be certain that any required license would be available to us on
acceptable terms, or at all. If we fail to obtain a license, or if the terms of
a license are burdensome to us, our business, financial condition and results of
operations could be materially harmed.

    Perkin-Elmer Corporation, PE Biosystems Group filed a lawsuit against us in
the United States District Court for the Northern District of California
claiming that our DNA sequencing equipment and products infringe patents
licensed to Perkin-Elmer by the California Institute of Technology. The suit
requests among other remedies that the court enjoin us from continuing to
infringe these patents and an unspecified amount of damages. If Perkin-Elmer is
successful in this suit, we may be unable to manufacture our DNA sequencing
equipment and products without a license from Perkin-Elmer. There can be no
assurance that we would be able to obtain a license for these patents on terms
acceptable to us, or at all. If we fail to obtain a license, or if the terms of
a license are burdensome to us, our business, financial condition and results of
operations could be materially harmed. In addition, monetary damages awarded to
Perkin-Elmer could be substantial, and if so, our business, financial condition
and results of operations could be materially harmed. Dr. Lloyd M. Smith, one of
our directors, is a named inventor on the patents that we are alleged to have
infringed. Dr. Smith indirectly receives royalty payments for those patents from
Perkin-Elmer through the California Institute of Technology. Dr. Smith is a
co-founder of Third-Wave Technologies Inc., which has announced that it will be
acquired by PE Biosystems in a stock-for-stock transaction. After the closing of
that transaction, Dr. Smith expects to be a consultant to PE Biosystems.

                                       26

CERTAIN SUPPLIES AND PARTS THAT WE NEED ARE AVAILABLE ONLY FROM LIMITED SOURCES
AND OUR BUSINESS WILL SUFFER IF WE CANNOT OBTAIN THESE SPECIALIZED ITEMS USED IN
OUR GENEKITS.

    Our GeneKits include dyes, reagents and other chemicals supplied by third
parties. We believe that some dyes supplied by Amersham International Public
Limited Company under our exclusive worldwide license to use and sell Amersham
dyes within our GeneKits, may not be available from other suppliers. However,
our customers might be able to purchase some, but not all, of these dyes
directly from Amersham. In addition, certain reagents and other chemicals that
we use and include in our GeneKits are available only under license from their
manufacturers. We cannot be certain that we will be able to renew these licenses
upon expiration on favorable terms or at all. While we believe that alternative
dyes, chemicals and reagents are available, alternate products may not be as
effective as certain of the products that we presently use. If we switched to an
alternative dye, chemical or reagent, we may also have to adapt the GeneKit's
analysis software to the new product, which could take time. If the GeneKit is
FDA approved, we may also be required to seek FDA approval for the altered
GeneKit if the alternative product were to substantially alter the performance
of the GeneKit or if the changes could significantly affect safety or
effectiveness. This could cause delays in production and in bringing the changed
GeneKit to market.

    We also use certain custom-designed components supplied by third parties in
our DNA sequencers and other equipment. We believe that there are alternative
suppliers for these custom-designed parts. However, we will incur costs in
switching to alternative suppliers and will likely experience delays in
production of the products that use any of these parts until such time as we are
able to locate alternate suppliers or parts on acceptable terms.

WE ARE DEPENDENT ON OUR LICENSE FOR THE POLYMERASE CHAIN REACTION TECHNOLOGY WE
USE IN OUR GENEKITS AND OUR BUSINESS WOULD SUFFER IF THE LICENSE WAS TERMINATED
OR NOT RENEWED.

    We license the polymerase chain reaction technology that we use in our
GeneKits from Roche Molecular Systems, Inc. and F. Hoffmann La Roche Ltd. These
licenses are not exclusive, and, therefore, may be granted by the Roche
companies to our competitors and others. We are required to pay royalties to the
Roche companies for these licenses. One license is for the life of the patents
included within the licensing agreement, which expire at various times
commencing July 2004. The second license expires in February 2003 but will be
automatically extended until July 2004, unless the Roche companies elect not to
renew the license. After the expiration of the initial term of this license, the
Roche companies may terminate the license at any time by giving us a one-year
notice. The termination of either of these licenses would have a material
adverse effect on our ability to produce or sell GeneKits. Consequently, we
could experience a deterioration of anticipated future sales of our GeneKits and
further losses.

WE FACE SUBSTANTIAL COMPETITION FROM MANY COMPANIES, AND WE MAY NOT BE ABLE TO
EFFECTIVELY COMPETE.

    The biotechnology industry is highly competitive. We compete with entities
in the United States and abroad that are engaged in the development and
production of products that analyze genetic information. They include:

    - manufacturers and distributors of DNA sequencers such as the PE Biosystems
      Group of the Perkin-Elmer Corporation, Amersham and its Molecular Dynamics
      subsidiary, LI-COR, Inc., Hitachi, Ltd. and Molecular and Genetic
      BioSystems, Inc.;

    - manufacturers and distributors of DNA probe-based diagnostic systems such
      as Abbott Laboratories, Chiron Corp., Gene Probe Inc., Innogenetics NV,
      Digene Corporation and Johnson & Johnson;

    - manufacturers of new technologies used to analyze genetic information,
      such as chip-based and assay-based technologies, including, Hyseq Inc.,
      Affymetrix Inc., ChemCore Inc., CuraGen Corp., Nanogen, Inc.;

                                       27

    - manufacturers of cell cultured assays, including ViroLogic, Inc. and
      VIRCO; and

    - manufacturers homebrew genetic tests, which typically have not undergone
      clinical validation and have not been approved by the FDA or other
      regulatory agencies.

    Many of our competitors have much greater financial, technical research and
development resources and production and marketing capabilities than we do.
Smaller companies may also prove to be significant competitors, particularly
through collaborative arrangements with large pharmaceutical and biotechnology
companies. If any of our competitors were to devote significant resources to
developing an integrated solution for genotyping, we would experience
significantly more competitive pressure. We cannot predict whether we could
successfully compete with these pressures and, if we are unable to do so, our
business, financial condition and results of operations could suffer.

WE MAY NOT BE ABLE TO HIRE OR RETAIN THE QUALIFIED SCIENTIFIC, TECHNICAL,
MANAGEMENT AND SALES AND MARKETING PERSONNEL WE REQUIRE.

    Because of the specialized scientific nature of our business, we are highly
dependent upon our ability to attract and retain qualified scientific and
technical personnel. We also must hire additional qualified management and sales
and marketing personnel as our business expands. Competition in our industry for
scientific, technical, management, and sales and marketing personnel is intense
and we cannot assure you that we will be able to hire a sufficient number of
qualified personnel. Loss of the services of our key personnel in these areas
could adversely affect our research and development and sales and marketing
programs and could impede the achievement of our goals. We do not maintain key
man life insurance on any of our personnel.

IF WE ARE UNABLE TO MANAGE OUR ANTICIPATED FUTURE GROWTH WE MAY NOT BE ABLE TO
IMPLEMENT OUR BUSINESS PLAN.

    If we are successful in increasing sales and expanding our markets, there
will be additional demands on our management, marketing, distribution, customer
support and other operational and administrative resources and systems. To
accommodate future growth, we may add staff and information and other systems.
We cannot guarantee that we will be able to do so or that, if we do so, we will
be able to effectively integrate them to our existing staff and systems. In
addition, our current and future expense levels are based largely on our
investment plans and estimates of future revenues and are, to a large extent,
fixed. We may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. Therefore, any significant shortfall in
revenues as compared to our planned expenditures will materially harm our
business, financial condition, and results of operations. If we are unable to
manage our growth, we may not be able to implement our business plan and our
business, financial condition and results of operations will be materially
harmed.

                                       28

IF WE ARE UNABLE TO EFFECTIVELY INTEGRATE FUTURE ACQUISITIONS OF NEW OR
COMPLEMENTARY BUSINESSES, PRODUCTS OR TECHNOLOGY, OUR BUSINESS MAY BE HARMED.

    We have made and in the future may make acquisitions of complementary
businesses, products, services or technologies. We have limited experience in
integrating newly acquired organizations into our operations. Acquisitions
expose us to many risks, including:

    - difficulty in assimilating technologies, products, personnel and
      operations;

    - diversion of management's attention from other business concerns;

    - large write-offs and amortization expenses related to goodwill and other
      intangible assets;

    - entering markets in which we have no or limited experience; and

    - incurrence of debt or assumption of other liabilities.

    The occurrence of one or more of these factors could materially harm our
business, financial condition and results of operations.

A SIGNIFICANT PORTION OF OUR SALES DURING 1998 AND 1999 HAVE BEEN TO ONE
DISTRIBUTOR AND WE MAY CONTINUE IN THE FUTURE TO RELY HEAVILY ON THAT
DISTRIBUTOR FOR SALES TO THE RESEARCH AND CLINICAL RESEARCH MARKETS.

    In February 1996, we granted Amersham an exclusive worldwide license to use
and sell the Seq4x4-TM- DNA sequencer and related products used and sold with
the sequencer, which is designed for the research market. During 1998 and 1999,
approximately 30% and 21%, respectively, of our revenues resulted from sales of
sequencers and other products to Amersham. Our agreement with Amersham expires
in February 2001 and is automatically renewed each year unless either party
notifies the other at least six months in advance of renewal that it wishes to
terminate the agreement. We cannot be certain that Amersham will be successful
in selling these products. In addition, we cannot be certain that the agreement
will not be terminated before expiration or that, upon expiration, it will be
renewed on favorable terms or at all.

WE MAY BE SUED BY CLINICIANS, PATIENTS OR THIRD-PARTY PAYORS AND OUR INSURANCE
MAY NOT SUFFICIENTLY COVER ALL CLAIMS BROUGHT AGAINST US.

    The testing, manufacturing, sale and marketing of our products exposes us to
the risk of product liability claims. In addition, clinicians, patients,
third-party payors and others may at times seek damages based on testing or
analysis errors based on a technician's misreading of the sequencing results,
mishandling of the patient samples or similar claims. Although we have obtained
liability insurance coverage, we cannot guarantee that liability insurance will
continue to be available to us on acceptable terms or that our coverage will be
sufficient to protect us against all claims that may be brought against us. A
liability claim, even one without merit or for which we have substantial
coverage, could result in significant legal defense costs, thereby increasing
our expenses, lowering our earnings and, depending on revenues, potentially
resulting in additional losses.

OUR INTERNATIONAL OPERATIONS MAY BE ADVERSELY AFFECTED BY RISKS ASSOCIATED WITH
INTERNATIONAL BUSINESS.

    We sell our products in many countries and operate offices in North America
and Europe. Therefore, we are subject to certain risks that are inherent in an
international business. These include:

    - varying regulatory restrictions on sales of our products to certain
      markets and unexpected changes in regulatory requirements;

    - tariffs, customs, duties and other trade barriers;

    - difficulties in managing foreign operations and foreign distribution
      partners;

    - longer payment cycles and problems in collecting accounts receivable;

                                       29

    - fluctuations in currency exchange rates;

    - political risks;

    - foreign exchange controls that may restrict or prohibit repatriation of
      funds;

    - varying laws relating to, among other things, employment and employment
      termination;

    - export and import restrictions or prohibitions, and delays from customs
      brokers or government agencies;

    - seasonal reductions in business activity in certain parts of the world;
      and

    - potentially adverse tax consequences.

    Depending on the countries involved, any or all of the foregoing factors
could materially harm our business, financial condition and results of
operations.

WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE AND WE CANNOT BE CERTAIN
THAT WE WILL BE ABLE TO RAISE CAPITAL WHEN NECESSARY ON ACCEPTABLE TERMS.

    At this time, our sales are not sufficient to meet our anticipated financing
requirements. Based on our current plans, we believe that current cash balances,
including proceeds from our recently completed financings, and anticipated funds
from operations will be sufficient to enable us to meet our operating needs for
the next 24 months. In addition, we have filed a registration statement with the
Securities and Exchange Commission covering our proposed sale of up to an
additional 2,300,000 common shares in a public offering. If we complete the
public offering, the proceeds of the offering would be available for general
corporate and working capital purposes, including, among other things, to
acquire complementary businesses, products, services or technologies. Currently,
we have no definitive agreements to make any acquisition and we cannot be
certain that the proceeds we would receive from the public offering would be
sufficient to complete any acquisition we might make in the future. In addition,
the actual amount of funds that we will need during the next 24 months will be
determined by many factors, some of which are beyond our control. These factors
include:

    - our success in selling our products in the research and clinical research
      markets during this period;

    - the cost and length of time required to complete the clinical trials
      needed for our application to the FDA for approval to sell our HIV
      OpenGene System to the clinical diagnostic market;

    - the timing of our submission of an application to the FDA for approval to
      sell our HIV OpenGene System and the length of time it takes the FDA to
      complete its review;

    - our success in introducing new products during the period;

    - our incurring significant fixed overhead and other expenses prior to
      increasing our revenues; and

    - the costs of acquiring and integrating any new business or technologies
      during the period.

    We may need to obtain additional funds sooner or in greater amounts than we
currently anticipate and we may need to obtain additional funds at the end of
this 24 month period. If we need to obtain funds at the end of 24 months, or
earlier, potential sources of financing include strategic relationships, public
or private sales of our shares or debt or other arrangements. Because of our
potential long term capital requirements, we may seek to access the public or
private equity markets whenever conditions are favorable, even if we do not have
an immediate need for additional capital at that time. We do not have any
committed sources of financing at this time and it is uncertain whether
additional funding will be available when we need it on terms that will be
acceptable to us or at all. If we raise funds by selling additional common
shares or other securities convertible into common shares, the ownership
interest of our existing shareholders will be diluted. If we are not able to
obtain financing when needed, we would be unable to carry out our business plan,
we would have to significantly limit our operations and our business, financial
condition and results of operations would be materially harmed.

                                       30

WE MAY REQUIRE APPROVAL OF THE HOLDERS OF OUR SERIES A PREFERRED SHARES IN ORDER
TO OBTAIN CERTAIN TYPES OF FINANCING AND WE MAY BE PREVENTED FROM OBTAINING
THESE TYPES OF FINANCING BY THE HOLDERS OF OUR SERIES A PREFERRED SHARES.

    We will be required to obtain the consent of the holders of a majority of
our then outstanding Series A preferred shares prior to issuing any equity
security that has rights as to dividends and liquidation that are senior or
equal to those of the Series A preferred shares. Also, under certain
circumstances, if we propose to sell equity securities, including debt
securities convertible into equity securities, certain holders of our Series A
preferred shares will be entitled to preemptive rights which allow them to
purchase a proportional amount of the securities being offered. We will also be
required to obtain the consent of the holders of a majority of our then
outstanding Series A preferred shares if we wish to borrow money and at such
time or as a result of such loans, the total principal amount of our
indebtedness and capitalized lease obligations exceeds $15.0 million. In
addition, if we were to enter into a credit facility with a financial
institution, we may be subject to additional limitations on our ability to incur
additional indebtedness. As a result, we may be delayed in, or prohibited from,
obtaining certain types of financing.

OUR U.S. INVESTORS COULD SUFFER ADVERSE TAX CONSEQUENCES IF WE ARE CHARACTERIZED
AS A PASSIVE FOREIGN INVESTMENT COMPANY.

    Although we do not believe that we were a passive foreign investment company
(or PFIC) for United States federal income tax purposes during 1999 there can be
no assurance that we will not be treated as a PFIC in 2000 or thereafter. We
would be a PFIC if 75% or more of our gross income in a taxable year is passive
income. We also would be a PFIC if at least 50% of the value of our assets
averaged over the taxable year produce, or are held for the production of,
passive income. For these purposes, the value of our assets is calculated based
on our market capitalization. Passive income includes, among other items,
interest, dividends, royalties, rents and annuities.

    For the 1999 taxable year, approximately 8%, of our assets averaged over the
taxable year produced, or were held for the production of, passive income, and
approximately 5% of our gross income was passive income. During the third and
fourth quarter of 1999, we raised a total of approximately $52 million in
private financings, after repayment of outstanding indebtedness and offering
expenses, to be used for general working capital purposes. Since a significant
portion of these funds and the funds that we will receive from this offering
will be invested until needed, the percentage of our assets that are likely to
produce passive income during 2000 will increase.

    If we become a PFIC, many of our U.S. shareholders will, in absence of
certain elections as discussed below, be subject to the following adverse tax
consequences:

    - they will be taxed at the highest ordinary income tax rates in effect
      during their holding period on certain distributions on our common shares,
      and gain from the sale or other disposition of our common shares;

    - they will be required to pay interest on taxes allocable to prior periods;
      and

    - the tax basis of our common shares will not be increased to fair market
      value at the date of their deaths.

    If we become a PFIC, our U.S. shareholders could avoid these tax
consequences by making a qualified electing fund election or a mark-to-market
election. These elections would need to be in effect for all taxable years
during which we were a PFIC and during which our U.S. shareholders held our
common shares. A U.S. shareholder who makes a qualified electing fund election
will be taxed currently on our ordinary income and net capital gain (unless a
deferral election is in effect). A U.S. shareholder who makes a mark-to-market
election will include as ordinary income each year an amount equal to the excess
of the fair market value of our common shares over the adjusted tax basis as of
the close of each year (with certain adjustments for prior years).

                                       31

    If we become a PFIC, our U.S. shareholders will generally be unable to
exchange our common shares for shares of an acquiring corporation on a
tax-deferred basis under the reorganization rules of the Internal Revenue Code,
and the benefits of many other nonrecognition provisions of the Internal Revenue
Code will not apply to transfers of our common shares. In addition, if we become
a PFIC, pledges of our common shares will be treated as sales for U.S. federal
income tax purposes. Our U.S. shareholders should note that state and local
taxes may also apply if amounts are included in U.S. federal taxable income
under the PFIC rules of the Internal Revenue Code. The PFIC rules are very
complex. Our U.S. shareholders are strongly encouraged to consult with their tax
advisors concerning all of the tax consequences of investing in our common
shares and the possible benefits of making a tax election given their
circumstances. Additionally, our U.S. shareholders should review the section
entitled "Taxation--U.S. Federal Income Tax Considerations--Tax Status of the
Company--Passive Foreign Investment Companies" for a more detailed description
of the PFIC rules and how they may affect their ownership of our common shares.

OUR AMENDED ARTICLES OF INCORPORATION AND BY-LAWS CONTAIN CERTAIN PROVISIONS
THAT MAKE IT DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY EVEN IF DOING SO
WOULD BE BENEFICIAL TO OUR SHAREHOLDERS AND, THEREFORE, OUR SHAREHOLDERS MAY NOT
BE ABLE TO MAXIMIZE THE RETURN ON THEIR INVESTMENT.

    Our authorized capital consists of an unlimited number of preferred shares.
The Board of Directors, without any further vote by the common shareholders, has
the authority to issue preferred shares and to determine the price, preferences,
rights and restrictions, including voting and dividend rights, of these shares.
The rights of the holders of common shares are subject to the rights of holders
of any preferred shares that the Board of Directors may issue in the future.
That means, for example, that we can issue preferred shares with more voting
rights, higher dividend payments or more favorable rights upon dissolution, than
the common shares. If we issued certain types of preferred shares in the future,
it may also be more difficult for a third party to acquire a majority of our
outstanding voting shares.

    In addition, we have a "classified" Board of Directors, which means that
only approximately one-third of our directors are eligible for election each
year. Therefore, if shareholders wish to change the composition of the Board of
Directors, it would take at least two years to remove a majority of the existing
directors, and three years to change all directors. Also, the holders of our
Series A preferred shares are entitled to vote as a class for one director. The
Series A Director serves for a one year term and any vacancy may be filled only
by a vote of the holders of Series A preferred shares. If we do not redeem our
Series A preferred shares as required during 2006, 2007, and 2008, then our
Series A shareholders will be entitled to special voting rights enabling them to
elect a majority of our Board of Directors, who will continue to serve as
directors until we have redeemed our Series A preferred shares as required.

    Having a classified Board of Directors and these special rights of the
Series A preferred shareholders may, in some circumstances, deter or delay
mergers, tender offers or other possible transactions which may be favored by
some or a majority of our shareholders.

BECAUSE OUR PREFERRED SHAREHOLDERS ARE ENTITLED TO CERTAIN PREFERENCES OVER OUR
COMMON SHAREHOLDERS, UNDER CERTAIN CIRCUMSTANCES, OUR COMMON SHAREHOLDERS MAY
NOT RECEIVE A RETURN OF THE FULL AMOUNT THEY HAVE INVESTED IN OUR COMPANY.

    In July 1999, we issued 33,948 Series A preferred shares. Our Series A
preferred shares entitle the holders to certain preferences over our common
shares (described elsewhere in this annual report), including the following:

    - we may not issue any securities that rank senior to, or in parity with,
      the Series A preferred shares without obtaining the approval of the
      holders of a majority of the Series A preferred shares;

    - we may not issue dividends to holders of common shares until all accrued
      and unpaid dividends on the Series A preferred shares are paid in full;
      and

                                       32

    - if we liquidate or wind-up our company or if we sell our company or in
      certain other circumstances, holders of Series A preferred shares are
      entitled to receive an amount equal to $1,000 per Series A preferred
      share, or approximately $34.0 million in the aggregate, plus accrued and
      unpaid dividends, before holders of common shares would be entitled to
      receive any distribution.

THE VOLATILITY OF THE STOCK MARKET COULD DRIVE DOWN THE PRICE OF OUR COMMON
SHARES WHICH COULD RESULT IN LOSSES TO OUR SHAREHOLDERS.

    The market prices for securities of life sciences companies, particularly
those that are not profitable, have been highly volatile, especially recently.
Publicized events and announcements may have a significant impact on the market
price of our common shares.

    In addition, the stock market from time to time experiences extreme price
and volume fluctuations which particularly affect the market prices for emerging
and life sciences companies, such as ours, and which are often unrelated to the
operating performance of the affected companies. These broad market fluctuations
may make it difficult for a shareholder to sell shares at a price equal to or
above the price at which the shares were purchased.

FUTURE SALES BY EXISTING SHAREHOLDERS MAY LOWER THE PRICE OF OUR COMMON SHARES
WHICH COULD RESULT IN LOSSES TO OUR SHAREHOLDERS.

    As of February 29, 2000, we had outstanding 16,045,167 voting shares, which
includes 3,259,768 shares issuable upon conversion of our Series A preferred
shares. All of these shares are eligible for sale under Rule 144, pursuant to
currently effective registration statements, or are otherwise freely tradable.
Directors, executive officers and certain shareholders who in the aggregate own
4,879,759 voting shares have agreed to a 90-day lock-up with respect to their
shares. FleetBoston Robertson Stephens Inc. may release shareholders from the
lockup agreement at any time and without notice. Following the expiration of
this lock-up period, 4,879,759 common shares subject to the lock-up agreements
will become available for immediate resale in the public market subject, in some
instances, to the volume and other limitations of Rule 144.

    Subject to the lock-up agreements described above, our common shares are
eligible for sale into the public market as follows:

    - Our affiliates own 1,971,325 shares that may be sold subject to volume
      restrictions imposed by Rule 144. Our affiliates also own options to
      acquire an additional 950,776 shares. The shares to be issued upon
      exercise of these options have been registered and may be freely sold when
      issued.

    - Our employees and consultants who are not deemed affiliates hold options
      to buy a total of 995,698 shares. The shares to be issued upon exercise of
      these options have been registered and may be freely sold when issued.

    - 3,069 shares issuable upon exercise of outstanding warrants, are
      registered for sale pursuant to a registration statement filed with the
      Securities and Exchange Commission, and may be freely sold.

    - We may issue options to purchase up to an additional 501,412 shares under
      our stock option plans. The shares to be issued upon exercise of these
      options have been registered and may be freely sold when issued.

    - We have filed registration statements covering 1,916,000 common shares,
      and an additional 5,283,758 common shares issuable upon conversion of our
      Series A preferred shares and issued or issuable upon exercise of certain
      warrants issued on July 15, 1999. These shares may be freely sold so long
      as the registration statements covering them remain effective.

    Sales of substantial amounts of common shares into the public market could
lower the market price of our common shares.

                                       33

    In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has owned shares for at least
one year would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) 1% of the number of our common
shares then outstanding (which equals approximately 127,854 common shares as of
February 29, 2000, without giving effect to our proposed offering) or (ii) the
average weekly trading volume of our common shares during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale. Sales under
Rule 144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about our
company. Under Rule 144(k), a person who is not deemed to have been our
affiliate at any time during the three months preceding a sale, and who has
owned the shares proposed to be sold for at least two years, is entitled to sell
his shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.

WE MAY SUFFER LOSSES AS RESULT OF FLUCTUATIONS IN EXCHANGE RATES BETWEEN THE
U.S. DOLLAR AND FOREIGN CURRENCIES.

    Our financial statements are prepared in U.S. dollars and much of our
business is conducted in U.S. dollars. However, we incur expenses in Canadian
dollars and in other foreign currencies. We also sell products to customers in
foreign countries and bill those customers in local currencies at predetermined
exchange rates. As our business expands, we anticipate that we will increasingly
incur expenses and bill and receive payments in local currencies at prevailing
exchange rates. As a result, we may suffer losses due to fluctuations in the
exchange rates between the U.S. dollar and the Canadian dollar and the U.S.
dollar and the currencies of other countries. We currently engage in limited
foreign exchange hedging activities by sometimes purchasing Canadian funds
before they are actually required to protect ourselves against the risk of
losses due to fluctuations in exchange rates. We do not currently engage in
hedging activities for any other foreign currencies.

                                       34

FORWARD-LOOKING STATEMENTS

    This annual report includes forward-looking statements. You can identify
these forward-looking statements when you see us using words such as "expect,"
"anticipate," "estimate," "believe," "intend," "may," "predict," and other
similar expressions. These forward looking statements cover, among other items:

    - FDA and other regulatory approval for certain of our products;

    - acceptance of our products in the clinical diagnostic market;

    - acceptance of genotyping in the clinical diagnostic market;

    - our marketing and sales plans;

    - our expectations about the markets for our products;

    - the performance of our products;

    - our intention to introduce new products;

    - our future capital needs;

    - our clinical trials;

    - reimbursement of our products by insurance companies and other third-party
      payors;

    - our ability to compete in the research, clinical research and clinical
      diagnostic markets;

    - our patent applications;

    - our ability to bring our Atlanta manufacturing facility fully operational;

    - our ability to modify our information systems to accommodate euro
      transactions; and

    - the status of year 2000 compliance efforts of our company, and our
      material customers and suppliers.

    We have based these forward-looking statements largely on our current
expectations. However, forward-looking statements are subject to a number of
risks and uncertainties, certain of which are beyond our control. Actual results
could differ materially from those anticipated as a result of the factors
described under "Risk Factors" including, among others:

    - delays in obtaining, or our inability to obtain, approval by the FDA and
      other regulatory authorities for our HIV OpenGene System and, in the
      future, certain of our other products for the clinical diagnostic market;

    - refusal of insurance companies and other third-party payors to reimburse
      patients and clinicians for our products;

    - uncertainty of acceptance of genotyping, in general, and of our products,
      in particular, in the clinical diagnostic market;

    - problems, delays and expenses we may face with our proposed clinical
      trials;

    - problems that we may face in manufacturing, marketing and distributing our
      products;

    - delays in the issuance of, or the failure to obtain, patents or licenses
      for certain of our products and technologies;

    - problems with important suppliers and business partners;

    - delays in developing, or the failure to develop, new products and enhanced
      versions of existing products; and

    - the timing of our future capital needs or our inability to raise
      additional capital when needed.

    We do not undertake any obligation to publicly update or revise any
forward-looking statements contained in this prospectus or incorporated by
reference, whether as a result of new information, future events or otherwise.
Because of these risks and uncertainties, the forward-looking statements and
circumstances discussed in this annual report might not transpire.

                                       35

ITEM 2. DESCRIPTION OF PROPERTY.

    The table below lists the locations of our facilities and summarizes certain
information about each location.


                                                                                                      SQUARE
                                                                                                       FEET
                                LOCATION                              USE                          (APPROXIMATE)
                                --------                              ---                          -------------
                                                                                          
1.                         Bay Street              Research, sales and principal executive            20,643
                           Toronto, Canada         offices

2.                         Etobicoke               MicroCel manufacturing                              8,482
                           Ontario, Canada

3.                         Etobicoke               Sequencer manufacturing                            10,500
                           Ontario, Canada

4.                         Oakville                Research and development                            8,000
                           Ontario, Canada

5.                         University of           Kit manufacturing and research and                  8,171
                           Pittsburgh              development
                           Applied Research
                           Center,
                           Pittsburgh,
                           Pennsylvania

6.                         Technology Park         Research and development and laboratory             7,313
                           Norcross, Georgia

7.                         Suwanee, Georgia*       GeneKit manufacturing, research and                99,822
                                                   development, and laboratory and
                                                   sales and administrative offices

8.                         Evry,                   European head office                                6,000
                           France

9.                         Meyerside Drive**       Kit development                                     3,100
                           Mississauga,
                           Canada

10.                        Kestrel Road**          Kit manufacturing                                  22,600
                           Mississauga,
                           Canada

11.                        Technology Park,**      Research and development and laboratory            21,032
                           Norcross, Georgia



                        TERM OF LEASE
                        -------------
                    
1.                     June 1995 -
                       May 2000
2.                     June 1996 -
                       May 2001
3.                     September 1998 -
                       August 2003
4.                     September 1998 -
                       August 2003
5.                     September 1997 -
                       August 2000

6.                     March 1998 -
                       February 2003
7.                     February 2000 -
                       March 2010

8.                     March 1999 -
                       February 2001
9.                     May 1999 -
                       April 2004

10.                    May 1999 -
                       April 2004

11.                    November 1999 -
                       October 2004


- - ------------------------

*   This facility is not yet operating.

**  We do not intend to use these facilities and are currently attempting to
    sublease them.

    In addition, to the foregoing we have entered into a short term lease in
Norcross, Georgia for temporary office space until our new facility in Suwanee,
Georgia is complete.

    We believe that additional facilities will be available at reasonable market
rates to meet any future needs we may have for additional space.

                                       36

ITEM 3. LEGAL PROCEEDINGS.

    We are not a party to any material legal proceedings other than the suit
described under "Description of Business--Proprietary Rights".

SERVICE AND ENFORCEMENT OF LEGAL PROCESS

    Our company is incorporated under the laws of the Province of Ontario,
Canada and a substantial portion of our assets are located in Canada. Certain of
our directors and officers and certain of the experts named in this annual
report are residents of Canada, and all or a substantial portion of their assets
are located outside the United States. As a result, if any of our shareholders
were to bring a lawsuit against our officers, directors or experts in the United
States it may be difficult for them to effect service of legal process within
the United States upon those people who are not residents of the United States
or to realize in the United States upon judgments of courts of the United States
based upon civil liability under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (including the rules promulgated
thereunder by the Securities and Exchange Commission). In addition, our
attorneys in Canada, Osler, Hoskin & Harcourt LLP, have advised us that there is
doubt as to the enforceability in Canada against our company, our directors and
officers, or the experts named in this annual report, in each case if not a
resident of the United States, of liabilities predicated solely upon U.S.
federal securities laws.

                                       37

ITEM 4. CONTROL OF REGISTRANT.

    The following table sets forth certain information regarding the beneficial
ownership of our outstanding voting shares, as of February 29, 2000, for
(i) all shareholders known to beneficially own or exercise control or direction
over more than 10% of our common shares, and (ii) all directors and executive
officers as a group (13 persons):



                                                                  NUMBER OF SHARES
                                                              BENEFICIALLY OWNED(1) OR
                                                               OVER WHICH CONTROL OR     PERCENTAGE OF
NAME                                                           DIRECTION IS EXERCISED      CLASS(1)
- - ----                                                          ------------------------   -------------
                                                                                   
Warburg, Pincus Funds(2)....................................         2,908,434               16.1%
GeneVest Inc. (3)...........................................         1,927,134               12.0%
All directors and executive officers as a group (13
  persons)(4)...............................................           409,134                2.5%


- - ------------------------

(1) The information in this table is based on our records, information provided
    to us by directors and executive officers and a review of any Schedules 13D
    and 13G filed in 1999 and 2000 by our shareholders with the Securities and
    Exchange Commission. Beneficial ownership is determined in accordance with
    rules of the Securities and Exchange Commission and includes shares over
    which the indicated beneficial owner exercises voting and/or investment
    power. Our common shares subject to options currently exercisable or
    exercisable within 60 days are deemed outstanding for computing the
    percentage ownership of the person holding the options but are not deemed
    outstanding for computing the percentage ownership of any other person. This
    information is based on 16,045,167 voting shares outstanding as of
    February 29, 2000, which includes 3,259,748 common shares issuable upon
    conversion of our Series A preferred shares as of February 29, 2000. The
    number of common shares issuable upon conversion of our Series A preferred
    shares will increase as the dividends payable thereon accrue.

(2) Consists of (i) 1,374,236 common shares held by Warburg, Pincus Equity
    Partners, L.P., which includes 1,361,122 common shares issuable upon
    conversion of their Series A preferred shares; (ii) 1,454,217 common shares
    held by Warburg, Pincus Ventures International, L.P., which includes
    1,440,341 common shares issuable upon conversion of their Series A preferred
    shares; (iii) 43,626 common shares held by Warburg, Pincus Netherlands
    Equity Partners, I, C.V., which includes 43,210 common shares issuable upon
    conversion of their Series A preferred shares; (iv) 29,084 common shares
    held by Warburg, Pincus Netherlands Equity Partners, II, C.V., which
    includes 28,807 common shares issuable upon conversion of their Series A
    preferred shares; and (v) 7,271 common shares held by Warburg, Pincus
    Netherlands Equity Partners III, C.V., which includes 7,202 common shares
    issuable upon conversion of their Series A preferred shares. Warburg, Pincus
    & Co. ("WP") is the sole general partner of each of these shareholders. Each
    of these shareholders is managed by E.M. Warburg, Pincus & Co., LLC ("EMW
    LLC"). Lionel I. Pincus is the managing partner of WP and the managing
    member of EMW LLC, and may be deemed to control both entities. Jonathan S.
    Leff, a director of our company, is a general partner of WP and a managing
    director and member of EMW LLC. Mr. Leff may be deemed to have an indirect
    pecuniary interest (within the meaning of Rule 16a-1 under the Securities
    Exchange Act of 1934, as amended) in an indeterminate portion of the shares
    beneficially owned by these shareholders. Mr. Leff disclaims beneficial
    ownership of all such shares.

(3) GeneVest Inc. is a Canadian company incorporated pursuant to the laws of
    Alberta, Canada. Mr. Sheldon Inwentash, one of our directors, is the
    President and Chief Executive Officer of GeneVest and, together with his
    affiliates, beneficially owns approximately 45% of GeneVest's issued and
    outstanding common shares.

(4) Includes an aggregate of 364,943 shares subject to options, exercisable
    within 60 days from February 29, 2000, held by our directors and executive
    officers, but excludes the shares held by GeneVest Inc. and Warburg Pincus
    Funds.

                                       38

ITEM 5. NATURE OF TRADING MARKET.

    Our common shares are traded on the Nasdaq National Market under the symbol
"VGIN". Our common shares are not listed or quoted for trading on securities
markets outside of the United States. The following table sets forth, for the
periods indicated, high and low sale prices of our common shares as reported on
the Nasdaq National Market.



                                                                HIGH           LOW
                                                              --------       --------
                                                                       
FISCAL YEAR ENDED DECEMBER 31, 1998
    First Quarter...........................................  $  9.75         $ 6.00
    Second Quarter..........................................  $ 11.38         $ 7.50
    Third Quarter...........................................  $ 13.06         $ 7.00
    Fourth Quarter..........................................  $ 14.00         $ 9.25

FISCAL YEAR ENDED DECEMBER 31, 1999
    First Quarter...........................................  $ 21.75         $10.00
    Second Quarter..........................................  $ 21.81         $15.31
    Third Quarter...........................................  $ 22.81         $ 8.88
    Fourth Quarter..........................................  $ 34.63         $15.00

FISCAL YEAR ENDED DECEMBER 31, 2000
    First Quarter (through March 9, 2000)...................  $119.13         $29.00


    On March 9, 2000 the last reported sale price of our common shares on the
Nasdaq National Market was $93.00. As of February 29, 2000, there were 111
holders of record of our common shares. This number does not include an
indeterminable number of beneficial holders of these securities whose common
shares are held by financial institutions in "street name."

ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.

    There is no law, government decree or regulation in Canada restricting the
export or import of capital or affecting the remittance of dividends, interest
or other payments to a nonresident holder of common shares, other than
withholding tax requirements. See "Taxation--Canadian Federal Income Tax
Considerations-Nonresidents of Canada."

    There is no limitation imposed by Canadian law or by our articles or other
charter documents on the right of a nonresident to hold or vote common shares or
preference shares with voting rights (collectively, "Voting Shares"), other than
as provided in the Investment Canada Act (the "Investment Act"), as amended by
the World Trade Organization Agreement Implementation Act (the "WTOA Act"). The
Investment Act generally prohibits implementation of a direct reviewable
investment by an individual, government or agency thereof, corporation,
partnership, trust or joint venture that is not a "Canadian," as defined in the
Investment Act (a "non-Canadian"), unless, after review, the minister
responsible for the Investment Act is satisfied that the investment is likely to
be of net benefit to Canada. An investment in Voting Shares by a non-Canadian
(other than a "WTO Investor," as defined below) would be reviewable under the
Investment Act if it were an investment to acquire direct control of our
company, and the value of the assets of our company were Cdn$5.0 million or more
(provided that immediately prior to the implementation of the investment our
company was not controlled by WTO Investors). An investment in Voting Shares by
a WTO Investor (or by a non-Canadian other than a WTO Investor if, immediately
prior to the implementation of the investment our company was controlled by WTO
Investors) would be reviewable under the Investment Act if it were an investment
to acquire direct control of our company (in 2000) and the value of the assets
of our company equalled or exceeded Cdn$192.0 million. A non-Canadian, whether a
WTO Investor or otherwise, would be deemed to acquire control of our company for
purposes of the Investment Act if he or she acquired a majority of the Voting
Shares. The acquisition of less than a majority, but at least one-third of our
Voting Shares, would be presumed to be an acquisition of control of

                                       39

our company, unless it could be established that we were not controlled in fact
by the acquirer through the ownership of Voting Shares. In general, an
individual is a WTO Investor if he or she is a "national" of a country (other
than Canada) that is a member of the World Trade Organization ("WTO Member") or
has a right of permanent residence in a WTO Member. A corporation or other
entity will be a "WTO Investor" if it is a "WTO investor-controlled entity,"
pursuant to detailed rules set out in the Investment Act. The United States is a
WTO Member.

    Certain transactions involving Voting Shares would be exempt from the
Investment Act, including: (a) an acquisition of Voting Shares if the
acquisition were made in the ordinary course of that person's business as a
trader or dealer in securities; (b) an acquisition of control of our company in
connection with the realization of a security interest granted for a loan or
other financial assistance and not for any purpose related to the provisions of
the Investment Act; and (c) an acquisition of control of our company by reason
of an amalgamation, merger, consolidation or corporate reorganization, following
which the ultimate direct or indirect control in fact of our company, through
the ownership of voting interests, remains unchanged.

ITEM 7. TAXATION.

CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

    The following summary describes certain material Canadian federal income tax
consequences generally applicable to a holder of common shares and a holder of
Series A preferred shares each of whom at all relevant times, for purposes of
the Income Tax Act (Canada) (the "ITA"), (i) acquires and holds such shares as
capital property (including common shares acquired on a conversion of Series A
preferred shares) and (ii) deals at arm's length with our company and, in case
of a holder of Series A preferred shares, is a resident of the United States and
not a resident in Canada for purposes of the Canada-United States Income Tax
Convention, 1980 (a "Holder" and a "Series A Holder", with reference to a holder
of common shares and a holder of Series A preferred shares, respectively).
Generally, common shares and Series A preferred shares will be considered to be
capital property to a Holder or a Series A Holder provided that such Holder or
Series A Holder does not use or hold such shares in the course of carrying on a
business, has not acquired such shares in a transaction or transactions
considered to be an adventure in the nature of trade, and is not a financial
institution subject to the rules whereby gains and losses on certain securities
are recorded on a mark-to-market basis. Some Holders may be entitled to have
their common shares treated as capital property by making the irrevocable
election in subsection 39(4) of the ITA.

    This summary is based upon the current provisions of the Canada-United
States Income Tax Convention, 1980 (the "U.S. Treaty"), the ITA and the
regulations thereunder and on an understanding of the published administrative
practices of the Canada Customs and Revenue Agency (the "CCRA"). This summary
does not take into account or anticipate any possible changes in law, or in the
administration thereof, whether by legislative, governmental or judicial action,
except proposals for specific amendment thereto which have been publicly
announced by the Minister of Finance (Canada) prior to the date hereof (the
"Proposed Amendments").

    This summary does not address all aspects of Canadian federal income tax law
that may be relevant to Holders or Series A Holders based upon their particular
circumstances, and does not deal with provincial, territorial or foreign income
tax legislation or considerations, which might differ significantly from the
Canadian federal income tax considerations summarized herein.

    This summary is of a general nature only and is not intended to be, nor
should it be construed as, advice to any particular Holder or Series A Holder.
Holders and Series A Holders are advised to consult their tax advisors regarding
the application of the Canadian federal income tax law to their particular
circumstances, as well as any provincial, territorial and other tax consequences
of the acquisition, ownership and disposition of their common shares or Series A
preferred shares, as the case may be.

                                       40

    All amounts relevant in computing the liability of a Holder or Series A
Holder under the ITA are to be computed in Canadian currency at the rate of
exchange prevailing at the relevant time.

COMMON SHARES

NONRESIDENTS OF CANADA

    TAXATION OF DIVIDENDS.  A Holder who, at all relevant times, is not resident
in Canada for purposes of the ITA (a "NonResident Holder") will be subject to
Canadian non-resident withholding tax on dividends paid or credited, or deemed
under the ITA to be paid or credited, to the NonResident Holder on the common
shares. The rate of withholding tax under the ITA on dividends is 25% of the
gross amount of the dividend. Such rate may be reduced under the provisions of
an applicable international tax treaty. Pursuant to the U.S. Treaty, the rate of
Canadian withholding tax applicable in respect of dividends paid or credited by
our company to a NonResident Holder resident in the United States is generally
reduced to 15%, or 5% in the case of a corporate NonResident Holder that owns
beneficially 10% or more of the voting stock of our company. Moreover, pursuant
to Article XXI of the U.S. Treaty, an exemption from Canadian withholding tax
generally is available in respect of dividends received by certain trusts,
companies and other organizations whose income is exempt from tax under the laws
of the United States.

    DISPOSITION OF COMMON SHARES.  A NonResident Holder will not be subject to
tax under the ITA in respect of a capital gain realized on the disposition of a
common share unless the common share constitutes or is deemed to constitute
"taxable Canadian property" (as defined in the ITA) and the capital gain is not
exempt from tax under the ITA pursuant to an applicable international tax
treaty. Shares of a Canadian corporation that are listed on a prescribed stock
exchange (which includes the National Association of Securities Dealers
Automated Quotation System) will generally not be considered to be taxable
Canadian property to a NonResident Holder, unless, at any time during the five
year period immediately preceding the disposition or deemed disposition of the
common share, the NonResident Holder, persons with whom the NonResident Holder
did not deal at arm's length or any combination thereof owned or had an option
to acquire not less than 25% of the issued shares of any class or series of
shares of our company.

    For the purposes of determining whether a property is a taxable Canadian
property, a person holding an option to acquire shares or other securities
convertible into or exchangeable for shares, or otherwise having an interest in
shares, will be considered to own the shares that could be acquired upon the
exercise of the option, the conversion or exchange rights or in which there is
such interest. The aforementioned rules can apply to any class of shares.

    A common share acquired by a NonResident holder on the conversion of a
Series A preferred share will be considered to be taxable Canadian property.

    A NonResident Holder whose common shares constitute or are deemed to
constitute taxable Canadian property and who would not be eligible for an
exemption from tax under the ITA in respect of any gains realized on the
depreciation of such shares pursuant to an applicable international tax treaty
is referred to in the discussion below under "Canadian Residents -- DISPOSITION
OF COMMON SHARES" for information regarding the treatment of the disposition
under the ITA.

    Even if the common shares constitute or are deemed to constitute taxable
Canadian property to a NonResident Holder and their disposition would give rise
to a capital gain, an exemption from tax under the ITA may be available under
the terms of an applicable international tax treaty. A NonResident Holder
resident in the United States for purposes of the U.S. Treaty will generally be
exempt from tax under the ITA in respect of a gain on the disposition of common
shares provided that the value of the common shares is not derived principally
from real property situated in Canada. Paragraph 5 of Article XIII of the U.S.
Treaty provides that paragraph 4 of Article XIII, which normally provides such
an exemption for U.S. residents from Canadian tax on the disposition of property
such as shares, generally does not apply where

                                       41

the U.S. resident was a Canadian resident for 120 months during any period of
twenty consecutive years preceding the time of the disposition of the property
and the individual was resident in Canada at any time during the ten years
immediately preceding the disposition of the property.

    As discussed below under "Canadian Residents -- DISPOSITION OF COMMON
SHARES", a purchase of common shares by our company (other than a purchase of
common shares by our company on the open market in a manner in which shares
would normally be purchased by any member of the public in the open market) will
give rise to a deemed dividend under the ITA. Any such dividend deemed to have
been received by a NonResident Holder will be subject to non-resident
withholding tax as described above. The amount of any such deemed dividend will
reduce the proceeds of disposition of the common share to the NonResident Holder
for the purpose of computing the amount of the NonResident Holder's capital gain
or loss under the ITA.

CANADIAN RESIDENTS

    TAXATION OF DIVIDENDS.  Dividends received on a common share held by a
Holder who at all relevant times, is a resident of Canada for purposes of the
ITA (a "Resident Holder"), will be required to be included in the Resident
Holder's income as computed under the ITA. Under Part I of the ITA, gross-up and
dividend tax credit rules normally applicable to taxable dividends received from
taxable Canadian corporations by individuals will apply to dividends received by
the a Resident Holder who is an individual. Dividends received by a Resident
Holder that is a corporation normally will be deductible in computing the
taxable income of the Resident Holder. Certain corporations may be liable to pay
a 33 1/3% refundable tax under Part IV of the ITA on such dividends.

    DISPOSITION OF COMMON SHARES.  Upon the disposition or deemed disposition of
a common share, a Resident Holder will realize a capital gain (or a capital
loss) to the extent that the proceeds of disposition are greater than (or less
than) the aggregate of the adjusted cost base to the Resident Holder of the
common share and any reasonable costs of disposition.

    Three-quarters (or, under the Proposed Amendments, two-thirds) of any
capital gain realized by a Holder (a taxable capital gain) will be included in
computing the Resident Holder's income and three-quarters (or, under the
proposed Amendments, two-thirds) of any capital loss realized by a Resident
Holder may normally be deducted from the Resident Holder's taxable capital gains
realized in the year of disposition, the three preceding taxation years or any
subsequent taxation years, subject to detailed rules contained in the ITA. In
certain cases, a capital loss otherwise determined from the disposition of a
common share may be reduced by the amount of dividends previously received.

    A purchase of common shares by our company (other than a purchase of common
shares by our company on the open market in a manner in which shares would
normally be purchased by any member of the public in the open market) will give
rise to a deemed dividend (except to the extent that such dividend may be
regarded under the ITA as proceeds of disposition or a capital gain and not as a
dividend for Resident Holders that are corporations) under the ITA. The amount
of any such deemed dividend will reduce the proceeds of disposition of the
common shares to the Resident Holder for the purpose of computing the amount of
the Resident Holder's capital gain or loss under the ITA.

SERIES A PREFERRED SHARES

    TAXATION OF DIVIDENDS.  A Series A Holder will be subject to Canadian
non-resident withholding tax on dividends paid or credited, or deemed to be paid
or credited, to the Series A Holder on the Series A preferred shares. The rate
of non-resident withholding tax under the ITA on dividends is 25% of the gross
amount of the dividend. Pursuant to the U.S. Treaty, the rate of Canadian
non-resident withholding tax applicable in respect of dividends paid or credited
to a Series A Holder is generally reduced to 15%, or 5% in the case of a
corporate Series A holder that owns beneficially 10% or more of our voting
shares. Moreover, pursuant to Article XXI of the U.S. Treaty, an exemption from
Canadian non-resident

                                       42

withholding tax is generally available in respect of dividends received by
certain trusts, companies and other organizations whose income is exempt from
tax under the laws of the United States.

    Where our company pays or is deemed to pay a dividend on the Series A
preferred shares we will generally be subject to a tax under Part VI.1 of the
ITA equal to 25% of the amount of the dividend. We will generally be entitled to
deduct nine-fourths of the amount of such tax in computing our taxable income
for purposes of Part I of the ITA.

    REDEMPTION OF THE SERIES A PREFERRED SHARES.  A redemption of a Series A
preferred share will give rise to a deemed dividend equal to the difference
between the amount we paid on the redemption of the Series A preferred share and
the paid-up capital of such share as determined in accordance with the ITA. The
paid-up capital of such share may be less than the Series A Holder's cost of
such share. The amount of any such deemed dividend will reduce the proceeds of
disposition to the Series A Holder for purposes of computing the amount of the
Series A Holder's capital gain (or capital loss) under the ITA. A redemption of
a Series A preferred share will be considered to be disposition under the ITA
and will give rise to a capital gain (or capital loss) to the extent that the
Series A Holder's proceeds of disposition (excluding any deemed dividend on
redemption) exceed the total of the Series A Holder's adjusted cost base of such
share and any reasonable costs of disposition. A redemption of a Series A
preferred share will trigger certain filing requirements under section 116 of
the ITA. For information regarding the treatment of the deemed dividend, see
Taxation of Dividends, above. For information regarding the treatment of the
capital gain or capital loss, see DISPOSITION OF SERIES A PREFERRED SHARES,
below.

    CONVERSION OF THE SERIES A PREFERRED SHARES.  The conversion of a Series A
preferred share into common shares will be deemed by the ITA not to be a
disposition of the Series A preferred share and, accordingly, a Series A Holder
will not be considered to have realized a capital gain or capital loss on such
conversion. If, and to the extent that, a dividend is deemed to be paid or
credited on the conversion, such dividend will be subject to withholding tax,
see TAXATION OF DIVIDENDS, above. Although the matter is not free from doubt, no
dividend should be deemed to be paid or credited on the conversion.

    For purposes of the conversion, the cost of the common shares acquired on
conversion will be equal to the adjusted cost base of the Series A preferred
shares to the Series A Holder that have been converted. The adjusted cost base
to the Series A Holder of the common shares acquired on the conversion will be
determined by averaging the cost of the common shares acquired on the conversion
with the adjusted cost base to the Series A Holder of all other common shares
held as capital property at that time by the Series A Holder.

    A common share acquired on a conversion will constitute taxable Canadian
property under the ITA. Therefore a Series A Holder that disposes of a common
share acquired on a conversion will be subject to tax under the ITA in respect
of a capital gain realized on the disposition, unless relief under an applicable
international tax treaty is available. For more information regarding the
treatment of the disposition under the ITA and the U.S. Treaty, see DISPOSITION
OF SERIES A PREFERRED SHARES, below.

    Under the current administrative practice of the CCRA, a Series A holder
who, upon conversion of a Series A preferred share, receives cash not in excess
of C$200 in lieu of a fraction of a common share may either treat this amount as
proceeds of disposition of a portion of the Series A preferred share or,
alternatively, reduce the adjusted cost base of the common share received on the
conversion by the amount of case received. In the event that the Series A Holder
chooses to recognize a disposition of a portion of the Series A preferred share,
a capital gain or loss may be realized. For information regarding the treatment
of the capital gain or capital loss, see DISPOSITION OF SERIES A PREFERRED
SHARES, below.

    DISPOSITION OF THE SERIES A PREFERRED SHARES.  A Series A Holder will be
subject to tax under the ITA in respect of a capital gain realized on the
disposition of a share if the share constitutes or is deemed to constitute
"taxable Canadian property" (as defined in the ITA) and the disposition is not
exempt from tax under the ITA due to the application of the U.S. treaty.

                                       43

    A Series A preferred share will constitute taxable Canadian property for
purposes of the ITA. However, a Series A Holder resident in the United States
for purposes of the U.S. Treaty will generally be exempt from Canadian tax in
respect of a gain on the disposition of a Series A preferred share provided that
the value of the Series A preferred share is not derived principally from real
property situated in Canada.

    Paragraph 5 of Article XIII of the U.S. Treaty provides that paragraph 4 of
Article XIII, which normally provides such an exemption for U.S. residents from
Canadian tax on the disposition of property such as shares, generally does not
apply where the U.S. resident was a Canadian resident for 120 months during any
period of twenty consecutive years preceding the time of the disposition of the
property and the individual was resident in Canada at any time during the ten
years immediately preceding the disposition of the property.

    A disposition of a Series A preferred share will trigger certain filing
requirements under section 116 of the ITA, regardless of whether relief from
taxation under an applicable international tax treaty is available.

U.S. FEDERAL INCOME TAX CONSIDERATIONS

    The following summary describes material United States federal income tax
consequences arising from the purchase, ownership and sale of common shares.
This summary is based on the provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), final, temporary and proposed United States Treasury
Regulations promulgated thereunder, and the administrative and judicial
interpretations thereof, all as in effect as of the date of this annual report
and all of which are subject to change, possibly on a retroactive basis. The
consequences to any particular investor may differ from those described below by
reason of that investor's particular circumstances. This summary does not
address the considerations that may be applicable to any particular taxpayer
based on such taxpayer's particular circumstances (including potential
application of the alternative minimum tax), to particular classes of taxpayers
(including financial institutions, broker-dealers, insurance companies,
taxpayers who have elected mark-to-market accounting, tax-exempt organizations,
taxpayers who hold ordinary shares as part of a straddle, "hedge" or "conversion
transaction" with other investments, investors who own (directly, indirectly or
through attribution) 10% or more of our company's outstanding voting stock,
taxpayers whose functional currency is not the U.S. dollar, persons who are not
citizens or residents of the United States, or persons which are foreign
corporations, foreign partnerships or foreign estates or trusts as to the United
States) or any aspect of state, local or non-United States tax laws.
Additionally, the discussion does not consider the tax treatment of persons who
hold common shares through a partnership or other pass-through entity or the
possible application of United States federal gift or estate tax. This summary
is addressed only to a holder of common shares who is (i) a citizen or resident
of the United States who owns less than 10% of our company's outstanding voting
stock, (ii) a corporation organized in the United States or under the laws of
the United States or any state thereof, (iii) an estate, the income of which is
includable in gross income for United States federal income tax purposes
regardless of source, or (iv) a trust, if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more U.S. persons have the authority to control all substantial decisions
of the trust (a "U.S. Holder"). This summary is for general information purposes
only and does not purport to be a comprehensive description of all of the tax
considerations that may be relevant to a decision to purchase common shares.
This summary generally considers only U.S. Holders that will own their common
shares as capital assets.

    Each shareholder should consult with such shareholder's own tax advisor as
to the particular tax consequences to such shareholder of the purchase,
ownership and sale of their common shares including the effects of applicable
state, local, foreign or other tax laws and possible changes in the tax laws.

                                       44

TREATMENT OF DIVIDEND DISTRIBUTIONS

    Subject to the discussion below under "Tax Status Of The Company -- Passive
Foreign Investment Companies," a distribution by our company to a U.S. Holder in
respect of the common shares (including the amount of any Canadian taxes
withheld thereon) will generally be treated for United States federal income tax
purposes as a dividend to the extent of our company's current and accumulated
earnings and profits, as determined under United States federal income tax
principles. To the extent, if any, that the amount of any such distribution
exceeds our company's current and accumulated earnings and profits, as so
computed, it will first reduce the U.S. Holder's tax basis in the common shares
owned by him, and to the extent it exceeds such tax basis, it will be treated as
capital gain from the sale of common shares.

    While it is not anticipated that our company will pay dividends in the
foreseeable future, the gross amount of any distribution from our company
received by a U.S. Holder which is treated as a dividend for United States
federal income tax purposes (before reduction for any Canadian tax withheld at
source) will be included in such U.S. Holder's gross income, will be subject to
tax at the rates applicable to ordinary income and generally will not qualify
for the dividends received deduction applicable in certain cases to United
States corporations. For United States federal income tax purposes, the amount
of any dividend paid in Canadian dollars by our company to a U.S. Holder will
equal the U.S. dollar value of the amount of the dividend paid in Canadian
dollars, at the exchange rate in effect on the date of the distribution,
regardless of whether the Canadian dollars are actually converted into United
States dollars at that time. Canadian dollars received by a U.S. Holder will
have a tax basis equal to the U.S. dollar value thereof determined at the
exchange rate on the date of the distribution. Currency exchange gain or loss,
if any, recognized by a U.S. Holder on the conversion of Canadian dollars into
U.S. dollars will generally be treated as U.S. source ordinary income or loss to
such holder. U.S. Holders should consult their own tax advisors concerning the
treatment of foreign currency gain or loss, if any, on any Canadian dollars
received which are converted into dollars subsequent to distribution.

    A U.S. Holder generally will be entitled to deduct any Canadian taxes
withheld from dividends in computing United States taxable income, or to credit
such withheld taxes against the United States federal income tax imposed on such
U.S. Holder's dividend income. No deduction for Canadian taxes may be claimed,
however, by a noncorporate U.S. Holder that does not itemize deductions. The
amount of foreign taxes for which a U.S. Holder may claim a credit in any year
is subject to complex limitations and restrictions, which must be determined on
an individual basis by each shareholder. Distributions with respect to common
shares that are taxable as dividends will generally constitute foreign source
income for purposes of the foreign tax credit limitation. The limitation on
foreign taxes eligible for credit is calculated separately with respect to
specific classes of income. For this purpose, dividends distributed by our
company with respect to the common shares will generally constitute "passive
income." Foreign income taxes exceeding a shareholder's credit limitation for
the year of payment or accrual of such tax can be carried back for two taxable
years and forward for five taxable years, subject to the credit limitation
applicable in each of such years. Additionally, the foreign tax credit in any
taxable year may not offset more than 90% of a shareholder's liability for
United States individual or corporate alternative minimum tax. The total amount
of allowable foreign tax credits in any year generally cannot exceed regular
U.S. tax liability for the year attributable to foreign source taxable income. A
U.S. Holder will be denied a foreign tax credit with respect to Canadian income
tax withheld from dividends received on the common shares to the extent such
U.S. Holder has not held the ordinary shares for at least 16 days of the 30-day
period beginning on the date which is 15 days before the ex-dividend date or to
the extent such U.S. Holder is under an obligation to make certain related
payments with respect to substantially similar or related property. Any days
during which a U.S. Holder has substantially diminished its risk of loss on the
common shares are not counted toward meeting the 16 day holding period required
by the statute.

                                       45

SALE OR EXCHANGE OF A COMMON SHARE

    Subject to the discussion below under "Tax Status Of The Company -- Passive
Foreign Investment Companies," the sale or exchange by a U.S. Holder of a common
share generally will result in the recognition of gain or loss by the U.S.
Holder in an amount equal to the difference between the amount realized and the
U.S. Holder's basis in the common share sold. Such gain or loss will be capital
gain or loss provided that the common share is a capital asset in the hands of
the holder. The gain or loss realized by a noncorporate U.S. Holder on the sale
or exchange of a common share will be long-term capital gain or loss subject to
tax at a maximum tax rate of 20% if the common share had been held for more than
one year. If the common share had been held by such noncorporate U.S. Holder for
not more than one year, such gain will be short-term capital gain subject to tax
at a maximum rate of 39.6%. Finally, gain realized by a noncorporate U.S. Holder
with respect to common shares acquired after December 31, 2000 and held for more
than five years, shall be taxed at a maximum rate of 18%. Gain realized by a
corporate U.S. Holder will be subject to tax at a maximum rate of 35%. Gains
recognized by a U.S. Holder on a sale, exchange or other disposition of common
shares generally will be treated as United States source income for United
States foreign tax credit purposes. A loss recognized by a U.S. Holder on the
sale, exchange or other disposition of common shares generally is allocated to
U.S. source income under recently finalized regulations. However, those
regulations require such loss to be allocated to foreign source income to the
extent certain dividends were received by the taxpayer within the 24-month
period preceding the date on which the taxpayer recognized the loss. The
deductibility of a capital loss recognized on the sale, exchange or other
disposition of common shares is subject to limitations. A U.S. Holder that
receives foreign currency upon disposition of common shares and subsequently
converts the foreign currency into U.S. dollars generally will have foreign
exchange gain or loss based on any appreciation or depreciation in the value of
the foreign currency against the U.S. dollar. U.S. Holders should consult their
own tax advisors regarding treatment of any foreign currency gain or loss on any
Canadian dollars received in respect of the sale, exchange or other disposition
of common shares.

TAX STATUS OF THE COMPANY

    PERSONAL HOLDING COMPANIES.  A non-U.S. corporation may be classified as a
personal holding company (a "PHC") for United States federal income tax purposes
if both of the following two tests are satisfied: (i) if at any time during the
last half of the company's taxable year, five or fewer individuals (without
regard to their citizenship or residency) own or are deemed to own (under
certain attribution rules) more than 50% of the stock of the corporation by
value and (ii) 60% or more of such non-U.S. corporation's gross income derived
from U.S. sources or effectively connected with a U.S. trade or business, as
specifically adjusted, is from certain passive sources such as dividends and
royalty payments. Such a corporation generally is taxed (currently at a rate of
39.6% of "undistributed personal holding company income") on the amounts of such
passive source income, after making adjustments such as deducting dividends paid
and income taxes, that are not distributed to shareholders. We believe that our
company was not a PHC in 1999 and is not currently a PHC. However, no assurance
can be given that either test will not be satisfied in the future.

    FOREIGN PERSONAL HOLDING COMPANIES.  A non-U.S. corporation will be
classified as a foreign personal holding company (an "FPHC") for United States
federal income tax purposes if both of the two following tests are satisfied:
(i) five or fewer individuals who are United States citizens or residents own or
are deemed to own (under certain attribution rules) more than 50% of all classes
of the corporation's stock measured by voting power or value and (ii) the
corporation receives at least 60% (50% if previously an FPHC) of its gross
income (regardless of source), as specifically adjusted, from certain passive
sources. If such a corporation is classified as a FPHC, a portion of its
"undistributed foreign personal holding company income" (as defined for United
States federal income tax purposes) would be imputed to all of its shareholders
who are U.S. Holders on the last taxable day of the corporation's taxable year,
or, if earlier, the last day on which it is classifiable as a FPHC. Such income
would be taxable as a dividend, even if no

                                       46

cash dividend is actually paid. U.S. Holders who dispose of their shares prior
to such date would not be subject to tax under these rules. We believe that our
company is not currently a FPHC. However, no assurance can be given that our
company will not qualify as a FPHC in the future.

    PASSIVE FOREIGN INVESTMENT COMPANIES.  A company will be a passive foreign
investment company ("PFIC") if 75% or more of its gross income (including the
pro rata share of the gross income of any company (United States or foreign) in
which the company is considered to own 25% or more of the shares (determined by
market value)) in a taxable year is passive income. Alternatively, the company
will be considered to be a PFIC if at least 50% of the value of the company's
assets (averaged over the year) (including the pro rata share of the value of
the assets of any company in which the company is considered to own 25% or more
of the shares (determined by market value)) in a taxable year are held for the
production of, or produce, passive income. For these purposes, the value of our
assets is calculated based on our market capitalization. Passive income
generally includes, among others, interest, dividends, royalties, rents and
annuities.

    If our company is a PFIC for any taxable year, a U.S. Holders, in the
absence of an election by such U.S. Holder to treat our company as a "qualified
electing fund" (a "QEF election"), as discussed below, would, upon certain
distributions by our company and upon disposition of the common shares at a
gain, be liable to pay tax at the highest tax rate on ordinary income in effect
for each period to which the income is allocated, plus interest on the tax, as
if the distribution or gain had been recognized ratably over the days in the
U.S. Holder's holding period for the common shares during which our company was
a PFIC. Additionally, were our company a PFIC, U.S. Holders who acquire ordinary
shares from decedents would be denied the normally available step-up of the
income tax basis for such common shares to fair market value at the date of
death and instead would have a tax basis equal to the decedent's basis, if
lower.

    If our company is treated as a PFIC for any taxable year, U.S. Holders
should consider whether to make a QEF Election for United States federal income
tax purposes. If a U.S. Holder has a QEF Election in effect for all taxable
years that such U.S. Holder has held the common shares and our company was a
PFIC, distributions and gain will not be recognized ratably over the U.S.
Holder's holding period or subject to an interest charge, gain on the sale of
common shares will be characterized as capital gain and the denial of basis
step-up at death described above would not apply. Instead, each such U.S. Holder
is required for each taxable year that our company is a qualified electing fund
to include in income a pro rata share of the ordinary earnings of our company as
ordinary income and a pro rata share of the net capital gain of our company as
long-term capital gain, subject to a separate election to defer payment of
taxes, which deferral is subject to an interest charge. Consequently, in order
to comply with the requirements of a QEF Election, a U.S. Holder must receive
from our company certain information. We intend to supply U.S. Holders with the
information needed to report income and gain pursuant to a QEF Election in the
event our company is classified as a PFIC. The QEF Election is made on a
shareholder-by-shareholder basis and can be revoked only with the consent of the
Internal Revenue Service (the "IRS"). A shareholder makes a QEF Election by
attaching a completed IRS Form 8621 (including the PFIC annual information
statement) to a timely filed United States federal income tax return and by
filing such form with the IRS Service Center in Philadelphia, Pennsylvania. Even
if a QEF Election is not made, a shareholder in a PFIC who is a U.S. Holder must
file a completed IRS Form 8621 every year.

    As an alternative to making a QEF Election, a U.S. Holder may elect to make
a mark-to-market election (the "Mark-to-Market Election") with respect to the
common shares owned by him. If the Mark-to-Market Election were made, then the
rules set forth above would not apply for periods covered by the election. Under
such election, a U.S. Holder includes in income each year an amount equal to
fair market value of the common shares owned by such U.S. Holder as of the close
of the taxable year over the U.S. Holder's adjusted basis in such shares. The
U.S. Holder would be entitled to a deduction for the excess, if any, of such
U.S. Holder's adjusted basis in his common shares over the fair market value of
such shares as of the close of the taxable year; provided however, that such
deduction would be limited to the extent of any net mark-to-market gains with
respect to the common shares included by the U.S. Holder under the

                                       47

election for prior taxable years. The U.S. Holder's basis in his common shares
is adjusted to reflect the amounts included or deducted pursuant to this
election. Amounts included in income pursuant to the Mark-to-Market Election, as
well as gain on the sale or exchange of the common shares, will be treated as
ordinary income. Ordinary loss treatment applies to the deductible portion of
any mark-to-market loss, as well as to any loss realized on the actual sale or
exchange of the common shares to the extent that the amount of such loss does
not exceed the net mark-to-market gains previously included with respect to such
common shares.

    The Mark-to-Market election applies to the tax year for which the election
is made and all later tax years, unless the common shares cease to be marketable
or the IRS consents to the revocation of the election.

    We do not believe our company was a PFIC during 1999. However, there can be
no assurance that our company will not be classified as a PFIC in 2000 or
thereafter because the tests for determining PFIC status are applied annually
and it is difficult to make accurate predictions of future income and assets,
which are relevant to this determination. U.S. Holders who hold common shares
during a period when our company is a PFIC will be subject to the foregoing
rules, even if our company ceases to be a PFIC, subject to certain exceptions
for U.S. Holders who made a QEF election. U.S. Holders are urged to consult with
their own tax advisors about making a QEF Election or Mark-to-Market Election
and other aspects of the PFIC rules.

BACK-UP WITHHOLDING AND INFORMATION REPORTING

    U.S. Holders generally are subject to information reporting requirements
with respect to dividends paid in the United States on common shares. Under
existing regulations, such dividends are not subject to back-up withholding.
U.S. Holders generally are subject to information reporting and back-up
withholding at a rate of 31% on proceeds paid from the disposition of common
shares unless the U.S. Holder provides IRS Form W-9 or otherwise establishes an
exemption.

    Treasury regulations generally effective January 1, 2001 may alter the rules
regarding information reporting and back-up withholding. In particular, those
regulations generally would impose back-up withholding on dividends paid in the
United States on common shares unless the U.S. Holder provides IRS Form W-9 or
otherwise establishes an exemption. Prospective investors should consult their
tax advisors concerning the effect, if any, of these Treasury regulations on an
investment in common shares. The amount of any back-up withholding will be
allowed as a credit against a U.S. or Non-U.S. Holder's United States federal
income tax liability and may entitle such Holder to a refund, provided that
certain required information is furnished to the IRS.

                                       48

ITEM 8. SELECTED FINANCIAL DATA.

    The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our Consolidated Financial Statements and the
Notes thereto. The Consolidated Statements of Operations data for fiscal years
1997, 1998, 1999 and the Consolidated Balance Sheet data as of December 31, 1998
and 1999, as set forth below, have been derived from our consolidated financial
statements which have been audited by PricewaterhouseCoopers LLP, Chartered
Accountants in Canada, whose report with respect to such financial statements is
included herein. The Consolidated Statements of Operations data for fiscal years
1995 and 1996 and the Consolidated Balance Sheet data as of December 31, 1995,
1996 and 1997, as set forth below, have been derived from audited consolidated
financial statements not included in this annual report. Historical results are
not necessarily indicative of results to be expected for any future period.



                                                              YEARS ENDED DECEMBER 31
                                           --------------------------------------------------------------
                                              1995         1996         1997         1998         1999
                                           ----------   ----------   ----------   ----------   ----------
                                                      ($ IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                
STATEMENTS OF OPERATIONS DATA:
  Sales..................................  $       --   $      978   $    3,033   $   10,875   $   13,627
  Cost of sales..........................          --          561        1,995        6,673        9,273
                                           ----------   ----------   ----------   ----------   ----------
  Gross margin...........................          --          417        1,038        4,202        4,354
  Sales, general and administrative
    expense..............................       1,476        3,377        7,448       11,516       19,074
  Research and development expense.......       1,241        2,745        4,123        6,289        7,935
  Other expense..........................          --           --          654          420        1,329
                                           ----------   ----------   ----------   ----------   ----------
  Loss from operations before interest...      (2,717)      (5,705)     (11,187)     (14,023)     (23,984)
  Interest income........................          12          609          774          264          695
  Interest and financing expense.........         (19)         (69)          (3)      (1,132)      (1,998)
                                           ----------   ----------   ----------   ----------   ----------
  Net loss...............................      (2,724)      (5,165)     (10,416)     (14,891)     (25,287)
  Cumulative preferred dividends and
    accretion of discount attributable to
    preferred shares.....................          --           --           --           --       (1,770)
                                           ----------   ----------   ----------   ----------   ----------
  Net loss attributable to common
    shareholders.........................  $   (2,724)  $   (5,165)  $  (10,416)  $  (14,891)  $  (27,057)
                                           ==========   ==========   ==========   ==========   ==========
  Net loss per common share..............  $    (0.65)  $    (0.89)  $    (1.48)  $    (1.91)  $    (2.73)
  Weighted average number of common
    shares outstanding...................   4,181,599    5,791,367    7,059,578    7,782,094    9,916,954




                                                                      DECEMBER 31
                                                  ----------------------------------------------------
                                                    1995       1996       1997       1998       1999
                                                  --------   --------   --------   --------   --------
                                                                     (IN THOUSANDS)
                                                                               
BALANCE SHEET DATA:
  Cash and short-term investments...............   $  403    $18,928    $ 7,588    $11,274    $42,688
  Working capital...............................      418     20,061      9,561      8,432     45,611
  Total assets..................................    1,791     22,606     13,936     27,783     58,640
  Indebtedness..................................      500         --         --      7,495         --
  Mandatorily redeemable convertible preferred
    shares......................................       --         --         --         --     27,556
  Accumulated deficit...........................   (3,680)    (8,845)   (19,260)   (34,151)   (59,438)
  Shareholders' equity..........................      841     21,795     12,610     14,579     24,351


                                       49

ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.

    YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
ITEM 8 --"SELECTED FINANCIAL DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED ELSEWHERE IN THIS ANNUAL REPORT. IN ADDITION TO
HISTORICAL INFORMATION, THE FOLLOWING DISCUSSION CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES, SUCH AS STATEMENTS OF OUR PLANS, OBJECTIVES, EXPECTATIONS AND
INTENTIONS. SEE "DESCRIPTION OF BUSINESS--FORWARD-LOOKING STATEMENTS."

OVERVIEW

    We began operations in 1993. Until 1996, we devoted substantially all of our
resources to the research and development of our technology and products. In
late 1996, we began manufacturing and selling our products to the research and
clinical research markets.

    Our products and services include:

    - SEQUENCING SYSTEMS. Sequencing systems consist of automated DNA sequencers
      and related equipment, and our proprietary DNA analysis and data
      management software.

    - GENEKITS AND OTHER CONSUMABLES. GeneKits consist of various reagents,
      enzymes, primers and other chemicals, and other consumables consist of
      disposable gel cassettes, acrylamide and other materials.

    - TESTING, SEQUENCING AND OTHER SERVICES. We provide services, such as viral
      load testing, genotyping and other molecular services, through our
      wholly-owned subsidiaries, Applied Sciences, Inc., which we acquired in
      1997, and Visible Genetics Europe S.A. (formerly known as ACT Gene S.A.),
      which we acquired in 1998.

    During 1996 and 1997, we generated revenues primarily by selling sequencing
systems. During this period, our business strategy focused on installing our DNA
sequencers and related equipment in research and clinical research facilities.
During 1998, we began to shift our strategy to target the clinical diagnostic
market and to place greater emphasis on generating recurring revenues from sales
of GeneKits and other consumables initially to the research and clinical
research markets and, subject to FDA approval, to the clinical diagnostic
market. As part of this strategy, we may sell our DNA sequencers at reduced
prices to customers who commit to purchase significant quantities of GeneKits
and other consumables. In addition, in 1998 and 1999, we bundled our DNA
sequencers and GeneKits for sale at reduced prices. We discontinued the practice
of bundled sales in the second half of 1999. This strategy may result,
initially, in reduced gross margins and additional losses as we attempt to
expand our installed base of DNA sequencers. However, we believe that this
strategy, over the long term, will help us maximize recurring sales of our HIV
GeneKit and other GeneKits to the clinical diagnostic market, should we receive
FDA approval.

OUR OPERATIONS

    SALES.  Sales consist of revenues from the sale of sequencing systems and
GeneKits and other consumables, as well as from the sale of testing services.
Sales include shipping charges, but exclude sales and excise taxes. Revenues
from the sale of our products are recognized when shipment occurs, title passes
to the customer or distributor and there is a reasonable assurance of
collectibility. Revenues from the sale of testing and other services are
recognized when the service is provided and there is a reasonable assurance of
collectibility. Sales of bundled sequencing systems and GeneKits are recognized
proportionately as the components of the bundle are shipped to customers. The
total sales price of the bundle is allocated to the components proportionately
based on the retail prices typically charged for such components if they were
sold individually rather than as part of the bundle.

                                       50

    We sell our products in North America, Europe, Asia, Australia and South
America. In the United States, Canada and many countries in Europe, we sell our
products directly through our own sales force. In selected geographic and
product markets, we seek to sell our products through distribution, marketing or
agency agreements with leading distributors. Currently, we have entered into
agreements with distributors or agents in Spain, Portugal, Japan, Australia, New
Zealand and Argentina.

    For an analysis of sales by product segment and geographic market, see
Note 15 to our Consolidated Financial Statements.

    COST OF SALES.  Cost of sales consists of manufacturing costs including
materials, labor and overhead chargeable to inventory. The gross margin from
sales of our products and services varies depending on product category,
distribution channel and geographic market. Gross margin is calculated by
subtracting cost of sales from sales.

    SALES, GENERAL AND ADMINISTRATIVE EXPENSES.  Sales, general and
administrative expenses consist primarily of salaries and related expenses,
occupancy costs, utilities, professional fees, consulting fees, travel costs,
capital taxes, depreciation of fixed assets and amortization of costs paid to
patent counsel.

    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses
consist primarily of salaries and related expenses for employees engaged in
research and development, occupancy costs, consulting fees, travel costs,
depreciation and amortization of fixed assets and costs related to FDA clinical
trials for our HIV OpenGene System.

    INTEREST INCOME.  Interest income consists of income earned on cash, cash
equivalents and marketable securities.

    INTEREST AND FINANCING EXPENSE.  Interest and financing expense consists of
interest paid or accrued, and amortization of warrant costs and other financing
expenses.

    Our financial statements are presented in U.S. dollars and are prepared in
accordance with generally accepted accounting principles in the United States.

RESULTS OF OPERATIONS

COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 1999 TO FISCAL YEAR ENDED
  DECEMBER 31, 1998

    SALES.  Sales increased 25% to $13.6 million in 1999, from $10.9 million in
1998. This increase resulted primarily from increased sales of our GeneKits and
other consumables. In 1999, 340 sequencing systems were sold, as compared to 412
sequencing systems sold in 1998. The decrease in sequencing systems sold in 1999
as compared to 1998 is due to a decline in Seq4x4 sales to Amersham, which
decreased from 273 units in 1998 to 85 units in 1999. In 1998 Amersham began to
actively market the Seq4x4 and initial sales were high as Amersham filled their
distribution pipeline. Subsequently, Amersham's marketing effort has been
transferred to the Long-Read Tower at a higher unit price but lower anticipated
volume. In 1999, sequencing systems accounted for 57% of total sales, compared
to 74% of total sales in 1998. In 1999, GeneKits and other consumables accounted
for 35% of total sales, compared to 13% of total sales in 1998. Testing services
accounted for 8% of sales in 1999, compared to 13% of sales in 1998. Sales in
North America, Europe, Japan and the rest of the world were $5.2 million,
$5.5 million, $1.6 million and $1.3 million, respectively, for 1999, as compared
to $4.4 million, $4.6 million, $1.6 million and $0.3 million, respectively,
during 1998. During 1999, Amersham accounted for approximately 21% of sales, of
which 19% comprised sequencing systems and 2% comprised GeneKits and other
consumables. During 1998, Amersham accounted for 30% of sales, of which 29%
comprised sequencing systems and 1% comprised GeneKits and other consumables.
The sales to Amersham were made on the same general terms and conditions as the
majority of other sales during the respective periods.

                                       51

    COST OF SALES.  Cost of sales increased 39% to $9.3 million in 1999, from
$6.7 million in 1998. In 1999, cost of sales aggregated 68% of sales, compared
to 61% of sales in 1998. This increase in cost of sales as a percentage of sales
was primarily related to a write-off of obsolete and discontinued instruments
and related parts totaling $0.6 million recorded in the second quarter of 1999.

    SALES, GENERAL AND ADMINISTRATIVE EXPENSES.  Sales, general and
administrative expenses increased 66% to $19.1 million in 1999, from
$11.5 million in 1998. This increase resulted primarily from increased payroll
and personnel costs due to the continued growth of our business, costs of
quality control and regulatory departments established in 1998 and the continued
expansion of our sales force in North America and Europe. Sales and marketing
expenses included in sales, general and administrative expenses increased 79% to
$11.1 million in 1999, from $6.2 million in 1998.

    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses
increased 26% to $7.9 million in 1999, from $6.3 million in 1998. This increase
resulted from increased payroll and personnel costs, along with increased
purchases of laboratory supplies, as we developed additional GeneKits and
continued our research programs. Additionally, we incurred costs for
pre-clinical and clinical trials related to our FDA submission for our HIV
OpenGene System.

    EXIT AND TERMINATION COSTS.  During 1999 we incurred exit and termination
costs of $1.3 million. There were no such costs in 1998. Of this amount,
$0.8 million related to the planned relocation of certain of our activities to a
new location in Atlanta, and $0.5 million was for termination benefits payable
to two senior officers in connection with the termination of their employment
with our company.

    INTEREST INCOME.  Interest income increased to $0.7 million in 1999, from
$0.3 million in 1998. The increase reflects interest earned on higher average
cash balances as a result of the proceeds received from financings completed
during the third and fourth quarters of 1999.

    INTEREST AND FINANCING EXPENSE.  Interest and financing expense increased to
$2.0 million in 1999, from $1.1 million in 1998. This increase was due to
interest and financing costs on our term loan agreements entered into in April
and September 1998 and the Warburg Pincus financing in July 1999. Of the total
interest and financing expense, $1.5 million was a non-cash charge due to the
amortization of costs attributable to warrants issued in connection with our
term loans and the Warbug Pincus financing, compared to $0.6 million during
1998.

COMPARISON OF FISCAL YEAR ENDED DECEMBER 31, 1998 TO FISCAL YEAR ENDED
  DECEMBER 31, 1997

    SALES.  Sales increased 259% to $10.9 million in 1998 from $3.0 million in
1997. This increase resulted from increased sales of our sequencing systems,
GeneKits and other consumables and testing, sequencing and other services. In
1998, 412 sequencing systems were sold, an increase of 353% from the 91 systems
sold in 1997. In 1998, sequencing systems accounted for 74% of sales, compared
to 90% of sales in 1997. GeneKits and other consumables accounted for 13% of
sales in 1998, compared to 8% in 1997. Testing services accounted for 13% of
sales in 1998 compared to 2% of sales in 1997 as a result of our acquisitions in
1997 and 1998 of a DNA diagnostic testing companies. Sales during 1998 in North
America, Europe, Japan and the rest of the world were $4.4 million,
$4.6 million, $1.6 million and $0.3 million, respectively, as compared to
$2.8 million, $0.2 million, nil and $0.05 million, respectively, during 1997.
During 1998, Amersham accounted for 30% of sales, of which 29% comprised
sequencing systems and 1% comprised GeneKits and other consumables. The sales to
Amersham were made on the same general terms and conditions as the majority of
other sales during the year. During 1997, no customer accounted for more than
10% of sales.

    COST OF SALES.  Cost of sales increased 235% to $6.7 million in 1998 from
$2.0 million in 1997. In 1998, cost of sales aggregated 61% of sales, a decrease
from 66% of sales in 1997. Cost of sales decreased in 1998 as a percentage of
sales due to improvements in our manufacturing processes, as well as

                                       52

economies of scale as production of sequencing systems, GeneKits and other
consumables increased compared to the previous year.

    SALES, GENERAL AND ADMINISTRATIVE EXPENSES.  Sales, general and
administrative expenses increased 55% to $11.5 million in 1998 from
$7.4 million in 1997. This increase resulted primarily from increased payroll
and personnel costs due to the growth of our business, establishment of quality
control and regulatory departments and development of a sales force in North
America and in certain countries in Europe. Sales and marketing expenses
included in sales, general and administrative expenses increased 72% to
$6.2 million in 1998 from $3.6 million in 1997.

    RESEARCH AND DEVELOPMENT EXPENSES.  Research and development expenses
increased 53% to $6.3 million in 1998 from $4.1 million in 1997. This increase
in research and development expenses resulted from increased payroll and
personnel costs along with increased purchases of laboratory supplies as we
continued to develop GeneKits and expanded our research programs.

    In April 1998, we acquired 100% of the shares of ACT Gene S.A., a DNA
diagnostic testing company, for 85,000 common shares and cash payable of
$0.7 million. This acquisition was accounted for as a purchase, and resulted in
the recording of an excess of purchase price over tangible net assets of
$0.5 million, of which $0.4 million was determined to be in-process research and
development, and reflected as an expense in 1998. The in-process research and
development related to the cost and time pertaining to the development of a test
kit and research clinical samples necessary for the development of several kits
designed for use with sequencing systems. As of April 1998, the test kit was
approximately 80% completed, with an estimated cost to complete the kit of
approximately $650,000. At that time we expected to complete the kit during
1999. We currently estimate the cost to date plus additional cost to complete
the kit will total approximately $900,000. We currently expect development of
the kit to be completed during 2000. At the date of acquisition, the test kit
had not yet reached technological feasibility and had no alternative future uses
in the clinical diagnostic market.

    INTEREST INCOME.  Interest income declined to $0.3 million in 1998 from
$0.8 million in 1997.

    INTEREST AND FINANCING EXPENSE.  Interest and financing expense increased to
$1.1 million in 1998 from approximately nil in 1997 due to interest paid or
accrued and the amortization of costs attributable to warrants issued in
connection with term loans entered into in April and September 1998.

LIQUIDITY AND CAPITAL RESOURCES

    Since inception, we have financed our operations primarily through private
placements of equity and an initial public offering in June 1996. We have also
borrowed funds from institutional lenders.

    INSTITUTIONAL LOANS.  On April 30, 1998, our subsidiary, Visible Genetics
Corp., or VGC, borrowed $7.0 million from various funds, which we refer to as
the Hilal Funds, for which Hilal Capital Management LLC serves as general
partner, investment advisor or management company. In September 1998, VGC
borrowed an additional $1.0 million from these lenders. The interest rate of the
loans was 10% per year. Interest and principal on the $7.0 million loan were
payable on or about April 29, 1999, and, on the $1.0 million loan, were payable
on December 28, 1999.

    On April 30, 1999, we and the Hilal Funds agreed to delay the payment date
of the $7.0 million loan to December 31, 1999, and to move up the payment date
of the $1.0 million loan to July 1, 1999. The Hilal Funds later extended the
payment date to the earlier of July 22, 1999, or the completion of the Warburg
Pincus financing described below. In addition, the Hilal Funds agreed to permit
us to borrow up to an additional $5.0 million of loans from other lenders which
would be senior to the $7.0 million loan and junior to the $1.0 million loan.

    We guaranteed VGC's obligations under both loans. We gave the Hilal Funds a
security interest in most of our assets to secure our obligations under the
guaranty, including a pledge of the outstanding stock

                                       53

of VGC. Both the loan agreements and the guaranty imposed certain restrictions
on us and our subsidiaries, including limitations on loans and other obligations
that we may incur.

    As part of the loan arrangements, we granted the Hilal Funds warrants to
purchase our common shares. Initially, we granted the Hilal Funds warrants to
purchase 420,000 common shares which may be exercised until April 2003, at a
price of $10.00 per share. When we borrowed an additional $1.0 million from the
Hilal Funds in September 1998, we granted them warrants for an additional
120,000 common shares which may be exercised until September 2003, at a price of
$10.00 per share. The warrants were valued using the Black-Scholes option
valuation model. The total proceeds received from the Hilal Funds were allocated
between the warrants and term loans based on the relative fair value of each
component, resulting in $0.9 million and $0.2 million of the total proceeds from
the April 1998 and September 1998 term loans, respectively, being allocated to
warrants. The value of the term loans were to be increased to their face value
at their respective maturity dates, resulting in a charge to financing expense
and warrants, by their pro rata share, over the remaining term of the loans. As
a result, non-cash charges of $0.6 million were recorded as financing expenses
in 1998. The remaining $0.6 million was recorded as non-cash financing expenses
in 1999.

    On April 30, 1999, we granted the Hilal Funds warrants to purchase an
additional 140,000 common shares which may be exercised until April 30, 2006, at
a price of $17.00 per share. The warrants were valued using the Black-Scholes
option valuation model, resulting in a value being attributed to these warrants
of $0.9 million. This amount was recorded as a deferred charge on the balance
sheet and was to be amortized to financing expense over the remaining term of
the loan maturing on December 31, 1999. As a result, the entire amount was
recorded as a non-cash charge to financing expense in 1999.

    On July 15, 1999, we repaid or satisfied all of the loans made to us by the
Hilal Funds. Of the $8.0 million principal amount of the loans, we paid
$4.1 million of principal plus accrued interest on the loan in cash. The Hilal
Funds converted the remaining $3.9 million principal amount plus accrued
interest into 3,948 Series A preferred shares and 147,098 warrants to purchase
our common shares. The warrants were valued using the Black-Scholes option
valuation model. The value of the net proceeds was allocated between convertible
preferred shares and warrants based on the relative fair value of each
instrument. The total amount allocated to warrants and preferred shares, was
$0.9 million and $3.0 million, respectively. The value of the warrants is
treated as a discount to the preferred shares and will be charged directly to
retained earnings or, in the absence of retained earnings, against other equity
over seven years, the time period when redemption of the preferred shares first
becomes mandatory. The increase in value of the preferred shares to their
mandatory redemption price as well as the accrual of dividends on the preferred
shares will reduce earnings attributable to common shareholders. The Series A
preferred shares and warrants have the same terms as those granted to Warburg
Pincus as described in "Interest of Management in Certain Transactions."

    WARBURG PINCUS FINANCING.  On July 15, 1999, certain affiliated funds
managed by E.M. Warburg, Pincus & Co., LLC, who we refer to as the Warburg
Pincus Funds, invested $30.0 million in our company. In consideration for this
investment, we issued to the Warburg Pincus Funds 30,000 Series A preferred
shares convertible at the holders' option into common shares at $11.00 per
share, and warrants to purchase 1,100,000 common shares exercisable for four
years at a purchase price of $12.60 per share. The warrants were valued using
the Black-Scholes option valuation model. The value of the net proceeds was
allocated between convertible preferred shares and warrants based on the
relative fair value of each instrument. The total amount allocated to warrants
and preferred shares was $6.4 million and $22.8 million, respectively. The value
of the warrants is treated as a discount to the preferred shares and will be
charged directly to retained earnings or, in the absence of retained earnings,
against other equity over seven years, the time period when redemption of the
preferred shares first becomes mandatory. The increase in value of the preferred
shares to their mandatory redemption price as well as the accrual of dividends
on the preferred shares will reduce earnings attributable to common
shareholders. In February 2000, the Warburg Pincus Funds exercised all of their
warrants. Under the terms of our warrant agreement, the Warburg Pincus

                                       54

Funds elected to pay the exercise price for the warrants through a non-cash
exercise. As a result, the Warburg Pincus Funds received 847,749 of our common
shares rather than 1,100,000 common shares they otherwise would have received
upon exercise in cash of all of their warrants.

    DECEMBER 1999 PRIVATE PLACEMENT.  In December 1999, various institutional
investors purchased 1,916,000 common shares of our company in a private
placement. The investors paid $15 per share and we received net proceeds of
$26.7 million from the private placement. The institutional investors included
the Warburg Pincus Funds, the Hilal Funds, certain investors who had purchased
our common shares in a November 1998 private placement and certain new
institutional investors.

    CAPITAL EXPENDITURES.  Additions to fixed assets were approximately
$1.9 million, $3.3 million and $1.3 million for the years ended December 31,
1999, 1998 and 1997, respectively. We expect capital expenditures to increase
over the next several years as we expand our facilities and acquire additional
manufacturing and scientific equipment.

    CURRENT AND FUTURE FINANCING NEEDS.  We have incurred negative cash flow
from operations since we started our business. We have spent, and expect to
continue to spend, substantial amounts to complete our planned product
development efforts, expand our sales and marketing activities, conduct our
clinical trials, conduct research, build our business infrastructure and expand
our manufacturing capabilities. At this time, funds from operations are not
sufficient to meet our operating needs and other anticipated financial
requirements.

    Based on our current plans, we believe that our cash on hand, anticipated
funds from operations and net proceeds from this offering, will be sufficient to
enable us to meet our operating needs for the next 24 months. In addition, we
have filed a registration statement with the Securities and Exchange Commission
covering our proposed sale of up to an additional 2,300,000 common shares in a
public offering. If we complete the public offering, the proceeds of the
offering would be available for general corporate and working capital purposes,
including, among other things, to acquire complementary businesses, products,
services or technologies. Currently, we have no definitive agreements to make
any acquisition and we cannot be certain that the proceeds we would receive from
the public offering would be sufficient to complete any acquisition we might
make in the future. The actual amount of funds we will need to operate for the
next 24 months is subject to many factors, some of which are beyond are control.
We may need to obtain additional funds sooner or in greater amounts than we
currently anticipate and we may need to obtain additional funds at the end of
the 24 month period. If we need to obtain funds at the end of 24 months, or
earlier, potential sources of financing include strategic relationships, public
or private sales of our shares or debt or other arrangements. Because of our
potential long term capital requirements, we may seek to access the public or
private equity markets whenever conditions are favorable, even if we do not have
an immediate need for additional capital at that time. We do not have any
committed sources of financing at this time and it is uncertain whether
additional funding will be available when we need it on terms that will be
acceptable to us or at all. If we raise funds by selling additional common
shares or other securities convertible into common shares, the ownership
interest of our existing shareholders will be diluted. If we are not able to
obtain financing when needed, we would be unable to carry out our business plan,
we would have to significantly limit our operations and our business, financial
condition and results of operations would be materially harmed.

    If we wish to issue equity securities or obtain additional financing, we
will need, under certain circumstances, the consent of the Series A preferred
shareholders. We will be required to obtain the consent of the holders of a
majority of the then outstanding Series A preferred shares prior to issuing any
equity security that has rights as to dividends and liquidation that are senior
or equal to those of the Series A preferred shares. We will also be required to
obtain the consent of the holders of a majority of the then outstanding
Series A preferred shares if we wish to borrow money and at such time or as a
result of such loans, the total principal amount of our indebtedness and
capitalized lease obligations exceeds $15.0 million. As a result, we may be
delayed in, or prohibited from, obtaining certain types of financing.

                                       55

YEAR 2000

    We have conducted a comprehensive examination of our information technology
systems and the software applications sold with our products to determine year
2000 compliance. Based on our examination, we believe that these systems and
software are year 2000 compliant and to date none of these systems or
applications have experienced year 2000 problems.

    We have spent approximately $470,000 on our year 2000 compliance efforts, of
which $454,000 was for a new enterprise system purchased in 1998. While we did
not purchase the new system specifically in response to year 2000 issues, our
efforts at compliance accelerated the timetable for purchasing the system.

    We have contacted our material customers, suppliers and third-party service
providers to identify year 2000 problems and provide solutions to prevent any
disruption of business activities. We completed a review of the compliance
efforts by these parties in the third quarter of 1999. Based on the information
we have received, our most significant year 2000 risk would involve disruption
of our material supply and distribution channels, and in particular the supply
of certain instrument parts and supplies from single-source suppliers. This
would likely lead to material interruption in product development and sales of
our products. In addition, we could encounter significant expenses in remedying
any problems or switching to year 2000 compliant vendors and suppliers. As of
the date of this prospectus, we are not aware of any year 2000 problems
affecting any of our material customers, suppliers or third-party service
providers that might materially disrupt our business.

EURO CONVERSION

    Effective January 1, 1999, 11 of the 15 member countries of the European
Union adopted the euro as their common legal currency and each participant
established fixed conversion rates between their sovereign, or legacy,
currencies and the common euro currency. The legacy currencies of the individual
countries are scheduled to remain legal tender as denominations of the euro
until January 1, 2002, when euro-denominated bills and coins will be introduced.
During this transition period, public and private parties may choose to pay for
goods and services using either the euro or the participating country's legacy
currency. By July 1, 2002, the legacy currencies will be phased out entirely as
legal tender.

    We currently conduct business operations in U.S. and Canadian dollars and
several other currencies. Since our information systems and processes generally
accommodate multiple currencies, we anticipate that any necessary modification
to our information systems, equipment and processes to accommodate euro
transactions will be made on a timely basis and do not expect any failures that
would have a material adverse effect on our financial position or results of
operations.

ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    We do not own and have not issued any market risk sensitive instruments
about which disclosure is required to be provided pursuant to this Item.

                                       56

ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.

EXECUTIVE OFFICERS AND DIRECTORS

    The following table sets forth certain information with respect to our
executive officers and directors. This information is supplied based upon our
records and information furnished by our executive officers and directors.



                                                                                                          DIRECTOR'S
                                                                                                YEAR         TERM
NAME                           AGE                           POSITION                         APPOINTED    EXPIRES
- - ----                         --------   ---------------------------------------------------   ---------   ----------
                                                                                              
Richard T. Daly(3)........      50      President, Chief Executive Officer and Director         1998         2001
Thomas J. Clarke..........      51      Chief Financial Officer                                 2000
Timothy W. Ellis..........      52      Chief Operating Officer                                 1999
Dr. Arthur W.G. Cole......      49      Executive Vice President; President, Visible            1996
                                        Genetics Europe S.A.
Dr. James M. Dunn.........      45      Vice President, Technology                              1994
Marguerite Ethier.........      36      Vice President, General Counsel and Director            2000
Michael A. Cardiff(2).....      40      Director                                                1999         2000
Sheldon Inwentash(1)......      44      Director                                                1994         2002
Jonathan S. Leff(1)(2)....      31      Director                                                1999         2000
Robert M. MacIntosh.......      77      Director                                                2000         2000
Prof. J. Robert S.
  Prichard(1)(2)(3).......      50      Director                                                1999         2002
Dr. Lloyd M. Smith........      44      Director                                                1995         2001
Dr. Konrad M. Weis........      71      Director                                                1997         2001


- - ------------------------

(1) Member of Audit Committee

(2) Member of Compensation Committee

(3) Corporate Governance Committee

    The following is the business experience for at least the last five years of
each of our executive officers and directors:

    RICHARD T. DALY has been a Director of our company since June 1998,
Executive Vice President since March 1999 and President and Chief Executive
Officer since July 1999. Prior to joining Visible Genetics, Mr. Daly founded,
and, from March 1989 through July 1998, served as Chairman and Chief Executive
Officer of Clinical Partners, Inc., a San Francisco-based company providing
comprehensive, therapy-specific management of HIV and AIDS patients for
employers and managed health-care organizations. Prior to founding Clinical
Partners, Mr. Daly spent over 15 years in the healthcare industry with several
companies in a variety of executive positions in sales, marketing and general
management, including serving as the President of Baxter Canada for a period of
four years, and President of the Health Data Institute.

    THOMAS J. CLARKE has been Chief Financial Officer of our company since
January 2000. From July 1997 to January 2000, Mr. Clarke was Chief Operating
Officer of CCS TrexCom, Inc., a telecommunications software company. From 1991
to July 1997, Mr. Clarke was Chief Financial Officer of CCS TrexCom. From 1989
to 1990, Mr. Clarke was Chief Financial Officer of Medaphis Corporation, a
medical transaction-processing company. From 1986 to 1989, Mr. Clarke was Senior
Vice President and Chief Financial Officer of Days Inn Corporation. From 1985 to
1986, Mr. Clarke was Controller of Quadram Corporation. From 1980 to 1985, Mr.
Clarke held various financial positions at Contel Corporation. Mr. Clarke is a
Certified Public Accountant.

                                       57

    TIMOTHY W. ELLIS has been Chief Operating Officer of our company since
November 1999. From January 1998 to November 1999, Mr. Ellis operated his own
management consultant practice. From 1991 to 1997, Mr. Ellis was President of
Dynex Technologies. From 1988 to 1991, Mr. Ellis was President of Genetic
Systems Corporation. From 1985 to 1988, Mr. Ellis was General Manager of Abbott
Laboratories' Clinical Chemistry Business Unit.

    DR. ARTHUR W. G. COLE has been Executive Vice President of our company since
May 1996 and the President of our Visible Genetics Europe S.A. subsidiary since
September 1999. From May 1996 to September 1999, Dr. Cole served as Chief
Business Officer of our company. From 1995 to May 1996, Dr. Cole was a business
consultant to companies in the biotechnology industry through AC Consulting.
From 1981 to 1995, Dr. Cole worked at Pharmacia Biotech, AB, a Swedish
biotechnology supply company in a range of positions, including five years as
Vice President. During his time with Pharmacia, Dr. Cole ran the division
responsible for worldwide sales of DNA sequencing equipment and supplies.

    DR. JAMES M. DUNN has been Vice President, Technology of our company since
June 1998 and was our Director of Molecular Test Development from January 1994
to June 1998. Prior to joining our company, Dr. Dunn was a research consultant
to the Hospital for Sick Children from August 1993 to January 1994 and a
National Cancer Institute of Canada research fellow at the Division of Biology,
California Institute of Technology from 1990 to 1993. Dr. Dunn received a B.Sc.
in chemistry from the University of British Columbia and a Ph.D. from the
University of Toronto.

    MARGUERITE ETHIER has been Vice President, General Counsel of our company
since January 2000 and has been a Director of our company since February 2000.
From 1998 to 1999, Ms. Ethier was a partner in the law firm of McCarthy
Tetrault, and from 1995 to 1997 and 1992 to 1993, Ms. Ethier was an associate
with McCarthy Tetrault. From 1993 to 1995, Ms. Ethier was an associate with the
law firms of Townsend & Townsend Khourie & Crew and Howard Rice Nemerovski
Canady Falk & Rabkin. Ms. Ethier holds a B.Sc. degree from the University of
Alberta, an M.Sc. degree from the University of Toronto, and an LL.B. degree
from Osgoode Hall Law School. Ms. Ethier is a member of the Ontario and
California bars, and is qualified as both a registered Canadian Patent Agent and
a United States Patent Attorney.

    MICHAEL A. CARDIFF has been a Director of our company since June 1999. Since
September 1999, Mr. Cardiff has been President and Chief Executive Officer of
Prologic Corporation. From October 1996 to September 1999, Mr. Cardiff was
Executive Vice President, Financial Services of EDS Canada. From November 1994
to September 1996, Mr. Cardiff was Senior Vice President of Sales and Marketing
of EDS Canada and from 1989 to 1994, he held several positions with Stratus
Computer Corp. Mr. Cardiff presently is a member of the boards of directors of
Visible Decisions Inc. (which company is not related to our company), SOLCORP
Insurance Software Solutions Corp. and Spectra Securities Software Inc.

    SHELDON INWENTASH has been a Director of our company since April 1994. Since
November 1993, Mr. Inwentash has been the Chairman and Chief Executive Officer
of GeneVest Inc. (formerly known as Gene Screen Inc.), a Canadian company which
is a principal shareholder of our company. Since February 1992, Mr. Inwentash
has been the Chairman and Chief Executive Officer of Pinetree Capital Corp., a
venture capital firm.

    JONATHAN S. LEFF has been a director of our company since July 1999, serving
as the nominee of the Series A preferred shareholders. Mr. Leff joined E.M.
Warburg, Pincus & Co., LLC in July 1996 as an Associate. In January 1999, he
became a Vice President, and in January 2000, he became a Managing Director.
Mr. Leff is also a director of Intermune Pharmaceuticals Inc., VitalCom Inc.,
and a number of private health care companies.

    ROBERT M. MACINTOSH has been a Director of our company since March 2000.
From 1980 until his retirement in 1989, Mr. MacIntosh was President of the
Canadian Bankers Association. Mr. MacIntosh presently is a member of the board
of directors of Chase Manhattan Bank of Canada.

                                       58

    PROF. J. ROBERT S. PRICHARD has been a Director of our company in May 1999.
Prof. Prichard has been President of the University of Toronto since 1990. From
1984 to 1990, Prof. Prichard was Dean of the Faculty of Law at the University of
Toronto. Prof. Prichard is a past Chairman of the Council of Ontario
Universities, a Director of the Association of American Universities and a
Director of the Association of Universities and Colleges of Canada and the
International Association of Universities. Prof. Prichard presently serves as a
Director of the University Health Network, Onex Corporation, BioChem
Pharmaceuticals, Moore Corporation, Four Seasons Hotels Inc. and Tesma
International Inc.

    DR. LLOYD M. SMITH has been a Director of our company since March 1995.
Since June 1994, Dr. Smith has been Professor of Chemistry at the University of
Wisconsin-Madison. Dr. Smith has been involved in the development of
fluorescence-based automated DNA sequencers for over 15 years, has written
numerous scientific papers and is a named inventor on a number of U.S. patents.
Dr. Smith is a past member of the National Institutes of Health National Human
Genome Research Institute Study Section. Dr. Smith is a member of the Scientific
Advisory Board of CuraGen Corp. He also serves, or has served, on the editorial
boards of GENOME RESEARCH, DNA SEQUENCE GENETIC ANALYSIS: TECHNIQUES AND
APPLICATIONS and JOURNAL OF CAPILLARY ELECTROPHORESIS and was a member of the
scientific advisory boards of Fotodyne Incorporated and Boehringer Mannheim
Corp. Dr. Smith is co-founder of Third-Wave Technologies, Inc., a biotechnology
company, which has agreed to be acquired by PE Biosystems in a stock-for-stock
transaction.

    DR. KONRAD M. WEIS has been a Director of our company since 1997. Dr. Weis
has been the honorary Chairman of Bayer Corporation since 1991. He was President
and Chief Executive Officer of the company that later became Bayer Corporation
from 1974 until his retirement in 1991. He presently is a member of the boards
of directors of Demegen Inc., Michael Baker Corporation and Titan
Pharmaceuticals, Inc.

ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.

    All of our directors who are not employees or officers receive a $2,500 fee
for each Board of Directors or committee meeting they attend, up to $10,000 per
year. Directors who are not our employees are also eligible to participate in
our Director Option Plan. All directors are reimbursed for reasonable out-of-
pocket travel expenses incurred by them in attending meetings of the Board of
Directors or committee meetings.

    The aggregate amount of compensation paid by us to all of our directors and
executive officers as a group (16 persons) in 1999 was $1,249,408 for services
in such capacities, of which $40,476 was paid as bonuses and $519,063 was paid
as severance payments. These amounts do not include compensation we paid to
firms with which a director and a former director, respectively, are associated.

                                       59

ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.

    As of February 29, 2000 there were options and warrants outstanding to
purchase an aggregate of 2,898,592 common shares, including options to purchase
1,104,776 common shares held by directors and executive officers as a group. The
options held by directors and executive officers as a group have exercise prices
ranging from $1.32 to $24.89 per share and expire at various times between 2004
and 2009. The other options and warrants have exercise prices ranging from $1.37
to $30.00 per share, and expire at various times between 2002 and 2009.

ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.

    Dr. John K. Stevens, our founder, served as the President and Chief
Executive Officer of our company until his retirement in July 1999. In
July 1996, we loaned Dr. Stevens $323,405. Interest accrued on the outstanding
principal amount of the loan at the annual rate of 6% and was payable annually
on December 31. The principal amount was payable $17,967 on or before
December 31, 1997 and the balance in nine equal annual installments ending on
December 31, 2007. In 1998, we amended the loan arrangement to eliminate all
required interest payments and to provide that the princpal was payable in full
on or before December 31, 2006. In addition, during 1997, we loaned Dr. Stevens
$50,000 which was payable, together with accrued interest at the rate of 6% per
year, on December 31, 1999. The largest aggregate amount of indebtedness owed by
Dr. Stevens was $379,769 during 1999. Upon retirement, Dr. Stevens paid all
amounts owed to our company.

    In accordance with the terms of his employment agreement, in July 1999,
Dr. Stevens received a severance package of two years salary plus benefits. We
extended the termination date of Dr. Stevens' options until 2003. In November
1999, Dr. Stevens retired as Chairman of the Board of Directors.

    In connection with the termination of employment of our former chief
financial officer, Mr. Jeffrey K. Sherman, from our Company in November 1999, we
paid $89,388 to Mr. Sherman.

    In November 1999, Dr. Chalom Sayada ceased employment with us as our Vice
President for European Business Development. In connection with his termination
of employment, we paid him $262,500. In addition, we retained him as a
consultant to provide marketing and strategy services to us for 18 months. In
consideration of such services, he will earn a minimum of $125,000 for the first
twelve months of service and $63,000 for the remaining six months of service.

    In June 1998, Richard Daly was appointed as one of our directors. Mr. Daly
was appointed President and Chief Executive Officer of our company in July 1999.
During 1999, we paid an aggregate $291,115 in consulting fees to Clinical
Partners, Inc. in connection with clinical studies performed by Clinical
Partners, Inc. for us. Mr. Daly is the founder and was previously the Chairman
and President of Clinical Partners.

    Mr. Samuel Schwartz, one of our former directors and executive officers, is
a senior partner of a law firm to which we paid $246,210 legal fees in 1999.

    For a description of transactions between the company, and each of the Hilal
Funds and the Warburg Pincus Funds, respectively, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."

                                       60

                                    PART II

ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.

    Not Applicable.

                                    PART III

ITEM 15. DEFAULTS UPON SENIOR SECURITIES.

    None.

ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
  SECURITIES.

    Our Board of Directors is authorized to issue an unlimited number of
preferred shares in one or more series, to fix the number of preferred shares
and determine the designations, rights (including voting and dividend rights),
privileges, restrictions and conditions attaching to the shares of each such
series, without further vote or action by the shareholders. Because the terms of
the preferred shares may be fixed by our Board of Directors without shareholder
action, the preferred shares could, subject to regulatory policies, be issued
quickly, with terms calculated to defeat a takeover of our company or to make
the removal of our directors and executive officers more difficult. Under
certain circumstances, this could have the effect of decreasing the market value
of our common shares. The preferred shares may have voting rights superior to
our common shares and may rank senior to the common shares as to dividends and
as to the distribution of assets in the event our company were liquidated or
dissolved.

    On July 15, 1999, our Board of Directors authorized the issuance of 33,950
shares of Series A mandatorily redeemable convertible preferred shares. We have
issued 33,948 Series A preferred shares. The Series A preferred shares are
convertible at the holders' option into common shares at $11.00 per share. The
Series A preferred shares contain provisions under which the conversion price
would be reduced on a weighted average basis if we issue shares, options or
certain other securities at prices lower than the conversion price (subject to
certain exceptions), and will also be adjusted upon the issuance of certain
other securities, certain recapitalization events and in certain other
circumstances to protect the holders against the dilutive effect of those
events.

    Dividends on the Series A preferred shares accrue quarterly at the rate of
9% per year during the first three years after issuance, and 4% per year
thereafter and are compounded annually. Dividends are not payable for the first
three years. After three years, at our option, we may pay dividends in cash. If
dividends are not paid in cash, they will continue to accrue.

    After the third anniversary and prior to the seventh anniversary of the date
of issuance of the Series A preferred shares, we have the right to redeem the
outstanding Series A preferred shares at a price, which we call the redemption
price, equal to $1,000 per share, plus accrued but unpaid dividends, provided
that the price of our common shares on the Nasdaq National Market equals or
exceeds 150% of the conversion price for 20 trading days during a consecutive
30-day period ending within 10 days before we notify shareholders of the
redemption. We will be required to redeem one-third of any remaining outstanding
Series A preferred shares on each of the seventh, eighth and ninth anniversaries
of the date of issuance at the redemption price, and we will be permitted to
redeem the Series A preferred shares at any time beginning on the seventh
anniversary after issuance. If we fail to redeem the Series A preferred shares
as required, holders may appoint a majority of our Board of Directors, who will
continue to serve until we have redeemed the preferred shares as required.

    The holders of Series A preferred shares are entitled to vote as a group
with the holders of common shares on all matters, except that holders of Series
A preferred shares are entitled to vote separately for one director and are not
entitled to participate in the vote for any other directors of our company. On
all other matters, each holder of Series A preferred shares is entitled to the
number of votes corresponding to the number of common shares the holder is
entitled to receive upon conversion of his Series A preferred shares. Our
agreements with the holders of, and the terms of the, Series A preferred shares
provide that

                                       61

we are prohibited from declaring or issuing any dividends to holders of our
common shares before paying all accrued and unpaid dividends on the Series A
preferred shares. We also are prohibited from issuing any equity securities that
have rights as to dividends and liquidation that are senior or equal in rank to
the Series A preferred shares without approval of the holders of a majority of
the Series A preferred shares. If our company were to be liquidated or sold or
under certain other circumstances, holders of Series A preferred shares would be
entitled to receive an amount equal to $1,000 per share, plus accrued and unpaid
dividends, before holders of our common shares would be entitled to any
distributions.

    Certain holders of our Series A preferred shares are also entitled to
certain other rights, including the right to participate, on a pro rata basis,
in future company financings, subject to certain exceptions. If we propose to
sell equity securities of any kind, including debt securities convertible into
equity securities, certain of our Series A holders are entitled to purchase a
proportional amount of the securities being offered based on the number of
common shares they own assuming conversion of all convertible securities. These
holders of Series A preferred shares are not entitled to exercise this right in
connection with securities issued: (i) to the public in a firm commitment
underwriting; (ii) upon exercise of any of our options or warrants outstanding
on July 15, 1999; (iii) pursuant to the acquisition of another entity by us or
one of our subsidiaries by merger, purchase of substantially all of the assets
or other form of reorganization; (iv) in connection with our acquisition or
license of technology rights or other assets; (v) pursuant to our stock option
plans, stock bonus plans, stock purchase plans or other compensation equity
agreements or programs; or (vi) upon conversion or exercise of any equity
securities, such as warrants, options, or other rights to acquire equity
securities and debt securities convertible into equity securities. The right of
these holders of Series A preferred shares to participate in future offerings in
this manner provides those shareholders with the opportunity to avoid having
their ownership interest in our company diluted under certain circumstances when
the interest of our common shareholders would be diluted.

    We also are prohibited from incurring indebtedness for borrowed money and
capital lease obligations in excess of $15.0 million outstanding at any one
time, without first obtaining approval of the holders of a majority of the
Series A preferred shares.

    We are required to obtain the consent of the holders of a majority of our
then outstanding Series A preferred shares if we wish to borrow money and at
such time or as a result of such loans, the total principal amount of our
indebtedness and capitalized lease obligations exceeds $15.0 million. In
addition, if we were to enter into a credit facility with a financial
institution, we may be subject to additional limitations on our ability to incur
additional indebtedness.

                                    PART IV

ITEM 17. FINANCIAL STATEMENTS.

    Not applicable.

ITEM 18. FINANCIAL STATEMENTS.

    Attached. See Item 19(a).

ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.

    (a) Financial Statements:

    See the Index to Consolidated Financial Statements accompanying this report
on page F-1.

                                       62

    (b) Exhibits:

                     
         3.1            Certificate and Restated Articles of Incorporation of the
                          Company.(1)
        *3.2            Certificate and Articles of Amendment of the Company.
         3.3            Amended and Restated Bylaws of the Company.(2)
         4.1            Specimen of Certificate for Common Shares.(3)
         4.2            Certificate of Designations, Number, Voting Powers,
                          Preference and Rights of Series A Convertible Preferred
                          Shares of Visible Genetics Inc.(4)
        10.1            Visible Genetics Inc. Employee Pool Stock Option Plan.(5)
        10.2            Visible Genetics Inc. 1997 Director Option Plan.(6)
       *10.3            Visible Genetics Inc. Employee Share Option Plan, Amended
                          through May 19, 1999.
        10.4            Visible Genetics Inc. Employee Share Ownership Plan.(7)
        10.5            Common Shares Purchase Agreement, dated November 20, 1998,
                          between Visible Genetics Inc. and each of the Investors
                          who are signatories thereto.(8)
        10.6            Registration Rights Agreement, dated November 20, 1998, by
                          and among Visible Genetics Inc. and the Investors to that
                          certain Common Shares Purchase Agreement.(9)
        10.7            Stock Purchase Agreement, dated April 7, 1998, between
                          Visible Genetics Inc., Mr. Chalom Sayada, Mr. Jean Marc
                          Feryn and Mr. Philippe Halfon. (THIS AGREEMENT IS IN
                          FRENCH, THEREFORE AN ENGLISH VERSION OF THE AGREEMENT HAS
                          ALSO BEEN FILED.)(10)
        10.8            Agreement and Plan of Merger, dated as of September 10,
                          1997, by and among Visible Genetics Inc., VGI Acquisition,
                          Inc., Applied Sciences, Inc. and the Shareholders of
                          Applied Sciences, Inc.(11)
        10.9            PCR Diagnostic License Agreement, dated August 18, 1997, by
                          and between Roche Molecular Systems, Inc., F. Hoffmann-La
                          Roche Ltd. and Visible Genetics Inc. (THIS AGREEMENT IS
                          FILED IN REDACTED FORM BASED UPON A GRANT OF CONFIDENTIAL
                          TREATMENT BY THE SEC.)(12)
       *10.10           Securities Purchase Agreement, dated as of July 15, 1999, by
                          and among Visible Genetics Inc., Warburg, Pincus Equity
                          Partners, L.P., Warburg, Pincus Ventures International,
                          L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.,
                          Warburg, Pincus Netherlands Equity Partners II, C.V. and
                          Warburg, Pincus Netherlands Equity Partners III, C.V.
       *10.11           Registration Rights Agreement, dated as of July 15, 1999, by
                          and among Visible Genetics Inc. and the Investors listed
                          on Schedule I thereto.
       *10.12           Common Shares Purchase Agreement, dated December 14, 1999,
                          by and among Visible Genetics Inc. and the Investors who
                          are signatories hereto.
       *10.13           Registration Rights Agreement, dated as December 14, 1999,
                          by and among Visible Genetics Inc. and each of the
                          Investors to that certain Common Shares Purchase
                          Agreement.
       *10.14           Lease between Visible Genetics Corp. and Duke-Weeks Realty
                          Limited Partnership, dated February 15, 2000.
       *10.15           Lease between Visible Genetics Inc. and LuCliff Company
                          Limited, dated March 31, 1992.
       *10.16           Lease between Visible Genetics Inc. and Royal Trust
                          Corporation of Canada, as trustee and RT Pensior
                          Properties Limited dated June 1, 1996
       *10.17           Lease between Visible Genetics Inc. and Comwest Properties
                          Limited dated July 20, 1998.
       *10.18           Lease between Visible Genetics Corp. and the University of
                          Pittsburgh of the Commonwealth System of Higher Education
                          dated Dec 1, 1996.
        10.19           Master Agreement, dated as of February 22, 1996 and executed
                          on April 1, 1996, between Amersham International plc.,
                          Amersham Canada Limited and the Company. (THIS AGREEMENT
                          IS FILED IN REDACTED FORM BASED UPON A GRANT OF
                          CONFIDENTIAL TREATMENT BY THE SEC.)(13)
        10.20           Amersham Supply Agreement, dated as of February 22, 1996 and
                          executed on April 1, 1996, between Amersham International
                          plc, Amersham Canada Limited and the Company. (THIS
                          AGREEMENT IS FILED IN REDACTED FORM BASED UPON A GRANT OF
                          CONFIDENTIAL TREATMENT BY THE SEC.)(14)



                                       63

                     
        10.21           VGI Supply Agreement, dated as of February 22, 1996 and
                          executed on April 1, 1996 between Amersham International
                          plc, Amersham Canada Limited and the Company. (THIS
                          AGREEMENT IS FILED IN REDACTED FORM BASED UPON A GRANT OF
                          CONFIDENTIAL TREATMENT BY THE SEC.)(15)
       *10.22           Amendment No. 1 to Guarantee, dated as of April 30, 1999 to
                          the Guarantee dated as of April 30, 1998, by and among
                          Visible Genetics Inc., Hilal Capital, L.P., Hilal Capital
                          QP, LP, Hilal Capital International, Ltd., Highbridge
                          International LLC, C.J. Partners L.P. and Hilal Capital
                          Management LLC, as adviser for Leo Holdings, Inc.
       *10.23           Amendment No. 2 to Term Loan Agreement, dated as of April
                          30, 1999, to the Term Loan Agreement, dated as of
                          April 30, 1999 as amended by Amendment No. 1 to the Term
                          Loan Agreement dated as of September 29, 1998, by and
                          among Visible Genetics Corp., Hilal Capital, L.P., Hilal
                          Capital QP, LP, Hilal Capital International, Ltd.,
                          Highbridge International LLC, C.J. Partners L.P. and Hilal
                          Capital Management LLC, as adviser for Leo Holdings, Inc.
       *10.24           Letter Agreement between Visible Genetics Inc. and Hilal
                          Capital Management dated July 15, 1999.



- - ------------------------

(1) Incorporated by reference from Exhibit 3.1 to Amendment No. 1 to the
    Company's Registration Statement on Form F-1, File No. 333-3118 filed with
    the Securities and Exchange Commission on May 16, 1996

(2) Incorporated by reference from Exhibit 3.2 to Amendment No. 1 to the
    Company's Registration Statement on Form F-1, File No. 333-3118 filed with
    the Securities and Exchange Commission on May 16, 1996

(3) Incorporated by reference from Exhibit 4.1 to Amendment No. 1 to the
    Company's Registration Statement on Form F-1, File No. 333-3118 filed with
    the Securities and Exchange Commission on May 16, 1996.

(4) Incorporated by reference from Exhibit 4.2 to the Company's Registration
    Statement on Form F-3, File No.333-91155 filed with the Securities and
    Exchange Commission on November 17, 1999

(5) Incorporated by reference from Exhibit 4.4 to the Company's Registration
    Statement on Form S-8, File No. 333-06454 filed with the Securities and
    Exchange Commission on February 18, 1997.

(6) Incorporated by reference from Exhibit 2.1 to the Company's Annual Report on
    Form 20-F, File No. 0-28550 filed with the Securities and Exchange
    Commission on April 28, 1997.

(7) Incorporated by reference from Exhibit 2.2 to the Company's Annual Report on
    Form 20-F, File No. 0-28550 filed with the Securities and Exchange
    Commission on April 28, 1997.

(8) Incorporated by reference from Exhibit 3.7 to the Company's Annual Report on
    Form 20-F, File No. 333-03118 filed with the Securities and Exchange
    Commission on July 19, 1999.

(9) Incorporated by reference from Exhibit 3.8 to the Company's Annual Report on
    Form 20-F, File No. 333-03118 filed with the Securities and Exchange
    Commission on July 19, 1999.

(10) Incorporated by reference from Exhibit 3.9 to the Company's Annual Report
    on Form 20-F, File No. 0-28550 filed with the Securities and Exchange
    Commission on July 19, 1999.

(11) Incorporated by reference from Exhibit 3.10 to the Company's Annual Report
    on Form 20-F, File No. 0-28550 filed with the Securities and Exchange
    Commission on July 19, 1999.

(12) Incorporated by reference from Exhibit 3.11 to the Company's Annual Report
    on Form 20-F, File No. 0-28550 filed with the Securities and Exchange
    Commission on July 19, 1999.

(13) Incorporated by reference from Exhibit 10.8 to Amendment No. 1 to the
    Company's Registration Statement on Form F-1, File No. 333-3118 filed with
    the Securities and Exchange Commission on May 16, 1996.

(14) Incorporated by reference from Exhibit 10.9 to Amendment No. 1 to the
    Company's Registration Statement on Form F-1, File No. 333-3118 filed with
    the Securities and Exchange Commission on May 16, 1996.

(15) Incorporated by reference from Exhibit 10.10 to Amendment No. 1 to the
    Company's Registration Statement on Form F-1, File No. 333-3118 filed with
    the Securities and Exchange Commission on May 16, 1996.

*   Filed herewith.

                                       64

                                   SIGNATURES

    Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this Annual Report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                                      
                                                       VISIBLE GENETICS INC.

                                                       By:  /s/ RICHARD T. DALY
                                                            -----------------------------------------
                                                            Richard T. Daly
                                                            President and Chief Executive Officer



Date: March 10, 2000

                                       65

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                                PAGE
                                                              --------
                                                           
Audited Consolidated Financial Statements for the years
  ended December 31, 1999, 1998 and 1997

Auditors' Report............................................    F-2

Consolidated Balance Sheets as at December 31, 1999 and
  1998......................................................    F-3

Consolidated Statements of Operations for the years ended
  December 31, 1999, 1998 and 1997..........................    F-4

Consolidated Statements of Deficit for the years ended
  December 31, 1999, 1998 and 1997..........................    F-5

Consolidated Statements of Comprehensive Loss for the years
  ended December 31, 1999, 1998 and 1997....................    F-5

Consolidated Statements of Cash Flows for the years ended
  December 31, 1999, 1998 and 1997..........................    F-6

Notes to Consolidated Financial Statements..................    F-7


                                      F-1

                                AUDITORS' REPORT

TO THE SHAREHOLDERS OF VISIBLE GENETICS INC.

    We have audited the consolidated balance sheets of Visible Genetics Inc. as
at December 31, 1999 and 1998 and the consolidated statements of operations,
deficit, comprehensive loss, and cash flows for the years ended December 31,
1999, 1998 and 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

    In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1999 and 1998
and the results of its operations and its cash flows for the years ended
December 31, 1999, 1998 and 1997 in accordance with generally accepted
accounting principles in the United States of America.

PricewaterhouseCoopers LLP

Chartered Accountants
Toronto, Canada
February 18, 2000

                                      F-2

                             VISIBLE GENETICS INC.

                       CONSOLIDATED FINANCIAL STATEMENTS

                          CONSOLIDATED BALANCE SHEETS



                                                                      DECEMBER 31
                                                              ---------------------------
                                                                  1999           1998
                                                              ------------   ------------
                                                                       
ASSETS
Current assets
  Cash and cash equivalents.................................  $  2,792,985   $  6,165,924
  Short-term investments....................................    39,894,978      5,108,254
  Trade receivables (net of allowance for doubtful accounts
    of $1,180,801; 1998--$470,926)..........................     5,657,822      4,770,796
  Other receivables (Note 4)................................       668,748      1,445,820
  Prepaid and deposits......................................       729,307        233,072
  Inventory (Note 5)........................................     2,600,007      3,912,336
                                                              ------------   ------------
Total current assets........................................    52,343,847     21,636,202
                                                              ------------   ------------
Fixed assets (Note 6).......................................     4,173,335      3,877,163
Patents and licenses (Note 7)...............................     2,122,367      2,269,170
                                                              ------------   ------------
                                                              $ 58,639,549   $ 27,782,535
                                                              ============   ============

LIABILITIES
Current liabilities
  Notes payable (Note 8)....................................  $         --   $  7,494,877
  Accounts payable..........................................     3,110,442      3,985,103
  Accrued liabilities (Note 9)..............................     3,622,110      1,723,840
                                                              ------------   ------------
Total current liabilities...................................     6,732,552     13,203,820
                                                              ------------   ------------
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES
  (Note 10).................................................    27,555,652             --
                                                              ------------   ------------
SHAREHOLDERS' EQUITY
Share capital (Note 11).....................................    75,422,070     46,412,685
Other equity (Note 11)......................................     8,987,328      2,232,465
Cumulative translation adjustment...........................      (619,911)        84,822
Deficit.....................................................   (59,438,142)   (34,151,257)
                                                              ------------   ------------
                                                                24,351,345     14,578,715
                                                              ------------   ------------
                                                              $ 58,639,549   $ 27,782,535
                                                              ============   ============
COMMITMENTS AND CONTINGENCY (Note 16)


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

Approved by the Board.

                                                                              

                 /s/ RICHARD T. DALY
     -------------------------------------------
              Richard T. Daly, Director

                /s/ SHELDON INWENTASH
     -------------------------------------------
             Sheldon Inwentash, Director



                                      F-3

                             VISIBLE GENETICS INC.

                       CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                YEARS ENDED DECEMBER 31
                                                       ------------------------------------------
                                                           1999           1998           1997
                                                       ------------   ------------   ------------
                                                                            
Sales
  Products...........................................  $ 12,455,775   $  9,421,933   $  2,967,695
  Services...........................................     1,171,145      1,453,415         65,041
                                                       ------------   ------------   ------------
                                                         13,626,920     10,875,348      3,032,736
                                                       ------------   ------------   ------------
Costs of sales
  Products...........................................     8,593,774      5,995,869      1,963,312
  Services...........................................       679,112        677,712         31,520
                                                       ------------   ------------   ------------
                                                          9,272,886      6,673,581      1,994,832
                                                       ------------   ------------   ------------
Gross margin.........................................     4,354,034      4,201,767      1,037,904
                                                       ------------   ------------   ------------
Expenses:
  Sales, general and administrative (Note 7).........    19,073,546     11,515,757      7,447,861
  Research and development...........................     7,935,327      6,289,032      4,122,916
  Acquired research and development (Note 12)........            --        420,043        654,621
  Exit and termination costs (Note 13)...............     1,329,083             --             --
                                                       ------------   ------------   ------------
                                                         28,337,956     18,224,832     12,225,398
                                                       ------------   ------------   ------------
Loss from operations before interest.................   (23,983,922)   (14,023,065)   (11,187,494)
Interest income......................................       694,549        264,195        774,462
Interest and financing expense (Note 8)..............    (1,997,512)    (1,132,091)        (2,714)
                                                       ------------   ------------   ------------
Net loss for the year................................   (25,286,885)   (14,890,961)   (10,415,746)
Cumulative preferred dividends and accretion of
  discount attributable to preferred shares
  (Note 10)..........................................    (1,770,069)            --             --
                                                       ------------   ------------   ------------
Net loss attributable to common shareholders.........  $(27,056,954)  $(14,890,961)  $(10,415,746)
                                                       ============   ============   ============
Weighted average number of common shares
  outstanding........................................     9,916,954      7,782,094      7,059,578
Basic and diluted loss per common share..............  $      (2.73)  $      (1.91)  $      (1.48)


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                      F-4

                             VISIBLE GENETICS INC.

                       CONSOLIDATED FINANCIAL STATEMENTS

                       CONSOLIDATED STATEMENTS OF DEFICIT



                                                                YEARS ENDED DECEMBER 31
                                                       ------------------------------------------
                                                           1999           1998           1997
                                                       ------------   ------------   ------------
                                                                            
Deficit, beginning of year...........................  $(34,151,257)  $(19,260,296)  $ (8,844,550)
Net loss for the year................................   (25,286,885)   (14,890,961)   (10,415,746)
                                                       ------------   ------------   ------------
Deficit, end of year.................................  $(59,438,142)  $(34,151,257)  $(19,260,296)
                                                       ============   ============   ============


                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS



                                                                YEARS ENDED DECEMBER 31
                                                       ------------------------------------------
                                                           1999           1998           1997
                                                       ------------   ------------   ------------
                                                                            
Net loss for the year................................  $(25,286,885)  $(14,890,961)  $(10,415,746)
Other comprehensive income:
  Foreign currency translation adjustments...........      (704,733)       112,477             --
                                                       ------------   ------------   ------------
Comprehensive loss for the year......................  $(25,991,618)  $(14,778,484)  $(10,415,746)
                                                       ============   ============   ============


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                      F-5

                             VISIBLE GENETICS INC.

                       CONSOLIDATED FINANCIAL STATEMENTS

                     CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                     YEARS ENDED DECEMBER 31
                                                            ------------------------------------------
                                                                1999           1998           1997
                                                            ------------   ------------   ------------
                                                                                 
Cash provided by (used in) operating activities
  Net loss for the year...................................  $(25,286,885)  $(14,890,961)  $(10,415,746)
  Add: Items not involving cash
    Depreciation..........................................     1,708,923      1,090,086        495,388
    Amortization..........................................       393,979        206,640        130,593
    Patents and licenses written off......................       451,085             --             --
    Deferred compensation cost related to options
      granted.............................................            --         77,469        250,067
    Non cash financing expense related to warrants
      granted.............................................     1,466,691        580,981             --
    Amortization of discount on accounts receivable.......       (48,158)            --             --
    Foreign exchange loss.................................        26,789         28,453         37,067
    In-process research and development acquired..........            --        420,043        654,621
  Increase (decrease) from changes in
    Trade receivables.....................................    (1,804,006)    (2,327,121)    (1,193,858)
    Other receivables.....................................       719,519       (850,270)      (142,757)
    Prepaids and deposits.................................      (501,742)        28,913        (92,247)
    Inventory.............................................     1,290,997     (3,149,740)      (441,957)
    Refundable investment tax credits.....................            --             --        476,393
    Accounts Payable......................................      (734,230)     2,490,594        624,278
    Accrued liabilities...................................     1,956,660      1,159,952        (80,460)
                                                            ------------   ------------   ------------
                                                             (20,360,378)   (15,134,961)    (9,698,618)
                                                            ------------   ------------   ------------
Investing activities
  Purchase of fixed assets................................    (1,905,129)    (3,348,261)    (1,265,825)
  Licenses and patents acquired...........................      (698,261)      (877,796)      (815,925)
  Purchase of short-term investments......................   (50,503,643)   (13,705,737)    (3,221,329)
  Redemption of short-term investments....................    15,716,919     14,616,777      7,432,233
  Acquisition of ACT Gene S.A.............................            --       (536,929)            --
                                                            ------------   ------------   ------------
                                                             (37,390,114)    (3,851,946)     2,129,154
                                                            ------------   ------------   ------------
Financing activities
  Preferred shares issued, net of expenses................    22,719,748             --             --
  Warrants issued in connection with preferred shares.....     6,397,448             --             --
  Common shares issued, net of expenses...................    29,009,385     14,640,188        419,167
  Warrants issued in connection with private placement....            --        444,572             --
  Issuance of notes payable...............................            --      6,817,559             --
  Warrants issued in connection with notes payable........            --      1,182,441             --
  Repayment of note payable...............................    (4,100,000)            --             --
  Other equity............................................        29,851          8,259         38,392
  Repayment of loan from an officer.......................       323,405             --             --
                                                            ------------   ------------   ------------
                                                              54,379,837     23,093,019        457,559
                                                            ------------   ------------   ------------
Effect of exchange rate fluctuations on cash..............        (2,284)       193,133        151,982
                                                            ------------   ------------   ------------
Increase (decrease) in cash during the year...............    (3,372,939)     4,299,245     (6,959,923)
  Cash, beginning of year.................................     6,165,924      1,866,679      8,826,602
                                                            ------------   ------------   ------------
  Cash, end of year.......................................  $  2,792,985   $  6,165,924   $  1,866,679
                                                            ============   ============   ============
Supplemental information
  Interest paid...........................................  $    786,585   $     48,073   $      2,714
  Income taxes paid.......................................  $         --   $         --   $         --


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                      F-6

                             VISIBLE GENETICS INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--NATURE OF OPERATIONS

    Visible Genetics Inc. (the "Company") develops, manufactures and sells
integrated DNA sequencing systems that analyze genetic information. Such systems
are designed to identify mutations in the DNA of genes associated with certain
diseases. The Company's products are intended for research and clinical
purposes. Prior to marketing any products for use in the clinical diagnostic
market, the Company will require appropriate regulatory approval.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    These financial statements have been prepared in United States dollars, in
accordance with the accounting principles generally accepted in the United
States. The principal accounting policies of the Company, which have been
consistently applied, are summarized as follows:

PRINCIPLES OF CONSOLIDATION

    The accompanying consolidated financial statements of the Company include
the following wholly owned subsidiaries: Visible Genetics Corp., Visible
Genetics B.V., Applied Sciences, Inc., Gene Foundry Inc., Visible Genetics
Europe S.A. (formerly ACT Gene S.A.), Visible Genetics Israel Ltd. and Visible
Genetics Srl. All intercompany accounts and transactions have been eliminated
upon consolidation.

USE OF ESTIMATES

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

REVENUE RECOGNITION AND WARRANTY

    Revenues from the sale of the Company's products are recognized when
shipment occurs and title passes to the customer or distributor and there is
reasonable assurance of collectibility. There are no significant customer
acceptance requirements or post shipment obligations on the part of the Company.
Revenues from the sale of services are recognized when the services are provided
and there is reasonable assurance of collectibility. A provision is made for
estimated warranty costs at the time of the sale. Revenues from extended
warranty contracts are recognized over the life of the contract. Sales of
bundled sequencing systems and testing kits are recognized pro rata as the
components of the bundle are shipped to customers.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

    As required under Statement of Financial Accounting Standards (SFAS)
No. 95, cash equivalents consist of short-term investments that are highly
liquid, are readily convertible to cash and have initial terms to maturity of
three months or less. Short-term investments consist of United States treasury
bills and corporate debt securities. They are classified as held-to-maturity and
are recorded at amortized cost. Contractual maturities of short-term investments
at December 31, 1999 and December 31, 1998 range from one to eight months.

                                      F-7

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS

    The carrying values of the Company's financial instruments consisting of
cash and cash equivalents, short-term investments, trade and other receivables,
accounts payable and notes payable, approximate their fair values due to their
short-term nature.

CONCENTRATION OF CREDIT RISK

    The Company's financial instruments that are exposed to concentration of
credit risk consist primarily of cash and cash equivalents, short-term
investments and receivables. The Company maintains its accounts for cash and
cash equivalents and short-term investments with the United States treasury and
a number of large low-credit-risk financial institutions and corporations in
Canada and the United States in order to reduce its exposure. In addition, the
Company limits its maximum investment to any one counterparty to limit its
credit exposure. At December 31, 1999 and December 31, 1998 no customers
accounted for greater than 10% of gross trade receivables.

INVENTORY

    Inventory is stated at the lower of cost and estimated realizable value.
Cost is determined by the first-in first-out method, and includes material,
labor, and an allocation of overhead.

FIXED ASSETS

    Fixed assets are recorded at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the assets, as follows:

                                        
Laboratory and computer equipment          2 to 5 years

Leasehold improvements                     term of the lease



PATENTS AND LICENSES

    External costs of patents and licenses are recorded at cost and amortized
over their estimated useful lives, which are generally up to ten years. If the
carrying amount of a patent or license is no longer recoverable, the related
unamortized cost is written down to fair value.

IMPAIRMENT OF LONG-LIVED ASSETS

    In accordance with the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company reviews long-lived assets, including fixed assets, patents and
licenses, for impairment whenever events or changes in business circumstances
indicate that the carrying amount of the asset may not be fully recoverable.
Under SFAS No. 121, an impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of the asset and
its eventual disposition are less than its carrying amount. Impairment, if any,
is assessed using discounted cash flows.

                                      F-8

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION

    Monetary assets and liabilities denominated in foreign currencies are
translated into United States dollars at the exchange rate prevailing at the
balance sheet date. Other assets, liabilities and operating items are translated
at exchange rates prevailing at the respective transaction dates. Resulting
translation adjustments are included in the consolidated statement of
operations. Assets and liabilities of subsidiaries with functional currencies
other than United States dollars are translated at the exchange rate prevailing
at the balance sheet date, and the results of their operations are translated at
average exchange rates for the year. The resulting translation adjustments are
reflected in a separate component of shareholders' equity. Other exchange gains
or losses are included in the consolidated statement of operations.

INCOME TAXES

    The Company provides for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," which prescribes an asset and liability approach
that results in the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
consolidated financial statements or tax returns.

RESEARCH AND DEVELOPMENT EXPENSES

    Research and development costs are expensed in the period incurred. The
Company is entitled to certain Canadian federal and provincial tax incentives
for qualified research and development. They are accounted for as a reduction of
the related expenditure for current expenses and a reduction of the related
asset for capital assets when it is more likely than not that the credit will be
realized. The Company is entitled to Canadian federal investment tax credits at
a rate of 20% on eligible current and capital expenditures, claimable against
income taxes otherwise payable.

ADVERTISING COSTS

    The Company expenses the cost of advertising as incurred. The Company
incurred advertising costs of approximately $560,000, $271,000 and $408,000 for
1999, 1998 and 1997, respectively.

STOCK OPTIONS

    The Company follows SFAS No. 123 which permits the use of APB No. 25 to
account for stock options issued to employees. Under that method, the Company
uses the intrinsic value method to measure the cost associated with the granting
of stock options to employees. The amount by which the market price of the
underlying shares exceeds the exercise price of the options is accounted for as
compensation expense over the periods in which services are rendered. Options
issued to consultants are recorded at their fair market value at the date of the
grant. This amount is charged to operations over the periods in which services
are rendered.

EARNINGS (LOSS) PER SHARE

    The company follows SFAS No. 128 "Earnings Per Share" to calculate basic and
diluted earnings (loss) per share. Basic earnings (loss) per share is calculated
using the weighted average number of common shares outstanding during the year.
Diluted earnings (loss) per share is calculated using the weighted average
number of common and potential common shares outstanding during the year.
Potential

                                      F-9

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
common shares consist of the incremental common shares issuable upon conversion
of outstanding convertible preferred shares (using the if converted method) and
shares issuable upon the exercise of stock options and warrants (using the
treasury stock method). Potential common shares are excluded from the
calculation if their effect is anti-dilutive, as was the case for the years
ended December 31, 1999, 1998 and 1997.

RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
The Company does not anticipate that SFAS No. 133 will have a significant impact
on its financial position or results of operations.

NOTE 3--COLLABORATIVE AND DISTRIBUTION AGREEMENTS

COLLABORATIVE AGREEMENTS

    The Company has agreements with several parties for the use of certain
intellectual property in the manufacture of the Company's products, the most
significant of which are as follows:

    The Polymerase Chain Reaction (PCR) is used in most of the GeneKits made by
the Company and is produced and sold under license from Roche Molecular Systems,
Inc. and F. Hoffman-La Roche, Ltd. The reverse transcriptase enzyme used in the
TRUGENE HIV-1 Genotyping Kit is the Superscript II-TM- licensed from Life
Technologies. A portion of the method of CLIP sequencing which is used by most
of the GeneKits made by the Company is licensed from Genaissance
Pharmaceuticals, Inc. UNG (Uracin N-Glycosylase) is a method of incorporating
Uracil into a PCR product, which can be subsequently destroyed enzymatically.
This method is used to control carry-over contamination between sequential
samples under going PCR. At present, none of the Company's products uses this
method, however, it is expected that future GeneKit production may incorporate
this technology. This method is licensed from Life Technologies.

    Under these agreements, the Company is required to make certain up-front
payments and certain royalty payments on specified sales to customers ranging
from 0.5% to 15%, and up to 25% on specified product sales to certain
distributors. Included in accounts payable is an amount of approximately
$461,000 and $148,000, relating to royalties payable, at December 31, 1999 and
1998, respectively.

DISTRIBUTION AGREEMENTS

    Commencing in 1999, the Company entered into various distribution and
marketing arrangements with distributors to sell the Company's products to the
research and clinical diagnostic markets in selected geographic markets outside
North America and certain European countries. These agreements expire at various
times from April 2000 through April 2002, and in certain cases, are subject to
automatic renewal. Certain of the agreements may also be terminated by either
party upon specified notice periods and may require us to make termination
payments under certain circumstances. Certain of the agreements also provide for
minimum annual purchases for specified periods.

                                      F-10

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--OTHER RECEIVABLES



                                                                   DECEMBER 31
                                                              ---------------------
                                                                1999        1998
                                                              --------   ----------
                                                                   
Refundable taxes............................................  $105,007   $  616,214
Other.......................................................   563,741      829,606
                                                              --------   ----------
                                                              $668,748   $1,445,820
                                                              ========   ==========


NOTE 5--INVENTORY



                                                                    DECEMBER 31
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                     
Raw materials...............................................  $1,346,951   $2,231,994
Work in process.............................................     221,771      339,109
Finished goods..............................................   1,031,285    1,341,233
                                                              ----------   ----------
                                                              $2,600,007   $3,912,336
                                                              ==========   ==========


NOTE 6--FIXED ASSETS



                                                                    DECEMBER 31
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                     
COST
    Laboratory and computer equipment.......................  $6,511,025   $4,581,794
    Leasehold improvements..................................   1,264,022    1,198,488
                                                              ----------   ----------
                                                               7,775,047    5,780,282
                                                              ----------   ----------
ACCUMULATED DEPRECIATION AND AMORTIZATION
    Laboratory and computer equipment.......................   3,118,913    1,650,840
    Leasehold improvements..................................     482,799      252,279
                                                              ----------   ----------
                                                               3,601,712    1,903,119
                                                              ----------   ----------
                                                              $4,173,335   $3,877,163
                                                              ==========   ==========


                                      F-11

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--PATENTS AND LICENSES



                                                                    DECEMBER 31
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                     
COST
    Patents.................................................  $1,078,173   $1,050,276
    Licenses................................................   1,596,591    1,616,032
                                                              ----------   ----------
                                                               2,674,764    2,666,308
                                                              ----------   ----------
ACCUMULATED AMORTIZATION
    Patents.................................................     207,197      166,548
    Licenses................................................     345,200      230,590
                                                              ----------   ----------
                                                                 552,397      397,138
                                                              ----------   ----------
                                                              $2,122,367   $2,269,170
                                                              ==========   ==========


    The net book value of patents and licenses at December 31, 1999 is after
reflecting an impairment loss of $401,085 and $50,000, respectively, recorded
during the year and included in "Sales, general and administrative" expenses in
the statement of operations. The impairment loss was recorded as a result of the
Company abandoning certain patents and licensed technologies.

NOTE 8--NOTES PAYABLE

    On April 30, 1998, the Company, through its subsidiary, Visible Genetics
Corp., borrowed $7,000,000 under a term loan agreement with certain
institutional lenders. The loan bore interest at 10% per annum, and interest and
principal were payable in full on or about April 29, 1999. The loan was secured
by a security interest in substantially all of the assets of the Company, and it
imposed certain restrictive covenants, including a limit on the total
indebtedness the Company could incur. In connection with the loan, the Company
granted warrants to the lenders to purchase an aggregate of 420,000 common
shares at an exercise price of $10.00 per share. On September 28, 1998, the term
loan facility was extended under similar terms and the Company borrowed an
additional $1,000,000 under the expanded loan facility. The additional loan was
due on December 28, 1999. In connection with the additional loan, the Company
granted warrants to the lenders to acquire 120,000 common shares at an exercise
price of $10.00 per share. The fair market value of the warrants granted in
connection with both loans was estimated at the date of grant using the
Black-Scholes option valuation model based upon the following assumptions:
dividend yield--nil, risk-free interest rate--5.0%, average expected
volatility--65%, expected term--2 years.

    The total proceeds received from the institutional lenders were allocated
between the warrants and term loans based on the relative fair value of each
component, resulting in $944,836 and $237,805 of the total proceeds from the
April 1998 and September 1998 term loans, respectively, being allocated to
warrants. The value of the term loans was accreted to their face value,
resulting in a charge to financing expense over the term of the loans. As a
result, $601,660 and $580,981 were recorded as financing expense in 1999 and
1998, respectively.

                                      F-12

                             VISIBLE GENETICS INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8--NOTES PAYABLE (CONTINUED)

    On April 30, 1999, the Company and the institutional lenders agreed to delay
the payment date of the $7,000,000 loan to December 31, 1999, and to move up the
payment date of the $1,000,000 loan to July 1, 1999. The institutional lenders
later extended the payment date of the $1,000,000 loan to the earlier of
July 22, 1999, or the completion of the Warburg Pincus financing (see Note 10).
In addition, the institutional lenders agreed to permit the Company to borrow up
to an additional $5,000,000 of loans from other lenders which would be senior to
the $7,000,000 loan and junior to the $1,000,000 loan. The amended terms of the
loans did not result in the loans being considered substantially different, as
the cash flow effect on a present value basis was less than 10%. Accordingly, no
debt extinguishment gain or loss was recognized in the statement of operations.

    In connection with the modification of the term loans, on April 30, 1999,
the Company granted the institutional lenders warrants to purchase an additional
140,000 common shares at an exercise price of $17.00 per share. The fair market
value of the warrants was estimated at the date of grant using the Black-
Scholes option valuation model based upon the following assumptions: dividend
yield--nil, risk-free interest rate--5.0%, average expected volatility--65%,
expected term--2.5 years, resulting in a value attributed to these warrants of
$865,031. This amount was recorded as a deferred charge and was to be amortized
to financing expense over the term of the loan maturing on December 31, 1999.

    On July 15, 1999, the Company repaid all of the loans made to the
institutional lenders. Of the $8,000,000 principal amount of loans, the Company
paid $4,100,000 of principal plus accrued interest on the loans in cash with the
balance of principal plus accrued interest being converted into 3,948 Series A
preferred shares (see Note 10) and 147,098 warrants to purchase common shares.
As a result, the unamortized balance of the deferred charge was recorded as
financing expense at that time.

NOTE 9--ACCRUED LIABILITIES



                                                                    DECEMBER 31
                                                              -----------------------
                                                                 1999         1998
                                                              ----------   ----------
                                                                     
Warranty provision..........................................  $  387,103   $   90,107
Salaries and benefits.......................................   1,149,279       79,640
Professional fees...........................................     393,196      161,251
Interest....................................................      13,000      503,037
Value added taxes...........................................     492,711      335,944
Provision for exit costs....................................     789,849           --
Other.......................................................     396,972      553,861
                                                              ----------   ----------
                                                              $3,622,110   $1,723,840
                                                              ==========   ==========


NOTE 10--MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES

(A) AUTHORIZED AND ISSUED

    Authorized share capital consists of an unlimited number of preferred shares
which may be issued in one or more series.

    On July 15, 1999, the Board of Directors authorized the issuance of 33,950
Series A Convertible Preferred Shares, of which 33,948 were issued during 1999.

                                      F-13

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES (CONTINUED)
    On July 15, 1999, the Company issued 30,000 preferred shares and warrants to
purchase 1,100,000 common shares to certain affiliated funds managed by E.M.
Warburg, Pincus & Co., LLC (Warburg Pincus) for net proceeds of $29,219,854. In
addition, on July 15, 1999 in connection with the repayment of certain loans
with institutional lenders specified in note 8, the Company issued 3,948
preferred shares and warrants to purchase 147,098 common shares for net proceeds
of $3,845,008.

    The fair market value of the warrants was estimated at the date of grant
using the Black-Scholes option valuation model based upon the following
assumptions: dividend yield--nil, risk-free interest rate--5.61%, average
expected volatility--70%, expected term--4 years.

    The value of the net proceeds was allocated between warrants and mandatorily
redeemable convertible preferred shares based on the relative fair value of each
instrument. The total amount relating to Warburg Pincus, net of issue costs of
$780,146 allocated to warrants and mandatorily redeemable convertible preferred
shares, was $6,420,672 and $22,799,182, respectively. The total amount relating
to the institutional investors, net of issue costs of $102,992 allocated to
warrants and mandatorily redeemable convertible preferred shares, was $858,607
and $2,986,401, respectively.

    The value of the warrants is treated as a discount to the mandatorily
redeemable convertible preferred shares and will be charged directly to retained
earnings or, in the absence of retained earnings, against other equity, over
seven years, the time period when redemption of the mandatorily redeemable
convertible preferred shares first becomes mandatory.

(B) RIGHTS AND CONDITIONS OF MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED
  SHAREHOLDERS

CONVERSION

    The mandatorily redeemable convertible preferred shares are convertible at
any time, at the option of the holders into common shares of the Company at a
conversion price of $11.00, subject to certain adjustments. The mandatorily
redeemable convertible preferred shares contain provisions under which the
conversion price would be reduced on a weighted average basis if the Company
issues shares, options or certain other securities at prices lower than the
conversion price (subject to certain exceptions), and will also be adjusted upon
the issuance of certain other securities, certain recapitalization events and in
certain other circumstances to protect the holders against the dilutive effect
of those events.

    This conversion right will terminate on any redemption of the mandatorily
redeemable convertible preferred shares or any liquidation of the Company. Each
mandatorily redeemable convertible preferred share will automatically convert
into common shares at its then effective conversion price, if at least a
majority of the mandatorily redeemable convertible preferred shares are either
voted to be converted or have already been converted into common shares.

DIVIDENDS

    Dividends on the mandatorily redeemable convertible preferred shares accrue
quarterly at the rate of 9% per year during the first three years after
issuance, and 4% per year thereafter and are compounded annually. Dividends are
not payable for the first three years. After three years, at the Company's
option, dividends are payable in cash. If dividends are not paid in cash, they
will continue to accrue and will be convertible into additional common shares
upon conversion of the mandatorily redeemable convertible preferred shares. The
Company is prohibited from declaring or issuing any dividends to holders of

                                      F-14

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SHARES (CONTINUED)
common shares before paying all unpaid dividends on the mandatorily redeemable
convertible preferred shares. The Company is also prohibited from issuing any
equity securities that are senior or equal in rank to the mandatorily redeemable
convertible preferred shares without approval of the holders of a majority of
such shares. If the Company were to be liquidated or sold or under certain other
circumstances, holders of mandatorily redeemable convertible preferred shares
would be entitled to receive an amount equal to $1,000 per share, plus accrued
and unpaid dividends, before holders of common shares would be entitled to any
distributions.

REDEMPTION

    After the third anniversary and prior to the seventh anniversary of the date
of issuance of the mandatorily redeemable convertible preferred shares, the
Company has the right to redeem the outstanding mandatorily redeemable
convertible preferred shares at the redemption price, equal to $1,000 per share,
plus accrued but unpaid dividends, subject to certain conditions. The Company
will be required to redeem one-third of any remaining outstanding mandatorily
redeemable convertible preferred shares on each of the seventh, eighth and ninth
anniversaries of the date of issuance at the redemption price. If the Company
fails to redeem the shares as required, holders may appoint a majority of our
Board of Directors, who will continue to serve until the Company has redeemed
the mandatorily redeemable convertible preferred shares as required.

VOTING

    The holders of the mandatorily redeemable convertible preferred shares are
entitled to vote as a group with the holders of common shares on all matters
except that holders of the mandatorily redeemable convertible preferred shares
are entitled to vote separately for one director and are not entitled to
participate in the vote for any other directors of the Company. On all other
matters, each holder of mandatorily redeemable convertible preferred shares is
entitled to the number of votes equal to the number of common shares the holder
is entitled to receive upon conversion of the holder's mandatorily redeemable
convertible preferred shares.

OTHER

    Certain holders of mandatorily redeemable convertible preferred shares are
also entitled to certain other rights, including the right to participate, on a
pro rata basis, in future Company financings, subject to certain exceptions. The
right of holders of mandatorily redeemable convertible preferred shares to
participate in future offerings in this manner provides those shareholders with
the opportunity to avoid having their ownership interest in the Company diluted
under certain circumstances when the interest of common shareholders would be
diluted.

    The Company is also prohibited from incurring indebtedness for borrowed
money and capital lease obligations in excess of $15,000,000 outstanding at any
one time, without first obtaining approval of the holders of a majority of the
mandatorily redeemable convertible preferred shares.

                                      F-15

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11--SHARE CAPITAL

(A) AUTHORIZED AND ISSUED SHARE CAPITAL

    Authorized share capital consists of an unlimited number of common shares,
without par value.



                                                              NUMBER OF    AVERAGE
                                                                COMMON      ISSUE
                                                                SHARES      PRICE       AMOUNT
                                                              ----------   --------   -----------
                                                                             
BALANCE, DECEMBER 31, 1996..................................   6,962,198              $30,339,955
                                                              ==========              ===========
  Issued for cash under stock option arrangements...........     191,498    $ 2.19        419,167
  Issued for acquisition of Applied Sciences, Inc...........      95,000    $ 5.50        522,500
                                                              ----------    ------    -----------

BALANCE, DECEMBER 31, 1997..................................   7,248,696               31,281,622
                                                              ==========              ===========
  Issued for cash under stock option arrangements...........     385,548    $ 2.39        921,395
  Issued for acquisition of ACT Gene S.A....................      85,000    $ 5.78        490,875
  Issued for private placement offering, net of issue          1,528,989
    costs (i)...............................................                $ 9.88     13,718,793
                                                              ----------    ------    -----------

BALANCE, DECEMBER 31, 1998..................................   9,248,233               46,412,685
                                                              ==========              ===========
  Issued for cash under stock option arrangements...........     457,882    $ 5.12      2,343,603
  Issued for private placement offering, net of issue          1,916,000
    costs...................................................                $13.92     26,665,782
                                                              ----------    ------    -----------

BALANCE, DECEMBER 31, 1999..................................  11,622,115              $75,422,070
                                                              ==========              ===========


- - ------------------------

(i)  The value of the warrants issued in connection with the private placement
    (Note 11(e)) in the amount of $444,572 has been recorded as a reduction of
    the proceeds of issue and an increase to warrants included in Other equity
    (Note 11(b)). The fair market value of the warrants is estimated at the date
    of grant using the Black-Scholes option valuation model based upon the
    following assumptions: dividend yield--nil, risk-free interest rate--4.0%,
    average expected volatility--65%, expected term--2.5 years.

(B) OTHER EQUITY



                                                               1999          1998        1997
                                                            -----------   ----------   ---------
                                                                              
Deferred compensation costs...............................  $        --   $       --   $ (77,469)
Options...................................................      922,714      922,714     922,714
Warrants..................................................    9,782,470    1,610,791      80,115
Contributed surplus.......................................       61,250       61,250      61,250
Cumulative preferred dividends attributable to mandatorily
  redeemable convertible preferred shares.................   (1,400,344)          --          --
Cumulative accretion of discount attributable to
  mandatorily redeemable convertible preferred shares.....     (369,728)          --          --
Loan to an officer to purchase shares.....................           --     (323,405)   (323,405)
Employee share purchase loans.............................       (9,034)     (38,885)    (47,144)
                                                            -----------   ----------   ---------
                                                            $ 8,987,328   $2,232,465   $ 616,061
                                                            ===========   ==========   =========


                                      F-16

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11--SHARE CAPITAL (CONTINUED)
    Employee share purchase loans are non-recourse and secured only by the
shares themselves. The loan to an officer was made in July 1996 to purchase
shares of the Company. The loan was interest free and was originally repayable
in 2006. In November 1999, the loan was repaid.

(C) DEFERRED COMPENSATION COSTS



                                                                1999       1998       1997
                                                              --------   --------   ---------
                                                                           
BALANCE, BEGINNING OF YEAR..................................    $ --     $(77,469)  $(354,786)
Options granted less cancellation...........................      --           --      27,250
Charged to expense during the year..........................      --       77,469     250,067
                                                                ----     --------   ---------
BALANCE, END OF YEAR........................................    $ --     $     --   $ (77,469)
                                                                ====     ========   =========


(D) OPTIONS

    The Company has incentive plans under which options to purchase common
shares may be granted to its employees, consultants or directors at the
discretion of the Board of Directors. Options for an aggregate of 3,750,901
shares may be granted, subject to shareholder ratification. Under the plans,
each option is for the purchase of one common share, expires up to ten years
from the date of issue, and is generally earned over a three to four year
period. There are no repurchase features. Options issued to employees may be
cancelled if employment is terminated within three years. The number of options
that may be cancelled is reduced in stages over that period. Options issued to
employees after May, 1996 must be exercised within 90 days of the termination of
employment.



                                                                          WEIGHTED AVERAGE
                                                               NUMBER      EXERCISE PRICE
                                                              ---------   ----------------
                                                                    
BALANCE, DECEMBER 31, 1996..................................  1,235,625        $ 3.56
                                                              =========        ======
  Granted at $3.50 to $11.50................................    527,580        $ 5.25
  Exercised.................................................   (191,498)       $ 2.19
  Cancelled.................................................    (20,237)       $ 3.50
                                                              ---------        ------

BALANCE, DECEMBER 31, 1997..................................  1,551,470        $ 4.32
                                                              =========        ======
  Granted at $7.70 to $10.98................................    580,364        $ 8.26
  Exercised.................................................   (387,881)       $ 2.41
  Cancelled.................................................    (45,902)       $ 4.01
                                                              ---------        ------

BALANCE, DECEMBER 31, 1998..................................  1,698,051        $ 6.11
                                                              =========        ======
  Granted at $3.50 to $19.08................................  1,001,545        $11.69
  Exercised.................................................   (383,749)       $ 4.82
  Cancelled.................................................   (170,294)       $ 7.51
                                                              ---------        ------

BALANCE, DECEMBER 31, 1999..................................  2,145,553        $ 8.82
                                                              =========        ======


                                      F-17

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11--SHARE CAPITAL (CONTINUED)
    The fair market value of employee options granted in 1999 was approximately
$6,689,000 (1998--$2,397,000; 1997--$1,342,000). If employee options granted had
been recorded at their fair market value, the pro forma net loss in 1999 would
have been $(28,763,000) or $(3.08) per common share (1998--$(16,753,000) or
$(2.15) per common share; 1997--$(11,443,000) or $(1.62) per common share).

    The fair market value of each option is estimated at the date of grant using
the Black-Scholes option valuation model based upon the following assumptions:
dividend yield--nil, risk-free interest rate (for four-year zero coupon
bond)--5.5% (1998 and 1997--5.0%), average expected volatility--70% (1998 and
1997--65%), expected average option term--4 years. The weighted average fair
value for options granted in 1999 was $6.68 (1998--$4.13; 1997--$2.63).

    The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's stock option plans have characteristics significantly
different from those of traded options, and because change in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.



                                             WEIGHTED
                            NUMBER       AVERAGE EXERCISE                        NUMBER       WEIGHTED AVERAGE
                        OUTSTANDING AT       PRICE OF          WEIGHTED      EXERCISABLE AT   EXERCISE PRICE OF
      RANGE OF           DECEMBER 31,      OUTSTANDING         AVERAGE        DECEMBER 31,       EXERCISABLE
   EXERCISE PRICES           1999            OPTIONS        REMAINING LIFE        1999             OPTIONS
- - ---------------------   --------------   ----------------   --------------   --------------   -----------------
                                                                               
    Cdn$1.37-Cdn$3.42        182,541         Cdn$2.49          5.3 years          182,541         Cdn$2.49
              US$3.50        340,998          US$3.50          6.7 years          317,826          US$3.50
          $4.45-$6.07         23,250            $5.72          7.5 years           15,117            $5.62
          $7.12-$7.84        230,757            $7.76          7.8 years          141,499            $7.76
          $8.00-$9.35        506,182            $8.60          8.5 years          275,879            $8.39
        $10.00-$11.50        608,625           $11.01          9.4 years          125,043           $11.33
        $12.74-$16.45        119,200           $15.83          9.8 years              667           $12.74
        $17.00-$19.08        134,000           $18.11          9.5 years           65,333           $18.18
                           ---------         --------                           ---------
                           2,145,553            $8.82                           1,123,905
                           =========         ========                           =========


                                      F-18

                             VISIBLE GENETICS INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11--SHARE CAPITAL (CONTINUED)

(E) WARRANTS



                                                        NUMBER     EXERCISE PRICE     EXPIRY DATE
                                                       ---------   --------------   ---------------
                                                                           
BALANCE, DECEMBER 31, 1996 AND 1997..................     79,803
                                                       =========
  Granted in connection with loans (Note 8)..........    540,000       $10.00        April, 2003--
                                                                                    September, 2003
  Granted in connection with private placement (Note
    11(a))...........................................    121,951       $12.81       November, 2003
                                                       ---------

BALANCE, DECEMBER 31, 1998...........................    741,754
                                                       =========
  Granted in connection with loans (Note 8)..........    140,000       $17.00         April, 2006
  Granted in connection with mandatorily redeemable
    convertible preferred shares (Note 10)...........  1,247,098       $12.60         July, 2003
  Exercised..........................................    (76,734)      $ 6.90
                                                       ---------

BALANCE, DECEMBER 31, 1999...........................  2,052,118
                                                       =========


    On February 17, 2000, warrants to purchase 1,100,000 common shares were
exercised at a price of $12.60 per common share. Under the terms of the warrant
agreement, the warrant holders elected to pay the exercise price for the
warrants through a non-cash exercise. As a result, the warrant holders received
847,749 common shares rather than 1,100,000 common shares they would otherwise
have received upon exercise in cash of all of their warrants.

NOTE 12--ACQUISITIONS

    Effective April, 1998, the Company acquired 100% of the shares of ACT Gene
S.A., a DNA diagnostic testing company, for 85,000 common shares of the Company,
and cash payable of $650,000. The acquisition was accounted for as a purchase,
and resulted in the recording of an excess of purchase price over tangible net
assets of $488,000, of which $420,043 was recorded as in-process research and
development, and reflected as an expense in 1998. The nature of the acquired
research and development relates to the cost and time pertaining to the
development of a test kit and research clinical samples necessary for the
development of several kits designed for use with DNA sequencing systems. As of
April, 1998 the kit was approximately 80% completed and was expected to be
completed during 1999. As a result of delays related to the development of the
kit, the estimated completion date has been revised to the year 2000. The
projected incremental cash flows of these projects were discounted using
discount rates ranging from 60% to 70%. The primary risk factor affecting the
commercialization of each of these products is the receipt of FDA and foreign
regulatory agency approvals for use in the clinical diagnostic market.

    Effective October, 1997, the Company acquired 100% of the shares of Applied
Sciences, Inc., a DNA diagnostic testing company, for 95,000 common shares of
the Company, and the assumption of all liabilities (including $90,000 which was
repaid to the former shareholders of Applied Sciences, Inc.), as well as a
deficit of $132,000. The acquisition was accounted for as a purchase, and
resulted in the recording of an excess of purchase price over tangible net
assets of $654,621 which was recorded as in-process research and development,
and reflected as an expense in 1997. The nature of the acquired research and
development relates to the cost and time pertaining to the development of
certain test kits designed for

                                      F-19

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12--ACQUISITIONS (CONTINUED)
use with DNA sequencing systems. As of October 1997, these kits were
approximately 20% to 50% completed. Development of one kit was completed in the
fourth quarter of 1998, and the remaining kits are expected to be completed
during 2000. Projected incremental cash flows of these projects were discounted
using discount rates ranging from 60% to 70%. The primary risk factor affecting
the commercialization of each of these products is the receipt of FDA and
foreign regulatory agency approvals for use in the clinical diagnostic market.

NOTE 13--EXIT AND TERMINATION COSTS

EXIT COSTS

    During 1999, the Company approved a plan to move the sales, marketing and
various other corporate functions from Canada to a U.S. facility being
established in Atlanta. The U.S. facility will also house Applied Sciences Inc.
(a wholly owned subsidiary of the Company) as well as being used for kit
manufacturing. The exit plan is expected to be completed in 2000.

    As a result of the decision to centralize U.S. operations in Atlanta,
certain premises currently leased by the Company will be vacated. In
December 1999, the Company committed to a new facility and commenced efforts to
sublease the premises to be vacated. Accordingly, the Company recorded a charge
of approximately $790,000 in the statement of operations in 1999, which is
included in accrued liabilities at December 31, 1999. This amount represents the
remaining future lease commitments net of estimated sub-lease income, the
unamortized balance of leasehold improvements, and other estimated costs of
sub-leasing the vacated facilities. If the Company is unsuccessful in its
subleasing efforts, the remaining future lease commitments on premises to be
vacated, in excess of amounts accrued, approximates $2,100,000.

TERMINATION COSTS

    During 1999, two senior officers of the Company received special termination
benefits in connection with their departure from the Company. The termination
benefits included lump-sum payments and periodic future payments, as specified
in the related termination agreements, offered by the Company and accepted by
the officers. The present value of the obligations for special termination
benefits approximated $539,000, which was included in the statement of
operations in 1999. As at December 31, 1999, approximately $162,000 of these
costs were paid and the balance is included in accrued salaries and benefits.

                                      F-20

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14--INCOME TAXES

    The Company's income tax provision has been determined as follows:



                                                                YEARS ENDED DECEMBER 31,
                                                       ------------------------------------------
                                                           1999           1998           1997
                                                       ------------   ------------   ------------
                                                                            
Net loss for the year comprised of:
  Domestic...........................................  $ (8,081,807)  $ (6,195,350)  $ (8,472,572)
  Foreign............................................   (17,205,078)    (8,695,611)    (1,943,174)
                                                       ------------   ------------   ------------
                                                       $(25,286,885)  $(14,890,961)  $(10,415,746)
                                                       ============   ============   ============
Income taxes at 44.6%................................  $(11,283,008)  $ (6,641,369)  $ (4,645,423)
Decrease resulting from permanent non-tax deductible
  expense............................................       736,478         52,182        412,842
Decrease resulting from foreign rate differences.....       835,867        114,856             --
Increase in valuation allowance......................     9,710,663      6,474,331      4,232,581
                                                       ------------   ------------   ------------
                                                       $         --   $         --   $         --
                                                       ============   ============   ============


    As at December 31, 1999, the Company has available losses in various
countries that may be used to reduce taxable income in future years, and expire
as follows:



                                CANADA(1)    UNITED STATES     FRANCE      ITALY     NETHERLANDS      ISRAEL
                               -----------   -------------   ----------   --------   -----------     --------
                                                                                   
2001.........................  $   481,000    $        --    $       --   $    --    $       --      $     --

2002.........................    1,480,000             --            --        --            --            --

2003.........................    2,846,000             --       439,000        --            --            --

2004.........................    4,805,000             --     3,037,000    95,000            --            --

2005.........................    1,567,000             --            --        --            --            --

2006.........................    2,819,000             --            --        --            --            --

2012.........................           --      1,238,000            --        --            --            --

2018.........................           --      3,962,000            --        --            --            --

2019.........................           --      6,671,000            --        --            --            --

No Expiry Date...............           --             --            --        --     5,908,000       156,000
                               -----------    -----------    ----------   -------    ----------      --------

Total........................  $13,998,000    $11,871,000    $3,476,000   $95,000    $5,908,000      $156,000
                               ===========    ===========    ==========   =======    ==========      ========


- - ------------------------

(1) In addition to the Canadian losses above, certain scientific research and
    development expenditures eligible for tax purposes incurred by the Company
    may be deferred and deducted in future years. These unclaimed deductions,
    which can be carried forward indefinitely, amounted to approximately
    $12,946,000 at December 31, 1999. In addition, the Company has earned
    non-refundable investment tax credits amounting to approximately $3,028,000
    that can be applied to reduce future income taxes payable. These expire
    $504,000 in 2006, $744,000 in 2007, $1,034,000 in 2008 and $746,000 in 2009.

                                      F-21

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14--INCOME TAXES (CONTINUED)
    The benefit of these losses, unclaimed deductions and non-refundable
investment tax credits has not been reflected in these financial statements. The
deferred tax balances are summarized as follows:



                                                                 1999          1998
                                                              -----------   -----------
                                                                      
DEFERRED TAX ASSETS
Research expenses...........................................  $ 5,776,300   $ 4,122,100
Non-capital losses..........................................   15,555,300     8,483,100
Investment tax credits......................................    1,597,600     1,114,700
Fixed assets................................................    1,048,100       239,000
Warranty and other provisions...............................      810,100        25,600
                                                              -----------   -----------
                                                               24,787,400    13,984,500
Valuation allowance.........................................  (24,787,400)  (13,984,500)
                                                              -----------   -----------
Net deferred tax asset (liability)..........................  $        --   $        --
                                                              ===========   ===========


    The valuation allowance increased by $10,802,900 during 1999
(1998--$4,903,000). Realization of the future tax benefits related to the
deferred tax assets is dependent upon many factors, including the Company's
ability to generate taxable income within the loss carryforward periods.

NOTE 15--SEGMENTED INFORMATION

    In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This replaced the previous industry segment
approach with disclosure based upon the internal organization used by management
for making operating decisions and assessing performance. SFAS No. 131 also
requires disclosures as to products and services, geographic areas and major
customers. The adoption of SFAS No. 131 did not affect results of operations or
financial position, but did affect the disclosure of segment information. The
Company's reportable segments are Sequencing Systems, GeneKits and other
Consumables, and Testing, Sequencing and Other services. The accounting policies
of the segments are the same as those described above in Note 2, "Summary of
significant accounting policies."

1999



                             SEQUENCING    GENEKITS AND OTHER   TESTING, SEQUENCING   RECONCILING
                               SYSTEMS        CONSUMABLES       AND OTHER SERVICES       ITEMS           TOTAL
                             -----------   ------------------   -------------------   -----------     -----------
                                                                                       
Revenues...................  $ 7,725,910       $ 4,729,865           $1,171,145                --     $13,626,920
Depreciation and
  Amortization.............   (1,184,981)         (985,608)            (383,398)               --      (2,553,987)
Profit (loss) from
  operations before
  interest.................  (13,889,277)      (10,099,584)               4,939                --     (23,983,922)
Additions to Fixed
  assets...................      697,030           835,181              372,918                --       1,905,129
Total assets...............    7,466,062         6,724,730            1,760,794       $42,687,963(1)   58,639,549


RECONCILING ITEM CONSISTS OF: (1) CASH, CASH EQUIVALENTS AND SHORT-TERM
  INVESTMENTS

                                      F-22

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15--SEGMENTED INFORMATION (CONTINUED)
1998



                            SEQUENCING    GENEKITS AND OTHER   TESTING, SEQUENCING   RECONCILING
                              SYSTEMS        CONSUMABLES       AND OTHER SERVICES       ITEMS           TOTAL
                            -----------   ------------------   -------------------   -----------     ------------
                                                                                      
Revenues..................  $ 8,042,421       $1,379,512            $1,453,415                --     $ 10,875,348
Depreciation and
  Amortization............     (396,837)        (666,061)             (233,828)               --       (1,296,726)
Profit (loss) from
  operations before
  interest................  (10,879,023)      (3,023,804)              299,805       $  (420,043)(2)  (14,023,065)
Additions to Fixed
  assets..................    1,199,316        1,137,904             1,011,041                --        3,348,261
Total assets..............    8,859,003        5,281,294             2,368,060        11,274,178(3)    27,782,535


RECONCILING ITEMS CONSIST OF: (2) ACQUIRED RESEARCH AND DEVELOPMENT (NOTE 12)

                         (3) CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

1997



                             SEQUENCING    GENEKITS AND OTHER   TESTING, SEQUENCING   RECONCILING
                               SYSTEMS        CONSUMABLES       AND OTHER SERVICES       ITEMS           TOTAL
                             -----------   ------------------   -------------------   -----------     ------------
                                                                                       
Revenues...................  $ 2,720,844       $  246,851             $ 65,041                --      $  3,032,736
Depreciation and
  Amortization.............     (231,694)        (362,688)             (31,599)               --          (625,981)
Profit (loss) from
  operations before
  interest.................   (9,592,047)        (874,149)             (66,677)       $ (654,621)(4)   (11,187,494)
Additions to Fixed
  assets...................      557,427          504,142              204,256                --         1,265,825
Total assets...............    4,126,088        2,002,571              199,812         7,607,901(5)     13,936,372


RECONCILING ITEMS CONSIST OF: (4) ACQUIRED RESEARCH AND DEVELOPMENT (NOTE 12)

                         (5) CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

                                      F-23

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15--SEGMENTED INFORMATION (CONTINUED)



GEOGRAPHIC INFORMATION--YEARS ENDED DECEMBER 31
- - -----------------------------------------------
SALES, BY CUSTOMER LOCATION                                  1999          1998          1997
- - ---------------------------                               -----------   -----------   ----------
                                                                             
NORTH AMERICA
Canada..................................................  $   468,535   $   844,863   $  542,716
United States...........................................    4,686,868     3,513,150    2,278,246
                                                          -----------   -----------   ----------
                                                            5,155,403     4,358,013    2,820,962
                                                          -----------   -----------   ----------
EUROPE
France..................................................    1,252,222     1,616,788           --
Other Europe............................................    4,298,745     2,949,288      161,837
                                                          -----------   -----------   ----------
                                                            5,550,967     4,566,076      161,837
                                                          -----------   -----------   ----------
ASIA AND LATIN AMERICA..................................
Japan...................................................    1,609,799     1,640,123           --
Other Asia and Latin America............................    1,310,751       311,136       49,937
                                                          -----------   -----------   ----------

                                                            2,920,550     1,951,259       49,937
                                                          -----------   -----------   ----------
                                                          $13,626,920   $10,875,348   $3,032,736
                                                          ===========   ===========   ==========




GEOGRAPHIC INFORMATION--YEARS ENDED DECEMBER 31
- - -----------------------------------------------
FIXED ASSETS                                                 1999          1998          1997
- - ------------                                              -----------   -----------   ----------
                                                                             
Canada..................................................  $ 2,530,222   $ 2,346,394   $  928,350
United States...........................................      955,161     1,083,788      459,983
France..................................................      687,952       446,981       62,647
                                                          -----------   -----------   ----------
                                                          $ 4,173,335   $ 3,877,163   $1,450,980
                                                          ===========   ===========   ==========


    In 1999, one customer accounted for 21% of sales, of which 19% comprised
Sequencing Systems and 2% comprised GeneKits and other Consumables. (1998--one
customer accounted for 30% of sales, of which 29% comprised Sequencing Systems
and 1% comprised GeneKits and other Consumables; 1997--no customer accounted for
more than 10% of sales).

NOTE 16--COMMITMENTS AND CONTINGENCY

COMMITMENTS

    The Company is committed to make a payment under a license agreement of
$300,000 in 2000. The Company has collaborative arrangements with certain third
parties that provide for royalty payments (see Note 3).

                                      F-24

                             VISIBLE GENETICS INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16--COMMITMENTS AND CONTINGENCY (CONTINUED)
    The Company has entered into operating leases for premises and equipment as
follows:

                                                            
2000........................................................    $1,584,020

2001........................................................     1,292,084

2002........................................................     1,116,517

2003........................................................     1,078,102

2004 and thereafter.........................................     3,513,877
                                                                ----------

                                                                $8,584,600
                                                                ==========



    Rent expense was $851,876 in 1999 (1998--$554,497; 1997--$284,396).

CONTINGENCY

    In December 1999, a lawsuit was filed against the Company alleging
unspecified damages resulting from the Company's alleged infringement of certain
patents. The Company has previously studied these patents and has received legal
advice that it is not liable for any claims of infringement. Management believes
that these allegations are without merit and intends to vigorously defend
against these allegations. No amount has been provided in these financial
statements in respect of these allegations, as the amount of the loss, if any,
cannot be determined and the results of such allegations cannot be predicted
with certainty.

NOTE 17--RELATED PARTY TRANSACTIONS

    During 1999, the Company incurred legal fees to a law firm, in which a
partner was a former director of the Company, of $246,210 (1998--$164,624;
1997--$183,627). During 1999, the Company incurred consulting fees to a firm, of
which the president was a director of the Company, of $291,115 (1998--$280,000;
1997--nil). During 1999, the Company also incurred consulting fees to a former
director of the Company, of $58,269 (1998--nil; 1997--nil). Other receivables
include a loan and unpaid interest due from a Company officer and director
aggregating $55,614 in 1998 and $72,018 in 1997. The loan was repaid during
1999.

NOTE 18--COMPARATIVE FIGURES

    Certain comparative figures have been reclassified to conform to the
financial statement presentation adopted in the current year.

                                      F-25

                                 EXHIBIT INDEX



      EXHIBITS
       NUMBER                             DESCRIPTION OF DOCUMENT                       PAGE
- - ---------------------   ------------------------------------------------------------  --------
                                                                                
        *3.2            Certificate and Articles of Amendment of the Company.
       *10.3            Visible Genetics Inc. Employee Share Option Plan, Amended
                          through May 19, 1999.
       *10.10           Securities Purchase Agreement, dated as of July 15, 1999, by
                          and among Visible Genetics Inc., Warburg, Pincus Equity
                          Partners, L.P., Warburg, Pincus Ventures International,
                          L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.,
                          Warburg, Pincus Netherlands Equity Partners II, C.V. and
                          Warburg, Pincus Netherlands Equity Partners III, C.V.
       *10.11           Registration Rights Agreement, dated as of July 15, 1999, by
                          and among Visible Genetics Inc. and the Investors listed
                          on Schedule I thereto.
       *10.12           Common Shares Purchase Agreement, dated December 14, 1999,
                          by and among Visible Genetics Inc. and the Investors who
                          are signatories hereto.
       *10.13           Registration Rights Agreement, dated as December 14, 1999,
                          by and among Visible Genetics Inc. and each of the
                          Investors to that certain Common Shares Purchase
                          Agreement.
       *10.14           Lease between Visible Genetics Corp. and Duke-Weeks Realty
                          Limited Partnership, dated February 15, 2000.
       *10.15           Lease between Visible Genetics Inc. and LuCliff Company
                          Limited, dated March 31, 1992.
       *10.16           Lease between Visible Genetics Inc. and Royal Trust
                          Corporation of Canada, as trustee and RT Pensior
                          Properties Limited dated June 1, 1996
       *10.17           Lease between Visible Genetics Inc. and Comwest Properties
                          Limited dated July 20, 1998.
       *10.18           Lease between Visible Genetics Corp. and the University of
                          Pittsburgh of the Commonwealth System of Higher Education
                          dated Dec 1, 1996.
       *10.22           Amendment No. 1 to Guarantee, dated as of April 30, 1999 to
                          the Guarantee dated as of April 30, 1998, by and among
                          Visible Genetics Inc., Hilal Capital, L.P., Hilal Capital
                          QP, LP, Hilal Capital International, Ltd., Highbridge
                          International LLC, C.J. Partners L.P. and Hilal Capital
                          Management LLC, as adviser for Leo Holdings, Inc.
       *10.23           Amendment No. 2 to Term Loan Agreement, dated as of April
                          30, 1999, to the Term Loan Agreement, dated as of
                          April 30, 1999 as amended by Amendment No. 1 to the Term
                          Loan Agreement dated as of September 29, 1998, by and
                          among Visible Genetics Corp., Hilal Capital, L.P., Hilal
                          Capital QP, LP, Hilal Capital International, Ltd.,
                          Highbridge International LLC, C.J. Partners L.P. and Hilal
                          Capital Management LLC, as adviser for Leo Holdings, Inc.
       *10.24           Letter Agreement between Visible Genetics Inc. and Hilal
                          Capital Management dated July 15, 1999.


*   Filed herewith.

EX-3.2

                                                                     EXHIBIT 3.2


    For Ministry Use Only                           Ontario Corporation Number
A l'usage exclusif du ministere                  Numero de la societe en Ontario

                                                             1079808
                                                 -------------------------------

[SEAL]   Ministry of             Ministere de
         Consumer and            la Consommation
Ontario  Commercial Relations    et du Commerce
CERTIFICATE                      CERTIFICAT
This is to certify that those    Ceci certifie que les presents
articles are effective on        status entrent en vigueur le

                     JULY 15 JUILLET, 1999
- - --------------------------------------------------------------

                       /s/ [ILLEGIBLE]
                     Director/Directeur
  Business Corporations Act/Loi sur les societes par actions

- - --------------------------------------------------------------------------------

                                       ARTICLES OF AMENDMENT
   Form 3                             STATUTS DE MODIFICATION
  Business
Corporations   1. the name of the corporation is:  Denomination sociale de la
     Act                                           societe:
               -----------------------------------------------------------------
   Formule     VISIBLE GENETICS INC.
  numero 3     -----------------------------------------------------------------
 loi sur les
societes par   -----------------------------------------------------------------
   actions
               -----------------------------------------------------------------

               -----------------------------------------------------------------

               2. The name of the corporation      Nouvelle denomination sociale
                  is changed to (if applicable):   de la societe (s'il y a
                                                   lieu):
               -----------------------------------------------------------------

               -----------------------------------------------------------------

               -----------------------------------------------------------------

               -----------------------------------------------------------------

               -----------------------------------------------------------------

               3. Date of incorporation/           Date de la constitution ou de
                  amalgamation:                    la fusion:

                                        1st May, 1994
               -----------------------------------------------------------------
                                     (Day, Month, Year)
                                     (jour, mois, annee)

               4. The articles of the corporation  Les statuts de la societe
                  are amended as follows:          sont modifies de la facon
                                                   suivante.

                  NOW THEREFORE BE IT RESOLVED AS FOLLOWS:

                  (A) That, pursuant to authority conferred upon the Board of
                      Directors by the Restated Articles of Incorporation of the
                      Corporation, the Board of Directors hereby authorizes the
                      issuance of 33,950 Series A Convertible Preferred Shares
                      of the Corporation, and hereby fixes the designations,
                      powers, preferences and relative, participating, optional
                      or other special rights, and the qualifications,
                      limitations or restrictions thereof, of such shares, as
                      follows:

                  1.  DESIGNATION AND AMOUNT. The shares of such series shall be
                      designated "Series A Convertible Preferred Shares" (the
                      "Series A Preferred Stock") and the number of shares
                      constituting such series shall be 33,950.

   Document
   prepared
  using Fast
 Company, by
  Do Process
Software Ltd.,
   Toronto,
   Ontario
(416) 322-6111

                                                                       Page 1(a)


2. DIVIDENDS

(a)   The holders of Series A Preferred Stock shall be entitled to receive, when
      and as declared by the Board of Directors, out of any funds legally
      available therefor, preferential cumulative dividends payable in U.S.
      dollars at the rate per annum per share of nine percent (9.0%) of the
      Series A Liquidation Value (as hereinafter defined) until July 15, 2002
      and thereafter at the rate per annum per share of four percent (4.0%) of
      the Series A Liquidation Value, not more. Such dividends shall be fully
      paid before any dividends shall be set apart for or paid upon the Common
      Shares (herein the "Common Stock")) or any other shares ranking as to
      dividends junior to the Series A Preferred Stock (such Common Stock and
      other shares being referred to hereinafter collectively as "Junior Stock")
      in any year.

(b)   Dividends on the Series A Preferred Stock shall accrue quarterly on July
      15, October 15, January 15 and April 15, beginning October 15, 1999, and
      shall accumulate from the date of issuance of the Series A Preferred
      Stock, whether or not earned or declared and whether or not in any fiscal
      year there shall be net profits or surplus available for the payment of
      dividends in such fiscal year, so that if in any fiscal year or years,
      dividends in whole or in part are not paid upon the Series A Preferred
      Stock, unpaid dividends shall accumulate as against the holders of the
      Junior Stock and any sums in any later years shall be paid to the holders
      of the Series A Preferred Stock with respect to any prior year or years
      when dividends were not paid.

(c)   Dividends on the Series A Preferred Stock shall accrue from the date of
      issuance of such shares but shall not be paid prior to July 15, 2002.
      Subsequent to such date, dividends on the Series A Preferred Stock,
      including amounts previously accrued but unpaid, shall be paid only when
      and as declared by the Board of Directors, provided, that the Board shall
      furnish the holders of the Series A Preferred Stock at least thirty (30)
      days advance notice of any such payment date in order to permit the
      holders to elect to convert their shares of Series A Preferred Stock prior
      to such payment date.

(d)   So long as any of the Series A Preferred Stock remains outstanding, in no
      event shall any dividend whatsoever, whether in cash or other property
      (other than in shares of Junior Stock), be paid or declared or any
      distribution be made on the Junior Stock, nor shall any shares of the
      Junior Stock be purchased, retired or otherwise acquired for a
      consideration by the Corporation (i) unless the full dividends of the
      Series A Preferred Stock for all past dividend periods from the date on
      which they became cumulative shall have been declared and paid; and (ii)
      unless, if at any time the Corporation is obligated to retire shares of
      the Series A Preferred Stock pursuant to the mandatory redemption
      requirement set forth in Section 8 hereof, all arrears, if any, in respect
      of the retirement of the Series A Preferred Stock shall have been made
      good. Notwithstanding the provisions of this Section 1(d), without
      declaring or paying dividends on the Series A Preferred Stock, the
      Corporation may, subject to applicable law, repurchase or redeem shares of
      capital stock of the

                                                                       Page 1(b)


      Corporation from current or former officers, directors, employees or
      consultants of the Corporation pursuant to the terms of restricted stock
      agreements or similar agreements in effect on the date hereof (or
      restricted stock agreements entered into after the date hereof containing
      substantially similar repurchase or redemption terms as the restricted
      stock agreements or similar agreements in effect on the date hereof,
      provided such restricted stock agreements have been approved by the Board
      of Directors of the Corporation), provided that the terms of such
      agreements provide for a repurchase or redemption price not in excess of
      the price per share paid by such employee for such share. Subject to the
      foregoing provisions and not otherwise, and subject to the provisions of
      Section 4(d)(i) hereof, such dividends (payable in cash, stock or
      otherwise) as may be determined by the Board of Directors may be declared
      and paid on the Junior Stock from time to time out of the remaining funds
      of the Corporation legally available therefor, and the Series A Preferred
      Stock shall not be entitled to participate in any such dividend, whether
      payable in cash, stock or otherwise.

3. LIQUIDATION, DISSOLUTION OR WINDING UP.

(a)   In the event of any liquidation, distribution or sale of assets,
      dissolution or winding up of the Corporation, whether voluntary or
      involuntary, then before any distribution or payment shall be made to the
      holders of the Junior Stock, the holders of the Series A Preferred Stock
      shall be entitled to be paid out of the assets of the Corporation an
      amount per share of Series A Preferred Stock, equal to One Thousand U.S.
      Dollars (U.S.$1,000) plus all accrued or declared and unpaid dividends on
      the Series A Preferred Stock, (as adjusted for any stock dividends,
      combinations, splits, recapitalizations and the like with respect to such
      shares), for each share of Series A Preferred Stock held by them (the
      "Series A Liquidation Value").

(b)   After the payment of the full Series A Liquidation Value to the holders of
      the Series A Preferred Stock set forth in Section 3(a) above, the
      remaining assets of the Corporation legally available for distribution, if
      any, shall be distributed to the holders of the Junior Stock, ratably in
      proportion to the full amounts to which they would otherwise be
      respectively entitled.

(c)   If, upon any liquidation, distribution or winding up, the assets of the
      Corporation shall be insufficient to make payment in full to all holders
      of Series A Preferred Stock, then such assets shall be distributed among
      the holders of Series A Preferred Stock at the time outstanding, ratably
      in proportion to the full amounts to which they would otherwise be
      respectively entitled.

(d)   The merger or consolidation of the Corporation into or with another
      company, or the merger or consolidation of any other company into or with
      the Corporation, in each case in which the holders of the Common Stock and
      Series A Preferred Stock and any other voting capital

                                                                       Page 1(c)


      shares of the Corporation prior to such consolidation or merger do not
      hold at least 51% of the combined voting power of the surviving person in
      such merger or consolidation, or the sale, conveyance or lease of all or
      substantially all the assets of the Corporation to a person, other than a
      company 51% or more of the voting power of which is owned by the
      Corporation, shall be deemed to be a liquidation, dissolution or winding
      up of the Corporation for purposes of this Section 3.

4. VOTING

(a)   Each issued and outstanding share of Series A Preferred Stock shall be
      entitled to the number of votes equal to the number of shares of Common
      Stock into which each such share of Series A Preferred Stock is
      convertible (as adjusted from time to time pursuant to Section 5 hereof),
      at each meeting of stockholders of the Corporation with respect to any and
      all matters presented to the stockholders of the Corporation for their
      action or consideration other than the election of directors (as to which
      the Series A Preferred Stock shall have rights voting separately as a
      class as set out in paragraphs (b) and (c) below). Except as provided by
      law, by the provisions of paragraphs (b), (c) and (d) below or by the
      provisions establishing any other series of Preferred Shares, holders of
      Series A Preferred Stock and of any other outstanding Preferred Stock
      shall vote together with the holders of Common Stock as a single class.

(b)   For so long as the total number of shares of Common Stock issuable on
      conversion of the Series A Preferred Stock in accordance with the
      provisions hereof equals at least 5% of the then outstanding shares of
      Common Stock of the Corporation, the holders of Series A Preferred Stock
      shall have the exclusive right, voting separately as a class, to elect one
      director (herein referred to as the "Series A Director"). The Series A
      Director shall be elected by the affirmative vote of the holders of record
      of a majority of the outstanding shares of Series A Preferred Stock,
      either at meetings of stockholders at which directors are elected, a
      special meeting of holders of Series A Preferred Stock or by written
      consent without a meeting in accordance with the Ontario Business
      Corporation Act. Each Series A Director so elected shall serve for a term
      of one year and until his successor is elected and qualified. Any vacancy
      in the position of a Series A Director may be filled only by the holders
      of the Series A Preferred Stock. Each Series A Director may, during his
      term of office, be removed at any time, with or without cause, by and only
      by the affirmative vote, at a special meeting of holders of Series A
      Preferred Stock called for such purpose, or the written consent, of the
      holders of record of a majority of the outstanding shares of Series A
      Preferred Stock. Any vacancy created by such removal may also be filled at
      such meeting or by such consent. At such time as the holders of Series A
      Preferred Stock shall no longer be eligible to elect a Series A Director,
      the term of the Series A Director then serving shall immediately and
      automatically terminate without any action by the Board of Directors, the
      Series A Director or any other Person.

                                                                       Page 1(d)


(c)   In the event (each a "Default") that the Corporation shall be in arrears
      in the mandatory redemption of Series A Preferred Stock as called for in
      paragraph 8(b) below, then upon written notice to the Corporation given at
      any time during the pendency of such a Default by the holders of not less
      than a majority of the outstanding shares of Series A Preferred Stock, the
      holders of the Series A Preferred Stock shall as a class become entitled
      to special voting rights (the "Special Voting Rights"). The Special Voting
      Rights of the holders of the Series A Preferred Stock shall continue until
      the Default giving rise to such Special Voting Rights shall have been
      cured in full, whereupon all Special Voting Rights of the holders of the
      Series A Preferred Stock shall cease, subject to being again revived from
      time to time upon the recurrence or occurrence of a Default. Failure by
      the holders of the Series A Preferred Stock to exercise their Special
      Voting Rights promptly upon the occurrence of a given Default shall not be
      deemed to be a waiver of such rights, such rights being exercisable at any
      time that a Default shall have occurred and be continuing.

      For purposes of this Section 4(c), the term "Special Voting Rights" shall
      mean the right to elect, upon the occurrence and during the continuance
      of a Default as provided in the foregoing paragraph, that number of
      additional directors (the "Default Directors") that, when added to the
      Series A Director will constitute one more than half of the Board of
      Directors of the Corporation as it will be constituted following the
      election of such Default Directors.

      Immediately upon the accrual of the Special Voting Rights of the holders
      of Series A Preferred Stock, the number of directors of the Corporation
      shall automatically be increased by the requisite number of Default
      Directors and each of the Default Directors shall be elected only by vote
      of the holders of Series A Preferred Stock, voting as a class. The holders
      of the Series A Preferred Stock may at their option at any time, upon the
      occurrence and during the continuance of a Default, exercise the Special
      Voting Rights to elect each of the Default Directors either at a special
      meeting of holders of Series A Preferred Stock or by written consent
      without a meeting in accordance with the Ontario Business Corporation Act.
      Each Default Director shall serve for a term of one year and until his
      successor is elected and qualified, or until the earlier termination of
      the Special Voting Rights of the holders of the Series A Preferred Stock.
      Upon the election of the Default Directors, then so long as the holders of
      the Series A Preferred Stock are entitled to the Special Voting Rights,
      the presence of a majority of the directors shall be required for there to
      be a quorum at all meetings of the Board of Directors of the Corporation,
      and of the Executive Committee of the Corporation if there be such a
      committee. So long as the holders of the Series A Preferred Stock are
      entitled to the Special Voting Rights, any vacancy in the position of a
      Default Director may be filled only by the holders of the Series A
      Preferred Stock. Each Default Director may, during his term of office, be
      removed at any time, with or without cause, by and only by the affirmative
      vote, at a special meeting of holders of the Series A Preferred Stock
      called for such purpose, or the written consent, of the holders of record
      of a majority of the outstanding shares of the Series A Preferred Stock.
      Any vacancy created by

                                                                       Page 1(e)


      such removal may also be filled at such meeting or by such consent. Upon
      the termination of the Special Voting Rights of the holders of the Series
      A Preferred Stock, the terms of office of the Default Directors shall
      forthwith automatically terminate without any action of the Board of
      Directors, the Default Directors, the holders of the Series A Preferred
      Stock or any other Person and the number of directors of the Corporation
      shall thereupon be automatically appropriately decreased.

(d)   In addition to any other rights provided by law, the Corporation shall
      not, without first obtaining the affirmative vote or written consent of
      the holders of a majority of the outstanding shares of Series A Preferred
      Stock:

      (i)   authorize or effect the incurrence, creation or assumption, or
            suffer the existence of any indebtedness of the Company or any
            subsidiary for borrowed money or for the deferred purchase price of
            property or services (other than current trade liabilities incurred
            in the ordinary course of business or liabilities created as a
            result of the endorsement of negotiable instruments for deposit or
            collection in the ordinary course of business), any other
            indebtedness of the Company or any subsidiary which is evidenced by
            a note, bond, debenture or similar debt instrument, and capitalized
            lease obligations of the Company or any subsidiary in an aggregate
            amount at any time outstanding in excess of U.S. $15,000,000; or

      (ii)  authorize any additional shares of Series A Preferred Stock or
            amend, alter or repeal the preferences, special rights or other
            powers of the Series A Preferred Stock so as to affect materially
            and adversely the Series A Preferred Stock. For the purpose of this
            Section 4(d)(ii), the authorization or issuance of any other series
            of Preferred Shares with preference or priority over, or being on a
            parity with the Series A Preferred Stock as to the right to receive
            either dividends or amounts distributable upon liquidation,
            dissolution or winding up of the Corporation shall be deemed so to
            affect materially and adversely the Series A Preferred Stock.

5. OPTIONAL CONVERSION - Each share of Series A Preferred Stock may be converted
at any time, at the option of the holder thereof, into the number of fully-paid
and nonassessable shares of Common Stock obtained by dividing the then Series A
Liquidation Value by the Conversion Price then in effect, provided, however,
that on any redemption of any Series A Preferred Stock or any liquidation of the
Corporation, the right of conversion shall terminate at the close of business on
the full business day immediately preceding the date fixed for such redemption
or for the payment of any amounts distributable on liquidation to the holders of
Series A Preferred Stock.

(a)   The initial conversion price shall be U.S.$11.00 per share of the
      Corporation's Common Stock (the "Initial Conversion Price"). The Initial
      Conversion Price and the applicable conversion price from time to time in
      effect (both the "Conversion Price") are subject to adjustment as
      hereinafter provided.

                                                                      Page 1 (f)


(b)   The Corporation shall not issue fractions of shares of Common Stock upon
      conversion of Series A Preferred Stock or scrip in lieu thereof. If any
      fraction of a share of Common Stock would, except for the provisions of
      this paragraph (b), be issuable upon conversion of any Series A Preferred
      Stock, the Corporation shall in lieu thereof pay to the person entitled
      thereto an amount in cash equal to the current value of such fraction,
      calculated to the nearest one-hundredth (1/100) of a share, to be computed
      (i) if the Common Stock is listed on any national securities exchange or
      quoted on NASDAQ, on the basis of the last sales price of the Common Stock
      on such exchange or NASDAQ (or the quoted closing bid price if there shall
      have been no sales) on the date of conversion, or (ii) if no last sales
      prices are then being quoted for the Common Stock, on the basis of the
      mean between the closing bid and asked prices for the Common Stock on the
      date of conversion as reported by Nasdaq, or its successor, or (iii) if
      there are no such closing bid and asked prices, on the basis of the fair
      market value per share as determined by the Board of Directors of the
      Corporation.

(c)   Whenever the Conversion Price shall be adjusted as provided in Section 6
      hereof, the Corporation shall forthwith file at the principal office of
      the transfer agent for the Series A Preferred Stock (or if no transfer
      agent shall at the time be appointed, then the Corporation at its
      principal office), a statement, signed by the Chairman of the Board, the
      President, any Vice President or Treasurer of the Corporation, showing in
      reasonable detail the facts requiring such adjustment and the Conversion
      Price that will be effective after such adjustment. The Corporation shall
      also cause a notice setting forth any such adjustments to be sent by mail,
      first class, postage prepaid, to each record holder of Series A Preferred
      Stock at his or its address appearing on the stock register. If such
      notice relates to an adjustment resulting from an event referred to in
      paragraph 6(g), such notice shall be included as part of the notice
      required to be mailed and published under the provisions of paragraph 6(g)
      hereof.

(d)   in order to exercise the conversion privilege, the holder of any Series A
      Preferred Stock to be converted shall surrender his or its certificate or
      certificates therefore to the principal office of the transfer agent for
      the Series A Preferred Stock (or if no transfer agent shall at the time be
      appointed, then the Corporation at its principal office), and shall give
      written notice to the Corporation at such office that the holder elects to
      convert the Series A Preferred Stock represented by such certificates, or
      any number thereof. Such notice shall also state the name or names (with
      address) in which the certificate or certificates for shares of Common
      Stock which shall be issuable on such conversion shall be issued, subject
      to any restrictions on transfer relating to shares of the Series A
      Preferred Stock or shares of Common Stock upon conversion thereof. If so
      required by the Corporation, certificates surrendered for conversion shall
      be endorsed or accompanied by written instrument or instruments of
      transfer, in form satisfactory to the Corporation, duly authorized in
      writing. The date of receipt by the transfer agent (or by the Corporation
      if the Corporation serves as its own transfer agent) of the certificates
      and notice shall be the conversion date. As soon as practicable after
      receipt of such notice and the surrender of the certificate or
      certificates for

                                                                       Page 1(g)


      Series A Preferred Stock as aforesaid, the Corporation shall cause to be
      issued and delivered at such office to such holder, or on his or its
      written order, a certificate or certificates for the number of full shares
      of Common Stock issuable on such conversion in accordance with the
      provisions hereof and cash as provided in paragraph (b) of this Section 5
      in respect of any fraction of a share of Common Stock otherwise issuable
      upon such conversion.

(e)   The Corporation shall at all times when the Series A Preferred Stock shall
      be outstanding reserve and keep available out of its authorized but
      unissued stock, for the purposes of effecting the conversion of the Series
      A Preferred Stock, such number of its duly authorized shares of Common
      Stock as shall from time to time be sufficient to effect the conversion of
      all outstanding Series A Preferred Stock.

(f)   All shares of Series A Preferred Stock which shall have been surrendered
      for conversion as herein provided shall no longer be deemed to be
      outstanding and all rights with respect to such shares, including the
      rights, if any, to receive notices and to vote, shall forthwith cease and
      terminate except only the right of the holder thereof to receive shares of
      Common Stock in exchange therefor. Any shares of Series A Preferred Stock
      so converted shall be retired and cancelled and shall not be reissued, and
      the Corporation may from time to time take such appropriate action as may
      be necessary to reduce the authorized Series A Preferred Stock
      accordingly.

6. ANTI-DILUTION PROVISIONS

(a)   In order to prevent dilution of the right granted hereunder, the
      Conversion Price shall be subject to adjustment from time to time in
      accordance with this paragraph 6(a). At any given time the Conversion
      Price, whether as the Initial Conversion Price (U.S.$l1.00 per share) or
      as last adjusted, shall be that dollar (or part of a dollar) amount the
      payment of which shall be sufficient at the given time to acquire one
      share of the Corporation's Common Stock upon conversion of shares of
      Series A Preferred Stock. For purposes of this Section 6, the term "Number
      of Common Shares Deemed Outstanding" at any given time shall mean the sum
      of (x) the number of shares of the Corporation's Common Stock outstanding
      at such time, (y) the number of shares of the Corporation's Common Stock
      issuable upon the exercise or conversion of any then outstanding options,
      warrants or other convertible securities (including the Series A Preferred
      Stock) and (z), without duplication, the number of shares of the
      Corporation's Common Stock deemed to be outstanding under subparagraphs
      6(b)(1) to (9), inclusive, at such time.

(b)   Except as provided in paragraph 6(c) or 6(f) below, if and whenever on or
      after the date of initial issuance of the Series A Preferred Stock (the
      "Initial Issuance Date"), the Corporation shall issue or sell, or shall in
      accordance with subparagraphs 6(b)(1) to (9), inclusive, be deemed to have
      issued or sold any shares of its Common Stock for a consideration per
      share

                                                                      Page 1 (h)


      less than the Conversion Price in effect immediately prior to the time of
      such issue or sale, then forthwith upon such issue or sale (the
      "Triggering Transaction"), the Conversion Price shall, subject to
      subparagraphs (1) to (9) of this paragraph 6(b), be reduced to the
      Conversion Price (calculated to the nearest tenth of a cent) determined by
      dividing:

      (i)   an amount equal to the sum of (x) the product derived by multiplying
            the Number of Common Shares Deemed Outstanding immediately prior to
            such Triggering Transaction by the Conversion Price then in effect,
            plus (y) the consideration, if any, received by the Corporation upon
            consummation of such Triggering Transaction, by

      (ii)  an amount equal to the sum of (x) the Number of Common Shares Deemed
            Outstanding immediately prior to such Triggering Transaction plus
            (y) the number of shares of Common Stock issued (or deemed to be
            issued in accordance with subparagraphs 6(b)(1) to (9)) in
            connection with the Triggering Transaction.

      For purposes of determining the adjusted Conversion Price under this
      paragraph 6(b), the following subsections (1) to (9), inclusive, shall be
      applicable, and the outstanding shares of Series A Preferred Stock shall
      be deemed converted for all purposes and computations under this Section
      6(b) and the then current Conversion Price shall be deemed the Conversion
      Price per share:

      (1)   In case the Corporation at any time shall in any manner grant
            (whether directly or by assumption in a merger or otherwise) any
            rights to subscribe for or to purchase, or any options for the
            purchase of, Common Stock or any stock or other securities
            convertible into or exchangeable for Common Stock (such rights or
            options being herein called "Options" and such convertible or
            exchangeable stock or securities being herein called "Convertible
            Securities"), whether or not such Options or the right to convert or
            exchange any such Convertible Securities are immediately exercisable
            and the price per share for which the Common Stock is issuable upon
            exercise, conversion or exchange (determined by dividing (x) the
            total amount, if any, received or receivable by the Corporation as
            consideration for the granting of such Options, plus the minimum
            aggregate amount of additional consideration payable to the
            Corporation upon the exercise of all such Options, plus, in the case
            of such Options which relate to Convertible Securities, the minimum
            aggregate amount of additional consideration, if any, payable upon
            the issue or sale of such Convertible Securities and upon the
            conversion or exchange thereof, by (y) the total maximum number of
            shares of Common Stock issuable upon the exercise of such Options or
            the conversion or exchange of such Convertible Securities) shall be
            less than the Conversion Price in effect immediately prior to the
            time of the granting of such Option, then the total maximum amount
            of Common Stock issuable upon the exercise of such Options or in the
            case of Options for Convertible Securities, upon the conversion or
            exchange of such Convertible Securities shall (as of the date of

                                                                       Page 1(i)


            granting of such Options) be deemed to be outstanding and to have
            been issued and sold by the Corporation for such price per share. No
            adjustment of the Conversion Price shall be made upon the actual
            issue of such shares of Common Stock or such Convertible Securities
            upon the exercise of such Options or upon the actual issue of such
            shares of Common Stock upon conversion or exchange of such
            Convertible Securities, except as otherwise provided in subparagraph
            (3) below.

      (2)   In case the Corporation at any time shall in any manner issue
            (whether directly or by assumption in a merger or otherwise) or sell
            any Convertible Securities, whether or not the rights to exchange or
            convert thereunder are immediately exercisable, and the price per
            share for which Common Stock is issuable upon such conversion or
            exchange (determined by dividing (x) the total amount received or
            receivable by the Corporation as consideration for the issue or sale
            of such Convertible Securities, plus the minimum aggregate amount of
            additional consideration, if any, payable to the Corporation upon
            the conversion or exchange thereof, by (y) the total maximum number
            of shares of Common Stock issuable upon the conversion or exchange
            of all such Convertible Securities) shall be less than the
            Conversion Price in effect immediately prior to the time of such
            issue or sale, then the total maximum number of shares of Common
            Stock issuable upon conversion or exchange of all such Convertible
            Securities shall (as of the date of the issue or sale of such
            Convertible Securities) be deemed to be outstanding and to have been
            issued and sold by the Corporation for such price per share. Except
            as otherwise provided in subparagraph (3) below, no adjustment of
            the Conversion Price shall be made upon the actual issue of such
            Common Stock upon exercise of the rights to exchange or convert
            under such Convertible Securities, and if any such issue or sale of
            such Convertible Securities is made upon exercise of any rights to
            subscribe for or to purchase or any option to purchase any such
            Convertible Securities for which adjustments of the Conversion Price
            have been or are to be made pursuant to other provisions of this
            Section 6, no further adjustment of the Conversion Price shall be
            made by reason of such issue or sale.

      (3)   If the purchase price provided for in any Options referred to in
            subparagraph (1), the additional consideration, if any, payable upon
            the conversion or exchange of any Convertible Securities referred to
            in subparagraphs (1) or (2), or the rate at which any Convertible
            Securities referred to in subparagraph (1) or (2) are convertible
            into or exchangeable for Common Stock shall change at any time
            (other than under or by reason of provisions designed to protect
            against dilution of the type set forth in paragraphs 6(b) or 6(d)),
            the Conversion Price in effect at the time of such change shall
            forthwith be readjusted to the Conversion Price which would have
            been in effect at such time had such Options or Convertible
            Securities still outstanding provided for such changed purchase
            price, additional consideration or conversion

                                                                      Page 1 (j)


            rate, as the case may be, at the time initially granted, issued or
            sold. If the purchase price provided for in any Option referred to
            in subparagraph (1) or the rate at which any Convertible Securities
            referred to in subparagraphs (1) or (2) are convertible into or
            exchangeable for Common Stock, shall be adjusted at any time under
            or by reason of provisions with respect thereto designed to protect
            against dilution, then in case of the delivery of Common Stock upon
            the exercise of any such Option or upon conversion or exchange of
            any such Convertible Security, the Conversion Price then in effect
            hereunder shall forthwith be adjusted to such respective amount as
            would have been obtained had such Option or Convertible Security
            never been issued as to such Common Stock and had adjustments been
            made upon the issuance of the shares of Common Stock delivered as
            aforesaid.

      (4)   On the expiration of any Option or the termination of any right to
            convert or exchange any Convertible Securities, the Conversion Price
            then in effect hereunder shall forthwith be increased to the
            Conversion Price which would have been in effect at the time of such
            expiration or termination had such Option or Convertible Securities,
            to the extent outstanding immediately prior to such expiration or
            termination, never been issued and the Common Stock issuable
            thereunder shall no longer be deemed outstanding.

      (5)   In case any rights, Options or Convertible Securities shall be
            issued in connection with the issue or sale of other securities of
            the Corporation, together comprising one integral transaction in
            which no specific consideration is allocated to such rights, Options
            or Convertible Securities by the parties thereto, such rights,
            Options or Convertible Securities shall be deemed to have been
            issued without consideration.

      (6)   In case any shares of Common Stock, Options or Convertible
            Securities shall be issued or sold or deemed to have been issued or
            sold for cash, the consideration received therefor shall be deemed
            to be the amount received by the Corporation therefor, before
            deduction therefrom of any expenses incurred or any underwriting
            commissions or concessions paid or allowed by the Corporation in
            connection therewith. In case any shares of Common Stock, Options or
            Convertible Securities shall be issued or sold for a consideration
            other than cash, the amount of the consideration other than cash
            received by the Corporation shall be the fair value of such
            consideration as determined in good faith and in the reasonable
            exercise of business judgement by the Board of Directors of the
            Corporation. In case any shares of Common Stock or Convertible
            Securities or any rights or options to purchase such Common Stock or
            Convertible Securities shall be issued in connection with any merger
            in which the Corporation is the surviving corporation, the amount of
            consideration therefor shall be deemed to be the fair value as
            determined in good

                                                                       Page 1(k)


            faith and in the reasonable exercise of business judgement by the
            Board of Directors of the Corporation of such portion of the assets
            and business of the non-surviving corporation as such Board shall
            determine in good faith and in the reasonable exercise of business
            judgement, to be attributable to such Common Stock, Convertible
            Securities, rights or options, as the case may be.

      (7)   The number of shares of Common Stock outstanding at any given time
            shall not include shares owned or held by or for the account of the
            Corporation, and the disposition of any shares so owned or held
            shall be considered an issue or sale of Common Stock for the purpose
            of this section 6(b).

      (8)   In case the Corporation shall declare a dividend or make any other
            distribution upon the stock of the Corporation payable in Options or
            Convertible Securities, then in such case any Options or Convertible
            Securities, as the case may be, issuable in payment of such dividend
            or distribution shall be deemed to have been issued or sold without
            consideration.

      (9)   For purposes of this section 6(b), in case the Corporation shall
            take a record of the holders of its Common Stock for the purpose of
            entitling them (x) to receive a dividend or other distribution
            payable in Common Stock, Options or in Convertible Securities, or
            (y) to subscribe for or purchase Common Stock, Options or
            Convertible Securities, then such record date shall be deemed to be
            the date of the issue or sale of the shares of Common Stock deemed
            to have been issued or sold upon the declaration of such dividend or
            the making of such other distribution or the date of the granting of
            such right or subscription or purchase, as the case may be.

      Upon each adjustment of the Conversion Price resulting from any Common
Stock issued, issuable or deemed outstanding under subparagraphs (1) to (9)
above, the registered holder of shares of Series A Preferred Stock shall
thereafter be entitled to acquire upon conversion of each share of Series A
Preferred Stock, at the Conversion Price resulting from such adjustment, the
number of shares of the Corporation's Common Stock determined by dividing the
then current Series A Liquidation Value by the Conversion Price resulting from
such adjustment.

(c)   In the event the Corporation shall declare a dividend upon the Common
      Stock (other than a dividend payable in Common Stock) payable otherwise
      than out of earnings or earned surplus, determined in accordance with
      generally accepted accounting principles, including the making of
      appropriate deductions for minority interests, if any, in subsidiaries
      (herein referred to as "Liquidating Dividends"), then, as soon as possible
      after the conversion of any Series A Preferred Stock, the Corporation
      shall pay to the person converting such Series A Preferred Stock an amount
      equal to the aggregate value at the time of such exercise of all
      Liquidating Dividends (including but not limited to the Common Stock which
      would have

                                                                       Page 1(l)


      been issued at the time of such earlier exercise and all other securities
      which would have been issued with respect to such Common Stock by reason
      of stock splits, stock dividends, mergers or reorganizations, or for any
      other reason). For the purposes of this paragraph 6(c), a dividend other
      than in cash shall be considered payable out of earnings or earned surplus
      only to the extent that such earnings or earned surplus are charged an
      amount equal to the fair value of such dividend as determined in good
      faith by the Board of Directors of the Corporation.

(d)   In case the Corporation shall at any time (i) subdivide the outstanding
      Common Stock or (ii) issue a Common Stock dividend on its outstanding
      Common Stock, the number of shares of Common Stock issuable upon
      conversion of the Series A Preferred Stock shall be proportionately
      increased by the same ratio as the subdivision or dividend (with
      appropriate adjustments to the Conversion Price in effect immediately
      prior to such subdivision or dividend). In case the Corporation shall at
      any time combine its outstanding Common Stock, the number of shares
      issuable upon conversion of the Series A Preferred Stock immediately prior
      to such combination shall be proportionately decreased by the same ratio
      as the combination (with appropriate adjustments to the Conversion Price
      in effect immediately prior to such combination).

(e)   If any capital reorganization or reclassification of the capital stock of
      the Corporation, or consolidation or merger of the Corporation with
      another corporation, or the sale of all or substantially all of its assets
      to another corporation shall be effected in such a way that holders of
      Common Stock shall be entitled to receive stock, securities, cash or other
      property with respect to or in exchange for Common Stock, then, as a
      condition of such reorganization, reclassification, consolidation, merger
      or sale, lawful and adequate provision shall be made whereby the holders
      of the Series A Preferred Stock shall have the right to acquire and
      receive upon conversion of the Series A Preferred Stock, such shares of
      stock, securities, cash or other property issuable or payable (as part of
      the reorganization, reclassification, consolidation, merger or sale) with
      respect to or in exchange for such number of outstanding shares of the
      Corporation's Common Stock as would have been received upon conversion of
      the Series A Preferred Stock at the Conversion Price then in effect. The
      Corporation will not effect any such consolidation, merger or sale, unless
      prior to the consummation thereof the successor corporation (if other than
      the Corporation) resulting from such consolidation or merger or the
      corporation purchasing such assets shall assume by written instrument
      mailed or delivered to the holders of the Series A Preferred Stock at the
      last address of each such holder appearing on the books of the
      Corporation, the obligation to deliver to each such holder such shares of
      stock, securities or assets as, in accordance with the foregoing
      provisions, such holder may be entitled to purchase. If a purchase, tender
      or exchange offer is made to and accepted by the holders of more than 50%
      of the outstanding shares of Common Stock of the Corporation, the
      Corporation shall not effect any consolidation, merger or sale with the
      person having made such offer or with any

                                                                       Page 1(m)


      Affiliate of such person, unless prior to the consummation of such
      consolidation, merger or sale the holders of the Series A Preferred Stock
      shall have been given a reasonable opportunity to then elect to receive
      upon the conversion of the Series A Preferred Stock either the stock,
      securities or assets then issuable with respect to the Common Stock of the
      Corporation or the stock, securities or assets, or the equivalent, issued
      to previous holders of the Common Stock in accordance with such offer. For
      purposes hereof, the term "Affiliate" with respect to any given person
      shall mean any person controlling, controlled by or under common control
      with the given person.

(f)   The provisions of this Section 6 shall not apply to any Common Stock
      issued, issuable or deemed outstanding under subparagraphs 6(b)(1) to (9)
      inclusive: (i) to any person pursuant to any stock option, stock purchase
      or similar plan, arrangement or agreement for the benefit of officers,
      employees, directors, contractors or consultants of the Corporation or its
      subsidiaries in effect on the Initial Issuance Date or thereafter adopted
      by the Board of Directors of the Corporation, (ii) pursuant to options,
      warrants and conversion rights in existence on the initial Issuance Date
      (provided that the terms of such instruments are not modified after the
      Initial Issuance Date), (iii) to Dr. Thomas Merigan in connection with the
      letter of understanding previously entered into by the Company with Dr.
      Merigan, or (iv) on conversion of the Series A Preferred Stock or upon
      exercise or exchange of the Common Share Purchase Warrants being issued on
      the Initial Issuance Date.

(g)   In the event that:

      (1)   the Corporation shall declare any cash dividend upon its Common
            Stock, or

      (2)   the Corporation shall declare any dividend upon its Common Stock
            payable in stock or make any special dividend or other distribution
            to the holders of its Common Stock, or

      (3)   the Corporation shall offer for subscription pro rata to the holders
            of its Common Stock any additional shares of stock of any class or
            other rights, or

      (4)   there shall be any capital reorganization or reclassification of the
            capital stock of the Corporation, including any subdivision or
            combination of its outstanding shares of Common Stock, or
            consolidation or merger of the Corporation with, or sale of all or
            substantially all of its assets to, another corporation, or

      (5)   there shall be a voluntary or involuntary dissolution, liquidation
            or winding up of the Corporation;

      then, in connection with such event, the Corporation shall give to the
      holders of the Series A Preferred Stock:

                                                                       Page 1(n)


      (i)   at least twenty (20) days prior written notice of the date on which
            the books of the Corporation shall close or a record shall be taken
            for such dividend, distribution or subscription rights or for
            determining rights to vote in respect of any such reorganization,
            reclassification, consolidation, merger. sale, dissolution,
            liquidation or winding up; and

      (ii)  in the case of any such reorganization, reclassification,
            consolidation, merger, sale, dissolution, liquidation or winding up,
            at least twenty (20) days prior written notice of the date when the
            same shall take place. Such notice in accordance with the foregoing
            clause (i) shall also specify, in the case of any such dividend,
            distribution or subscription rights, the date on which the holders
            of Common Stock shall be entitled thereto, and such notice in
            accordance with the foregoing clause (ii) shall also specify the
            date on which the holders of Common Stock shall be entitled to
            exchange their Common Stock for securities or other property
            deliverable upon such reorganization, reclassification,
            consolidation, merger, sale, dissolution, liquidation or winding up,
            as the case may be. Each such written notice shall be given by first
            class mail, postage prepaid, addressed to the holders of the Series
            A Preferred Stock at the address of each such holder as shown on the
            books of the Corporation.

(h)   If at any time or from time to time on or after the Initial Issuance Date,
      the Corporation shall grant, issue or sell any Options, Convertible
      Securities or rights to purchase property (the "Purchase Rights") pro rata
      to the record holders of any class of Common Stock of the Corporation and
      such grants, issuances or sales do not result in an adjustment of the
      Conversion Price under paragraph 6(b) hereof, then each holder of Series A
      Preferred Stock shall be entitled to acquire (within thirty (30) days
      after the later to occur of the initial exercise date of such Purchase
      Rights or receipt by such holder of the notice concerning Purchase Rights
      to which such holder shall be entitled under paragraph 6(g)) and upon the
      terms applicable to such Purchase Rights either:

      (i)   the aggregate Purchase Rights which such holder could have acquired
            if it had held the number of shares of Common Stock acquirable upon
            conversion of the Series A Preferred Stock immediately before the
            grant, issuance or sale of such Purchase Rights; provided that if
            any Purchase Rights were distributed to holders of Common Stock
            without the payment of additional consideration by such holders,
            corresponding Purchase Rights shall be distributed to the exercising
            holders of the Series A Preferred Stock as soon as possible after
            such exercise and it shall not be necessary for the exercising
            holder of the Series A Preferred Stock specifically to request
            delivery of such rights; or

      (ii)  in the event that any such Purchase Rights shall have expired or
            shall expire prior to the end of said thirty (30) day period, the
            number of shares of Common Stock or the amount of property which
            such holder could have acquired upon such exercise at the time or
            times at which the Corporation granted, issued or sold such expired
            Purchase Rights.

                                                                      Page 1 (o)


(i)   If any event occurs as to which, in the opinion of the Board of Directors
      of the Corporation, the provisions of this Section 6 are not strictly
      applicable or if strictly applicable would not fairly protect the rights
      of the holders of the Series A Preferred Stock in accordance with the
      essential intent and principles of such provisions, then the Board of
      Directors of the Corporation shall make an adjustment in the application
      of such provisions, in accordance with such essential intent and
      principles, so as to protect such rights as aforesaid, but in no event
      shall any adjustment have the effect of increasing the Conversion Price as
      otherwise determined pursuant to any of the provisions of this Section 6
      except in the case of a combination of shares of a type contemplated in
      paragraph 6(d) and then in no event to an amount larger than the
      Conversion Price as adjusted pursuant to paragraph 6(d).

7. MANDATORY CONVERSION

(a)   Each share of Series A Preferred Stock shall automatically be converted
      into shares of Common Stock at its then effective Conversion Price for
      such shares (i) upon the vote to so convert of the holders of at least a
      majority of the shares of Series A Preferred Stock then outstanding or
      (ii) once at least a majority of the shares of Series A Preferred Stock
      issued on the original date of issuance of the Series A Preferred Stock
      shall have been converted into Common Stock.

(b)   All holders of record of shares of Series A Preferred Stock will be given
      at least 10 days' prior written notice of the date fixed and the place
      designated for mandatory conversion of all of such shares of Series A
      Preferred Stock pursuant to this Section 7. Such notice will be sent by
      mail, first class, postage prepaid, to each record holder of shares of
      Series A Preferred Stock at such holder's address appearing on the stock
      register. On or before the date fixed for conversion each holder of shares
      of Series A Preferred Stock shall surrender his or its certificates or
      certificates for all such shares to the Corporation at the place
      designated in such notice, and shall thereafter receive certificates for
      the number of shares of Common Stock to which such holder is entitled
      pursuant to this Section 7. On the date fixed for conversion, all rights
      with respect to the Series A Preferred Stock so converted will terminate,
      except only the rights of the holders thereof, upon surrender of their
      certificate or certificates therefore, to receive certificates for the
      number of shares of Common Stock into which such Series A Preferred Stock
      has been converted. If so required by the Corporation, certificates
      surrendered for conversion shall be endorsed or accompanied by written
      instrument or instruments of transfer, in form satisfactory to the
      Corporation, duly executed by the registered holder or by his attorneys
      duly authorized in writing. All certificates evidencing shares of Series A
      Preferred Stock which are required to be surrendered for conversion in
      accordance with the provisions hereof shall, from and after the date such
      certificates are so required to be surrendered, be deemed to have been
      retired and cancelled and the shares of Series A Preferred Stock
      represented thereby converted into Common Stock for all purposes,
      notwithstanding the failure of the holder or holders thereof

                                                                       Page 1(p)


      to surrender such certificates on or prior to such date. As soon as
      practicable after the date of such mandatory conversion and the surrender
      of the certificate or certificates for Series A Preferred Stock as
      aforesaid, the Corporation shall cause to be issued and delivered to such
      holder, or on his or its written order, a certificate or certificates for
      the number of full shares of Common Stock issuable on such conversion in
      accordance with the provisions hereof and cash as provided in paragraph
      (b) of Section 5 in respect of any fraction of a share of Common Stock
      otherwise issuable upon such conversion.

8. REDEMPTION

(a)   The Corporation, at its option, may redeem (to the extent that such
      redemption shall not violate any applicable provisions of the Ontario
      Business Corporation Act) all, but not less than all, of the shares of
      Series A Preferred Stock at a price equal to the then Series A Liquidation
      Value (subject to adjustment in the event of any stock dividend, stock
      split, stock distribution or combination with respect to such shares)
      (such price is hereinafter referred to as the "Redemption Price"), at any
      time after the third anniversary of the Initial Issuance Date (any such
      date of redemption is hereafter referred to as an "Optional Redemption
      Date"), provided, that prior to July 15, 2006, no shares of Series A
      Preferred Stock may be so called for redemption unless the closing price
      per share of Common Stock for any twenty (20) trading days within a period
      of thirty (30) consecutive trading days ending within ten (10) business
      days of the date on which notice of such redemption is given to the
      holders of the Series A Preferred Stock, shall have been at least 150% of
      the Conversion Price in effect on such date. For purposes of the foregoing
      calculation, "closing price" shall mean for any given date: (i) if the
      Common Stock is listed on any national securities exchange or quoted on
      NASDAQ, on the basis of the last sales price of the Common Stock on such
      exchange or NASDAQ (or the quoted closing bid price if there shall have
      been no sales) on such date, or (ii) if no last sales prices are then
      being quoted for the Common Stock, on the basis of the mean between the
      closing bid and asked prices for the Common Stock on such date as reported
      by Nasdaq, or its successor, or (iii) if there are no such closing bid and
      asked prices, on the basis of the fair market value per share as
      determined by the Board of Directors of the Corporation.

(b)   The Corporation shall redeem the Series A Preferred Stock (to the extent
      that such redemption shall not violate any applicable provisions of the
      Ontario Business Corporation Act) at a price equal to the Redemption Price
      as follows: (i) on July 15, 2006, the Corporation shall redeem the number
      of shares of Series A Preferred Stock equal to thirty-three percent (33%)
      of the shares of Series A Preferred Stock outstanding on such date, (ii)
      on the July 15, 2007, the Corporation shall redeem the number of shares of
      Series A Preferred Stock equal to fifty percent (50%) of the shares of
      Series A Preferred Stock outstanding on such date, and (iii) on July 15,
      2008, the Corporation shall redeem all shares of Series A Preferred Stock
      which remain outstanding as of such date (each of the above dates
      hereinafter referred to as a "Mandatory Redemption Date" and, together
      with an

                                                                       Page 1(q)


      Optional Redemption Date a "Redemption Date"). If the Corporation is
      unable at any Mandatory Redemption Date to redeem any shares of Preferred
      Stock then to be redeemed because such redemption would violate the
      applicable provisions of the Ontario Business Corporation Act, then the
      Corporation shall redeem such shares as soon thereafter as redemption
      would not violate such laws.

(c)   In the event of any redemption of only a part of the then outstanding
      Series A Preferred Stock, the Corporation shall effect such redemption pro
      rata among the holders thereof (based on the number of shares of Series A
      Preferred Stock held on the date of notice of redemption).

(d)   At least thirty (30) days prior to each Redemption Date, written notice
      shall be mailed, postage prepaid, to each holder of record of Series A
      Preferred Stock to be redeemed, at his or its post office address last
      shown on the records of the Corporation, notifying such holder of the
      number of shares so to be redeemed, specifying the Redemption Date and the
      date on which such holder's conversion rights (pursuant to Section 5
      hereof) as to such shares terminate and calling upon such holder to
      surrender to the Corporation, in the manner and at the place designated,
      his or its certificate or certificates representing the shares to be
      redeemed (such notice is hereinafter referred to as the "Redemption
      Notice"). On or prior to each Redemption Date, each holder of Series A
      Preferred Stock to be redeemed shall surrender his or its certificate or
      certificates representing such shares to the Corporation, in the manner
      and at the place designated in the Redemption Notice, and thereupon the
      Redemption Price of such shares shall be payable to the order of the
      person whose name appears on such certificate or certificates as the owner
      thereof and each surrendered certificate shall be cancelled. In the event
      less than all the shares represented by any such certificate are redeemed,
      a new certificate shall be issued representing the unredeemed shares. From
      and after the Redemption Date, unless there shall have been a default in
      payment of the Redemption Price, all rights of the holders of the Series A
      Preferred Stock designated for redemption in the Redemption Notice as
      holders of Series A Preferred Stock of the Corporation (except the right
      to receive the Redemption Price without interest upon surrender of their
      certificate or certificates) shall cease with respect to such shares, and
      such shares shall not thereafter be transferred on the books of the
      Corporation or be deemed to be outstanding for any purpose whatsoever.

(e)   Except as provided in paragraphs (a) and (b) above, the Corporation shall
      have no right to redeem the shares of Series A Preferred Stock other than
      with the consent of the holders of 66 2/3% of the then outstanding shares
      of Series A Preferred Stock. Any shares of Series A Preferred Stock so
      redeemed shall be permanently retired, shall no longer be deemed
      outstanding and shall not under any circumstances be reissued, and the
      Corporation may from time to time take such appropriate corporate action
      as may be necessary to reduce the authorized Series A Preferred Stock
      accordingly. Nothing herein contained shall prevent or restrict the
      purchase by the Corporation, from time to time either at public or private
      sale, of the whole or any part of the Series A Preferred Stock at such
      price or prices as the Corporation may determine, subject to the
      provisions of applicable law.

                                                                       Page 1(r)

(B) That any one of the Directors of the Corporation be and he is hereby
authorized for and on behalf of the Corporation to execute and deliver the said
Articles of Amendment and all such other documents and instruments to do such
acts and things as may be requisite to give full effect to this resolution.

                                                                               2


               5. The amendment has been duly      La modification a ete dument
                  authorized as required by        autorisee conformement aux
                  Sections 168 & 170 (as           articles 168 et 170 (selon le
                  applicable) of the Business      cas) de la Loi sur les
                  Corporations Act.                societes par actions.

               6. The resolution authorizing the   Les actionnaires ou les
                  amendment was approved by the    administrateurs (selon le
                  shareholders/directors (as       cas) de la societe ont
                  applicable) of the corporation   approuve la resolution
                  on                               autorisant la modification le

                                      14 - July - 1999
               -----------------------------------------------------------------
                                     (Day, Month, Year)
                                     (jour, mois, annee)

               These articles are signed in        Les presents statuts sont
               duplicate.                          signes en double exemplaire.

                                                   VISIBLE GENETICS INC.
                                            ------------------------------------
                                                   (Name of Corporation)
                                            (Denomination sociale de la societe)

   Document
   prepared                      By:/Par: /s/ Samuel Schwartz
  using Fast                              --------------------------------------
 Company, by                               (Signature)   (Description of Office)
  Do Process                               (Signature)         (Fonction)
Software Ltd.,                           Samuel Schwartz        Director
   Toronto,
   Ontario
(416) 322-6111

EX-10.3

                                                                  Exhibit 10.3

                              VISIBLE GENETICS INC.

                           EMPLOYEE SHARE OPTION PLAN
                        (AS AMENDED THROUGH MAY 19, 1999)
                        ---------------------------------

1. PURPOSE

The purpose of this Employee Share Option Plan (the "Plan") of Visible Genetics
Inc., an Ontario corporation (the "Company"), is to provide an incentive to
officers, consultants and key employees of the Company and its affiliates by
providing them with the opportunity, through share options, to acquire an
increased proprietary interest in the Company.

2. ADMINISTRATION

The Compensation Committee of the Company's Board of Directors (the "Directors")
shall supervise and administer the Plan.

3. GRANTING OF OPTIONS

The Directors may from time to time by resolution designate persons who are
officers, consultants or key employees of the Company or any of its affiliates
(the "Optionees") to whom options to purchase common shares of the Company (the
"Common Shares") may be granted and the number of the Common Shares to be
optioned to each of them, provided that the total number of Common Shares to be
optioned under this Plan shall not exceed the number provided for in Section 4
hereof. Options shall be granted for a period of up to ten (10) years from the
date, in each case, of the grant, and otherwise upon and subject to such terms,
conditions, limitations, prohibitions and restrictions as are herein contained,
and the said number of authorized and unissued Common Shares (subject to
adjustment pursuant to the provisions of Section 8 hereof) be and they are
hereby set aside and reserved for allotment for the purpose of this Plan.

The Directors may, in their discretion, require as conditions to the grant or
exercise of any option that the Optionee shall have:

     a)   Represented, warranted and agreed in form and substance satisfactory
          to the Company that the Optionee is acquiring and will acquire such
          option and the Common Shares to be issued upon exercise thereof or, as
          the case may be, is acquiring such Common Shares, for the Optionee's
          own account for investment and not with a view to or in connection
          with any distribution, that the Optionee has access to such
          information as is necessary to enable the Optionee to evaluate the
          merits and risks of such investment and that the Optionee is able to
          bear the economic risk of holding such Common Shares for an indefinite
          period;

     b)   Agreed to restrictions on transfer in form and substance satisfactory
          to the Company and to an endorsement on the option or certificate
          representing the Common Shares making appropriate reference to such
          restrictions; and



                                      A-1




     c)   Agreed to indemnify the Company in connection with the foregoing.

In addition, any option granted under this Plan shall be subject to the
requirement that, if at any time counsel to the Company shall determine that the
listing, registration or qualification of the Common Shares subject to such
option upon any securities exchange or under any law or regulation of any
jurisdiction, or the consent or approval of any securities exchange or any
governmental or regulatory body, is necessary as a condition of, or in
connection with, the grant or exercise of such option or the issuance or
purchase of Common Shares hereunder, such option may not be accepted or
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained on conditions
acceptable to the Directors. Nothing herein shall be deemed to require the
Company to apply for or to obtain such listing, registration, qualification,
consent or approval.

4. SHARES SUBJECT TO PLAN

The maximum number of Common Shares which may be reserved for issuance under
this Plan, subject to adjustment or increase of such number pursuant to the
provisions of Section 8 hereof, is 1,500,000 Common Shares. In addition, the
aggregate number of Common Shares reserved for issuance under all options
granted to any one Optionee, whether granted pursuant to a plan or any other
option right or share purchase right (whether granted pursuant to a plan or
otherwise) granted by the Company and outstanding at such time, shall not exceed
the number of Common Shares permitted to be so reserved to such Optionee by law
and by the regulations, rules or policies of the several securities authorities
and stock exchanges to which the Company is on the relevant date subject.

Common Shares in respect of which options are not exercised shall be available
for options subsequently granted. No fractional Common Shares may be purchased
under this Plan.

5. TERMS, CONDITIONS AND FORM OF OPTIONS

Each option granted under the Plan shall be evidenced by a written agreement in
such form as the Directors shall from time to time approve, which agreements
shall comply with and be subject to the following terms and conditions:

     a)   OPTION EXERCISE PRICE. The option exercise price per Common Share for
          each option granted under the Plan shall be as determined by the
          Directors, provided that such price shall not be less than the current
          market price of the Common Shares on the date of the grant. For the
          purposes hereof, the term "current market price" shall mean the
          current market price as determined in good faith by the Directors.

     b)   OPTIONS NON-TRANSFERABLE. Each option granted under the Plan by its
          terms shall not be transferable by the optionee otherwise than by
          will, or by the laws of descent and distribution, or pursuant to a
          qualified domestic relations order (as defined in Section 414(p) of
          the United states Internal Revenue Code (the



                                      A-2


          "Code")), and shall be exercised during the lifetime of the optionee
          only by him. No option or interest therein may be transferred,
          assigned, pledged or hypothecated by the optionee during his lifetime,
          whether by operation of law or otherwise, or be made subject to
          execution, attachment or similar process.

     c)   EXERCISE PERIOD. Except as otherwise provided in the plan, each option
          may be exercised fully on the date of grant of such option, provided
          that, subject to the provisions of Section 5(d), no option may be
          exercised more than ninety (90) days after the optionee ceases to
          serve as an employee or consultant of the Company. No option shall be
          exercisable after the expiration of ten (10) years from the date of
          grant or prior to approval of the Plan by the shareholders of the
          Company, whichever is earlier.

     d)   EXERCISE PERIOD UPON DISABILITY OR DEATH. Notwithstanding the
          provisions of Section 5(c), any option granted under the Plan:

               (i)  may be exercised in full by an optionee who becomes disabled
                    (within the meaning of Section 22(e)(3) of the Code or any
                    successor provision thereof) while serving as an employee or
                    consultant of the Company; or

               (ii) may be exercised:

                    (A)  in full upon the death of an optionee while serving as
                         an employee or consultant of the Company, or

                    (B)  to the extent when exercisable upon the death of an
                         optionee within ninety (90) days of ceasing to serve as
                         an employee or consultant of the Company,

               by   the person to whom it is transferred by will, by the laws of
                    descent and distribution, or by written notice filed
                    pursuant to Section 5(g);

                  in each such case within the period of one year after the date
                  the optionee ceases to be such an employee or consultant;
                  provided, that no option shall be exercisable after the
                  expiration of ten (10) years from the date of grant.

     (e)  EXERCISE PROCEDURE. Options may be exercised only by written notice to
          the Company at its principal office accompanied by payment of the full
          consideration for the Common Shares as to which they are exercised.

     (f)  PAYMENT OF PURCHASE PRICE. Options granted under the Plan may
          provide for the payment of the exercise price (i) by delivery of
          cash or a check to the order of the Company in an amount equal to
          the exercise price of such options or, (ii) to the extent provided
          in the applicable option agreement, by delivery to the Company of
          Common Shares then owned by the optionee having a fair market value
          equal

                                      A-3


          in amount to the exercise price of the Options being exercised, or
          (iii) by any combination of such methods of payment. The fair market
          value of any Common Shares or other non-cash consideration which may
          be delivered upon exercise of an option shall be determined by the
          Directors.

     (g)  EXERCISE OF REPRESENTATIVE FOLLOWING DEATH OF DIRECTOR. A Director, by
          written notice to the Company, may designate one or more persons (and
          from time to time change such designation) including his legal
          representative, who, by reason of his death, shall acquire the right
          to exercise all or a portion of the option. If the person or persons
          so designated wish to exercise any portion of the option, they must do
          so within the term of the option as provided herein. Any exercise by a
          representative shall be subject to the provisions of the Plan.

6. ASSIGNMENTS

The rights and benefits under the Plan may not be assigned except for the
designation of a beneficiary as provided in Section 5.

7. LIMITATION OF RIGHTS

     (a)  NO RIGHT TO CONTINUE AS AN EMPLOYEE OR CONSULTANT. Neither the Plan
          nor the granting of an option nor any other action taken pursuant to
          the Plan, shall constitute or be evidence of any agreement or
          understanding, express or implied, that the Company will retain an
          employee or consultant for any period of time.

     (b)  NO SHAREHOLDERS' RIGHTS FOR OPTIONS. An optionee shall have no rights
          as a shareholder with respect to the Common Shares covered by his
          options until the date of the issuance to him of a share certificate
          therefor, and no adjustment will be made for dividends or other rights
          for which the record date is prior to the date such certificate is
          issued.

8. CHANGES IN CAPITAL STOCK

     (a)  If (x) the outstanding shares of Common Shares are increased,
          decreased or exchanged for a different number or kind of share or
          other security of Company, or (y) additional shares of Common
          Shares or new or different shares of Common Shares or other
          securities of the Company or other non-cash assets are distributed
          with respect to such shares or other securities, through or as a
          result of any merger, consolidation, sale of all or substantially
          all of the assets of the Company, reorganization, recapitalization,
          reclassification, stock dividend, stock split, reverse stock split
          or other similar transactions with respect to such shares or other
          securities, and appropriate and proportionate adjustment shall be
          made in (i) the maximum number and kind of shares reserved for
          issuance under the plan, and (ii) the number and kind of shares or
          other securities subject to then outstanding options under the Plan
          and (iii) the price of each share subject to any then outstanding
          options under the Plan, without changing the aggregate purchase

                                      A-4


          price as to which such options remain exercisable. No fractional
          shares will be issued under the Plan on account of any such
          adjustments. Notwithstanding the foregoing, no adjustment shall be
          made pursuant to this Section 8 if such adjustment would cause the
          Plan to fail to comply with Rule 16b-3 or any successor rule
          promulgated pursuant to Section 16 of the Securities Exchange Act of
          1934.

     (b)  In the event that the Company is merged or consolidated into or with
          another corporation (in which consolidation or merger, the
          shareholders of the Company receive distributions of cash or
          securities of another issuer as a result thereof), or in the event
          that all or substantially all of the assets of the Company are
          acquired by any other person or entity, or in the event of a
          reorganization or liquidation of the Company, the Directors of the
          Company, or the board of directors of any corporation assuming the
          obligations of the Company, shall, as to outstanding options take one
          or more of the following actions: (i) provide that such options shall
          be assumed, or equivalent options shall be substituted, by the
          acquiring or succeeding corporation (or an affiliate thereof), (ii)
          upon written notice to the optionee, provide that all unexercised
          options will terminate immediately prior to the consummation of such
          transaction unless exercised by the optionee within a specified period
          following the date of such notice, or (iii) if, under the terms of a
          merger transaction, holders of the Common Shares of the Company will
          receive upon consummation thereof a cash payment for each share
          surrendered in the merger (the "Merger Price"), make or provide for a
          cash payment to the optionees equal to the difference between (A) the
          Merger Price times the number of shares of Common Shares subject to
          such outstanding options (to the extent then exercisable at prices not
          in excess of the Merger Price) and (B) the aggregate exercise price of
          all such outstanding options in exchange for the termination of such
          options.

9. AMENDMENT OF THE PLAN

The Directors may suspend or discontinue the Plan or review or amend it in any
respect whatsoever; provided, however, that without approval of the shareholders
of the Company no revision or amendment shall change the number of shares
subject to the Plan or the number of shares issuable to any shareholder of the
Company under the Plan (except as provided in Section 8), change the designation
of the class of persons eligible to receive options, or materially increase the
benefits accruing to participants under the Plan.

10. WITHHOLDING

The Company shall have the right to deduct from payments of any kind otherwise
due to the optionee, any federal, state or local taxes of any kind required by
law to be withheld with respect to any shares issued upon exercise of options
under the Plan.



                                      A-5




11. EFFECTIVE DATE AND DURATION OF THIS PLAN

     (a)  EFFECTIVE DATE. The Plan shall become effective when adopted by the
          Directors and approved by the Company's shareholders. Amendments to
          the plan not requiring shareholder approval shall become effective
          when adopted by the Directors; amendments requiring shareholder
          approval shall become effective when adopted by the Directors, but no
          option granted after the date of such amendment shall become
          exercisable (to the extent that such amendment to the Plan was
          required to enable the Company to grant such option to a particular
          optionee) unless and until such amendment shall have been approved by
          the Company's shareholders. If such shareholder approval is not
          obtained within twelve months of the Board's adoption of such
          amendment, any options granted on or after the date of such amendment
          shall terminate to the extent that such amendment to the Plan was
          required to enable the Company to grant such option to a particular
          optionee.

     (b)  TERMINATION. Unless sooner terminated by the Directors, the Plan shall
          terminate upon the date on which all shares available for issuance
          under the Plan shall have been issued pursuant to the exercise or
          cancellation of options granted under the Plan.

12. NOTICE

Any written notice to the Company required by any of the provisions of the Plan
shall be addressed to the Secretary of the Company and shall become effective
when it is received.

13. GOVERNMENTAL REGULATION

The Company's obligation to sell and deliver shares of Common Shares under the
plan is subject to the approval of or requirements of any governmental authority
applicable in connection with the authorization, issuance or sale of such
shares.

14. COMPLIANCE WITH RULE 16b-3

Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successor promulgated pursuant to Section 16 of
the Securities Exchange Act of 1934. To the extent any provision of the Plan or
action by the Directors in administering the plan fails to so comply, it shall
be deemed null and void, to the extent permitted by law and deemed advisable by
the Directors.

15. GOVERNING LAW

The Plan and all determinations made and actions taken pursuant hereto shall be
governed by the laws of the Province of Ontario and the laws of Canada
applicable therein.



                                      A-6




16. SUCCESSORS AND ASSIGNS

This Plan shall inure to the benefit of and be binding upon each successor and
assign of the Company. All obligations imposed upon an optionee, and all rights
granted to the Company hereunder, shall be binding upon the optionee's heirs,
legal representatives and successors.

17. ENTIRE AGREEMENT

This Plan and the written agreement with respect to each option granted under
this Plan constitute the entire agreement with respect to the subject matter
hereof and thereof, provided that in the event of any inconsistency between the
Plan and such written agreement, the terms and conditions of this Plan shall
control.

18. INCENTIVE STOCK OPTIONS

Notwithstanding anything in the Plan to the contrary, options granted under the
Plan which are intended to be "Incentive Stock Options" within the meaning of
Section 422 of the Code shall be subject to the following additional terms and
conditions:

     (a)  EXPRESS DESIGNATION. All Incentive Stock Options granted under the
          Plan shall, at the time of grant, be specifically designated as such
          in the written agreement evidencing such Incentive Stock Options.
          Incentive Stock Options may be granted only to persons who are, at the
          time of grant, employees of the Company or any parent or subsidiary of
          the Company as respectively defined in Sections 424(e) and 424(f) of
          the Code (an "Affiliate"). No Incentive Stock Option may be granted
          hereunder more than ten (10) years from the earlier of (i) the date
          the Plan was adopted, or (ii) the date the Plan was approved by the
          shareholders of the Company.

     (b)  EXERCISE PRICE. The option exercise price per Common Share subject to
          each Incentive Stock Option granted under the Plan shall not be less
          than 100% of the fair market value of a Common Share at the time of
          grant of such option. For purposes of the Plan, the fair market value
          of a Common Share as of a specified date shall be determined in good
          faith by the Directors. In no case shall the fair market value of a
          Common Share be determined with regard to restrictions other than
          restrictions which, by their terms, will never lapse.

     (c)  10% SHAREHOLDER. Notwithstanding the foregoing, if any employee to
          whom an Incentive Stock Option is to be granted under the Plan is, at
          the time of the grant of such option, the owner of stock possessing
          more than 10% of the total combined voting power of all classes of
          stock of the Company (after taking into account the attribution of
          stock ownership rules of Section 424(d) of the Code), then the
          following special provisions shall be applicable to the Incentive
          Stock Option granted to such individual:



                                      A-7




               (i)  the option exercise price per Common Share subject to such
                    Incentive Stock Option shall not be less than 110% of the
                    fair market value of a Common Share at the time of grant;
                    and

               (ii) the option exercise period shall not exceed five (5) years
                    from the date of grant.

     (d)  DOLLAR LIMITATION. For so long as the Code shall so provide, options
          granted to any employee under the Plan (and any other Incentive Stock
          Option plans of the Company) which are intended to constitute
          Incentive Stock Options shall not constitute Incentive Stock Options
          to the extent that such options, in the aggregate, become exercisable
          for the first time in any one calendar year for Common Shares with an
          aggregate fair market value, as of the respective date or dates of
          grant, of more than $100,000.

     (e)  EXERCISABILITY, TERMINATION OF EMPLOYMENT, DEATH AND DISABILITY. No
          Incentive Stock Option may be exercised unless, at the time of such
          exercise, the optionee is, and has been continuously since the date of
          grant of his or her option, employed by the Company or an Affiliate,
          except that:

               (i)  an Incentive Stock Option may be exercised within the period
                    of three (3) months after the date the optionee ceases to be
                    an employee of the Company or an Affiliate (or within such
                    lesser period as may be specified in the acceptable option
                    agreement), to the extent it is otherwise exercisable at the
                    time of such cessation,

               (ii) if the optionee dies while in the employ of the Company or
                    an Affiliate, or within three (3) months after the optionee
                    ceases to be such an employee, the Incentive Stock Option
                    may be exercised by the person to whom it is transferred by
                    will or the laws of descent and distribution within the
                    period of one (1) year after the date of death (or within
                    such lesser period as may be specified in the applicable
                    option agreement), to the extent it is otherwise exercisable
                    at the time of the optionee's death, and

               (iii) if the optionee becomes disabled (within the meaning of
                    Section 22(e)(3) of the Code or any successor provisions
                    thereto) while in the employ of the Company or an Affiliate,
                    the Incentive Stock Option may be exercised within the
                    period of one (1) year after the date the optionee ceases to
                    be such an employee because of such disability (or within
                    such lesser period as may be specified in the applicable
                    option agreement), to the extent it is otherwise exercisable
                    at the time of such cessation.

          For purposes of any Incentive Stock Option granted hereunder,
          "employment" shall be defined in accordance with the provisions of
          Section 1.421-7(h) of the



                                      A-8


          U.S. Income Tax Regulations (or any successor regulations).
          Notwithstanding the foregoing provisions, no Incentive Stock Option
          may be exercised after the earlier of (1) its expiration date, or (2)
          the tenth anniversary of the date of which the Incentive Stock Options
          is granted.

     (f)  TRANSFER, ASSIGNMENT. No Incentive Stock Option granted under this
          Plan shall be assignable or otherwise transferable by the optionee,
          except by will or by the laws of descent and distribution. An
          Incentive Stock Option may be exercised during the lifetime of the
          optionee only by the optionee.

                                      A-9

EX-10.10

                                                               Exhibit 10.10

- - --------------------------------------------------------------------------------

- - --------------------------------------------------------------------------------



                          SECURITIES PURCHASE AGREEMENT

                                  by and among

                     WARBURG, PINCUS EQUITY PARTNERS, L.P.,

                  WARBURG, PINCUS VENTURES INTERNATIONAL, L.P.

              WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I, C.V.,

              WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II, C.V.,

              WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS III, C.V.

                                       and

                              VISIBLE GENETICS INC.

                                  July 15, 1999

- - --------------------------------------------------------------------------------

- - --------------------------------------------------------------------------------








                                TABLE OF CONTENTS

                                                                                          PAGE
                                                                                          ----
                                                                                     
SECTION 1.  AUTHORIZATION OF COMMON STOCK AND WARRANT.......................................1

SECTION 2.  PURCHASE, SALE AND ISSUANCE OF SHARES AND WARRANTS..............................2

SECTION 3.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................2
        3.1.  Corporate Organization........................................................3
        3.2.  Subsidiaries..................................................................3
        3.3.  Capitalization................................................................4
        3.4.  Corporate Proceedings, etc....................................................5
        3.5.  Consents and Approvals........................................................5
        3.6.  Absence of Conflicts, etc.....................................................6
        3.7.  SEC Reports...................................................................6
        3.8.  Absence of Certain Developments...............................................8
        3.9.  Compliance with Law...........................................................8
        3.10.  Litigation...................................................................9
        3.11.  Material Contracts...........................................................9
        3.12.  Absence of Undisclosed Liabilities..........................................10
        3.13.  Labor Relations and Employment..............................................10
        3.14.  Employee Benefit Plans......................................................12
        3.15.  Real Property...............................................................12
        3.16.  Condition of Properties.....................................................13
        3.17.  Environmental Matters.......................................................13
        3.18.  Intellectual Property.......................................................15
        3.19.  Regulatory Matters..........................................................17
        3.20.  Year 2000...................................................................18
        3.21.  Tax Matters.................................................................18
        3.22.  Insurance...................................................................19
        3.23.  Transactions with Related Parties...........................................19
        3.24.  Interest in Competitors.....................................................19
        3.25.  Private Offering............................................................20
        3.26.  Brokerage...................................................................20
        3.27.  Material Facts..............................................................20
        3.28.  Fairness Opinion............................................................21

SECTION 4.  REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...............................21

SECTION 5.  COVENANTS OF THE PARTIES.......................................................22
        5.1.  Additional Agreements........................................................22

SECTION 6.  ADDITIONAL COVENANTS OF THE COMPANY............................................23
        6.1.  Use of Proceeds..............................................................23
        6.2.  Financial and Business Information...........................................23
        6.3.  Inspection...................................................................24
        6.4.  Confidentiality..............................................................25
        6.5.  Board Nominees...............................................................26
        6.6.  Board Committees.............................................................26
        6.7.  Subscription Right...........................................................26




                                       i


                                                                                    
        6.8.  Covenant not to Breach Representations and Warranties, Covenants.............28
        6.9.  Conduct of Business and Maintenance of Existence.............................28
        6.10.  Compliance with Laws........................................................28
        6.11.  Insurance...................................................................28
        6.12.  Keeping of Books............................................................29
        6.13.  Lost, etc. Certificates Evidencing Shares or Dividend
                     Shares (or Shares of Common Stock); Exchange..........................29
        6.14. Competing Transaction Restriction............................................29

SECTION 7.  ADDITIONAL COVENANTS OF THE PURCHASERS.........................................30
        7.1.  Resale of Securities.........................................................30
        7.2.  Standstill...................................................................31

SECTION 8.  CLOSING CONDITIONS OF THE PURCHASERS AND THE COMPANY...........................31
        8.1.  Injunction...................................................................31

SECTION 9.  PURCHASERS' CLOSING CONDITIONS.................................................31
        9.1.  Representations and Warranties...............................................32
        9.2.  Compliance with Transaction Documents........................................32
        9.3.  Officer's Certificate........................................................32
        9.4.  Consents.....................................................................32
        9.5.  Counsel's Opinion............................................................32
        9.6.  Registration Rights Agreement................................................32
        9.7.  Adverse Development..........................................................32
        9.8.  Election of Director.........................................................33
        9.9.  Approval of Proceedings......................................................33
        9.10.  Termination of Term Loan....................................................33

SECTION 10.  COMPANY CLOSING CONDITIONS....................................................33
        10.1.  Representations and Warranties..............................................33
        10.2.  Compliance with Transaction Documents.......................................33
        10.3.  Purchaser's Certificates....................................................34

SECTION 11.  TERMINATION, AMENDMENT AND WAIVER.............................................34
        11.1.  Termination.................................................................34
        11.2.  Effect of Termination.......................................................35
        11.3.  Amendment...................................................................35
        11.4.  Waiver......................................................................35

SECTION 12.  INTERPRETATION OF THIS AGREEMENT..............................................35
        12.1.  Terms Defined...............................................................35
        12.2.  Schedules...................................................................36
        12.3.  Accounting Principles.......................................................37
        12.4.  Directly or Indirectly......................................................37
        12.5.  Governing Law...............................................................37
        12.6.  Paragraph and Section Headings..............................................37

SECTION 13.  MISCELLANEOUS.................................................................37
                                      -ii-






                                                                                    
        13.1.  Survival of Representations, Warranties and Agreements......................37
        13.2.  Notices.....................................................................38
        13.3.  Expenses....................................................................39
        13.4.  Publicity...................................................................39
        13.5.  Specific Performance........................................................39
        13.6.  Submission to Jurisdiction..................................................39
        13.7.  Successors and Assigns......................................................40
        13.8.  Entire Agreement; Amendment and Waiver......................................40
        13.9.  Severability................................................................40
        13.10.  Limitation on Enforcement of Remedies......................................40
        13.11.  Counterparts...............................................................40





                                      -iii-






                        
EXHIBIT A                  Certificate of Designation
EXHIBIT B                  Form of Warrant
EXHIBIT C                  Restated Articles of Incorporation of the Company
EXHIBIT D                  By-law No. 3 of the Company
EXHIBIT E                  Form of Opinion of Counsel
EXHIBIT F                  Form of Registration Rights Agreement
EXHIBIT G                  Form of Amendment of Hilal Funds Registration Rights Agreement

Schedule 2                     Shares, Warrants, Purchase Price
Schedule 3.2                   Subsidiaries
Schedule 3.3(a)                Employee Stock Option Plans
Schedule 3.3(c)                Conversion and Preemptive Rights
Schedule 3.5                   Consents and Approvals
Schedule 3.6                   Conflicts, etc.
Schedule 3.8                   Certain Developments
Schedule 3.9                   Compliance with Law
Schedule 3.10                  Litigation
Schedule 3.12                  Undisclosed Liabilities
Schedule 3.13(a)               Labor Relations
Schedule 3.13(b)               Employment Not Terminable at Will
Schedule 3.13(c)               Exceptions to Confidentiality Agreements
Schedule 3.13(e)               Anticipated Employee Departures
Schedule 3.14                  Employee Benefit Plans
Schedule 3.15                  Leased Real Property
Schedule 3.18(a)               Intellectual Property - Liens
Schedule 3.18(b)               Intellectual Property - Claims
Schedule 3.18(c)               Intellectual Property - Licenses
Schedule 3.18(d)               Intellectual Property - Former Personnel
Schedule 3.19                  Regulatory Proceedings
Schedule 3.20                  Year 2000
Schedule 3.21                  Tax Matters
Schedule 3.22                  Insurance
Schedule 3.23                  Transactions with Related Parties




                                  -iv-







                                      INDEX

                                                                                         
1998 Financial Statements....................................................................7

Act..........................................................................................30
Affiliate....................................................................................34
Agreement.....................................................................................1

Board.........................................................................................1
Business Day.................................................................................35

CERCLA.......................................................................................14
Certificate of Designation....................................................................1
Closing.......................................................................................2
Closing Date..................................................................................2
Common Stock..................................................................................1
Company.......................................................................................1

Employee Benefit Plan........................................................................35
Environmental Laws...........................................................................14
Environmental Permits........................................................................14
Exchange Act.................................................................................35
Expiration Date..............................................................................34

FDA..........................................................................................17
FDCA.........................................................................................17

GAAP..........................................................................................7
Governmental Entity..........................................................................35

Hazardous Materials..........................................................................14
Hilal Funds...................................................................................9

IDE..........................................................................................17
Intellectual Property........................................................................16
Interim SEC Reports...........................................................................6

knowledge, to the best of the Company's knowledge............................................35

Leased Real Property.........................................................................12

Material Adverse Effect.......................................................................3

Organizational Documents......................................................................3

PCB..........................................................................................13
Person.......................................................................................35
Preferred Stock...............................................................................4
Proposed Securities..........................................................................26
Purchase Price................................................................................2
Purchaser.....................................................................................1
Purchasers....................................................................................1


                                        -v-



                                                                                         
RCRA.........................................................................................14
Registration Rights Agreement................................................................32
Regulated Product............................................................................17
Remedial Action..............................................................................15

SEC..........................................................................................35
SEC Reports...................................................................................6
Securities Act...............................................................................35
Shares........................................................................................1
subsidiary...................................................................................35

Transaction Documents.........................................................................5

Warburg Purchaser............................................................................30
Warrants......................................................................................1






                                      -vi-




                          SECURITIES PURCHASE AGREEMENT

     SECURITIES PURCHASE AGREEMENT, dated as of July 15, 1999 (this
"AGREEMENT"), by and among Visible Genetics Inc., an Ontario corporation (the
"COMPANY"), Warburg, Pincus Equity Partners, L.P., a Delaware limited
partnership, Warburg, Pincus Ventures International, L.P., a [Delaware] limited
partnership, Warburg, Pincus Netherlands Equity Partners I, C.V., a Dutch
limited partnership, Warburg, Pincus Netherlands Equity Partners II, C.V., a
Dutch limited partnership, and Warburg, Pincus Netherlands Equity Partners III,
C.V., a Dutch limited partnership (each, a "PURCHASER", and collectively, the
"PURCHASERS").

                              W I T N E S S E T H:

     WHEREAS, the Purchasers desire to purchase 30,000 Series A preferred
shares, without par value, of the Company (the "SHARES"), which are convertible
into common shares of the Company, without par value (the "COMMON STOCK"), and
to purchase warrants initially exercisable with respect to 1,100,000 shares of
Common Stock (the "WARRANTS"), and the Company desires to issue and sell the
Shares and the Warrants to the Purchasers, in each case upon the terms and
subject to the conditions set forth in this Agreement.

     WHEREAS, the Board of Directors of the Company (the "BOARD") has approved
the purchase and sale of the Shares and the Warrants, upon the terms and subject
to the conditions set forth herein, and the Board deems such sale to be
advisable and in the best interests of the stockholders of the Company.

     NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:

SECTION 1.  AUTHORIZATION OF COMMON STOCK AND WARRANT

     (a) The Company has authorized and created a series of its preferred shares
consisting of 33,950 shares, without par value, designated as its "Series A
Convertible Preferred Shares" (the "SERIES A PREFERRED STOCK"). The terms,
limitations and relative rights and preferences of the Series A Preferred Stock
are set forth in the Certificate of Designations, Number, Voting Powers,
Preferences and Rights of Series A Convertible Preferred Shares of the Company,
a copy of which is attached hereto as EXHIBIT A (the "CERTIFICATE OF
DESIGNATION"). The Company has reserved for issuance the shares of Common Stock
issuable upon conversion of the Series A Preferred Stock.



                                      -1-


     (b) The Company has authorized the issuance of the Warrants to the
Purchasers and reserved for issuance the shares of Common Stock issuable upon
exercise of the Warrants. The terms of the Warrants are set forth in the form of
Warrant, a copy of which is attached as EXHIBIT B hereto.

SECTION 2.  PURCHASE, SALE AND ISSUANCE OF SHARES AND WARRANTS

     (a) Subject to the terms and conditions set forth in this Agreement and in
reliance upon the Company's and the Purchasers' respective representations and
warranties set forth below, on the Closing Date (as defined below) the Company
shall sell to each Purchaser, and each Purchaser shall purchase from the
Company, (i) the number of shares of Series A Preferred Stock set forth opposite
such Purchaser's name in column 1 on Schedule 2, and (ii) a Warrant exercisable
to acquire the number of shares of Common Stock set forth opposite such
Purchaser's name in column 2 on Schedule 2, for such consideration as is set
forth opposite such Purchaser's name in column 3 on Schedule 2 (the aggregate
consideration to be paid by the Purchasers for the shares of Series A Preferred
Stock and the Warrants, the "PURCHASE PRICE"). Such sale and purchase shall be
effected on the Closing Date by the Company executing and delivering to each
Purchaser, duly registered in such Purchaser's name, (i) a duly executed stock
certificate evidencing the number of shares of Series A Preferred Stock set
forth opposite such Purchaser's name in column 1 on Schedule 2 and (ii) a duly
executed Warrant evidencing the number of shares of Common Stock into which such
Warrant is exercisable set forth opposite such Purchaser's name in column 2 on
Schedule 2, against delivery by the Purchasers to the Company of the Purchase
Price by wire transfer of immediately available United States dollars to such
account as the Company shall designate prior to the Closing Date.

     (b) The closing of such sale, purchase and issuance (the "CLOSING") shall
take place at 2:00 p.m., New York City time, on July 15, 1999, ior such other
date as the Purchasers and the Company shall agree in writing (the "CLOSING
DATE"), at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New
York, New York, or such other location as the Purchasers and the Company shall
mutually select.

SECTION 3.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company represents and warrants to the Purchasers that:

          3.1. CORPORATE ORGANIZATION

          (a) The Company is a corporation duly organized, validly existing and
     in good standing under the laws of the Province of Ontario. Attached hereto
     as EXHIBIT C and EXHIBIT D, respectively, are true and complete copies of
     the Restated




                                      -2-


     Articles of Incorporation and By-law No. 3 of the Company, as amended
     through the date hereof (collectively, the "ORGANIZATIONAL DOCUMENTS").

     (b) The Company has all requisite power and authority and has all necessary
approvals, licenses, permits and authorization to own, operate or lease its
properties and to carry on its business as now conducted, except where the
failure to have any such approval, license, permit or authorization would not
reasonably be expected to have a material adverse effect on the business,
properties, or financial condition of the Company and its subsidiaries taken as
a whole (a "MATERIAL ADVERSE EFFECT"). The Company has all requisite power and
authority to execute and deliver the Transaction Documents and to perform its
obligations hereunder and thereunder.

     (c) The Company has filed all necessary documents to qualify to do business
as a foreign corporation in, and the Company is in good standing under the laws
of, each jurisdiction in which the conduct of the Company's business or the
nature of the properties owned or leased by the Company requires such
qualification, except where the failure to so qualify would not reasonably be
expected to have a Material Adverse Effect.

     3.2. SUBSIDIARIES

     (a) SCHEDULE 3.2 sets forth (i) the name of each subsidiary of the Company,
other than subsidiaries that are dormant or that do not carry on business
activities; (ii) the name of each corporation, partnership, joint venture or
other entity (other than such subsidiaries) in which the Company or any of its
subsidiaries has, or pursuant to any agreement has the right or obligation to
acquire at any time by any means, directly or indirectly, an equity interest or
investment; (iii) in the case of each of such corporations described in clauses
(i) and (ii) above, (A) the jurisdiction of incorporation and (B) the
capitalization thereof and the percentage of each class of voting capital stock
owned by the Company or any of its subsidiaries.

     (b) Each subsidiary of the Company listed on SCHEDULE 3.2 has been duly
organized, is validly existing and in good standing under the laws of the
jurisdiction of its organization, has the corporate power and authority to own
and lease its properties and to conduct its business and is duly registered,
qualified and authorized to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the nature of its
properties requires such registration, qualification or authorization, except
where the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect. All of the issued and outstanding equity or other
participating interests of each subsidiary have been duly authorized and validly
issued, are fully paid and non-assessable, and, to the extent owned by the


                                      -3-



Company as indicated on SCHEDULE 3.2, are owned free and clear of any mortgage,
pledge, lien, encumbrance, security interest, claim or equity, except as set
forth on SCHEDULE 3.2.

     3.3. CAPITALIZATION

     (a) The authorized capital stock of the Company consists of an unlimited
number of shares of Common Stock and an unlimited number of preferred shares,
without par value ("PREFERRED STOCK"). As of the close of business on the date
one Business Day prior to the date hereof, (i) 9,569,988 shares of Common Stock
were issued and outstanding, (ii) no shares of Preferred Stock were issued and
outstanding, (iii) 2,850,901 shares of Common Stock were reserved for issuance
under the Company's employee stock option plans listed on SCHEDULE 3.3(a) in the
amounts stated in such schedule, (iv) 812,367 shares of Common Stock were
reserved for issuance under the Company's outstanding warrants and convertible
securities, and (v) there were no bonds, debentures, notes or other evidences of
indebtedness issued or outstanding having the right to vote on any matters on
which the Company's stockholders may vote.

     (b) All of the outstanding shares of Common Stock of the Company have been
duly and validly issued and are fully paid and non-assessable, and were issued
in accordance with all applicable United States federal and state and Canadian
federal and provincial securities laws. Upon issuance, sale and delivery as
contemplated by this Agreement, the Shares will be duly authorized, validly
issued, fully paid and non-assessable shares of Series A Preferred Stock, free
of all preemptive or similar rights. Upon their issuance in accordance with the
terms of the Series A Preferred Stock, the shares of Common Stock issuable upon
conversion of the Shares will be duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock of the Company, free of all preemptive or
similar rights. Upon their issuance in accordance with the terms of the
Warrants, the shares of Common Stock issuable upon exercise of the Warrants will
be duly authorized, validly issued, fully paid and non-assessable shares of
Common Stock, free of all preemptive or similar rights.

     (c) Except for the rights which attach to the options which are listed on
SCHEDULE 3.3(a) and the warrants, options and convertible securities which are
listed on SCHEDULE 3.3(c) hereto and to the Shares and Warrants, on the Closing
Date, there will be no shares of Common Stock or any other equity security of
the Company issuable upon exercise, conversion or exchange of any security of
the Company nor will there be any rights, options or warrants outstanding or
other agreements to acquire shares of Common Stock or any other equity security
of the Company nor will the Company be contractually obligated to purchase,
redeem or otherwise acquire any outstanding shares of Common Stock. Except as
set forth on SCHEDULE 3.3(c), (i) no stockholder of the



                                      -4-


Company is entitled to any preemptive or similar rights to subscribe for shares
of capital stock of the Company, (ii) the Company has not agreed to register any
of its securities under the Securities Act (other than pursuant to the
Registration Rights Agreement) and (iii) there are no existing voting trusts or
similar agreements to which the Company or any of its subsidiaries is a party
with respect to the voting of the capital stock of the Company or any of its
subsidiaries.

     3.4. CORPORATE PROCEEDINGS, ETC.

     The Company has full corporate power to execute and deliver this Agreement,
the Warrants and the Registration Rights Agreement (collectively, the
"TRANSACTION DOCUMENTS"), to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of the Transaction Documents by the Company
and each of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of the Company. No
other corporate action on the part of the Company is necessary to authorize the
execution, delivery and performance of the Transaction Documents by the Company
and each of the transactions contemplated hereby and thereby, and upon such
execution and delivery (assuming the Transaction Documents are executed and
delivered by the other parties thereto), each of the Transaction Documents shall
constitute a valid and binding obligation of the Company enforceable in
accordance with its terms, except that (i) the enforceability hereof and thereof
may be subject to applicable bankruptcy, insolvency or other similar laws, now
or hereinafter in effect, affecting creditors' rights generally, and (ii) the
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought.

     3.5. CONSENTS AND APPROVALS

     Except as set forth in SCHEDULE 3.5, the execution and delivery by the
Company of the Transaction Documents, the performance by the Company of its
obligations hereunder and thereunder and the consummation by the Company of the
transactions contemplated hereby and thereby do not require the Company or any
of its subsidiaries to obtain any consent, approval or action of, or make any
filing with or give any notice to, any corporation, Person, firm, Governmental
Entity or public or judicial authority, including, but not limited to, pursuant
to the Competition Act (Canada) and the Investment Canada Act, as amended.



                                      -5-


     3.6. ABSENCE OF CONFLICTS, ETC.

     Except as set forth in SCHEDULE 3.6, the execution and delivery by the
Company of the Transaction Documents do not, and the fulfillment of the terms
hereof and thereof by the Company, and the issuance of the Shares, the Warrants
and the Common Stock issuable upon exercise of the Warrants will not, result in
a breach of any of the terms, conditions or provisions of, or constitute a
default under, or permit the acceleration of rights under or termination of, the
Organizational Documents, any material agreement to which the Company or its
subsidiaries is a party, or any order, judgment, rule or regulation of any
Governmental Entity having jurisdiction over the Company or any of its
subsidiaries or over their respective properties or businesses, except for such
defaults that would not reasonably be expected to have a Material Adverse
Effect.

     3.7. SEC REPORTS

     (a) The Company has furnished the Purchasers with true and complete copies
(including all amendments thereof) of its (i) Annual Reports on Form 20-F for
the fiscal years ended December 31, 1997 and 1998 as filed with the SEC, (ii)
all other documents filed with the SEC (pursuant to Section 13, 14(a) and 15(d)
of the Exchange Act) and the Canadian securities regulatory authorities since
January 1, 1996 and (iii) all registration statements filed with the SEC since
January 1, 1996, which are all the documents (other than preliminary material)
that the Company filed or was required to file with the SEC or the Canadian
securities regulatory authorities from that date through the date hereof
(clauses (i) through (iii) being referred to herein collectively as the "SEC
REPORTS"). Except to the extent they may have been subsequently amended or
otherwise modified prior to the date hereof by subsequent reporting or filings,
as of their respective dates, the SEC Reports (as the same may have been amended
or otherwise modified) complied in all material respects with the requirements
of the Securities Act or the Exchange Act and the rules and regulations of the
SEC thereunder applicable to such reports and registration statements. Except to
the extent they may have been subsequently amended or otherwise modified prior
to the date hereof by subsequent reporting or filings, as of their respective
dates, the SEC Reports did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

     (b) From the date hereof through the Closing Date, the Company will
promptly furnish to the Purchasers upon their being filed copies of any
documents filed by the Company with the SEC or the Canadian securities
regulatory authorities (the "INTERIM SEC REPORTS"). As of their respective
dates, the Interim SEC Reports will comply in all material respects with the


                                      -6-


requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such reports and
registration statements. As of their respective dates, the Interim SEC Reports
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

     (c) The audited consolidated financial statements as at and for the period
ended December 31, 1998 of the Company included in the SEC Reports (the "1998
FINANCIAL STATEMENTS") comply as to form in all material respects with
accounting requirements of the Securities Act or the Exchange Act, as
applicable, and with the published rules and regulations of the SEC with respect
thereto. The 1998 Financial Statements (i) have been prepared in accordance with
generally accepted accounting principles in the United States of America
("GAAP") applied on a consistent basis (except as may be indicated therein or in
the notes thereto), (ii) present fairly, in all material respects, the financial
position of the Company and its subsidiaries as of the dates thereof and the
results of their operations and cash flows for the periods then ended and (iii)
are in all material respects in agreement with the books and records of the
Company and its subsidiaries.

     (d) Except as otherwise disclosed in a Form 6-K filed by the Company on
July 7, 1999, the unaudited interim financial statements of the Company as at
and for all periods commencing on or after January 1, 1999 included in the SEC
Reports or the Interim SEC Reports comply, or in the case of the Interim SEC
Reports will comply, as to form in all material respects with accounting
requirements of the Securities Act or the Exchange Act, as applicable, and with
the published rules and regulations of the SEC with respect thereto. Except as
otherwise disclosed in a Form 6-K filed by the Company on July 7, 1999, the
condensed financial statements included in the SEC Reports or in the Interim SEC
Reports: (i) have been, or in the case of the Interim SEC Reports will be,
prepared in accordance with GAAP applied on a consistent basis (except as may be
indicated therein or in the notes thereto), (ii) present or will present fairly,
in all material respects, the financial position of the Company and its
subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended subject to normal year-end audit
adjustments and any other adjustments described therein and the fact that
certain information and notes have been condensed or omitted in accordance with
the Exchange Act and the rules and regulations promulgated thereunder, and (iii)
are, and will be, in all material respects in agreement with the books and
records of the Company and its subsidiaries.

     (e) The Company and its subsidiaries keep proper accounting records in
which all material assets and liabilities,



                                      -7-


and all material transactions, of the Company and its subsidiaries are recorded
in conformity with applicable accounting principles. No part of the Company's or
any of its subsidiaries' accounting system or records, or access thereto, is
under the control of a Person who is not an employee of the Company or such
subsidiary.

     (f) The Company, along with its subsidiaries, had less than $25,000,000 of
aggregate sales in the United States in the most recently completed fiscal year,
and as of March 31, 1999 owned, either directly or indirectly, assets in the
United States with an aggregate book value of less than $15,000,000.

     3.8. ABSENCE OF CERTAIN DEVELOPMENTS

     Except as disclosed in the SEC Reports filed with the SEC on or prior to
the date hereof or in SCHEDULE 3.8, and except for the transactions contemplated
by this Agreement, since December 31, 1998, (i) the Company and each of its
subsidiaries has conducted its business only in the ordinary and usual course in
accordance with past practice, and (ii) there have not occurred any events or
changes (including the incurrence of any liabilities of any nature, whether or
not accrued, contingent or otherwise) that have had, or is reasonably likely in
the future to have, individually or in the aggregate, a Material Adverse Effect.

     3.9. COMPLIANCE WITH LAW

     (a) Neither the Company nor any of its subsidiaries is in violation of any
laws, ordinances, governmental rules or regulations to which it is subject,
except for violations which would not reasonably be expected to have a Material
Adverse Effect, including without limitation laws or regulations relating to
human therapeutic or diagnostic products or devices, the environment or to
occupational health and safety, and except as set forth in Schedule 3.9 no
material expenditures are or will be required in order to cause its current
operations or properties to comply with any such law, ordinances, governmental
rules or regulations. Neither the Company nor any of its subsidiaries has
received written notice of violation of any law, ordinance, governmental rule or
regulation, which if violated, would reasonably be expected to have a Material
Adverse Effect. No investigation or review by any Governmental Entity with
respect to the Company or any of its subsidiaries is pending or, to the best of
the Company's knowledge, threatened nor has any Governmental Entity indicated an
intention to conduct the same, except for an investigation or review conducted
as a result of an application or other filing made by the Company.

     (b) Neither the Company or any of its subsidiaries nor, to the Company's
knowledge, any of the officers, directors, employees, agents or other
representatives of the Company or any



                                      -8-


of its subsidiaries or Affiliates, has, directly or indirectly, made or
authorized any payment, contribution or gift of money, property, or services,
whether or not in contravention of applicable law, (i) as a kickback or bribe to
any Person or (ii) to any political organization, or the holder of or any
aspirant to any elective or appointive public office except as permitted by
applicable law and for personal political contributions not involving the direct
or indirect use of funds of the Company or any of its subsidiaries.

     (c) The Company and its subsidiaries have all licenses, permits, franchises
or other governmental authorizations necessary to the ownership of their
property or to the conduct of their respective businesses, except for those
which if violated or not obtained would reasonably be expected (and except for
any of the foregoing relating to Intellectual Property which are covered by the
provisions of Section 3.18) to have a Material Adverse Effect. Neither the
Company nor any subsidiary has finally been denied any application for any such
licenses, permits, franchises or other governmental authorizations necessary to
its business.

     3.10. LITIGATION

     There is no legal action, suit, arbitration or other legal, administrative
or other governmental investigation, inquiry or proceeding (whether federal,
state, local or foreign) pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any subsidiary or any of their
respective properties, assets or businesses which, either alone or in the
aggregate, would reasonably be expected to have a Material Adverse Effect or
prevent or delay the consummation of the transactions contemplated by the
Transaction Documents. The Company is not aware of any fact which might result
in or form the basis for any such action, suit, arbitration, investigation,
inquiry or other proceeding. Except as set forth in SCHEDULE 3.10, neither the
Company nor any subsidiary is subject to any order, writ, judgment, injunction,
decree, determination or award of any Governmental Entity against it.

     3.11. MATERIAL CONTRACTS

     Neither the Company nor any of its subsidiaries is in default (or would be
in default with notice or lapse of time, or both) under, is in violation (or
would be in violation with notice or lapse of time, or both) of, or has
otherwise breached, any material indenture, note, credit agreement, loan
document, lease, license or other agreement (unless such default has been
waived), which default, alone or in the aggregate with all other such defaults,
would reasonably be expected to have a Material Adverse Effect. The Company has
previously furnished to the Purchasers true and correct copies of all material
agreements to which the Company or any of its subsidiaries is a party,


                                      -9-


reflecting all amendments thereto through the date of this Agreement. Except as
set forth in SCHEDULE 3.11, each material agreement to which the Company or any
of its subsidiaries is a party is in full force and effect and is binding upon
the Company and, to the best of the Company's knowledge, is binding upon such
other parties, in each case in accordance with its terms. There are no material
unresolved disputes involving the Company or any of its subsidiaries under any
material agreement.

     3.12. ABSENCE OF UNDISCLOSED LIABILITIES

     Except as disclosed on SCHEDULE 3.12 and except for indebtedness or
liabilities that are reflected or reserved against in the most recent financial
statements included in the SEC Reports, neither the Company nor any of its
subsidiaries has any debt, obligation or liability of a kind required by GAAP to
be reflected on a balance sheet (whether accrued, absolute, contingent,
liquidated or otherwise, whether due or to become due and whether or not known
to the Company) arising out of any transaction entered into at or prior to the
Closing, or any act or omission at or prior to the Closing, or any state of
facts existing at or prior to the Closing, except current liabilities incurred
and obligations under agreements entered into since December 31, 1998, each in
the usual and ordinary course of business none of which (individually or in the
aggregate) would reasonably be expected to have a Material Adverse Effect.

     3.13. LABOR RELATIONS AND EMPLOYMENT

     (a) Except as set forth in SCHEDULE 3.13(a), (i) to the best of the
Company's knowledge, there are no union claims to represent the employees of the
Company or any of its subsidiaries; (ii) neither the Company nor any of its
subsidiaries is a party to or bound by any collective bargaining or similar
agreement with any labor organization, or work rules or practices agreed to with
any labor organization or employee association applicable to employees of the
Company or any of its subsidiaries; (iii) none of the employees of the Company
or any of its subsidiaries is represented by any labor organization and the
Company does not have any knowledge of any current union organizing activities
among the employees of the Company or any of its subsidiaries, nor to the
Company's knowledge does any question concerning representation exist concerning
such employees; (iv) the Company and its subsidiaries are in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, occupational safety and health,
equal opportunity, collective bargaining and payment of social security or
social insurance premiums, as applicable, except where the failure to be in
compliance would not reasonably be expected to have a Material Adverse Effect,
and are not engaged in any discriminatory employment practices or unfair labor
practices under applicable law, ordinance or regulation; (v) there is no unfair
labor



                                      -10-


practice charge or complaint against the Company or any of its subsidiaries
pending or, to the best of the Company's knowledge, threatened before any state
or foreign agency; (vi) neither the Company nor any of its subsidiaries has
received written notice of the intent of any federal, state, local or foreign
agency responsible for the enforcement of labor or employment laws to conduct an
investigation with respect to or relating to the Company or any of its
subsidiaries and no such investigation is in progress; and (vii) there are no
complaints, lawsuits or other proceedings pending or, to the best of the
Company's knowledge, threatened in any forum by or on behalf of any present or
former employee of the Company or any of its subsidiaries alleging breach of any
express or implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship, except for any
complaints, lawsuits or other proceedings which would not reasonably be expected
to have a Material Adverse Effect.

     (b) Except as set forth in SCHEDULE 3.13(b), the employment of all Persons
and officers employed by the Company or any of its subsidiaries is terminable at
will without any penalty or severance obligation of any kind on the part of the
Company or such subsidiary. All sums due for employee compensation and benefits,
including, without limitation, retiree benefits, and all vacation time owing to
any employees of the Company or any of its subsidiaries have been duly and
adequately accrued in all material respects on the accounting records of the
Company and its subsidiaries in accordance with GAAP.

     (c) Except as set forth on SCHEDULE 3.13(c) The Company and its
subsidiaries have in force written confidentiality and non-disclosure agreements
and patent/copyright/invention assignment agreements with, and requires as a
condition of employment the execution of such agreements by, all of its
technical research employees, all research consultants, all of its officers and
such other members of its staff as in the regular course of their duties are
reasonably likely to receive material confidential information regarding the
Company, its Intellectual Property and its current and prospective business
plans.

     (d) The Company is not aware that any of its officers or key employees or
any officers or key employees of its subsidiaries is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any Governmental
Entity, that would interfere with the use of such employee's best efforts to
promote the interests of the Company or that would conflict with the Company's
business as currently proposed to be conducted.



                                      -11-


     (e) Except as set forth in SCHEDULE 3.13(e), the Company is not aware that
any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company or any of its subsidiaries, nor does
the Company have a present intention to terminate the employment of any of the
foregoing.

     3.14. EMPLOYEE BENEFIT PLANS

     With respect to the Employee Benefit Plans of the Company and its
subsidiaries: (i) the fair market value of the assets of each funded Employee
Benefit Plan, if any, the liability of each insurer for any Employee Benefit
Plan funded through insurance or any book reserve established for any other
Employee Benefit Plan, together with any accrued contributions, is sufficient to
procure or provide for the accrued benefit obligations, as of the date hereof,
with respect to all current and former participants in such Employee Benefit
Plan according to the actuarial assumptions and valuations, if any, most
recently used to determine employer contributions to and liabilities of such
Employee Benefit Plan, and no transaction contemplated by this Agreement shall
cause such assets or insurance obligations or any book reserve to be less than
such benefit obligations; (ii) each Employee Benefit Plan has been maintained
and administered, in all material respects, in accordance with its terms and
with all applicable provisions of law (including rules and regulations
thereunder); and (iii) each Employee Benefit Plan which is required to be
registered with any governmental or regulatory authority has been registered and
maintained in good standing with the appropriate governmental and regulatory
authorities, except where the failure to be so registered or to maintain good
standing would not reasonably be expected to have a Material Adverse Effect.

     3.15. REAL PROPERTY

     (a) The Company and its subsidiaries do not own any real property in whole
or in part.

     (b) SCHEDULE 3.15 lists all real property leased by the Company or its
subsidiaries as well as the commencement and expiration dates of all leases
relating thereto (the "LEASED REAL PROPERTY"). True and complete copies of all
leases listed in SCHEDULE 3.15 have been delivered to Purchaser. The Company or
one of its subsidiaries has a valid and existing lease or sublease for each
property subsumed within the Leased Real Property. All leases covering any of
the Leased Real Property are valid and enforceable by the Company or one of its
subsidiaries, as the case may be, in accordance with their respective terms, are
in full force and effect, except that the enforceability thereof may be subject
to applicable bankruptcy, insolvency or other similar laws, now or hereinafter
in effect, affecting creditors' rights generally, and the availability of



                                      -12-


the remedy of specific performance or injunctive or other forms of equitable
relief may be subject to equitable defenses and would be subject to the
discretion of the court before which any proceeding therefor may be brought, and
have not been modified, supplemented or terminated in any material respect
except as set forth in SCHEDULE 3.15, and there is not under any such lease any
default by the Company or one of its subsidiaries or, to the best of the
Company's knowledge, by any landlord or lessor under any such lease except for
any such default which would not reasonably be expected to have a Material
Adverse Effect. The facilities and real properties covered by the Leased Real
Property constitute all of the facilities and real properties presently used by
the Company or its subsidiaries.

     3.16. CONDITION OF PROPERTIES

     All facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company and its subsidiaries are in good
operating condition and repair (normal wear and tear excepted), are reasonably
fit and usable for the purposes for which they are being used, are adequate and
sufficient for the Company's or such subsidiary's business and conform with all
applicable ordinances, regulations and laws except where the failure to conform
with the applicable ordinances, regulations or laws would not reasonably be
expected to have a Material Adverse Effect.

     3.17. ENVIRONMENTAL MATTERS

     (a) The Company and its subsidiaries (i) are in compliance with all
Environmental Laws; (ii) have obtained all necessary Environmental Permits, all
of which are in full force and effect; and (iii) are in compliance with all
terms and conditions of such Environmental Permits, except for any failure to
comply or the absence of any such permit which would not reasonably be expected
to have a Material Adverse Effect.

     (b) Neither the Company nor any of its subsidiaries has violated or done
any act which could reasonably be expected to result in liability under, or have
otherwise failed to act in a manner which would reasonably be expected to expose
any of them to liability under, any Environmental Law except for any liability
that would not reasonably be expected to have a Material Adverse Effect. No
event has occurred which, upon the passage of time, the giving of notice, or
failure to act would reasonably be expected to give rise to liability to the
Company or any of its subsidiaries under any Environmental Law except for any
liability that would not reasonably be expected to have a Material Adverse
Effect.

     (c) No Hazardous Material has been released, spilled, discharged, dumped,
or disposed of, by the Company, or otherwise come to be located in, at, beneath
or near any of the Leased Real



                                      -13-


Property as a result of the Company's action including properties formerly
owned, operated or otherwise controlled by the Company or any of its
subsidiaries (i) in violation of any Environmental Law or (ii) in such manner as
would reasonably be expected to result in environmental liability to the Company
or any of its subsidiaries.

     (d) To the Company's knowledge, there have been and are no: (i) aboveground
or underground storage tanks; (ii) surface impoundments for Hazardous Materials;
(iii) wetlands as defined under any Environmental Law; or (iv) asbestos or
asbestos containing materials or polychlorinated biphenyl ("PCB") or
PCB-containing equipment, located within any portion of the Owned Real Property
or Leased Real Property.

     (e) No liens currently encumber any Leased Real Property in connection with
any actual or alleged liability of the Company under any Environmental Law.

     (f) (i) Neither the Company nor any of its subsidiaries has received any
written notice, claim, demand, suit or request for information from any
Governmental Entity or private entity with respect to any liability or alleged
liability under any Environmental Law, nor to the knowledge of the Company has
any other entity whose liability, in whole or in part, may be attributed to the
Company or any of its subsidiaries, received any such notice, claim, demand,
suit or request for information; (ii) neither the Company nor any of its
subsidiaries has ongoing negotiations with or agreements with any Governmental
Entity or other Person or entity relating to any Remedial Action or other claim
arising under or related to any Environmental Law.

     (g) Neither the Company nor any of its subsidiaries has disposed, or
arranged for the disposal, of any Hazardous Materials at any facility that is or
has ever been the subject of investigation or response action under the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 ET SEQ. ("CERCLA"), Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 ET SEQ. ("RCRA"), or any state or Canadian law of similar
effect.

     (h) The Company has provided to Purchaser all environmental studies and
reports pertaining to the Leased Real Property and the improvements thereon that
the Company or its subsidiaries have in their possession. To the best of the
Company's knowledge, as of the respective dates thereof, such studies and
reports were current and accurate and complete in all material respects.

     For purposes of this Agreement, the following terms shall have the
following meanings:


                                      -14-


     "ENVIRONMENTAL LAWS" shall mean any statute, regulation, ordinance, order,
decree, treaty, agreement, compact, common law duty or other requirement of
United States, Canadian or international law relating to protection of human
health, safety or the environment (including, without limitation, ambient air,
surface water, groundwater, wetlands, soil, surface and subsurface strata).

     "ENVIRONMENTAL PERMITS" shall mean all permits, licenses, approvals,
authorizations, consents or registrations required under any applicable
Environmental Law.

     "HAZARDOUS MATERIALS" shall mean any chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, hazardous materials, hazardous
wastes, radioactive materials, petroleum or petroleum products.

     "REMEDIAL ACTION" shall mean any action required to: (i) clean up, remove
or treat Hazardous Materials; (ii) prevent a release or threat of release of any
Hazardous Material; (iii) perform pre-remedial studies, investigations or
post-remedial monitoring and care; or (iv) cure a violation of Environmental Law

     3.18. INTELLECTUAL PROPERTY

     (a) The Company has previously provided the Purchasers a complete list of
registrations/patents or applications therefor pertaining to the Intellectual
Property, the dates of application/issuance and the relevant jurisdictions.
Except as described in SCHEDULE 3.18(a), the Company or one of its subsidiaries
owns or has the valid right to use, free and clear of all liens and other
encumbrances or claims of any nature, except for liens or other encumbrances
that are not material, all of the Intellectual Property necessary for the
conduct of the business of the Company or any of its subsidiaries, except where
the failure to own or have the right to use any item of Intellectual Property
would not reasonably be expected to have a Material Adverse Effect. Except as
noted on SCHEDULE 3.18(a), all listed Intellectual Property that is material to
the Company, is valid, subsisting, unexpired, in proper form and enforceable and
all renewal fees and other maintenance fees that have fallen due on or prior to
the effective date of this Agreement have been paid.

     (b) Except as set forth on SCHEDULE 3.18(b), there is no claim, suit,
action or proceeding pending or, to the best of the Company's knowledge,
threatened against the Company or one of its subsidiaries: (i) alleging any
conflict or infringement with any third party's proprietary rights; or (ii)
challenging the Company or one of its subsidiaries' ownership or use, or the
validity or enforceability of any Intellectual Property; and to the Company's
knowledge no listed no listed application or



                                      -15-


registration/patent of the Company is the subject of any patent interference
proceeding or similar proceeding. Except as set forth on SCHEDULE 3.18(b), there
is no claim, suit, action or proceeding pending or, to best of the Company's
knowledge, threatened by the Company or one of its subsidiaries, alleging any
third party's intellectual property rights conflict or infringe the Intellectual
Property of the Company or one of its subsidiaries.

     (c) The Company has previously provided a complete and accurate list of
all: (i) material licenses, sublicenses and other agreements in which the
Company or one of its subsidiaries grants rights to any Person to use the
Intellectual Property; (ii) material licenses, sublicenses and other agreements
in which any Person grants rights to the Company or one of its subsidiaries to
use the Intellectual Property of such Person; and (iii) material consents,
indemnifications, forbearances to sue, settlement agreements or cross-licensing
arrangements relating to the Intellectual Property or the intellectual property
of any third party to which the Company or one of its subsidiaries is a party.
Except as previously disclosed, neither the Company nor any of its subsidiaries
is under any obligation to pay royalties or similar payments in connection with
any license, nor will the Company or any of its subsidiaries be, as a result of
the execution and delivery of the Transaction Documents or the performance of
its obligations hereunder or thereunder, in breach of any license, sublicense or
other agreement relating to the Intellectual Property except for any such breach
which would not reasonably be expected to have a Material Adverse Effect. As to
each material license agreement to which the Company or one of its subsidiaries
is a party, the Company or such subsidiary is current in the payment of all
royalties due thereunder.

     (d) Except as set forth in SCHEDULE 3.18(d), no former or present employee,
officer or director of the Company or any of its subsidiaries holds any right,
title or interest, directly or indirectly, in whole or in part, in or to any
Intellectual Property.

     (e) The Company or one of its subsidiaries owns or has the right to use all
computer software, software systems and databases and all other information
systems currently used in the business of the Company or any of its
subsidiaries, including, without limitation, all computer software used in the
business of the Company on personal computers by employees of the Company or any
of its subsidiaries.

     For purposes of this Agreement, "INTELLECTUAL PROPERTY" shall mean all of
the following, owned or used in the business of the Company or any of its
subsidiaries: (i) trademarks and service marks (registered or unregistered),
trade dress, trade names and other names and slogans embodying business or
product



                                      -16-


goodwill or indications of origin, all applications or registrations in any
jurisdiction pertaining to the foregoing and all goodwill associated therewith;
(ii) patents, patentable inventions, discoveries, improvements, ideas, know-how,
formula methodology, processes, technology and computer programs, software and
databases (including source code, object code, development documentation,
programming tools, drawings, specifications and data) and all applications or
registrations in any jurisdiction pertaining to the foregoing, including all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof; (iii) trade secrets, including confidential and other
non-public information, and the right in any jurisdiction to limit the use or
disclosure thereof; (iv) copyrights in writings, designs, mask works or other
works, and applications or registrations in any jurisdiction for the foregoing;
(v) database rights; (vi) Internet Web sites, domain names and registrations or
applications for registration thereof; (vii) licenses, immunities, covenants not
to sue and the like relating to any of the foregoing; (viii) books and records
describing or used in connection with any of the foregoing; and (ix) claims or
causes of action arising out of or related to infringement or misappropriation
of any of the foregoing.

     3.19. REGULATORY MATTERS

     (a) As to each product subject to the jurisdiction of the U.S. Food and
Drug Administration ("FDA") under the Federal Food, Drug and Cosmetic Act and
the regulations thereunder ("FDCA") (each such product, a "REGULATED PRODUCT")
that is manufactured, tested, distributed and/or marketed by the Company or any
of its Subsidiaries, such Regulated Product is being manufactured, tested,
distributed and/or marketed in substantial compliance with all applicable
requirements under FDCA and similar state and foreign laws and regulations,
including but not limited to those relating to investigational use, premarket
clearance, good manufacturing practices, labeling, advertising, record keeping,
filing of reports and security.

     (b) To the Company's knowledge, there are no rule making or similar
proceedings before the FDA or comparable federal, Canadian, state, provincial,
local or foreign government bodies which involve or, to the Company's actual
knowledge, affect the Company or any of its subsidiaries which, if the subject
of an action unfavorable to the Company or any of its subsidiaries, would have a
Material Adverse Effect.

     (c) The description of the results of tests or evaluations contained in the
Company's Investigational Device Exemption submission, dated November 11, 1998
(the "IDE"), are accurate and complete in all material respects, and the Company
has no knowledge of any other tests or evaluations, the results of which
reasonably call into question the results described or referred to in the IDE.
Except as set forth on SCHEDULE 3.19,



                                      -17-


neither the Company nor any of its subsidiaries has received any written notices
or correspondence from the FDA or any other governmental agency requiring the
termination, suspension or modification of any tests or evaluations conducted on
behalf of the Company or any of its subsidiaries.

     3.20. YEAR 2000

     Except as set forth in SCHEDULE 3.20, in the SEC Reports or as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect, the Company's computer software, hardware, firmware and other
similar or related items of automated, computerized and/or software system(s)
that are relied on by, or sold or provided with equipment or materials sold or
provided by, the Company or its subsidiaries in the conduct of their respective
businesses, (A) will not malfunction prior to, on, or after January 1, 2000 as a
consequence of the change of century or millennium associated with that date,
and (B) are, as applicable, able to process dates and calculate spans of dates
within and between the twentieth and twenty-first centuries prior to, including
and following January 1, 2000, including by: (i) correctly recognizing all valid
dates, including September 9, 1999 and January 1, 2001, (ii) properly
recognizing leap years, including recognizing year 2000 as a leap year with 366
days and February 29, 2000 as a leap year day, and (iii) properly interfacing
with the same or other systems, where designed to have the capacity to
interface, so as to preserve proper processing of date information, including by
automatic conversion of date information into and from a four-digit and
two-digit date format as appropriate, provided, however, that (a) the
representations and warranties contained in this Section 3.20 shall only apply
if the software, firmware or hardware is used in accordance with the
documentation therefor, and all other products used in combination with such
software, firmware or hardware properly exchange date data with the software,
firmware or hardware and (b) to the extent that any of the representations and
warranties contained in this Section 3.20 are made by the Company with respect
to computer software, hardware, firmware and other similar or related items of
automated, computerized and/or software systems that are manufactured, assembled
or provided by parties other than the Company or its subsidiaries, the
representations and warranties provided by the Company are provided to the best
of the Company's knowledge.

     3.21. TAX MATTERS

     Except as set forth on SCHEDULE 3.21, there are no United States or
Canadian federal, state, provincial, county, municipal or local taxes or
comparable foreign taxes due and payable by the Company or any of its
subsidiaries which have not been paid. The provisions for taxes on the
consolidated balance sheet of the Company for the year ended December 31, 1998
are sufficient for the payment of all accrued and unpaid United



                                      -18-


States and Canadian federal, state, provincial, county, municipal and local
taxes or comparable foreign taxes of the Company and its subsidiaries whether or
not assessed or disputed as of the date of such balance sheet. The Company and
each of its subsidiaries has duly filed all United States and Canadian federal,
state, provincial, county, municipal and local or comparable foreign tax returns
required to have been filed by it and there are in effect no waivers of
applicable statutes of limitations with respect to taxes for any year. Except as
set forth on SCHEDULE 3.21, neither the Company nor any of its subsidiaries has
been subject to a tax audit of any kind, whether in Canada, the United States or
other jurisdiction in which such entity conducts business.

     3.22. INSURANCE

     The Company and its subsidiaries and their respective properties are
insured in such amounts, against such losses and with such insurers as are
prudent when considered in light of the nature of the properties and businesses
of the Company and its subsidiaries. SCHEDULE 3.22 sets forth a complete and
accurate list of the insurance policies of the Company and its subsidiaries as
in effect on the date hereof, including in each case the applicable coverage
limits, deductibles and the policy expiration dates. No written notice of any
termination or threatened termination of any of such policies has been received
by the Company or any of its subsidiaries and such policies are in full force
and effect.

     3.23. TRANSACTIONS WITH RELATED PARTIES

     Except as set forth in the Company's Annual Report on Form 20-F for its
fiscal year ended December 31, 1998 or in SCHEDULE 3.23, neither the Company nor
any subsidiary is a party to any agreement with any of the Company's directors,
officers or shareholders or any Affiliate or family member of any of the
foregoing under which it: (i) leases any real or personal property other than
automobiles (either to or from such Person), (ii) licenses real or personal
property or Intellectual Property (either to or from such Person), (iii) is
obligated to purchase any tangible or intangible asset from or sell such asset
to such Person, (iv) purchases products or services from such Person, or (v) has
borrowed money from or lent money to such Person. Except as set forth in
SCHEDULE 3.23, to the best of the Company's knowledge, there exist no agreements
among shareholders of the Company, except as contemplated by the Transaction
Documents, to act in concert with respect to their voting or holding of Company
securities.

     3.24. INTEREST IN COMPETITORS

     Neither the Company, nor any or its subsidiaries, nor any of their
respective officers nor, to the best of the



                                      -19-


Company's knowledge, directors, has any interest, either by way of contract or
by way of investment (other than as holder of not more than 2% of the
outstanding capital stock of a publicly traded Person) or otherwise, directly or
indirectly, in any Person other than the Company and its subsidiaries that (i)
provides any services or designs, produces or sells any product or product lines
or engages in any activity similar to or competitive with any activity currently
conducted by the Company or any of its subsidiaries or (ii) has any direct or
indirect interest in any asset or property, real or personal, tangible or
intangible, of the Company.

     3.25. PRIVATE OFFERING

     Neither the Company nor anyone acting on its behalf has sold or has offered
any of the Shares or the Warrants for sale to, or solicited offers to buy from,
or otherwise approached or negotiated with respect thereto with, any prospective
purchaser, other than the Purchaser and other than certain investment funds
affiliated with Hilal Capital Management LLC, a Delaware limited liability
company (the "HILAL FUNDS"). Neither the Company nor anyone acting on its behalf
shall offer the Shares or the Warrants for issue or sale to, or solicit any
offer to acquire any of the same from, anyone so as to bring the issuance and
sale of the Shares, the Warrants or the shares of Common Stock issuable upon the
exercise of the Warrants, or any part thereof, within the provisions of Section
5 of the Securities Act. Based upon the representations of the Purchasers set
forth in Section 4, the offer, issuance and sale of the Shares, the Warrants and
the shares of Common Stock issuable upon exercise of the Warrants are and will
be exempt from the registration and prospectus delivery requirements of the
Securities Act, and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws, and are qualified for
distribution or are exempt from such requirements for qualification under
applicable Canadian federal and provincial securities laws.

     3.26. BROKERAGE

     There are no claims for brokerage commissions or finder's fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement made by or on behalf of the Company and the Company
shall indemnify and hold the Purchasers harmless against any costs or damages
incurred as a result of any such claim.

     3.27. MATERIAL FACTS

     This Agreement and the other Transaction Documents do not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained



                                      -20-


therein or herein, in light of the circumstances in which they were made, not
misleading.

     3.28. FAIRNESS OPINION

     The Company has received an opinion from Hambrecht & Quist, LLC to the
effect that the transactions contemplated by this Agreement and by the other
Transaction Documents are fair to the Company from a financial point of view.

SECTION 4.  REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

     Each Purchaser severally represents and warrants to the Company as follows:

     (a) Each Purchaser is a limited partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and each Purchaser has the requisite power and authority to
execute and deliver this Agreement and the other Transaction Documents to which
it is a party and to consummate the transactions contemplated hereby and
thereby, and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement and the other Transaction Documents to which
it is a party. No other action on the part of such Purchaser or any of its
partners is necessary to authorize the execution, delivery and performance of
the Transaction Documents by the Purchaser.

     (b) This Agreement and the other Transaction Documents to which it is a
party have been duly executed and delivered by each Purchaser and, assuming the
due execution and delivery of this Agreement by the Company and of such other
Transaction Documents by the other parties thereto, are valid and binding
obligations of each Purchaser, enforceable against each Purchaser in accordance
with their respective terms, except that (i) the enforceability hereof and
thereof may be subject to applicable bankruptcy, insolvency or other similar
laws, now or hereinafter in effect, affecting creditors' rights generally, and
(ii) the availability of the remedy of specific performance or injunctive or
other forms of equitable relief may be subject to equitable defenses and would
be subject to the discretion of the court before which any proceeding therefor
may be brought.

     (c) Neither the execution and delivery of this Agreement nor of the other
Transaction Documents to which it is a party nor the performance by each
Purchaser of its obligations hereunder or thereunder will violate any instrument
to which it is a party or any law, decree, order, statute, rule or regulation
applicable to such Purchaser or require any order, consent, authorization or
approval of, filing or registration with, or declaration or notice to, any
Governmental Entity, other than the United States federal securities laws.



                                      -21-


     (d) It is acquiring the Shares and the Warrant (and will acquire the Common
Stock issuable upon exercise of the Warrant) for its own account for investment
and not with a view towards the resale, transfer or distribution thereof, nor
with any present intention of distributing the Shares or the Warrant (or the
Common Stock acquired upon exercise of the Warrant), but subject, nevertheless,
to any requirement of law that the disposition of such Purchaser's property
shall, at all times, be within such Purchaser's control, and without prejudice
to such Purchaser's right at all times to sell or otherwise dispose of all or
any part of such securities under a registration under the Securities Act or
under an exemption from said registration available under the Securities Act.

     (e) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement or the other Transaction Documents to which it is a party based on any
arrangement made by or on behalf of such Purchaser and such Purchaser shall
indemnify and hold the Company harmless against any costs or damages incurred as
a result of any such claim.

     (f) It has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of its investment in the
Company as contemplated by this Agreement and is able to bear the economic risk
of such investment for an indefinite period of time. It has been furnished
access to such information and documents as it has requested and has been
afforded an opportunity to ask questions of and receive answers from
representatives of the Company concerning the terms and conditions of this
Agreement and the purchase of the Shares and the Warrant contemplated hereby. It
is an "accredited investor" as defined in Rule 501(a) under the Securities Act.

SECTION 5.  COVENANTS OF THE PARTIES

     5.1. ADDITIONAL AGREEMENTS

     (a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to cooperate with the other and use reasonable commercial
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Transaction Documents, including using reasonable commercial efforts to
obtain all necessary waivers, consents and approvals, and to effect all
necessary registrations and filings (including, but not limited to, filings with
all applicable Governmental Entities as required by law).

     (b) In case at any time after the Closing any further action is necessary
or desirable to carry out the purposes of any



                                      -22-


of the Transaction Documents, Purchaser and the Company shall take all such
action as promptly as practicable.

SECTION 6.  ADDITIONAL COVENANTS OF THE COMPANY

     6.1. USE OF PROCEEDS

     The Company shall utilize the proceeds from the sale of the Shares and the
Warrants hereunder (i) to repay in full $4,100,000 principal amount plus accrued
interest of loans outstanding to the Hilal Funds and (ii) for general corporate
purposes.

     6.2. FINANCIAL AND BUSINESS INFORMATION

     From and after the date hereof, the Company shall deliver to each of the
Purchasers, so long the Purchasers collectively own beneficially (within the
meaning of Rule 13d-3 under the Exchange Act) at least five percent (5%) of the
issued and outstanding shares of Common Stock:

     (a) QUARTERLY STATEMENTS - as soon as practicable, and in any event within
45 days after the close of each of the first three fiscal quarters of each
fiscal year of the Company, an unaudited consolidated balance sheet, statement
of income and statement of cash flows of the Company and its subsidiaries as at
the close of such quarter and covering operations for such quarter and the
portion of the Company's fiscal year ending on the last day of such quarter, all
in reasonable detail and prepared in accordance with GAAP, subject to audit and
year-end adjustments, setting forth in each case in comparative form the figures
for the comparable period of the previous fiscal year. The Company shall also
provide comparisons of each pertinent item to the budget referred to in
subsection (c) below.

     (b) ANNUAL STATEMENTS - as soon as practicable after the end of each fiscal
year of the Company, and in any event within 120 days thereafter, duplicate
copies of:

     (1) consolidated and consolidating balance sheets of the Company and its
subsidiaries at the end of such year;

     (2) consolidated and consolidating statements of income, stockholders'
equity and cash flows of the Company and its subsidiaries for such year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and accompanied by an opinion thereon of independent
certified public accountants of recognized national standing selected by the
Company, which opinion shall state that such financial statements fairly present
the financial position of the Company and its subsidiaries on a consolidated
basis and have been prepared in accordance with GAAP applied on a consistent
basis (except for changes in application in which such



                                      -23-


accountants concur) and that the examination of such accountants in connection
with such financial statements has been made in accordance with generally
accepted auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances; and

     (3) comparisons of such audited results to each pertinent item in the
budget referred to in subsection (c) below.

     (c) BUSINESS PLAN; PROJECTIONS - no later than 30 days prior to the
commencement of each fiscal year of the Company, an annual business plan of the
Company and projections of operating results, prepared on a quarterly basis, and
a three year business plan of the Company and projections of operating results.
Within 45 days of the close of each semi-annual fiscal period of the Company,
the Company shall provide the Purchasers with an update of such quarterly
projections. Such business plans, projections and updates shall contain such
substance and detail and shall be in such form as will be reasonably acceptable
to the Purchasers.

     (d) AUDIT REPORTS - promptly upon receipt thereof, one copy of each other
financial report and internal control letter submitted to the Company by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Company.

     (e) OTHER REPORTS - promptly upon their becoming available, one copy of
each financial statement, report, notice or proxy statement (or management
information circular) sent by the Company to stockholders generally, of each
financial statement, report, notice or proxy statement (or management
information circular) sent by the Company or any of its subsidiaries to the SEC
or any successor agency, if applicable, of each regular or periodic report and
any registration statement, prospectus or written communication in respect
thereof filed by the Company or any subsidiary with, or received by such Person
in connection therewith from, any domestic or foreign securities exchange, the
SEC or any successor agency or any foreign regulatory authority performing
functions similar to the SEC, of any press release issued by the Company or any
subsidiary, and of any material of any nature whatsoever prepared by the SEC or
any successor agency thereto or any state blue sky or securities law commission
which relates to or affects in any way the Company or any subsidiary.

     (f) REQUESTED INFORMATION - with reasonable promptness, the Company shall
furnish each of the Purchasers with such other data and information as from time
to time may be reasonably requested.

     6.3. INSPECTION



                                      -24-


     As long as the Purchasers collectively own beneficially (within the meaning
of Rule 13d-3 under the Exchange Act) at least five percent (5%) of the issued
and outstanding Common Stock, the Company shall permit the Purchasers, their
nominees, assignees, and their representatives to visit and inspect any of the
properties of the Company and its subsidiaries, to examine all its books of
account, records, reports and other papers not contractually required of the
Company to be confidential or secret, to make copies and extracts therefrom, and
to discuss its affairs, finances and accounts with its officers, directors, key
employees and independent public accountants or any of them (and by this
provision the Company authorizes said accountants to discuss with such
Purchasers, their nominees, assignees and representatives the finances and
affairs of the Company and any subsidiaries), all at such reasonable times and
as often as may be reasonably requested.

     6.4. CONFIDENTIALITY

     As to so much of the information and other material furnished under or in
connection with this Agreement (whether furnished before, on or after the date
hereof, including without limitation information furnished pursuant to Sections
6.2 and 6.3 hereof) as constitutes or contains confidential business, financial
or other information of the Company or any subsidiary, each of the Purchasers
covenants for itself and, its directors, officers and partners, if any, that it
will not disclose and it will use due care to prevent its officers, directors,
partners, employees, counsel, accountants and other representatives from
disclosing such information to Persons other than their respective authorized
employees, counsel, accountants, stockholders, partners, limited partners and
other authorized representatives who have agreed to be bound by the provisions
of this Section 6.4; PROVIDED, HOWEVER, that each Purchaser may disclose or
deliver any information or other material disclosed to or received by it should
such Purchaser be advised by its counsel (with a copy of such opinion being
furnished to the Company) that such disclosure or delivery is required by law,
regulation or judicial or administrative order; PROVIDED, FURTHER, that prior to
any such action Purchaser shall give the Company at least three Business Days
notice to enable the Company to obtain a protective order or take other
appropriate action. In the event of any termination of this Agreement
prior to the Closing Date, each Purchaser shall return to the Company all
confidential material previously furnished to such Purchaser or its officers,
directors, partners, employees, counsel, accountants and other representatives
in connection with this transaction. For purposes of this Section 6.4, "due
care" means at least the same level of care that such Purchaser would use to
protect the confidentiality of its own sensitive or proprietary information, but
in no event less than reasonable care, and this obligation shall survive
termination of this Agreement.


                                      -25-




     6.5. BOARD NOMINEES

     At the time of the conversion of the Shares, the Company shall take such
steps, including the creation (through resignation of a then serving director or
as otherwise permitted by the Ontario Business Corporations Act) and filling of
an appropriate vacancy on the Board, as shall permit the individual who formerly
held the position as director designated by the holders of Shares to continue to
serve as a director of the Company until the next annual meeting of the
shareholders of the Company. Thereafter, for so long as the Purchasers
collectively own beneficially (within the meaning of Rule 13d-3 under the
Exchange Act), in the aggregate, at least 5% of the issued and outstanding
shares of Common Stock, the Company will nominate and use commercially
reasonable efforts to elect and to cause to remain as a director on the Board
one individual as designated by the Purchasers. Any vacancy created by the
death, disability, retirement or removal of such individual may be filled by an
individual designated by the Purchasers.

     6.6. BOARD COMMITTEES

     For so long as the Purchasers have the right, either as holders of the
Shares or pursuant to Section 6.5 hereof, to designate at least one individual
to the Board, the Purchasers shall have the right to designate one individual to
each of the Executive Committee, Compensation Committee and Audit Committee of
the Board of Directors of the Company, when and if the same are established.

     6.7. SUBSCRIPTION RIGHT

     (a) If at any time after the Closing Date, the Company proposes to sell
equity securities of any kind (the term "equity securities" shall include for
these purposes any warrants, options or other rights to acquire equity
securities and debt securities convertible into equity securities) of the
Company (other than the issuance of securities (i) to the public in a firm
commitment underwriting pursuant to a registration statement filed under the
Securities Act, (ii) upon exercise of any options or warrants outstanding on the
Closing Date, (iii) pursuant to the acquisition of another entity by the Company
or one of its subsidiaries by merger, purchase of substantially all of the
assets or other form of reorganization, (iv) in connection with the acquisitions
or license of technology rights or other assets, (v) pursuant to a stock option
plan, stock bonus plan, stock purchase plan or other compensation equity
agreements or programs) or (vi) upon conversion or exercise of any "equity
securities" (within the meaning of this Section 6.7) which have been sold in
compliance with Section 6.7(c), the Company shall:

     (1) give each Purchaser written notice setting forth in reasonable detail
(i) the designation and all of the



                                      -26-


material terms and provisions of the securities proposed to be issued (the
"PROPOSED SECURITIES"), including, where applicable, the voting powers,
preferences and relative participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof and interest rate and
maturity; (ii) the price and other terms of the proposed sale of such
securities; (iii) the amount of such securities proposed to be issued; and (iv)
such other information as the Purchasers may reasonably request in order to
evaluate the proposed issuance; and

     (2) offer to issue to each Purchaser a portion of the Proposed Securities
equal to a percentage determined by dividing (x) the number of shares of Common
Stock held by such Purchaser and issuable to such Purchaser, assuming exercise
of the Warrants and conversion in full of the Shares and any other convertible
securities then held by such Purchaser, by (y) the total number of shares of
Common Stock then outstanding, including, for purposes of this calculation, all
shares of Common Stock issuable upon conversion in full of any then outstanding
convertible securities, including the Shares, and upon exercise of any then
outstanding options or warrants (including the Warrants).

     (b) Each Purchaser shall have ten (10) Business Days after receipt of such
notice (the "Notice") and the furnishing of all reasonably requested information
within which to notify the Company as to whether and to what extent it has
elected to purchase the Proposed Securities. The failure by a Purchaser to so
notify the Company within ten Business Days after receipt of the Notice will be
deemed to constitute an election by such Purchaser not to purchase any such
Proposed Securities.

     (c) If a Purchaser does not exercise the above subscription right with
respect to the Proposed Securities, or does not elect to purchase all of the
securities so offered to it, the Company may proceed to sell that proportion of
the Proposed Securities otherwise required to be sold to the Purchaser hereunder
within 90 days following the expiration of the 10 day period described above,
but only upon terms no more favorable to the purchasers of such securities as
those of the proposed sale as described in the notice referred to above. Any
Proposed Securities otherwise required to be offered to the Purchasers hereunder
which are offered or sold by the Company after such 90 day period must be
reoffered to the Purchaser pursuant to this Section 6.7.

     (d) The election by a Purchaser not to exercise its subscription rights
under this Section 6.7 in any instance shall not affect its right (other than in
respect of a reduction in its percentage holdings) to any subsequent proposed
issuance. Any sale of such securities by the Company without first giving the


                                      -27-


Purchasers the right described in this Section 6.7 shall be void and of no force
and effect.

     (e) The foregoing rights cease to exist at such time as the aggregate
holdings of Company securities by the Purchasers shall represent less than five
percent (5%) (calculated as described in subsection (a)(2) above) of the
Company's then outstanding Common Stock.

     6.8. COVENANT NOT TO BREACH REPRESENTATIONS AND WARRANTIES, COVENANTS

     Pending the Closing, the Company will not, without the Purchasers' prior
written consent, take any action which would result in any of the
representations or warranties contained in this Agreement not being true in all
material respects at and as of the time immediately after such action, or in any
of the covenants contained in this Agreement becoming incapable of performance.
The Company will promptly advise the Purchasers of any action or event of which
it becomes aware which has the effect of making incorrect in any material
respect any of such representations or warranties or which has the effect of
rendering any of such covenants incapable of performance.

     6.9. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE

     The Company will continue to engage in business of the same general type as
now conducted by it, and preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to maintain all rights,
privileges and franchises, except where the failure to maintain any of the
foregoing would not reasonably be expected to have a Material Adverse Effect.
The Company shall require all of its employees with access to proprietary
information, or its consultants, to enter into appropriate confidentiality
agreements and patent/invention agreements to protect confidential information
relating to the Company and its business, including trade secrets.

     6.10. COMPLIANCE WITH LAWS

     The Company will comply in all material respects with all applicable laws,
rules, regulations and orders, except where the failure to comply would not
reasonably be expected to have a Material Adverse Effect.

     6.11. INSURANCE

     The Company will maintain insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies of similar size and credit standing engaged in
similar business and owning similar properties, provided that such insurance is
and



                                      -28-


remains available to the Company at commercially reasonable rates.

     6.12. KEEPING OF BOOKS

     The Company will keep proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the Company in accordance with GAAP.

     6.13. LOST, ETC. CERTIFICATES EVIDENCING SHARES OR DIVIDEND SHARES (OR
SHARES OF COMMON STOCK); EXCHANGE

     Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any certificate evidencing any
shares of Common Stock, any shares of Series A Preferred Stock or any of the
Warrants owned by one of the Purchasers, and (in the case of loss, theft or
destruction) of an indemnity satisfactory to it, and upon reimbursement to the
Company of all reasonable expenses incidental thereto, and upon surrender and
cancellation of such certificate, if mutilated, the Company will make and
deliver in lieu of such certificate a new certificate of like tenor and for the
number of shares evidenced by such certificate which remain outstanding. Such
Purchaser's agreement of indemnity shall constitute indemnity satisfactory to
the Company for purposes of this Section 6.13. Upon surrender of any certificate
representing any shares of Common Stock, any shares of Series A Preferred Stock
or any of the Warrants for exchange at the office of the Company, the Company at
its expense will cause to be issued in exchange therefor new certificates in
such denomination or denominations as may be requested for the same aggregate
number of shares represented by the certificate so surrendered and registered,
as such holder may request. The Company will also pay the cost of all deliveries
of certificates for such shares to the office of such Purchaser (including the
cost of insurance against loss or theft in an amount satisfactory to the
holders) upon any exchange provided for in this Section 6.13.

     6.14. COMPETING TRANSACTION RESTRICTION

     For the period commencing on the date hereof and ending on the Closing Date
(the "Restricted Period"), neither the Company nor any of its officers, agents
or representatives (including without limitation, its investment banking firms
(collectively, "Representatives")) will, directly or indirectly, (i) solicit any
offers, bids or indications of interest, or initiate or participate in
negotiations with any person, with respect to any financing of the Company,
whether debt or equity, or, other than in the ordinary course of business, the
sale, license or other transfer by the Company of any material assets of the
Company (a "Competing Transaction"), (ii) enter into any



                                      -29-


agreement, agreement in principle, letter of intent or similar arrangement
(whether or not legally binding) relating to a Competing Transaction, (iii)
furnish, or authorize any Representatives to furnish, any confidential
information or draft agreement concerning a Competing Transaction to any party.
The Company's pending discussions with Dr. Thomas Merigan, Jr. regarding the
proposed transaction between the Company and Dr. Merigan and his affiliates
described in its Annual Report on Form 20-F for the fiscal year ended December
31, 1998, and its discussions with Transamerica Business Credit Corporation or
another similar institutional lender regarding a $5 million credit facility,
shall not be deemed Competing Transactions for purposes of this Agreement.

SECTION 7.  ADDITIONAL COVENANTS OF THE PURCHASERS

     7.1. RESALE OF SECURITIES

     (a) Each of the Purchasers severally covenants that it will not sell or
otherwise transfer the Shares or the Warrants (or any shares of Common Stock
acquired upon conversion of the Shares or exercise of the Warrants) to any
Person except pursuant to an effective registration under the Securities Act or
in a transaction which, in the opinion of counsel satisfactory to the Company,
qualifies as an exempt transaction under the Securities Act and the rules and
regulations promulgated thereunder.

     (b) The certificates evidencing the Shares, the Warrants and the shares of
Common Stock issuable upon conversion of the Shares or exercise of the Warrants
will bear the following legend reflecting the foregoing restrictions on the
transfer of such securities:

     "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN (A) REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE TRANSFERRED
     EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT OR IN A
     TRANSACTION WHICH, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
     COMPANY, QUALIFIES AS AN EXEMPT TRANSACTION UNDER THE ACT AND THE RULES AND
     REGULATIONS PROMULGATED THEREUNDER."

The Company shall remove this legend from the certificates evidencing such
securities as promptly as practicable following the registration of such
securities under the Securities Act or such earlier time as such securities are
no longer subject to restriction on transfer under the Securities Act.


                                      -30-


     7.2. STANDSTILL

     Each of the Purchasers which is an Affiliate of Warburg, Pincus & Co., a
New York general partnership (such Purchaser being herein called a "WARBURG
PURCHASER)", severally covenants that it will not acquire beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of any Common Stock of
the Company if, after giving effect to such acquisition and any substantially
contemporaneous acquisitions by other Affiliates of such Warburg Purchaser, the
aggregate beneficial ownership of all of the Warburg Purchasers and their
Affiliates would exceed 37% of the then outstanding shares of Common Stock of
the Company (assuming full conversion and full exercise of any Shares or
Warrants then held by such Purchasers); PROVIDED, HOWEVER, that the foregoing
covenant shall not restrict any Warburg Purchaser from exercising at any time
its right to convert the Shares or to exercise the Warrants then held by such
Purchaser, nor shall such covenant apply to any acquisition of shares of Common
Stock that has been previously approved by the Board of Directors of the
Company.

SECTION 8.  CLOSING CONDITIONS OF THE PURCHASERS AND THE COMPANY

     The respective obligations of each of the Company and the Purchasers to
effect the transactions contemplated by this Agreement shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions.

     8.1. INJUNCTION

     No preliminary or permanent injunction or other order by any federal or
state court in the United States or any federal or provincial court in Canada
which prevents the consummation of the transactions contemplated by this
Agreement shall have been issued and remain in effect.

SECTION 9.  PURCHASERS' CLOSING CONDITIONS

     The obligations of the Purchasers to effect the transactions contemplated
by this Agreement shall be subject to the satisfaction on or prior to the
Closing Date of the following conditions, any one or more of which may be waived
in writing by the Purchasers in accordance with Section 11.4 hereof:


                                      -31-


     9.1. REPRESENTATIONS AND WARRANTIES

     The representations and warranties of the Company contained in the
Transaction Documents shall be true in all material respects on and as of the
Closing Date as though such representations and warranties were made at and as
of such date, except that representations and warranties made as of a specific
date shall be true as of such date, and except as otherwise affected by the
transactions contemplated hereby.

     9.2. COMPLIANCE WITH TRANSACTION DOCUMENTS

     The Company shall have performed and complied in all material respects with
all agreements, covenants and conditions contained in the Transaction Documents
which are required to be performed or complied with by the Company prior to or
on the Closing Date.

     9.3. OFFICER'S CERTIFICATE

     The Purchasers shall have received a certificate, dated the Closing Date,
signed by each of the Chief Executive Officer and the Chief Financial Officer of
the Company, certifying that the conditions specified in the foregoing Sections
9.1 and 9.2 hereof have been fulfilled.

     9.4. CONSENTS

     All permits, consents, authorizations, approvals, waivers, registrations,
qualifications, designations and declarations material to the Company shall have
been obtained, and, to the extent required to be submitted prior to the Closing,
all filings and notices set forth in SCHEDULE 3.5 shall have been submitted.

     9.5. COUNSEL'S OPINION

     The Purchasers shall have received from the legal counsel to the Company,
Goldman, Spring, Schwartz & Kichler, an opinion, dated the Closing Date,
substantially in the form of EXHIBIT E hereto.

     9.6. REGISTRATION RIGHTS AGREEMENT

     The Company and the Purchasers shall have executed the Registration Rights
Agreement, the form of which is attached as EXHIBIT F hereto (the "REGISTRATION
RIGHTS AGREEMENT").

     9.7. ADVERSE DEVELOPMENT

     There shall have been no developments in the business of the Company or any
of its subsidiaries which in the opinion of



                                      -32-


Purchaser would reasonably be expected to have a Material Adverse Effect.

     9.8. ELECTION OF DIRECTOR

     Jonathan Leff shall have been elected to the Board of Directors of the
Company effective upon the Closing as the representative designated by the
holders of the Shares.

     9.9. APPROVAL OF PROCEEDINGS

     All proceedings to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the Purchasers and their
counsel, Willkie Farr & Gallagher; and the Purchasers shall have received copies
of all documents or other evidence which it and Willkie Farr & Gallagher may
reasonably request in connection with such transactions and of all records of
corporate proceedings in connection therewith in form and substance reasonably
satisfactory to the Purchasers and Willkie Farr & Gallagher.

     9.10. TERMINATION OF TERM LOAN

     The term loan entered into between the Hilal Funds and a subsidiary of the
Company on April 30, 1998, as its terms have been amended, shall have been
terminated and the obligations thereunder satisfied in their entirety by (a) the
issuance of 3,948 shares of Series A Preferred Stock and 147,098 Warrants and
(b) the payment of $4,244,355 in cash from the proceeds of the investment by the
Purchasers pursuant to this Agreement, and the Registration Rights Agreement
dated April 30, 1998, by and among the Company and the Hilal Funds, shall have
been amended as contemplated by Exhibit G hereto.

SECTION 10.  COMPANY CLOSING CONDITIONS

     The obligations of the Company to effect the transactions contemplated by
this Agreement shall be subject to the satisfaction on or prior to the Closing
Date of the following conditions, any one or more of which may be waived in
writing by the Company in accordance with Section 11.4 hereof:

     10.1. REPRESENTATIONS AND WARRANTIES

     The representations and warranties of the Purchasers contained in this
Agreement shall be true on and as of the Closing Date as though such
representations and warranties were made at and as of such date, except as
otherwise affected by the transactions contemplated hereby.

     10.2. COMPLIANCE WITH TRANSACTION DOCUMENTS


                                      -33-




     The Purchasers shall have performed and complied with all agreements,
covenants and conditions contained in the Transaction Documents which are
required to be performed or complied with by it prior to or on the Closing Date.

     10.3. PURCHASER'S CERTIFICATES

     The Company shall have received a certificate from the Purchasers, dated
the Closing Date, signed by a duly authorized representative of the Purchasers,
certifying that the conditions specified in the foregoing Sections 10.1 and 10.2
hereof have been fulfilled.

SECTION 11.  TERMINATION, AMENDMENT AND WAIVER

          11.1. TERMINATION

          This Agreement may be terminated at any time prior to the Closing:

          (a) By mutual written consent of the Company and the Purchasers; or

          (b) (i) By the Purchasers if any of the conditions specified in
Sections 8 or 9 have not been met or waived by the Purchasers at such time as
such condition is no longer capable of satisfaction (PROVIDED the Purchasers are
not otherwise in material breach of their representations, warranties, covenants
or agreements under this Agreement); or (ii) by the Company if any of the
conditions specified in Sections 8 or 10 have not been met or waived by the
Company at such time as such condition is no longer capable of satisfaction
(PROVIDED the Company is not otherwise in material breach of its
representations, warranties, covenants or agreements under this Agreement); or

          (c) By either the Purchasers or the Company if any Governmental Entity
of competent jurisdiction shall have issued a final permanent order
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement, and in any such case the time for appeal or
petition for reconsideration of such order shall have expired without such
appeal or petition being granted; or

          (d) By the Purchasers if, without any material breach by the
Purchasers of their obligations under the Transaction Documents, the
transactions contemplated hereby and thereby shall not have been consummated on
or before September 30, 1999 (the "EXPIRATION DATE"); or

          (e) By the Company if, without any material breach by the Company of
its obligations under the Transaction Documents, the transactions contemplated
hereby and thereby shall not have been consummated on or before the Expiration
Date; or



                                      -34-




     11.2. EFFECT OF TERMINATION

     In the event of termination of this Agreement as provided in Section 11.1
hereof, written notice thereof shall forthwith be given to the other party
specifying the provision hereof pursuant to which such termination is made, and
this Agreement shall forthwith become null and void and there shall be no
liability on the part of the Purchasers or the Company or their respective
officers or directors or partners; PROVIDED that nothing herein shall relieve
either party from liability for any breach of this Agreement.

     11.3. AMENDMENT

     This Agreement may not be amended except by an instrument in writing signed
on behalf of each of the parties hereto.

     11.4. WAIVER

     At any time prior to the Closing, the parties hereto, by or pursuant to
action taken by the Purchasers and the Company, may (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties of the other
party contained herein or in any documents delivered pursuant hereto by the
other party and (iii) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.

SECTION 12.  INTERPRETATION OF THIS AGREEMENT

     12.1. TERMS DEFINED

     As used in this Agreement, the following terms have the respective meanings
set forth below:

     AFFILIATE: shall mean any Person or entity, directly or indirectly,
controlling, controlled by or under common control with such Person or entity.

     BUSINESS DAY: shall mean a day other than a Saturday, Sunday or other day
on which banks in the State of New York and the Province of Ontario are not
required or authorized to close.

     EMPLOYEE BENEFIT PLAN: shall mean all material employee benefit or
executive compensation arrangements, perquisite programs or payroll practices,
including, without limitation, any such arrangements or payroll practices
providing severance pay, sick leave, vacation pay, salary continuation for
disability, retirement benefits, deferred compensation, bonus pay, incentive


                                      -35-




pay, stock options (including those held by Directors, employees, and
consultants), hospitalization insurance, medical insurance, life insurance,
scholarships or tuition reimbursements, that are maintained by the Company or
any of its subsidiaries or to which the Company or any subsidiary is obligated
to contribute thereunder for current or former employees of the Company or any
subsidiary.

     EXCHANGE ACT: shall mean the Securities Exchange Act of 1934, as amended.

     KNOWLEDGE , TO THE BEST OF THE COMPANY'S KNOWLEDGE: shall mean, along with
words of similar meaning applicable to the Company, the actual knowledge of John
K. Stevens, Jeffrey Sherman, Richard T. Daly or Samuel Schwartz.

     GOVERNMENTAL ENTITY: shall mean any United States, Canada or international
(a) federal, state, county, local or municipal government or administrative
agency or political subdivision thereof, (b) court or administrative tribunal,
(c) non-governmental agency, tribunal or entity that is vested by a governmental
agency with applicable jurisdiction, or (d) arbitration tribunal or other
non-Governmental Entity with applicable jurisdiction.

     PERSON: shall mean an individual, partnership, joint-stock company,
corporation, limited liability company, trust or unincorporated organization,
and a Governmental Entity.

     SEC: shall mean the Securities and Exchange Commission.

     SECURITIES ACT: shall mean the Securities Act of 1933, as amended.

     SUBSIDIARY: shall mean any (a) Person of which the Company (or other
specified Person) shall own directly or indirectly through a subsidiary, a
nominee arrangement or otherwise (i) at least a majority of the outstanding
voting capital stock (or other outstanding voting shares of beneficial interest)
or (ii) at least a majority of the partnership, membership, joint venture or
similar interests, or (b) in which the Company (or other specified Person) is a
general partner or joint venturer.

     12.2. SCHEDULES

     The disclosure contained in any one schedule of this Agreement, if by its
description is applicable to other sections of this Agreement, will also be
deemed to have been made with respect to such sections, even if such disclosure
is not repeated in any other schedules.



                                      -36-




     12.3. ACCOUNTING PRINCIPLES

     Where the character or amount of any asset or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done in accordance with GAAP at the time
in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.

     12.4. DIRECTLY OR INDIRECTLY

     Where any provision in this Agreement refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

     12.5. GOVERNING LAW

     This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
entirely within such State.

     12.6. PARAGRAPH AND SECTION HEADINGS

     The headings of the sections and subsections of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part thereof.

SECTION 13.  MISCELLANEOUS

     13.1. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS

     All statements contained in any certificate or other instrument executed
and delivered by the Company pursuant to this Agreement or in connection with
the transactions contemplated hereby shall be deemed representations and
warranties by the Company hereunder, except to the extent the same have been
subsequently amended prior to the date hereof. All representations and
warranties made by the parties hereto in this Agreement or pursuant hereto shall
survive the Closing hereunder and any investigation at any time made by or on
behalf of the Company; PROVIDED, HOWEVER, that neither party shall commence any
action against the other party in respect of any provision of this Agreement at
any time subsequent to the date eighteen (18) months after the Closing Date. All
covenants and agreements set forth in this Agreement shall survive in accordance
with their terms.



                                      -37-




     13.2. NOTICES

     (a) All communications under this Agreement shall be in writing and shall
be delivered by hand or facsimile or mailed by overnight courier or by
registered mail or certified mail, postage prepaid, in each case to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice, except that notices of changes of address shall be
effective upon receipt):

          (1)  if to Purchasers:

          Warburg, Pincus Equity Partners, L.P.
          466 Lexington Avenue
          New York, NY  10017
          Attention: Jonathan S. Leff
          Facsimile: (212) 878-9361

          With a copy to:

          Willkie Farr & Gallagher
          787 Seventh Avenue
          New York, New York  10019-6009
          Attention:  Peter Jakes, Esq.
          Facsimile:   (212) 728-8111

          (2)      if to the Company:

          Visible Genetics Inc.
          700 Bay Street
          Toronto, Ontario
          M5G 1Z6
          Attention:  Richard Daly
          Facsimile:  (416) 813-3250

          With a copy to:

          Goldman, Spring, Schwartz & Kichler
          Suite 700
          40 Sheppard Avenue West
          Toronto, Ontario  M2N 6K9
          Attention:  Samuel Schwartz, Esq.
          Facsimile:  (416) 225-4805

          and to:

          Baer Marks & Upham LLP
          805 Third Avenue
          New York, N.Y.  10022-7513
          Attention:  Steven S. Pretsfelder
          Facsimile:  (212) 702-5941



                                      -38-




     (b) Any notice so addressed shall be deemed to be given: if delivered by
hand or facsimile (with confirmation of transmission), on the date of such
delivery; if mailed by courier, when received; and if mailed by registered or
certified mail, when received.

     13.3. EXPENSES

     (a) All costs, fees and expenses incurred in connection with the
Transaction Documents and the transactions contemplated hereby and thereby shall
be paid by the party incurring such costs and expenses.

     13.4. PUBLICITY

     So long as this Agreement is in effect, the Purchasers and the Company
shall consult with each other in issuing any press release or otherwise making
any public statement with respect to the transactions contemplated by this
Agreement, and neither of them shall issue any press release or make any public
statement prior to such consultation, except as otherwise required by law. The
commencement of litigation relating to this Agreement or the transactions
contemplated hereby or any proceedings in connection therewith shall not be
deemed a violation of this Section 13.4.

     13.5. SPECIFIC PERFORMANCE

     The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any state or federal court sitting in the State of New York, this
being in addition to any other remedy to which they are entitled at law or in
equity.

     13.6. SUBMISSION TO JURISDICTION

     With respect to any suit, action or proceeding initiated by a party to this
Agreement arising out of, under or in connection with this Agreement or any of
the Transaction Documents, the Company and the Purchasers each hereby submit to
the exclusive jurisdiction of any state or federal court sitting in the State of
New York and irrevocably waive, to the fullest extent permitted by law, any
objection that they may now have or hereafter obtain to the laying of venue in
any such court in any such suit, action or proceeding. The Company agrees that,
within 14 days of the date of this Agreement, it will appoint and designate Baer
Marks & Upham LLP, or such other Person as may be satisfactory to the Company,
as its agent to receive process in any such suit, action or proceeding and
agrees that service of



                                      -39-


process on such agent shall be deemed to be in every respect effective service
of process on it in any such suit, action or proceeding and waives all claim of
error by reason of such service.

     13.7. SUCCESSORS AND ASSIGNS

     Neither the Purchasers, on the one hand, or the Company, on the other, may
assign this Agreement or any rights hereunder without the prior consent of the
other party hereof, except that a Purchaser may assign this Agreement and its
rights hereunder and under the other Transaction Documents to an Affiliate upon
notice of such assignment to the Company. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
parties hereto.

     13.8. ENTIRE AGREEMENT; AMENDMENT AND WAIVER

     This Agreement and the Transaction Documents constitute the entire
understanding of the parties hereto and supersede all prior agreements or
understandings with respect to the subject matter hereof among such parties.
This Agreement may be amended, and the observance of any term of this Agreement
may be waived, with (and only with) the written consent of the Company and the
Purchasers.

     13.9. SEVERABILITY

     In the event that any part or parts of this Agreement shall be held illegal
or unenforceable by any court or administrative body of competent jurisdiction,
such determination shall not affect the remaining provisions of this Agreement
which shall remain in full force and effect.

     13.10. LIMITATION ON ENFORCEMENT OF REMEDIES

     The Company hereby agrees that it will not assert against the limited
partners of the Purchasers any claim it may have under this Agreement or any
Company Transaction Document by reason of any failure or alleged failure by the
Purchaser to meet their obligations hereunder or thereunder.

     13.11. COUNTERPARTS

     This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall be considered one
and the same agreement.


                                      -40-




     IN WITNESS WHEREOF, the Company and the Purchasers have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.

COMPANY:                                PURCHASERS:

VISIBLE GENETICS INC.                   WARBURG, PINCUS EQUITY PARTNERS, L.P.

By: ________________________            By: Warburg, Pincus & Co.,
Name:  Richard T. Daly                      General Partner
Title: President and CEO

                                        By: ___________________________

                                        WARBURG, PINCUS VENTURES
                                        INTERNATIONAL, L.P.

                                        By: Warburg, Pincus & Co.,
                                            General Partner

                                        By: ___________________________

                                        WARBURG, PINCUS NETHERLANDS
                                        EQUITY PARTNERS I, C.V.

                                        By: Warburg, Pincus & Co.,
                                            General Partner

                                        By: ___________________________

                                        WARBURG, PINCUS NETHERLANDS
                                        EQUITY PARTNERS II, C.V.

                                        By: Warburg, Pincus & Co.,
                                            General Partner

                                        By: ___________________________

                                        WARBURG, PINCUS NETHERLANDS
                                        EQUITY PARTNERS III, C.V.

                                        By: Warburg, Pincus & Co.,
                                            General Partner

                                        By: ___________________________



                                      -41-

EX-10.11

                                                                 Exhibit 10.11

                              VISIBLE GENETICS INC.

                          REGISTRATION RIGHTS AGREEMENT

                  REGISTRATION RIGHTS AGREEMENT, dated as of July 15, 1999,
among the investors listed on Schedule I hereto (the "Investors") and Visible
Genetics Inc., an Ontario corporation (the "Company").

                                 R E C I T A L S

                  WHEREAS, the Investors have, pursuant to the terms of the
Securities Purchase Agreement, dated as of July 15, 1999, by and among the
Company and the Investors (the "Purchase Agreement"), agreed to purchase 30,000
shares of Series A preferred shares of the Company, without par value (the
"Shares"), which are convertible into common shares of the Company, without par
value (the "Common Stock"), and to purchase Warrants initially exercisable with
respect to 1,100,000 shares of Common Stock (the "Warrants"); and

                  WHEREAS, the Company has agreed, as a condition precedent to
the Investors' obligations under the Purchase Agreement, to grant the Investors
certain registration rights; and

                  WHEREAS, the Company and the Investors desire to define the
registration rights of the Investors on the terms and subject to the conditions
herein set forth.

                  NOW, THEREFORE, in consideration of the foregoing premises and
for other good and valuable consideration, the parties hereby agree as follows:

                 1.        DEFINITIONS

                  As used in this Agreement, the following terms have the
respective meaning set forth below:

                  COMMISSION: shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act;

                  CONTROL, CONTROLLING, CONTROLLED BY, and UNDER COMMON CONTROL
WITH: shall mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a person, whether through
the ownership of voting securities, by contract, or otherwise.





                  EXCHANGE ACT: shall mean the Securities Exchange Act of 1934,
as amended;

                  HOLDER: shall mean any holder of Registrable Securities;

                  INITIATING HOLDER: shall mean any Holder or Holders who in the
aggregate are Holders of more than 50% of the then outstanding Registrable
Securities;

                  MAJORITY HOLDERS OF THE REGISTRATION shall mean, with respect
to a particular registration, one or more of the Initiating Holders who hold a
majority of the Registrable Securities to be included in such registration.

                  PERSON: shall mean an individual, partnership, limited
liability company, joint-stock company, corporation, trust or unincorporated
organization, and a government or agency or political subdivision thereof;

                  REGISTER, registered and registration: shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act (and any post-effective amendments filed or
required to be filed) and the declaration or ordering of effectiveness of such
registration statement;

                  REGISTRABLE SECURITIES: shall mean (A) the shares of Common
Stock issuable on conversion of the Shares, (B) shares of Common Stock issuable
upon exercise or exchange of the Warrants, (C) any additional shares of Common
Stock acquired by the Investors and (D) any stock of the Company issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares of Common Stock referred to in clauses (A), (B) or
(C);

                  REGISTRATION EXPENSES: shall mean all expenses incurred by the
Company in compliance with Sections 2(a) and (b) hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and expenses of one counsel for
all the Holders in an amount not to exceed $15,000, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company);

                  SECURITY, SECURITIES: shall have the meaning set forth in
Section 2(1) of the Securities Act;

                  SECURITIES ACT: shall mean the Securities Act of 1933, as
amended; and


                                       2



                  SELLING EXPENSES: shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and all
fees and disbursements of counsel for each of the Holders other than fees and
expenses of one counsel for all the Holders in an amount not to exceed $15,000.

                  2.       REGISTRATION RIGHTS

                           (a) REQUESTED REGISTRATION.

                           (i) REQUEST FOR REGISTRATION. If the Company shall
         receive from an Initiating Holder, at any time after the first
         anniversary of the date hereof, a written request that the Company
         effect any registration with respect to all or a part of the
         Registrable Securities, the Company will:

                                    (A) promptly give written notice of the
                  proposed registration, qualification or compliance to all
                  other Holders; and

                                    (B) as soon as practicable, use its diligent
                  best efforts to effect such registration (including, without
                  limitation, the execution of an undertaking to file
                  post-effective amendments, appropriate qualification under
                  applicable blue sky or other state securities laws and
                  appropriate compliance with applicable regulations issued
                  under the Securities Act) as may be so requested and as would
                  permit or facilitate the sale and distribution of all or such
                  portion of such Registrable Securities as are specified in
                  such request, together with all or such portion of the
                  Registrable Securities of any Holder or Holders joining in
                  such request as are specified in a written request received by
                  the Company within 10 business days after written notice from
                  the Company is given under Section 2(a)(i)(A) above; PROVIDED
                  that the Company shall not be obligated to effect, or take any
                  action to effect, any such registration pursuant to this
                  Section 2(a):

                                    (x) In any particular jurisdiction in which
                     the Company would be required to (1) execute a general
                     consent to service of process in effecting such
                     registration, qualification or compliance, unless the
                     Company is already subject to service in such jurisdiction
                     and except as may be required by the Securities Act or
                     applicable rules or regulations thereunder; (2) qualify
                     generally to do any business in any jurisdiction where it
                     would not otherwise be required to qualify but for this
                     Section 2(a)(i)(B); or (3) subject itself to taxation in
                     any such jurisdiction.


                                       3



                                    (y) After the Company has effected two (2)
                     such registrations pursuant to this Section 2(a) and such
                     registrations have been declared or ordered effective; or

                                    (z) If the Registrable Securities requested
                     by all Holders to be registered pursuant to such request do
                     not have an anticipated aggregate public offering price
                     (before any underwriting discounts and commissions) of at
                     least $10,000,000.

                           The registration statement filed pursuant to the
         request of the Initiating Holders may, subject to the provisions of
         Section 2(a)(ii) below, include other securities of the Company which
         are held by Persons who, by virtue of agreements with the Company, are
         entitled to include their securities in any such registration ("Other
         Stockholders").

                           The registration rights set forth in this Section 2
         may be assigned, in whole or in part, to any transferee of Registrable
         Securities (who shall be bound by all obligations of this Agreement).

                           (ii) UNDERWRITING. If the Initiating Holders intend
         to distribute the Registrable Securities covered by their request by
         means of an underwriting, they shall so advise the Company as a part of
         their request made pursuant to Section 2(a).

                           If Other Stockholders request that shares of Common
         Stock be included in such registration, the Holders shall offer to
         include the securities of such Other Stockholders in the underwriting
         and may condition such offer on their acceptance of the further
         applicable provisions of this Section 2. The Holders whose shares are
         to be included in such registration and the Company shall (together
         with all Other Stockholders proposing to distribute their securities
         through such underwriting) enter into an underwriting agreement in
         customary form with the representative of the underwriter or
         underwriters selected for such underwriting by the Initiating Holders
         and reasonably acceptable to the Company. Notwithstanding any other
         provision of this Section 2(a), if the representative advises the
         Holders in writing that marketing factors require a limitation on the
         number of shares to be underwritten, the securities of the Company held
         by Other Stockholders shall be excluded from such registration to the
         extent so required by such limitation. If, after the exclusion of such
         shares, further reductions are still required, the number of shares
         included in the registration by each Holder shall be reduced on a pro
         rata basis (based on the number of shares held by such Holder), by such
         minimum number of shares as is necessary to comply with such


                                       4



         request. No Registrable Securities or any other securities excluded
         from the underwriting by reason of the underwriter's marketing
         limitation shall be included in such registration. If any Other
         Stockholder who has requested inclusion in such registration as
         provided above disapproves of the terms of the underwriting, such
         person may elect to withdraw therefrom by written notice to the
         Company, the underwriter and the Initiating Holders. The securities so
         withdrawn shall also be withdrawn from registration. If the underwriter
         has not limited the number of Registrable Securities or other
         securities to be underwritten, the Company and officers and directors
         of the Company may include its or their securities for its or their own
         account in such registration if the representative so agrees and if the
         number of Registrable Securities and other securities which would
         otherwise have been included in such registration and underwriting will
         not thereby be limited.

                           (iii) WITHDRAWALS. A request for registration
         pursuant to this Section 2(a) may be withdrawn by the Majority Holders
         of the Registration prior to the initial filing of a registration
         statement (a "Withdrawn Request") and a registration statement filed
         pursuant to this Section 2(a) may be withdrawn by the Majority Holders
         of the Registration prior to the effectiveness thereof (a "Withdrawn
         Registration Statement") and such withdrawals shall be treated as a
         demand registration which shall have been effected pursuant to this
         Section 2(a), unless the Holders of Registrable Securities to be
         included in such registration statement reimburse the Company for its
         out-of-pocket Registration Expenses relating to the preparation and
         filing of such registration statement to the extent actually incurred;
         provided, however, that if a Withdrawn Request or Withdrawn
         Registration Statement is made because of a material adverse change in
         the business or financial condition of the Company then such withdrawal
         shall not be treated as a registration effected pursuant to this
         Section 2(a) and shall not be counted towards the total number of
         registrations which Holders may request pursuant to this Section 2(a).
         If any Holder requesting inclusion in a registration pursuant to this
         Section 2(a) revokes such request and, as a result of such revocation,
         the anticipated aggregate public offering price of the Registrable
         Securities requested to be included in such registration falls below
         the minimum required by Section 2(a)(i)(B)(z) and the Holders
         continuing to seek such registration do not request to include
         additional Registrable Securities to make up such shortfall then the
         registration statement shall automatically without any further action
         on behalf of the Holders or any other parties be deemed to have been
         withdrawn by the Majority Holders of the registration and the Company
         shall not be required to bear any Registration Expenses in connection
         therewith.


                                       5



                           (b) COMPANY REGISTRATION.

                           (i) If the Company shall determine to register any of
         its equity securities either for its own account or for the account of
         Other Stockholders, other than a registration relating solely to
         employee benefit plans, or a registration relating solely to a
         Commission Rule 145 transaction, or a registration on any registration
         form which does not permit secondary sales or does not include
         substantially the same information as would be required to be included
         in a registration statement covering the sale of Registrable
         Securities, the Company will:

                                    (A) promptly give to each of the Holders a
              written notice thereof (which shall include a list of the
              jurisdictions in which the Company intends to attempt to qualify
              such securities under the applicable blue sky or other state
              securities laws); and

                                    (B) include in such registration (and any
              related qualification under blue sky laws or other compliance),
              and in any underwriting involved therein, all the Registrable
              Securities specified in a written request or requests, made by the
              Holders within fifteen (15) days after receipt of the written
              notice from the Company described in clause (i) above, except as
              set forth in Section 2(b)(ii) below. Such written request may
              specify all or a part of the Holders' Registrable Securities
              provided, however, that the Company shall not be obligated to
              effect any such registration pursuant to this Section 2(b) in any
              particular jurisdiction in which the Company would be required as
              a result of such registration to (i) execute a general consent to
              service of process in effecting such registration, qualification
              or compliance, unless the Company is already subject to service in
              such jurisdiction and except as may be required by the Securities
              Acts or applicable rules or regulations thereunder; (ii) qualify
              generally to do business in any jurisdiction where it would not
              otherwise be required to qualify or (iii) subject itself to
              taxation.

                           If at any time after giving written notice of its
              intention to register any securities and prior to the effective
              date of a registration statement filed pursuant to this Section
              2(b), the Company shall determine for any reason not to register
              or to delay registration of such securities, the Company may, at
              its election, give written notice of such determination to each
              Holder of Registrable Securities and thereupon (A) in the case of
              a determination not to register, the Company shall be relieved of
              its obligation to register any Registrable Securities in
              connection with such registration and (B) in the case of a
              determination to delay such


                                       6



              registration, the Company shall be permitted to delay such
              registration of such Registration of such Registrable Securities
              for the same period as the delay in the registering such other
              securities.

                          (ii) UNDERWRITING. If the registration of which the
         Company gives notice is for a registered public offering involving an
         underwriting, the Company shall so advise each of the Holders as a part
         of the written notice given pursuant to Section 2(b)(i)(A). In such
         event, the right of each of the Holders to registration pursuant to
         this Section 2(b) shall be conditioned upon such Holders' participation
         in such underwriting and the inclusion of such Holders' Registrable
         Securities in the underwriting to the extent provided herein. The
         Holders whose shares are to be included in such registration shall
         (together with the Company and the Other Stockholders distributing
         their securities through such underwriting) enter into an underwriting
         agreement in customary form with the representative of the underwriter
         or underwriters selected for underwriting by the Company.
         Notwithstanding any other provision of this Section 2(b), if the
         representative determines that marketing factors require a limitation
         on the number of shares to be underwritten, the representative may
         (subject to the allocation priority set forth below) limit the number
         of Registrable Securities to be included in the registration and
         underwriting. The Company shall so advise all holders of securities
         requesting registration, and the number of shares of securities that
         are entitled to be included in the registration and underwriting shall
         be allocated and included in the registration in the following order of
         priority: (A), in the case of a registration initiated by the Company;
         (1) first, the securities that the Company proposed to register for its
         own account, (2) second, the Registrable Securities requested to be
         included in such registration by the Holders and by any Other
         Stockholders of the Company, pro rata in proportion to the number of
         securities requested to be included in such registration by each of
         them and (3) third, other securities of the Company to be registered on
         behalf of any Person, including officers and directors of the Company,
         pro rata in proportion to the number of securities requested to be
         included in such registration by each of them; and

                          (B), in the case of a registration initiated by any
         Person or Persons other than the Company or a Holder; (1) first, the
         securities requested to be included in such registration by any such
         Persons initiating such registration, allocated pro rata in proportion
         to the number of securities requested to be so included in such
         registration by each of them, (2) second, the Registrable Securities of
         any Holder seeking to have its shares included in such registration and
         the securities of any other Persons who have been granted incidental or
         piggyback Registration


                                       7



         Rights that have requested that such securities be included in such
         Registration Statement, allocated pro rata in proportion to the number
         of securities requested to be so included in such registration by each
         of them; (3) third, the securities that the Company proposes to
         register for its own account; and (4) fourth, other securities of the
         Company to be registered on behalf of any other Person including
         officers and directors of the Company, pro rata in proportion to the
         number of securities requested to be included in such registration by
         each of them.

                           If any of the Holders or any officer, director or
         Other Stockholder disapproves of the terms of any such underwriting, he
         may elect to withdraw therefrom by written notice to the Company and
         the underwriter. Any Registrable Securities or other securities
         excluded or withdrawn from such underwriting shall be withdrawn from
         such registration.

                            (iii) APPLICATION TO CANADIAN PUBLIC OFFERINGS. If
         the Company proposes to file a prospectus for sale of any of the
         Company's securities to the public with any Canadian securities
         regulatory authority or otherwise to qualify any of its securities for
         distribution to the public in any province of Canada (excluding any
         filing solely for the purpose of listing any securities of the Company
         on the Toronto Stock Exchange) (a "Canadian Public Offering"), each
         Holder shall be entitled, subject to applicable Canadian securities
         law, to participate in the Canadian Public Offering to the same extent
         and on the same terms and conditions (before, during and after the
         Canadian Public Offering), mutatis mutandis, as such Holder is entitled
         to participate in a registration under this Agreement.

                  (c) FORM F-3. The Investors shall have the right to request
three (3) registrations in the aggregate for all Holders on Form F-3 (such
requests shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of shares by
such holders), subject only to the following:

                           (i) The Company shall not be required to effect a
         registration pursuant to this Section 2(c) prior to the first
         anniversary of the date hereof.

                          (ii) The Company shall not be required to effect a
         registration pursuant to this Section 2(c) unless the Holder or Holders
         requesting registration propose to dispose of shares of Registrable
         Securities having an aggregate price to the public (before deduction of
         underwriting discounts and expenses of sale) of more than $5,000,000.

                          (iii) The Company shall not be required to effect a
         registration pursuant to this Section 2(c) within 180 days


                                       8



         of the effective date of the most recent registration pursuant to this
         Section 2 in which securities held by the requesting Holder could have
         been included for sale or distribution.

                           (iv) The Company shall not be obligated to effect any
         registration pursuant to this Section 2(c) in any particular
         jurisdiction in which the Company would be required to (1) execute a
         general consent to service of process in effecting such registration,
         qualification or compliance, unless the Company is already subject to
         service in such jurisdiction and except as may be required by the
         Securities Act or applicable rules or regulations thereunder; (2)
         qualify generally to do any business in any jurisdiction where it would
         not otherwise be required to qualify but for this Section 2(c); or (3)
         subject itself to taxation in any such jurisdiction.

         Notwithstanding the provisions of Section 2(c)(i), to the extent the
Company acts at the request of funds affiliated with Hilal Capital Management
LLC to prepare and file a comparable registration statement, the Company shall
prepare and file with the Commission on or prior to October 30, 1999, a
registration statement on Form F-3 (which shall be counted as one of the three
(3) requests contemplated by this Section 2(c)) covering the resale by the
Holders of all of the Common Stock issuable upon exercise of the Warrants or
upon conversion of the Shares, from time to time in open market transactions,
and the Company shall use all commercially reasonable efforts to cause such
registration to become effective on or prior to December 31, 1999.

         The Company shall give written notice to all Holders of the receipt of
a request for registration pursuant to this Section 2(c) and shall provide a
reasonable opportunity for other Holders to participate in the registration,
provided that if the registration is for an underwritten offering, the terms of
Section 2(a)(ii) shall apply to all participants in such offering. Subject to
the foregoing, the Company will use its best efforts to effect promptly the
registration of all shares of Registrable Securities on Form F-3 to the extent
requested by the Holder or Holders thereof for purposes of disposition.

         The provisions of Section 2(a)(iii) shall apply also to withdrawals of
requests for registration under this Section 2(c).

                           (d) EXPENSES OF REGISTRATION. All Registration
Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Section 2 shall be borne by the Company, and all
Selling Expenses shall be borne by the Holders of the securities so registered
pro rata on the basis of the number of their shares so registered, except as
otherwise provided with respect to a Withdrawn Request or a Withdrawn


                                       9



Registration Statement in Section 2(a) or 2(c) or as otherwise expressly
provided herein.

                           (e) REGISTRATION PROCEDURES. In the case of each
registration effected by the Company pursuant to this Section 2, the Company
will keep the Holders, as applicable, advised in writing as to the initiation of
each registration and as to the completion thereof. At its expense, the Company
will:

                           (i) keep such registration effective for a period of
         one hundred twenty (120) days or until the Holders, as applicable, have
         completed the distribution described in the registration statement
         relating thereto, whichever first occurs; provided, however, that in
         the case of any registration of Registrable Securities on Form F-3
         which are intended to be offered on a continuous or delayed basis, such
         120-day period shall be extended until all such Registrable Securities
         are sold, provided that Rule 415, or any successor rule under the
         Securities Act, permits an offering on a continuous or delayed basis,
         and provided further that applicable rules under the Securities Act
         governing the obligation to file a post-effective amendment permit, in
         lieu of filing a post-effective amendment which (y) includes any
         prospectus required by Section 10(a) of the Securities Act or (z)
         reflects facts or events representing a material or fundamental change
         in the information set forth in the registration statement, the
         incorporation by reference of information required to be included in
         (y) and (z) above to be contained in periodic reports filed pursuant to
         Section 12 or 15(d) of the Exchange Act in the registration statement;

                          (ii) furnish such number of prospectuses and other
         documents incident thereto as each of the Holders, as applicable, from
         time to time may reasonably request;

                          (iii) notify each Holder of Registrable Securities
         covered by such registration at any time when a prospectus relating
         thereto is required to be delivered under the Securities Act of the
         happening of any event as a result of which the prospectus included in
         such registration statement, as then in effect, includes an untrue
         statement of a material fact or omits to state a material fact required
         to be stated therein or necessary to make the statements therein not
         misleading in the light of the circumstances then existing; and

                          (iv) furnish, on the date that such Registrable
         Securities are delivered to the underwriters for sale, if such
         securities are being sold through underwriters or, if such securities
         are not being sold through underwriters, on the date that the
         registration statement with respect to such securities becomes
         effective, (1) an opinion, dated as of such date, of the counsel
         representing the Company for


                                       10



         the purposes of such registration, in form and substance as is
         customarily given to underwriters in an underwritten public offering
         and reasonably satisfactory to a majority in interest of the Holders
         participating in such registration, addressed to the underwriters, if
         any, and to the Holders participating in such registration and (2) a
         letter, dated as of such date, from the independent certified public
         accountants of the Company, in form and substance as is customarily
         given by independent certified public accountants to underwriters in an
         underwritten public offering and reasonably satisfactory to a majority
         in interest of the Holders participating in such registration,
         addressed to the underwriters, if any, and if permitted by applicable
         accounting standards, to the Holders participating in such
         registration.

                           (f)  INDEMNIFICATION.

                           (i) The Company will indemnify each of the Holders,
         as applicable, each of its officers, directors and partners, and each
         person controlling each of the Holders, with respect to each
         registration which has been effected pursuant to this Section 2, and
         each underwriter of any registration effected pursuant to section 2(a),
         if any, and each person who controls any underwriter, against all
         claims, losses, damages and liabilities (or actions in respect thereof)
         arising out of or based on any untrue statement (or alleged untrue
         statement) of a material fact contained in any (A) registration
         statement (relating to any such registration) (a "Registration
         Statement") or any omission or alleged omission to state a material
         fact required to be stated therein and necessary to make the statements
         therein not misleading or (B) any prospectus (including any
         preliminary, final or summary prospectus, amendment or supplement
         thereto) included in any such Registration Statement (a "Prospectus")
         or any omission or alleged omission to state a material fact required
         to be stated therein or necessary to make any statements therein, in
         light of the circumstances under which they were made, not misleading
         or (C) any other violation by the Company of the Securities Act or the
         Exchange Act or any rule or regulation thereunder applicable to the
         Company and relating to action or inaction required of the Company in
         connection with any such registration, qualification or compliance, and
         will reimburse each of the Holders, each of its officers, directors and
         partners, and each person controlling each of the Holders, each such
         underwriter and each person who controls any such underwriter, for any
         legal and any other expenses reasonably incurred in connection with
         investigating and defending any such claim, loss, damage, liability or
         action, provided that the Company will not be liable in any such case
         to the extent that any such claim, loss, damage, liability or expense
         arises out of or is based on any untrue statement or omission based
         upon written


                                       11



         information furnished to the Company by the Holders or underwriter and
         stated to be specifically for use therein.

                           (ii) Each of the Holders will, if Registrable
         Securities held by it are included in the securities as to which such
         registration, qualification or compliance is being effected, indemnify
         the Company, each of its directors and officers and each underwriter,
         if any, of the Company's securities covered by such a registration
         statement, each person who controls the Company or such underwriter,
         each Other Stockholder and other Persons whose securities may be
         included in such registration and each of their officers, directors,
         and partners, and each person controlling such Other Stockholder and
         other Persons against all claims, losses, damages and liabilities (or
         actions in respect thereof) (whether arising in an action between the
         Holders and such indemnified parties or any other Person and such
         indemnified parties) arising out of or based on any untrue statement
         (or alleged untrue statement) of a material fact or any omission or
         alleged omission to state a material fact required to be stated therein
         or necessary to make any statements therein, in light of the
         circumstances under which they were made, not misleading, contained in
         any such Registration Statement or Prospectus and will reimburse the
         Company and such Other Stockholders, directors, officers, partners,
         persons, underwriters or control persons for any legal or any other
         expenses reasonably incurred in connection with investigating or
         defending any such claim, loss, damage, liability or action, in each
         case to the extent, but only to the extent, that such untrue statement
         (or alleged untrue statement) or omission (or alleged omission) is made
         in such Registration Statement or Prospectus in reliance upon and in
         conformity with written information furnished to the Company by such
         Holder and stated to be specifically for use therein; provided,
         however, that the obligations of each of the Holders hereunder shall be
         limited to an amount equal to the net proceeds to such Holder of
         securities sold as contemplated herein.

                          (iii) Each party entitled to indemnification under
         this Section 2(f) (the "Indemnified Party") shall give notice to the
         party required to provide indemnification (the "Indemnifying Party")
         promptly after such Indemnified Party has actual knowledge of any claim
         as to which indemnity may be sought, and shall permit the Indemnifying
         Party to assume the defense of any such claim or any litigation
         resulting therefrom; provided that counsel for the Indemnifying Party,
         who shall conduct the defense of such claim or any litigation resulting
         therefrom, shall be approved by the Indemnified Party (whose approval
         shall not unreasonably be withheld) and the Indemnified Party may
         participate in such defense at such party's expense (unless the
         Indemnified Party shall have reasonably concluded upon advice of
         counsel


                                       12



         that there may be a conflict of interest between the Indemnifying Party
         and the Indemnified Party in such action, in which case the fees and
         expenses of counsel shall be at the expense of the Indemnifying Party;
         provided, however, that the Indemnified Party shall be entitled to
         elect only one counsel at the expense of the Indemnifying Party and
         such counsel shall be approved by the Indemnifying Party, which
         approval shall not be unreasonably withheld), and provided further that
         the failure of any Indemnified Party to give notice as provided herein
         shall not relieve the Indemnifying Party of its obligations under this
         Section 2 unless the Indemnifying Party is materially prejudiced
         thereby. No Indemnifying Party, in the defense of any such claim or
         litigation shall, except with the consent of each Indemnified Party,
         consent to entry of any judgment or enter into any settlement which
         does not include as an unconditional term thereof the giving by the
         claimant or plaintiff to such Indemnified Party of a release from all
         liability in respect to such claim or litigation. No Indemnifying Party
         shall be held liable for any settlement or any judgment of, or in
         connection with, any such claim or action effected without its written
         consent, which consent shall not be unreasonably withheld. Each
         Indemnified Party shall furnish such information regarding itself or
         the claim in question as an Indemnifying Party may reasonably request
         in writing and as shall be reasonably required in connection with the
         defense of such claim and litigation resulting therefrom.

                           (iv) If the indemnification provided for in this
         Section 2(f) is held by a court of competent jurisdiction to be
         unavailable to an Indemnified Party with respect to any loss,
         liability, claim, damage or expense referred to herein, then the
         Indemnifying Party, in lieu of indemnifying such Indemnified Party
         hereunder, shall contribute to the amount paid or payable by such
         Indemnified Party as a result of such loss, liability, claim, damage or
         expense in such proportion as is appropriate to reflect the relative
         fault of the Indemnifying Party on the one hand and of the Indemnified
         Party on the other in connection with the statements or omissions which
         resulted in such loss, liability, claim, damage or expense, as well as
         any other relevant equitable considerations. The relative fault of the
         Indemnifying Party and of the Indemnified Party shall be determined by
         reference to, among other things, whether the untrue (or alleged
         untrue) statement of a material fact or the omission (or alleged
         omission) to state a material fact relates to information supplied by
         the Indemnifying Party or by the Indemnified Party and the parties'
         relative intent, knowledge, access to information and opportunity to
         correct or prevent such statement or omission.

                           (v) Notwithstanding the foregoing, to the extent that
         the provisions on indemnification and contribution


                                       13



         contained in the underwriting agreement entered into in connection with
         any underwritten public offering contemplated by this Agreement are in
         conflict with the foregoing provisions, the provisions in such
         underwriting agreement shall be controlling.

                           (vi) The foregoing indemnity agreement of the Company
         and Holders is subject to the condition that, insofar as they relate to
         any loss, claim, liability or damage made in a preliminary prospectus
         but eliminated or remedied in the amended prospectus on file with the
         Commission at the time the registration statement in question becomes
         effective or the amended prospectus filed with the Commission pursuant
         to Commission Rule 424(b) (the "Final Prospectus"), such indemnity or
         contribution agreement shall not inure to the benefit of any
         underwriter or Holder if a copy of the Final Prospectus was furnished
         to the underwriter and was not furnished to the person asserting the
         loss, liability, claim or damage at or prior to the time such action is
         required by the Securities Act.

                           (g) INFORMATION BY THE HOLDERS. Each of the Holders
holding securities included in any registration shall furnish to the Company
such information regarding such Holder and the distribution proposed by such
Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in Section 2. If any registration statement or comparable
statement under state securities laws refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall promptly
notify the Company of any fact of which such Holder becomes aware and the
happening of any event which relates to the Holder or the distribution of the
securities owned by such Holder which results in the Registration Statement or
the Prospectus included in such Registration Statement containing an untrue
statement of material fact or omitting to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
shall provide to the Company such information as shall be necessary to enable
the Company to prepare a supplement, or post-effective amendment to such
Registration Statement or related prospectus or any document incorporated
thereunder by reference or file any other documents required so that such
Registration Statement or Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein.

                  In the event that, either immediately prior to or subsequent
to the effectiveness of any registration statement, a Holder shall distribute
Registrable Securities to its partners, the Holder shall so advise the Company
and provide such information as shall be necessary to permit an amendment to
such registration statement to provide information with respect to such
partners, as selling securityholders. Promptly following


                                       14



receipt of such information, the Company shall file an appropriate amendment to
such registration statement reflecting the information so provided. Any expense
to the Company resulting from such amendment shall be borne by the Holder.

                           (h) RULE 144 REPORTING.

                  With a view to making available the benefits of certain rules
and regulations of the Commission which may permit the sale of restricted
securities to the public without registration, the Company agrees to:

                           (i) at all times make and keep public information
         available as those terms are understood and defined in Rule 144 under
         the Securities Act ("Rule 144");

                           (ii) use its best efforts to file with the Commission
         in a timely manner all reports and other documents required of the
         Company under the Securities Act and the Exchange Act; and

                           (iii) so long as the Holder owns any Registrable
         Securities, furnish to the Holder upon request, a written statement by
         the Company as to its compliance with the reporting requirements of
         Rule 144 and of the Securities Act and the Exchange Act, a copy of the
         most recent annual or quarterly report of the Company, and such other
         reports and documents so filed as the Holder may reasonably request in
         availing itself of any rule or regulation of the Commission allowing
         the Holder to sell any such securities without registration.

                           (i) RIGHT TO DEFER REGISTRATION; NO OBLIGATION TO
REGISTER. (A) Subject to the provisions of Section 2(i)(B), if (i) in the good
faith judgment of the Board of Directors of the Company, a registration would be
seriously detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is necessary to defer the filing of such
registration statement at such time and (ii) the Company shall furnish to the
requesting Holders a certificate signed by the President of the Company stating
that, in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company for such registration statement to
be filed in the near future and that it is therefore necessary to defer the
filing of such registration statement, then the Company shall have the right to
defer the filing of any registration statement requested under Section 2(a) or
2(c) hereunder, or taking of any other action otherwise required hereunder to
effect a registration, for the period during which such registration would be
detrimental, such period not to exceed 90 days; provided, however, that the
Company shall be entitled to exercise its rights under this Section 2(i) not
more than once during any twelve month period during the term of this Agreement.


                                       15



                  (B) Notwithstanding anything in this Agreement to the
contrary, the Company shall not be obligated to effect or take any action to
effect any registration pursuant to Section 2(a)(i) or 2(c) during the period
starting 90 days prior to the Company's good faith estimate of the date of
filing of, and ending on a date 180 days after the effective date of, a Company
initiated registration or (ii) if, within 14 days after its receipt of a written
request to effect such a registration, the Company causes to be delivered to the
Initiating Holders an opinion of counsel reasonably acceptable to the Initiating
Holders to the effect that the proposed disposition of Registrable Securities by
the Initiating Holders will not require registration or qualification under the
Securities Act or compliance with Rule 144(b), it being specifically understood
and agreed that the Initiating Holders will promptly furnish to the company and
such counsel all information such counsel may reasonably request in order to
enable such counsel to determine whether it would be able to render such
opinion.

                           (j) TERMINATION. With respect to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
and the registration rights set forth in this Agreement shall not be available
to the Holder thereof when (i) a registration statement with respect to the sale
of such securities shall have been declared effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (ii) such securities may be sold pursuant to Rule 144(k)
(or any similar provisions then in effect under the Securities Act), (iii) such
securities have been otherwise transferred, a new certificate or other evidence
of ownership for them not bearing the legend restricting further transfer shall
have been delivered by the Company and subsequent public distribution of such
securities shall not require registration under the Securities Act, or (iv) such
securities shall cease to be outstanding.

                  3.  MISCELLANEOUS

                           (a) DIRECTLY OR INDIRECTLY. Where any provision in
this Agreement refers to action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such Person.

                           (b) GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such State
(without giving effect to the principle of conflicts of laws).

                           (c) SECTION HEADINGS. The headings of the sections
and subsections of this Agreement are inserted for convenience only and shall
not be deemed to constitute a part thereof.


                                       16



                           (d)  NOTICES.

                           (i) All communications under this Agreement shall be
         in writing and shall be delivered by hand or facsimile or mailed by
         overnight courier or by registered or certified mail, postage prepaid:

                                    (A)     if to the Company, to:

                                    Visible Genetics Inc.
                                    700 Bay Street
                                    Toronto, Ontario
                                    M5G 1Z6
                                    Attention: Richard Daly
                                    Facsimile:  (416) 813-3250

                                    With a copy to:

                                    Goldman, Spring, Schwartz & Kichler
                                    Suite 700
                                    40 Sheppard Avenue West
                                    Toronto, Ontario  M2N 6K9
                                    Attention:  Samuel Schwartz, Esq.
                                    Facsimile:  (416) 225-4805

                                    Bear Marks & Upham LLP
                                    805 Third Avenue
                                    New York, New York 10022
                                    Attn: Steven S. Pretsfelder, Esq.
                                    Facsimile: (212) 702-5941

                                    or at such other address as it may have
                  furnished in writing to the Investors;

                                    (B) if to the Investors, at the address or
                  facsimile number listed on Schedule I hereto, or at such other
                  address or facsimile number as may have been furnished the
                  Company in writing, with a copy to:

                                    Willkie Farr & Gallagher
                                    787 Seventh Avenue
                                    New York, New York 10019-6099
                                    Attn: Peter H. Jakes, Esq.
                                    Facsimile: (212) 728-8111

                           (iii) Any notice so addressed shall be deemed to be
         given: if delivered by hand or facsimile (with confirmation of
         transmission), on the date of such delivery; if mailed by courier, when
         received; and if mailed by registered or certified mail, when received.

                           (e) REPRODUCTION OF DOCUMENTS. This Agreement and all
documents relating thereto, including, without limitation, any consents,
waivers and modifications which may


                                       17



hereafter be executed may be reproduced by the Investor and the Company by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and the Investors may destroy any original document so
reproduced. The parties hereto agree and stipulate that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made by the Investors in the regular course
of business) and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence.

                           (f) SUCCESSORS AND ASSIGNS. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted
assigns of each of the parties. Any Holder may assign to any transferee of its
Registrable Securities (other than a transferee that acquires such Registrable
Securities in a registered public offering or pursuant to a sale under Rule 144
of the Securities Act) its rights and obligations under this Agreement;
provided, however, that if any transferee shall take and hold Registrable
Securities, such transferee shall promptly notify the Company and by taking and
holding such Registrable Securities such transferee shall automatically be
entitled to receive the benefits of and be conclusively deemed to have to agreed
to be bound by and to perform all of the terms and provisions of this Agreement
as if it were a party hereto.

                           (g) ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This
Agreement constitutes the entire understanding of the parties hereto and
supersedes all prior understanding among such parties with respect to the
subject matter herein. This Agreement may be amended, and the observance of any
term of this Agreement may be waived, with (and only with) the written consent
of the Company and the Investors holding a majority of the then outstanding
Registrable Securities provided, however, that nothing herein shall prohibit any
amendment, modification, supplement, termination, waiver or consent to
departure, the effect of which is limited only to those Holders who have agreed
to such amendment, modification, supplement, termination, waiver or consent to
departure.

                           (h) SEVERABILITY. In the event that any part or parts
of this Agreement shall be held illegal or unenforceable by any court or
administrative body of competent jurisdiction, such determination shall not
effect the remaining provisions of this Agreement which shall remain in full
force and effect.

                           (i) COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original and all
of which together shall be considered one and the same agreement.


                                       18



                     IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.



                              
COMPANY:                         INVESTORS:

VISIBLE GENETICS INC.            WARBURG, PINCUS EQUITY PARTNERS, L.P.

By: ________________________     By: Warburg, Pincus & Co.,
Name:  Richard T. Daly               General Partner
Title: President and CEO

                                 By: ___________________________

                                 WARBURG, PINCUS VENTURES INTERNATIONAL, L.P.

                                 By: Warburg, Pincus & Co.,
                                     General Partner

                                 By: ___________________________

                                 WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS I,
                                 C.V.

                                 By: Warburg, Pincus & Co.,
                                     General Partner

                                 By: ___________________________

                                 WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS II,
                                 C.V.

                                 By: Warburg, Pincus & Co.,
                                     General Partner

                                 By: ___________________________

                                 WARBURG, PINCUS NETHERLANDS EQUITY PARTNERS
                                 III, C.V.

                                 By: Warburg, Pincus & Co.,
                                     General Partner

                                 By: ___________________________



                                       19

EX-10.12

                                                                   Exhibit 10.12
                                                                  EXECUTION COPY




                              VISIBLE GENETICS INC.

                        COMMON SHARES PURCHASE AGREEMENT


DECEMBER 14, 1999

TO EACH OF THE INVESTORS
WHO ARE SIGNATORIES HERETO

Ladies and Gentlemen:

Visible Genetics Inc., an Ontario corporation (the "COMPANY"), hereby agrees
with each of you as follows:

         1. AUTHORIZATION OF SALE OF THE SECURITIES.

         The Company has, or before the Closing (as defined below) will have,
authorized the sale and issuance of shares of its common shares, no par value
(the "COMMON STOCK"). The Common Stock sold hereunder shall be referred to
herein as the "SHARES."

         2. AGREEMENT TO SELL AND PURCHASE THE SHARES.

         2.1 SALE OF SHARES. Subject to the terms of this Common Shares Purchase
Agreement (this "PURCHASE AGREEMENT"), at the Closing (as defined in Section 3.1
hereof), the Company agrees to sell to each of the Investors who has executed a
counterpart execution page to this Purchase Agreement (each, "INVESTOR"), and
each Investor agrees to purchase from the Company, the aggregate number of
Shares set forth above such Investor's signature on the counterpart execution
page hereof, at a purchase price of US$15 per Share, provided that the aggregate
purchase price for the Shares sold to the Investors pursuant to this Agreement
shall not be less than $15 million.

         2.2 SEPARATE AGREEMENT. Each Investor shall severally, and not jointly,
be liable for only the purchase of the Shares that appears above such Investor's
signature and that relates to such Investor. The Company's agreement with each
of the Investors is a separate agreement, and the sale of Shares to each of the
Investors is a separate sale. The obligations of each Investor hereunder are
expressly not conditioned on the purchase by any or all of the other Shares such
other Investors have agreed to purchase.

         2.3 ACCEPTANCE OF PROPOSED PURCHASE OF SHARES. Each Investor
understands and agrees that the Company, in its sole discretion, reserves the
right to accept or reject, in whole or in part, any proposed purchase of Shares.
The Company shall have no obligation hereunder with respect to any Investors
until the Company shall execute and deliver to such Investors an executed copy
of this Purchase Agreement. If this Purchase Agreement is not executed and
delivered by the Company or the offering is terminated, this Purchase Agreement
shall be of no further force and effect.




         3. CLOSING AND DELIVERY.

         3.1 CLOSING. The closing of the purchase and sale of the Shares
pursuant to this Purchase Agreement (the "CLOSING") shall be held
contemporaneously (the "CLOSING DATE") with the satisfaction or waiver of all
conditions to Closing set forth in Sections 6 and 7 hereof, at 10:00 a.m. (New
York Time) at the offices of Baer Marks Upham LLP, located at 805 Third Avenue,
New York, New York, or on such other date and place as may be agreed to by the
Company and the Investors. Prior to the Closing, each Investors shall execute
any related agreements or other documents required to be executed hereunder.

         3.2 DELIVERY OF THE SHARES AT THE CLOSING. At the Closing, the Company
shall deliver to each Investor stock certificates registered in the name of such
Investor, or in such nominee name(s) as designated by such Investor,
representing the Shares to be purchased by such Investor at the Closing as set
forth in the Schedule of Investors against payment of the purchase price for
such Shares by means of a wire transfer of same day funds to an account
designated by the Company in a written notice to PaineWebber Incorporated. The
name(s) in which the stock certificates are to be issued to each Investor are
set forth in the Investor's counterpart execution page hereto, as completed by
each Investor.

         4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to the Investors that:

         4.1 CORPORATE ORGANIZATION

                  (a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the Province of Ontario. True
and complete copies of the Company's Restated Articles of Incorporation and
By-law No. 3 (collectively, the "ORGANIZATIONAL DOCUMENTS") have been filed by
the Company with the United States Securities and Exchange Commission (the
"SEC") and provided to the Investors.

                  (b) The Company has all requisite power and authority and has
all necessary approvals, licenses, permits and authorization to own, operate or
lease its properties and to carry on its business as now conducted, except where
the failure to have any such approval, license, permit or authorization would
not reasonably be expected to have a material adverse effect on the business,
properties, or financial condition of the Company and its subsidiaries taken as
a whole (a "MATERIAL ADVERSE EFFECT"). The Company has all requisite power and
authority to execute and deliver this Purchase Agreement and the Registration
Rights Agreement dated the date hereof between the Company and the Investors
(the "REGISTRATION RIGHTS AGREEMENT" and with the Purchase Agreement, the
"TRANSACTION DOCUMENTS") and to perform its obligations hereunder and
thereunder.

                  (c) The Company has filed all necessary documents to qualify
to do business as a foreign corporation in, and the Company is in good standing
under the laws of, each jurisdiction in which the conduct of the Company's
business or the nature of the properties owned or leased by the Company requires
such qualification, except where the failure to so qualify would not reasonably
be expected to have a Material Adverse Effect.



                                      -2-


         4.2 SUBSIDIARIES

                  (a) Schedule 4.2 sets forth; (i) the name of each subsidiary
of the Company, other than subsidiaries that are dormant or that do not carry on
business activities; (ii) the name of each corporation, partnership, joint
venture or other entity (other than such subsidiaries) in which the Company or
any of its subsidiaries has, or pursuant to any agreement has the right or
obligation to acquire at any time by any means, directly or indirectly, an
equity interest or investment; (iii) in the case of each of such corporations
described in clauses (i) and (ii) above, (A) the jurisdiction of incorporation
and (B) the capitalization thereof and the percentage of each class of voting
capital stock owned by the Company or any of its subsidiaries.

                  (b) Each subsidiary of the Company listed on Schedule 4.2 has
been duly organized, is validly existing and in good standing under the laws of
the jurisdiction of its organization, has the corporate power and authority to
own and lease its properties and to conduct its business and is duly registered,
qualified and authorized to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the nature of its
properties requires such registration, qualification or authorization, except
where the failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect. All of the issued and outstanding equity or other
participating interests of each subsidiary have been duly authorized and validly
issued, are fully paid and non-assessable, and, to the extent owned by the
Company as indicated on Schedule 4.2, are owned free and clear of any mortgage,
pledge, lien, encumbrance, security interest, claim or equity, except as set
forth on Schedule 4.2.

                  (c) For purposes of this Purchase Agreement, "SUBSIDIARY"
shall mean any (i) Person (as hereinafter defined in Section 4.5) of which the
Company (or other specified Person) shall own directly or indirectly through a
subsidiary, a nominee arrangement or otherwise (A) at least a majority of the
outstanding voting capital stock (or other outstanding voting shares of
beneficial interest) or (B) at least a majority of the partnership, membership,
joint venture or similar interests, or (ii) in which the Company (or other
specified Person) is a general partner or joint venturer.

         4.3 CAPITALIZATION

                  (a) The authorized capital stock of the Company consists of an
unlimited number of shares of Common Stock and an unlimited number of preferred
shares, without par value ("PREFERRED STOCK"). As of the close of business on
the date one business day prior to the date hereof, 9,682,631shares of Common
Stock were issued and outstanding, (ii) 33,948shares of Series A Convertible
Preferred Stock were issued and outstanding, (iii) 3,208,680 shares of Common
Stock were reserved for issuance under the Company's employee stock option plans
listed on SCHEDULE 4.3(a) in the amounts stated in such schedule, (iv) 5,207,739
shares of Common Stock were reserved for issuance under the Company's
outstanding warrants and convertible securities, and (v) there were no bonds,
debentures, notes or other evidences of indebtedness issued or outstanding
having the right to vote on any matters on which the Company's stockholders may
vote.

                  (b) All of the outstanding shares of Common Stock and
Preferred Stock of the Company have been duly and validly issued and are fully
paid and non-assessable, and were



                                      -3-


issued in accordance with all applicable United States federal and state and
Canadian federal and provincial securities laws. Upon issuance, sale and
delivery as contemplated by this Purchase Agreement, the Shares will be duly
authorized, validly issued, fully paid and non-assessable shares, free of all
preemptive or similar rights.

                  (c) Except for the rights which attach to the outstanding
Series A Convertible Preferred Stock as described in the Restated Articles of
Incorporation of the Company and the options which are listed on Schedule 4.3(a)
and the warrants, options and convertible securities which are listed on
SCHEDULE 4.3(c) hereto, on the Closing Date, there will be no shares of Common
Stock, Preferred Stock or any other equity security of the Company issuable upon
exercise, conversion or exchange of any security of the Company nor will there
be any rights, options or warrants outstanding or other agreements to acquire
shares of Common Stock or any other equity security of the Company nor will the
Company be contractually obligated to purchase, redeem or otherwise acquire any
outstanding shares of Common Stock. Except as set forth on Schedule 4.3(c), (i)
no stockholder of the Company is entitled to any preemptive or similar rights to
subscribe for shares of capital stock of the Company, (ii) the Company has not
agreed to register any of its securities under the Securities Act (other than
pursuant to the Registration Rights Agreement) and (iii) there are no existing
voting trusts or similar agreements to which the Company or any of its
subsidiaries is a party with respect to the voting of the capital stock of the
Company or any of its subsidiaries.

         4.4 CORPORATE PROCEEDINGS, ETC. The Company has full corporate power to
execute and deliver each Transaction Document, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution, delivery and performance of the Transaction
Documents by the Company and each of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of the Company. No other corporate action on the part of the Company is
necessary to authorize the execution, delivery and performance of the
Transaction Documents by the Company and each of the transactions contemplated
hereby and thereby, and upon such execution and delivery (assuming the
Transaction Documents are executed and delivered by the other parties thereto),
each of the Transaction Documents shall constitute a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except that (i) the enforceability hereof and thereof may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereinafter in
effect, affecting creditors rights generally, and (ii) the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought.

         4.5 CONSENTS AND APPROVALS. Except as set forth in SCHEDULE 4.5, the
execution and delivery by the Company of the Transaction Documents, the
performance by the Company of its obligations hereunder and thereunder and the
consummation by the Company of the transactions contemplated hereby and thereby
do not require the Company or any of its subsidiaries to obtain any consent,
approval or action of, or make any filing with or give any notice to, any
individual, firm, corporation, partnership, limited liability company, trust or
other entity (collectively, "PERSON") or public, governmental or judicial
authority or agency (collectively, "GOVERNMENTAL ENTITY"), including, but not
limited to, pursuant to the Competition Act (Canada) and the Investment Canada
Act, as amended.

                                      -4-


         4.6 ABSENCE OF CONFLICTS, ETC. Except as set forth in SCHEDULE 4.6, the
execution and delivery by the Company of the Transaction Documents do not, and,
the fulfillment of the terms hereof and thereof by the Company, and the issuance
of the Shares, will not, result in a breach of any of the terms, conditions or
provisions of, or constitute a default under, or permit the acceleration of
rights under or termination of, the Organizational Documents, any material
agreement to which the Company or its subsidiaries is a party, or any order,
judgment, rule or regulation of any Governmental Entity having jurisdiction over
the Company or any, of its subsidiaries or over their respective properties or
businesses, except for such defaults that would not reasonably be expected to
have a Material Adverse Effect.

         4.7 SEC REPORTS

                  (a) The Company has filed with the SEC, among other reports
(i) Annual Reports on Form 20-F for the fiscal years ended December 31, 1997 and
1998 as filed with the United States Securities and Exchange Commission (the
"SEC"), (ii) all other documents filed with the SEC (pursuant to Section 13,
14(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT")) and the Canadian securities regulatory authorities since
January 1, 1996 and (iii) all registration statements filed with the SEC since
January 1, 1996, which are all the documents (other than preliminary material)
that the Company filed or was required to file with the SEC or the Canadian
securities regulatory authorities from that date through the date hereof
(clauses (i) through (iii) being referred to herein collectively as the "SEC
REPORTS"). Except to the extent they may have been subsequently amended or
otherwise modified prior to the date hereof by subsequent reporting or filings,
as of their respective dates, the SEC Reports (as the same may have been amended
or otherwise modified) complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the "SECURITIES ACT") or the Exchange
Act and the rules and regulations of the SEC thereunder applicable to such
reports and registration statements. Except to the extent they may have been
subsequently amended or otherwise modified prior to the date hereof by
subsequent reporting or filings, as of their respective dates, the SEC Reports
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

                  (b) The audited consolidated financial statements as at and
for the period ended December 31, 1998 of the Company included in the SEC
Reports (the "1998 FINANCIAL STATEMENTS") comply as to form in all material
respects with accounting requirements of the Securities Act or the Exchange Act,
as applicable, and with the published rules and regulations of the SEC with
respect thereto. The 1998 Financial Statements (i) have been prepared in
accordance with generally accepted accounting principles in the United States of
America ("GAAP") applied on a consistent basis (except as may be indicated
therein or in the notes thereto), (ii) present fairly, in all material respects,
the financial position of the Company and its subsidiaries as of the dates
thereof and the results of their operations and cash flows for the periods then
ended and (iii) are in all material respects in agreement with the books and
records of the Company and its subsidiaries.

                  (c) Except as otherwise disclosed in a Form 6-K filed by the
Company on July 7, 1999, the unaudited interim financial statements of the
Company as at and for all periods commencing on or after January 1, 1999
included in the SEC Reports comply as to form in all



                                      -5-


material respects with accounting requirements of the Securities Act or the
Exchange Act, as applicable, and with the published rules and regulations of the
SEC with respect thereto. Except as otherwise disclosed in a Form 6-K filed by
the Company on July 7, 1999, the condensed financial statements included in the
SEC Reports: (i) have been prepared in accordance with GAAP applied on a
consistent basis (except as may be indicated therein or in the notes thereto);
(ii) present fairly, in all material respects, the financial position of the
Company and its subsidiaries as of the dates thereof and the results of their
operations and cash flows for the periods then ended subject to normal year-end
audit adjustments and any other adjustments described therein and the fact that
certain information and notes have been condensed or omitted in accordance with
the Exchange Act and the rules and regulations promulgated thereunder; and (iii)
are in all material respects in agreement with the books and records of the
Company and its subsidiaries.

                  (d) The Company and its subsidiaries keep proper accounting
records in which all material assets and liabilities, and all material
transactions, of the Company and its subsidiaries are recorded in conformity
with applicable accounting principles. No part of the Company's or any of its
subsidiaries, accounting system or records, or access thereto, is under the
control of a Person who is not an employee of the Company or such subsidiary.

                  (e) The Company, along with its subsidiaries, had less than
$25,000,000 of aggregate sales in the United States in the most recently
completed fiscal year, and as of September 30, 1999 owned, either directly or
indirectly, assets in the United States with an aggregate book value of less
than $15,000,000.

         4.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in the SEC
Reports filed with the SEC on or prior to the date hereof or in SCHEDULE 4.8,
and except for the transactions contemplated by this Purchase Agreement, since
December 31, 1998, (i) the Company and each of its subsidiaries has conducted
its business only in the ordinary and usual course in accordance with past
practice, and (ii) there have not occurred any events or changes (including the
incurrence of any liabilities of any nature, whether or not accrued, contingent
or otherwise) that have had, or is reasonably likely in the future to have,
individually or in the aggregate, a Material Adverse Effect.

         4.9 COMPLIANCE WITH LAW

                  (a) Neither the Company nor any of its subsidiaries is in
violation of any laws, ordinances, governmental rules or regulations to which it
is subject, except for violations which would not reasonably be expected to have
a Material Adverse Effect, including without limitation laws or regulations
relating to human therapeutic or diagnostic products or devices, the environment
or to occupational health and safety and, except as set forth in SCHEDULE 4.9,
no material expenditures are or will be required in order to cause its current
operations or properties to comply with any such law, ordinances, governmental
rules or regulations. Neither the Company nor any of its subsidiaries has
received written notice of violation of any law, ordinance, governmental rule or
regulation, which if violated, would reasonably be expected to have a Material
Adverse Effect. No investigation or review by any Governmental Entity with
respect to the Company or any of its subsidiaries is pending or, to the best of
the Company's knowledge, threatened nor has any Governmental Entity indicated an
intention to conduct the



                                      -6-


same, except for an investigation or review conducted as a result of an
application or other filing made by the Company.

                  (b) Neither the Company or any of its subsidiaries nor, to the
Company's knowledge, any of the officers, directors, employees, agents or other
representatives of the Company or any of its subsidiaries or affiliates (as that
term is defined in Rule 405 promulgated under the Securities Act
("AFFILIATES")), has, directly or indirectly, made or authorized any payment,
contribution or gift of money, property, or services, whether or not in
contravention of applicable law, (i) as a kickback or bribe to any Person or
(ii) to any political organization, or the holder of or any aspirant to any
elective or appointive public office except as permitted by applicable law and
for personal political contributions not involving the direct or indirect use of
funds of the Company or any of its subsidiaries.

                  (c) The Company and its subsidiaries have all licenses,
permits, franchises or other governmental authorizations necessary to the
ownership of their property or to the conduct of their respective businesses,
except for those which if violated or not obtained would reasonably be expected
(and except for any of the foregoing relating to Intellectual Property which are
covered by the provisions of Section 4.18) to have a Material Adverse Effect.
Neither the Company nor any subsidiary has finally been denied any application
for any such licenses, permits, franchises or other governmental authorizations
necessary to its business.

         4.10 LITIGATION. There is no legal action, suit, arbitration or other
legal, administrative or other governmental investigation, inquiry or proceeding
(whether federal, state, local or foreign) pending or, to the best of the
Company's knowledge, threatened against or affecting the Company or any
subsidiary or any of their respective properties, assets or businesses which,
either alone or in the aggregate, would reasonably be expected to have a
Material Adverse Effect or prevent or delay the consummation of the transactions
contemplated by the Transaction Documents. The Company is not aware of any fact
which might result in or form the basis for any such action, suit, arbitration,
investigation, inquiry or other proceeding. Except as set forth in SCHEDULE
4.10, neither the Company nor any subsidiary is subject to any order, writ,
judgment, injunction, decree, determination or award of any Governmental Entity
against it.

         4.11 MATERIAL CONTRACTS. Neither the Company nor any of its
subsidiaries is in default (or would be in default with notice or lapse of time,
or both) under, is in violation (or would be in violation with notice or lapse
of time, or both) of, or has otherwise breached, any material indenture, note,
credit agreement, loan document, lease, license or other agreement (unless such
default has been waived), which default, alone or in the aggregate with all
other such defaults, would reasonably be expected to have a Material Adverse
Effect. All material agreements to which the Company or any of its subsidiaries
is a party, reflecting all amendments thereto through the date of filing, have
been filed by the Company with the SEC pursuant to the requirements of the
Securities Act and the Exchange Act. Except as set forth in SCHEDULE 4.11, each
material agreement to which the Company or any of its subsidiaries is a party is
in full force and effect and is binding upon the Company and, to the best of the
Company's knowledge, is binding upon such other parties, in each case in
accordance with its terms. There are no material unresolved disputes involving
the Company or any of its subsidiaries under any material agreement.

                                      -7-


         4.12 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed on
SCHEDULE 4.12 and except for indebtedness or liabilities that are reflected or
reserved against in the most recent financial statements included in the SEC
Reports, neither the Company nor any of its subsidiaries has any debt,
obligation or liability of a kind required by GAAP to be reflected on a balance
sheet (whether accrued, absolute, contingent, liquidated or otherwise, whether
due or to become due and whether or not known to the Company) arising out of any
transaction entered into at or prior to the Closing, or any act or omission at
or prior to the Closing, or any state of facts existing at or prior to the
Closing, except current liabilities incurred and obligations under agreements
entered into since December 31, 1998, each in the usual and ordinary course of
business none of which (individually or in the aggregate) would reasonably be
expected to have a Material Adverse Effect.

         4.13 LABOR RELATIONS AND EMPLOYMENT

                  (a) Except as set forth in SCHEDULE 4.13(a), (i) to the best
of the Company's knowledge, there are no union claims to represent the employees
of the Company or any of its subsidiaries; (ii) neither the Company nor any of
its subsidiaries is a party to or bound by any collective bargaining or similar
agreement with any labor organization, or work rules or practices agreed to with
any labor organization or employee association applicable to employees of the
Company or any of its subsidiaries; (iii) none of the employees of the Company
or any of its subsidiaries is represented by any labor organization and the
Company does not have any knowledge of any current union organizing activities
among the employees of the Company or any of its subsidiaries, nor to the
Company's knowledge does any question concerning representation exist concerning
such employees; (iv) the Company and its subsidiaries are in compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, occupational safety and health,
equal opportunity, collective bargaining and payment of social security or
social insurance premiums, as applicable, except where the failure to be in
compliance would not reasonably be expected to have a Material Adverse Effect,
and are not engaged in any discriminatory employment practices or unfair labor
practices under applicable law, ordinance or regulation; (v) there is no unfair
labor practice charge or complaint against the Company or any of its
subsidiaries pending or, to the best of the Company's knowledge, threatened
before any state or foreign agency; (vi) neither the Company nor any of its
subsidiaries has received written notice of the intent of any federal, state,
local or foreign agency responsible for the enforcement of labor or employment
laws to conduct an investigation with respect to or relating to the Company or
any of its subsidiaries and no such investigation is in progress; and (vii)
there are no complaints, lawsuits or other proceedings pending or, to the best
of the Company's knowledge, threatened in any forum by or on behalf of any
present or former employee of the Company or any of its subsidiaries alleging
breach of any express or implied contract of employment, any law or regulation
governing employment or the termination thereof or other discriminatory,
wrongful or tortious conduct in connection with the employment relationship,
except for any complaints, lawsuits or other proceedings which would not
reasonably be expected to have a Material Adverse Effect.

                  (b) Except as set forth in SCHEDULE 4.13(b), the employment of
all Persons and officers employed by the Company or any of its subsidiaries is
terminable at will without any penalty or severance obligation of any kind on
the part of the Company or such subsidiary. All sums due for employee
compensation and benefits, including, without limitation, retiree benefits,



                                      -8-


and all vacation time owing to any employees of the Company or any of its
subsidiaries have been duly and adequately accrued in all material respects on
the accounting records of the Company and its subsidiaries in accordance with
GAAP.

                  (c) Except as set forth on SCHEDULE 4.13(c), the Company and
its subsidiaries have in force written confidentiality and non-disclosure
agreements and patent/copyright/invention assignment agreements with, and
requires as a condition of employment the execution of such agreements by, all
of its technical research employees, all research consultants, all of its
officers and such other members of its staff as in the regular course of their
duties are reasonably likely to receive material confidential information
regarding the Company, its Intellectual Property (as hereinafter defined) and
its current and prospective business plans.

                  (d) The Company is not aware that any of its officers or key
employees or any officers or key employees of its subsidiaries is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any
Governmental Entity, that would interfere with the use of such employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as currently conducted.

                  (e) Except as set forth in SCHEDULE 4.13(e), the Company is
not aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company or any of its
subsidiaries, nor does the Company have a present intention to terminate the
employment of any of the foregoing.

         4.14 EMPLOYEE BENEFIT PLANS.

                  (a) With respect to Employee Benefit Plans (as hereinafter
defined) of the Company and its subsidiaries: (i) the fair market value of the
assets of each funded Employee Benefit Plan, if any, the liability of each
insurer for any Employee Benefit Plan funded through insurance or any book
reserve established for any other Employee Benefit Plan, together with any
accrued contributions, is sufficient to procure or provide for the accrued
benefit obligations, as of the date hereof, with respect to all current and
former participants in such Employee Benefit Plan according to the actuarial
assumptions and valuations, if any, most recently used to determine employer
contributions to and liabilities of such Employee Benefit Plan, and no
transaction contemplated by this Purchase Agreement shall cause such assets or
insurance obligations or any book reserve to be less than such benefit
obligations; (ii) each Employee Benefit Plan has been maintained and
administered, in all material respects, in accordance with its terms and with
all applicable provisions of law (including rules and regulations thereunder);
and (iii) each Employee Benefit Plan which is required to be registered with any
Governmental Entity has been registered and maintained in good standing with the
appropriate Governmental Entity, except where the failure to be so registered or
to maintain good standing would not reasonably be expected to have a Material
Adverse Effect.

                  (b) For purposes of this Purchase Agreement, "EMPLOYEE BENEFIT
PLAN" shall mean all material employee benefit or executive compensation
arrangements, perquisite programs or payroll practices, including, without
limitation, any such arrangements or payroll



                                      -9-


practices providing severance pay, sick leave, vacation pay, salary continuation
for disability, retirement benefits, deferred compensation, bonus pay,
incentives pay, stock options (including those held by Directors, employees, and
consultants), hospitalization insurance, medical insurance, life insurance,
scholarships or tuition reimbursements, that are maintained by the Company or
any of its subsidiaries or to which the Company or any subsidiary is obligated
to contribute thereunder for current or former employees of the Company or any
subsidiary.

         4.15 REAL PROPERTY

                  (a) The Company and its subsidiaries do not own any real
property in whole or in part.

                  (b) SCHEDULE 4.15 lists all real property leased by the
Company or its subsidiaries as well as the commencement and expiration dates of
all leases relating thereto (the "LEASED REAL PROPERTY"). The Company or one of
its subsidiaries has a valid and existing lease or sublease for each property
subsumed within the Leased Real Property. All leases covering any of the Leased
Real Property are valid and enforceable by the Company or one of its
subsidiaries, as the case may be, in accordance with their respective terms, are
in full force and effect, except that the enforceability thereof may be subject
to applicable bankruptcy, insolvency or other similar laws, now or hereinafter
in effect, affecting creditors rights generally, and the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought, and have not been
modified, supplemented or terminated in any material respect except as set forth
in Schedule 4.15, and there is not under any such lease any default by the
Company or one of its subsidiaries or, to the best of the Company's knowledge,
by any landlord or lessor under any such lease except for any such default which
would not reasonably be expected to have a Material Adverse Effect. The
facilities and real properties covered by the Leased Real Property constitute
all of the facilities and real properties presently used by the Company or its
subsidiaries.

                  4.16 CONDITION OF PROPERTIES. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company and its subsidiaries are in good operating condition and repair (normal
wear and tear excepted), are reasonably fit and usable for the purposes for
which they are being used, are adequate and sufficient for the Company's or such
subsidiary's business and conform with all applicable ordinances, regulations
and laws except where the failure to conform with the applicable ordinances,
regulations or laws would not reasonably be expected to have a Material Adverse
Effect.

         4.17 ENVIRONMENTAL MATTERS.

                  (a) The Company and its subsidiaries (i) are in compliance
with all Environmental Laws; (ii) have obtained all necessary Environmental
Permits, all of which are in full force and effect; and (iii) are in compliance
with all terms and conditions of such Environmental Permits, except for any
failure to comply or the absence of any such permit which would not reasonably
be expected to have a Material Adverse Effect.

                                      -10-


                  (b) Neither the Company nor any of its subsidiaries has
violated or done any act which would reasonably be expected to result in
liability under, or have otherwise failed to act in a manner which would
reasonably be expected to expose any of them to liability under, any
Environmental Law except for any liability that would not reasonably be expected
to have a Material Adverse Effect. No event has occurred which, upon the passage
of time, the giving of notice, or failure to act would reasonably be expected to
give rise to liability to the Company or any of its subsidiaries under any
Environmental Law except for any liability that would not reasonably be expected
to have a Material Adverse Effect.

                  (c) No Hazardous Material has been released, spilled,
discharged, dumped, or disposed of, by the Company, or otherwise come to be
located in, at, beneath or near any of the Leased Real Property as a result of
the Company's action including properties formerly owned, operated or otherwise
controlled by the Company or any of its subsidiaries (i) in violation of any
Environmental Law or (ii) in such manner as would reasonably be expected to
result in environmental liability to the Company or any of its subsidiaries.

                  (d) To the Company's knowledge, there have been and are no:
(i) aboveground or underground storage tanks; (ii) surface impoundments for
Hazardous Materials; (iii) wetlands as defined under any Environmental Law; or
(iv) asbestos or asbestos containing materials or polychlorinated biphenyl
("PCB") or PCB-containing equipment, located within any portion of the Leased
Real Property.

                  (e) No liens currently encumber any Leased Real Property in
connection with any actual or alleged liability of the Company under any
Environmental Law.

                  (f) (i) Neither the Company nor any of its subsidiaries has
received any written notice, claim, demand, suit or request for information from
any Governmental Entity or private entity with respect to any liability or
alleged liability under any Environmental Law, nor to the knowledge of the
Company has any other entity whose liability, in whole or in part, may be
attributed to the Company or any of its subsidiaries, received any such notice,
claim, demand, suit or request for information; (ii) neither the Company nor any
of its subsidiaries has ongoing negotiations with or agreements with any
Governmental Entity or other Person or entity relating to any Remedial Action or
other claim arising under or related to any Environmental Law.

                  (g) Neither the Company nor any of its subsidiaries has
disposed, or arranged for the disposal, of any Hazardous Materials at any
facility that is or has ever been the subject of investigation or response
action under the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 ET SEQ. ("CERCLA"), Resource Conservation
and Recovery Act, 42 U.S. C. Section 6901 ET SEQ. ("RCRA") , or any state or
Canadian law of similar effect.

                  (h) The Company does not have in its possession any
environmental studies and reports pertaining to any of the Leased Real Property.

         For purposes of this Purchase Agreement, the following terms shall have
the following meanings:

                                      -11-


         "ENVIRONMENTAL LAWS" shall mean any statute, regulation, ordinance,
order, decree, treaty, agreement, compact, common law duty or other requirement
of United States, Canadian or international law relating to protection of human
health, safety or the environment (including, without limitation, ambient air,
surface water, groundwater, wetlands, soil, surface and subsurface strata).

         "ENVIRONMENTAL PERMITS" shall mean all permits, licenses, approvals,
authorizations, consents or registrations required under any applicable
Environmental Law.

         "HAZARDOUS MATERIALS" shall mean any chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, hazardous
materials, hazardous wastes, radioactive materials, petroleum or petroleum
products.

         "REMEDIAL ACTION" shall mean any action required to: (i) clean up,
remove or treat Hazardous Materials; (ii) prevent a release or threat of release
of any Hazardous Material; (iii) perform pre-remedial studies, investigations or
post-remedial monitoring and care; or (iv) cure a violation of Environmental Law

         4.18 INTELLECTUAL PROPERTY

                  (a) Except as described in SCHEDULE 4.18(a), the Company or
one of its subsidiaries owns or has the valid right to use, free and clear of
all liens and other encumbrances or claims of any nature, except for liens or
other encumbrances that are not material, all of the Intellectual Property
necessary for the conduct of the business of the Company or any of its
subsidiaries, except where the failure to own or have the right to use any item
of Intellectual Property would not reasonably be expected to have a Material
Adverse Effect. Except as noted on Schedule 4.18(a), all Intellectual Property
that is material to the Company, is valid, subsisting, unexpired, in proper form
and enforceable and all renewal fees and other maintenance fees that have fallen
due on or prior to the effective date of this Agreement have been paid.

                  (b) Except as set forth on SCHEDULE 4.18(b), there is no
claim, suit, action or proceeding pending or, to the best of the Company's
knowledge, threatened against the Company or one of its subsidiaries: (i)
alleging any conflict or infringement with any third party's proprietary rights;
or (ii) challenging the Company or one of its subsidiaries, ownership or use, or
the validity or enforceability of any Intellectual Property; and to the
Company's knowledge no listed application or registration/patent of the Company
is the subject of any patent interference proceeding or similar proceeding.
Except as set forth on Schedule 4.18(b), there is no claim, suit, action or
proceeding pending or, to best of the Company's knowledge, threatened by the
Company or one of its subsidiaries, alleging any third party's intellectual
property rights conflict or infringe the Intellectual Property of the Company or
one of its subsidiaries.

                  (c) Any (i) material license, sublicense and other agreements
in which the Company or one of its subsidiaries grant rights to any Person to
use the Intellectual Property; (ii) material license, sublicense and other
agreement in which any Person grants rights to the Company or one of its
subsidiaries to use the Intellectual Property of such Person; or (iii) material
consent, indemnification, forbearance to sue, settlement agreement or
cross-licensing arrangement relating to the Intellectual Property or the
intellectual property of any third party to



                                      -12-


which the Company or one of its subsidiaries is a party, which is described by
the Company in its Annual Report on Form 20-F for the year ended December 31,
1998 or in any subsequent filing made with the SEC, is correct in all material
respects except as the same may have been supplemented or modified by a later
filing with the SEC. Except as previously disclosed, neither the Company nor any
of its subsidiaries is under any obligation to pay royalties or similar payments
in connection with any license, nor will the Company or any of its subsidiaries
be, as a result of the execution and delivery of the Transaction Documents or
the performance of its obligations hereunder or thereunder, in breach of any
license, sublicense or other agreement relating to the Intellectual Property
except for any such breach which would not reasonably be expected to have a
Material Adverse Effect. As to each material license agreement to which the
Company or one of its subsidiaries is a party, the Company or such subsidiary is
current in the payment of all royalties due thereunder.

                  (d) Except as set forth in SCHEDULE 4.18(d), no former or
present employee, officer or director of the Company or any of its subsidiaries
holds any right, title or interest, directly or indirectly, in whole or in part,
in or to any Intellectual Property.

                  (e) The Company or one of its subsidiaries owns or has the
right to use all computer software, software systems and databases and all other
information systems currently used in the business of the Company or any of its
subsidiaries, including, without limitation, all computer software used in the
business of the Company on personal computers by employees of the Company or any
of its subsidiaries.

         For purposes of this Purchase Agreement, "INTELLECTUAL PROPERTY" shall
mean all of the following, owned or used in the business of the Company or any
of its subsidiaries: (i) trademarks and service marks (registered or
unregistered), trade dress, trade names and other names and slogans embodying
business or product goodwill or indications of origin, all applications or
registrations in any jurisdiction pertaining to the foregoing and all goodwill
associated therewith; (ii) patents, patentable inventions, discoveries,
improvements, ideas, know-how, formula methodology, processes, technology and
computer programs, software and databases (including source code, object code,
development documentation, programming tools, drawings, specifications and data)
and all applications or registrations in any jurisdiction pertaining to the
foregoing, including all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof; (iii) trade secrets,
including confidential and other non-public information, and the right in any
jurisdiction to limit the use or disclosure thereof; (iv) copyrights in
writings, designs, mask works or other works, and applications or registrations
in any jurisdiction for the foregoing; (v) database rights; (vi) Internet Web
sites, domain names and registrations or applications for registration thereof;
(vii) licenses, immunities, covenants not to sue and the like relating to any of
the foregoing; (viii) books and records describing or used in connection with
any of the foregoing; and (ix) claims or causes of action arising out of or
related to infringement or misappropriation of any of the foregoing.

         4.19 REGULATORY MATTERS

                  (a) As to each product subject to the jurisdiction of the U.S.
Food and Drug Administration ("FDA") under the Federal Food, Drug and Cosmetic
Act and the regulations thereunder ("FDCA") (each such product, a "REGULATED
PRODUCT") that is manufactured, tested,



                                      -13-


distributed and/or marketed by the Company or any of its subsidiaries, such
Regulated Product is being manufactured, tested, distributed and/or marketed in
substantial compliance with all applicable requirements under FDCA and similar
state and foreign laws and regulations, including but not limited to those
relating to investigational use, premarket clearance, good manufacturing
practices, labeling, advertising, record keeping, filing of reports and
security.

                  (b) To the Company's knowledge, there are no rule making or
similar proceedings before the FDA or comparable federal, Canadian, state,
provincial, local or foreign government bodies which involve or, to the
Company's actual knowledge, affect the Company or any of its subsidiaries which,
if the subject of an action unfavorable to the Company or any of its
subsidiaries, would have a Material Adverse Effect.

                  (c) The description of the results of tests or evaluations
contained in the Company's Investigational Device Exemption submission, dated
November 11, 1998 (the "IDE"), are accurate and complete in all material
respects, and the Company has no knowledge-of any other tests or evaluations,
the results of which reasonably call into question the results described or
referred to in the IDE. Except as set forth on SCHEDULE 4.19, neither the
Company nor any of its subsidiaries has received any written notices or
correspondence from the FDA or any other governmental agency requiring the
termination, suspension or modification of any tests or evaluations conducted on
behalf of the Company or any of its subsidiaries.

         4.20 YEAR 2000. Except as set forth in SCHEDULE 4.20, in the SEC
Reports or as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect, the Company's computer software,
hardware, firmware and other similar or related items of automated, computerized
and/or software system(s) that are relied on by, or sold or provided with
equipment or materials sold or provided by, the Company or its subsidiaries in
the conduct of their respective businesses, (A) will not malfunction prior to,
on, or after January 1, 2000 as a consequence of the change of century or
millennium associated with that date, and (B) are, as applicable, able to
process dates and calculate spans of dates within and between the twentieth and
twenty-first centuries prior to, including and following January 1, 2000,
including by: (i) correctly recognizing all valid dates, including September 9,
1999 and January 1, 2001, (ii) properly recognizing leap years, including
recognizing year 2000 as a leap year with 366 days and February 29, 2000 as a
leap year day, and (iii) properly interfacing with the same or other systems,
where designed to have the capacity to interface, so as to preserve proper
processing of date information, including by automatic conversion of date
information into and from a four digit and two digit date format as appropriate,
provided, however, that (a) the representations and warranties contained in this
Section 4.20 shall only apply if the software, firmware or hardware is used in
accordance with the documentation therefor, and all other products used in
combination with such software, firmware or hardware properly exchange date data
with the software, firmware or hardware and (b) to the extent that any of the
representations and warranties contained in this Section 4.20 are made by the
Company with respect to computer software, hardware, firmware and other similar
or related items of automated, computerized arid/or software systems that are
manufactured, assembled or provided by parties other than the Company or its
subsidiaries, the representations and warranties provided by the Company are
provided to the best of the Company's knowledge.

                                      -14-


                  4.21 TAX MATTERS. Except as set forth on SCHEDULE 4.21, there
are no United States or Canadian federal, state, provincial, county, municipal
or local taxes or comparable foreign taxes due and payable by the Company or any
of its subsidiaries which have not been paid. The provisions for taxes on the
consolidated balance sheet of the Company for the year ended December 31, 1998
are sufficient for the payment of all accrued and unpaid United States and
Canadian federal, state, provincial, county, municipal and local taxes or
comparable foreign taxes of the Company and its subsidiaries whether or not
assessed or disputed as of the date of such balance sheet. The Company and each
of its subsidiaries has duly filed all United States and Canadian federal,
state, provincial, county, municipal and local or comparable foreign tax returns
required to have been filed by it and there are in effect no waivers of
applicable statutes of limitations with respect to taxes for any year. Except as
set forth on Schedule 4.21, neither the Company nor any of its subsidiaries has
been subject to a tax audit of any kind, whether in Canada, the United States or
other jurisdiction in which such entity conducts business.

                  4.22 INSURANCE. The Company and its subsidiaries and their
respective properties are insured in such amounts, against such losses and with
such insurers as are prudent when considered in light of the nature of the
properties and businesses of the Company and its subsidiaries. SCHEDULE 4.22
sets forth a complete and accurate list of the insurance policies of the Company
and its subsidiaries as in effect on the date hereof, including in each case the
applicable coverage limits, deductibles and the policy expiration dates. No
written notice of any termination or threatened termination of any of such
policies has been received by the Company or any of its subsidiaries and such
policies are in full force and effect.

                  4.23 TRANSACTIONS WITH RELATED PARTIES. Except as set forth in
the Company's Annual Report on Form 20-F for its fiscal year ended December 31,
1998 or in SCHEDULE 4.23, neither the Company nor any subsidiary is a party to
any agreement with any of the Company's directors, officers or shareholders or
any Affiliate or family member of any of the foregoing under which it: (i)
leases any real or personal property other than automobiles (either to or from
such Person), (ii) licenses real or personal property or Intellectual Property
(either to or from such Person), (iii) is obligated to purchase any tangible or
intangible asset from or sell such asset to such Person, (iv) purchases products
or services from such Person, or (v) has borrowed money from or lent money to
such Person. Except as set forth in Schedule 4.23, to the best of the Company's
knowledge, there exist no agreements among shareholders of the Company, except
as contemplated by the Transaction Documents, to act in concert with respect to
their voting or holding of Company securities.

                  4.24 INTEREST IN COMPETITORS. Neither the Company, nor any or
its subsidiaries, nor any of their respective officers nor, to the best of the
Company's knowledge, directors, has any interest, either by way of contract or
by way of investment (other than as holder of not more than 2% of the
outstanding capital stock of a publicly traded Person) or otherwise, directly or
indirectly, in any Person other than the Company and its subsidiaries that (i)
provides any services or designs, produces or sells any product or product lines
or engages in any activity similar to or competitive with any activity currently
conducted by the Company or any of its subsidiaries or (ii) has any direct or
indirect interest in any asset or property, real or personal, tangible or
intangible, of the Company.

                                      -15-


                  4.25 PRIVATE OFFERING. Neither the Company nor anyone acting
on its behalf shall offer the Shares for issue or sale to, or solicit any offer
to acquire, any of the same from, anyone so as to bring the issuance and sale of
the Shares within the provisions of Section 5 of the Securities Act. Based upon
the representations of the Investors set forth in Section 4, the offer, issuance
and sale of the Shares, are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act, and have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws, and are qualified for distribution or are exempt from such
requirements for qualification under applicable Canadian federal and provincial
securities laws.

                  4.26 MATERIAL FACTS. This Agreement and the other Transaction
Documents do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained therein or
herein, in light of the circumstances in which they were made, not misleading.

5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTORS.

         5.1 INVESTMENT REPRESENTATIONS. Each Investor, severally and not
jointly, represents and warrants to and covenants with the Company that:

                  (a) Investor is knowledgeable, sophisticated and experienced
in making, and is qualified to make, decisions with respect to investments in
shares presenting an investment decision like that involved in the purchase of
the Shares, including investments in securities issued by the Company, and has
requested, received, reviewed and considered all information Investors deems
relevant (including the SEC Reports) in making an informed decision to purchase
the Shares.

                  (b) Investor is purchasing the Shares in the ordinary course
of its business for its own account for investment only and with no present
intention of distributing the Shares or any arrangement or understanding with
any other persons regarding the distribution of the Shares (except for transfers
to "affiliates," meaning, for purposes of this Section 5.1(b), with respect to
an Investors, any other person directly or indirectly controlling, controlled by
or under direct or indirect common control with such Investors).

                  (c) Investor shall not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the securities purchased
hereunder except in compliance with the Securities Act, applicable Blue Sky
laws, and the rules and regulations promulgated thereunder, and any applicable
Canadian laws, rules or regulations.

                  (d) Investor has completed or caused to be completed the
information requested on the Investors' counterpart execution page and the
Registration Questionnaire, attached as Appendix I to the Registration Rights
Agreement for use in preparation of the Registration Statement, and the answers
thereto are true and correct in all material respects as of the date hereof and
will be true and correct, in all material respects, as of the effective date of
the Registration Statement (provided that Investors shall be entitled to update
such information by



                                      -16-


providing notice thereof to the Company prior to the effective date of such
Registration Statement).

                  (e) Investor has, in connection with its decision to purchase
the Shares, relied with respect to the Company and its affairs solely upon the
SEC Reports and the representations and warranties of the Company contained
herein.

                  (f) Investor is an "accredited investor" within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act.

                  (g) Investor has full right, power, authority and capacity to
enter into this Purchase Agreement and the Registration Rights Agreement and to
perform the transactions contemplated hereby and thereby. This Purchase
Agreement and the Registration Rights Agreement have been duly authorized,
executed and delivered by the Investor. Assuming due authorization, execution
and delivery by each of the other parties hereto and thereto, this Purchase
Agreement and the Registration Rights Agreement are valid and binding
obligations of Investor, enforceable against it in accordance with their terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general equitable principles

         5.2 ABILITY TO BEAR RISK. Investor is able to bear the economic risk of
holding the Shares for an indefinite period, including the loss of Investors'
entire investment. The Shares were not offered or sold to Investors by any form
of general solicitation or advertising.

         5.3 INDEPENDENT ADVICE. Investor understands that nothing in the SEC
Reports, this Purchase Agreement, the Registration Rights Agreement or any other
materials presented to Investors in connection with the purchase and sale of the
Shares constitutes legal, tax or investment advice and that no independent legal
counsel retained by the Company has reviewed these documents and materials on
Investor's behalf. Investor has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Shares.

         5.4 NO TRANSFERABILITY. Investor understands that: (a) subject to
Section 5.1(b), the Shares shall not be transferable in the absence of
registration under the Securities Act or an exemption therefrom or in the
absence of compliance with any term of this Purchase Agreement; (b) the Company
shall provide stop transfer instructions to its transfer agent with respect to
the Shares in order to enforce the restrictions contained in this Section 5.4;
and (c) each certificate representing Shares shall be in the name of Investor
and shall bear substantially the following legends (in addition to any legends
required under applicable securities laws):

                  "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
                  "SECURITIES ACT"), OR REGISTERED OR QUALIFIED UNDER THE
                  SECURITIES LAWS OF ANY JURISDICTION, AND MAY ONLY BE SOLD,
                  PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF BY AN INVESTOR
                  IF SUBSEQUENTLY REGISTERED

                                      -17-


                  UNDER THE SECURITIES ACT AND REGISTERED OR QUALIFIED UNDER ANY
                  APPLICABLE STATE SECURITIES LAWS, UNLESS EXEMPTIONS FROM SUCH
                  REGISTRATION AND QUALIFICATION REQUIREMENTS ARE AVAILABLE."

The legend contained in this Section 5.4 may be removed from a stock certificate
immediately upon receipt by the Company's transfer agent of a certificate
substantially in the form of EXHIBIT A attached hereto, if being sold pursuant
to the Registration Statement if then effective, and such other documentation as
the Company's transfer agent may routinely require, including, but not limited
to, an opinion of counsel. Notwithstanding the foregoing, such Shares must be
held in certificated form until all restrictive legends required by applicable
law may be removed in accordance with applicable law.

6. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING.

         The Company's obligations to complete the sale and issuance of the
Shares and to deliver Shares to each Investor, individually, as set forth in the
Schedule of Investors shall be subject to the following conditions (to the
extent not waived by the Company):

         6.1 PAYMENT FOR SHARES. Each Investor shall have paid to the Company
the purchase price for the Shares purchased by it.

         6.2 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by such Investors in Section 5 hereof shall be true and correct
when made, and shall be true and correct on the Closing.

         6.3 MINIMUM SALE. The aggregate purchase price for the Shares sold to
Investors pursuant to this Agreement shall not be less than $15 million.

7. CONDITIONS TO INVESTORS' OBLIGATIONS AT THE CLOSING.

         Each Investor's obligation to accept delivery of the Shares and to pay
for the Shares shall be subject to the following conditions (to the extent not
waived by such Investors):

         7.1 REGISTRATION RIGHTS AGREEMENT. The Company shall have executed and
delivered the Registration Rights Agreement.

         7.2 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 4 shall be true and correct as of the
Closing.

         7.3 COVENANTS PERFORMED. The Company shall have performed and complied
in all material respects with all of its obligations under this Purchase
Agreement which are to be performed or complied with on or prior to the Closing.

         7.4 LEGAL OPINIONS.

                  (a) Investors shall have received from Baer Marks & Upham LLP,
counsel to the Company, an opinion letter addressed to the Investors, dated as
of the date of the Closing, in

                                      -18-



a form acceptable to PaineWebber Incorporated (the "PLACEMENT AGENT"), the
Investors and their respective counsel, subject to customary assumptions and
qualifications.

                  (b) Investors shall have received from Goldman, Spring,
Schwartz & Kichler, counsel to the Company, an opinion letter addressed to the
Investors, dated as of the date of the Closing, in a form acceptable to the
Placement Agent and the Investors and their respective counsel, subject to
customary assumptions and qualifications.

                  (c) Investors shall have received from Hyman, Phelps &
McNamara, P.C., counsel to the Company, an opinion letter addressed to the
Investors, dated as of the date of the Closing, in a form acceptable to the
Placement Agent and the Investors and their respective counsel, subject to
customary assumptions and qualifications.

                  (d) Investors shall have received from Oppedahl & Larson,
counsel to the Company, an opinion letter relating to intellectual property
matters addressed to the Investors, dated as of the date of the Closing, in a
form acceptable to the Placement Agent and the Investors and their respective
counsel, subject to customary assumptions and qualifications.

         7.5 MINIMUM SALE. The aggregate purchase price for the Shares sold to
the Investors pursuant to this Agreement shall not be less than $15 million.

8. MISCELLANEOUS.

         8.1 WAIVERS AND AMENDMENTS. Neither this Purchase Agreement nor any
provision hereof may be changed, waived, discharged, terminated, modified or
amended except upon the written consent of the Company and holders of at least a
majority of the Shares, or, in the case of non-material or ministerial
amendments, upon the written consent of the Company and the Placement Agent.

         8.2 HEADINGS. The headings of the various sections of this Purchase
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Purchase Agreement.

         8.3 BROKER'S FEE. The Company and each Investor (severally and not
jointly) hereby represent that, except for amounts to be paid by the Company to
the Placement Agent and certain other financial advisers as set forth in the
Company's engagement letter with the Placement Agent, there are no brokers or
finders entitled to compensation in connection with the sale of the Shares, and
shall indemnify each other for any such fees for which they are responsible.

         8.4 SEVERABILITY. In case any provision contained in this Purchase
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

         8.5 NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (c) upon receipt when sent by first-class registered or
certified mail, return receipt requested, postage prepaid, or (d) upon receipt
after



                                      -19-


deposit with a nationally recognized overnight express courier, postage prepaid,
specifying next day delivery with written verification of receipt. All
communications shall be sent to the party to be notified at the address as set
forth below or at such other address as such party may designate by ten (10)
days advance written notice to the Company. All communications shall be
addressed as follows:

                  (a) if to the Company, to:

                                    VISIBLE GENETICS INC.
                                    700 Bay Street, Suite 1000
                                    Toronto, Ontario
                                    M5G 1Z6
                                    Telephone: (416) 813-3242
                                    Facsimile: (416) 813-3250
                                    Attention:  Chief Executive Officer

                           with a copy so mailed to:

\                                   BAER MARKS & UPHAM LLP
                                    805 Third Avenue
                                    New York, New  York  10022
                                    Telephone: (212) 702-5700
                                    Facsimile: (212) 702-5941
                                    Attention: Steven S. Pretsfelder

                           and to:

                                    GOLDMAN, SPRING, SCHWARTZ & KICHLER
                                    Suite 700
                                    40 Sheppard Avenue West
                                    Toronto, Ontario
                                    M2N 6K9
                                    Attention:  Samuel Schwartz

                  (b) if to the Investors, at the address as set forth on the
Counterpart Execution Page of this Purchase Agreement.

         8.6 GOVERNING LAW; EXCLUSIVE JURISDICTION. This Purchase Agreement
shall be governed by and construed in accordance with the laws of the State of
New York as applied to contracts entered into and performed entirely in New York
by New York residents, without regard to conflicts of law principles. The
parties hereto (a) agree that any suit, action or other proceeding arising out
of this Agreement shall be brought only in the courts of the State of New York
or the courts of the United States located within the State of New York, in each
case in the County of New York, (b) consent and submit to the exclusive
jurisdiction of each such court in any such suit, action or proceeding and (c)
waive any objection which they, or any of them, may have to personal
jurisdiction or the laying of venue of any such suit, action or proceeding in
any of such courts, and agree not to seek to change venue.


                                      -20-


         8.7 COUNTERPARTS. This Purchase Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.

         8.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Purchase Agreement,
all covenants, agreements, representations and warranties made by the Company
and each Investors herein and in the certificates for the securities delivered
pursuant hereto shall survive the execution of this Purchase Agreement, the
delivery to the Investors of the Shares and the payment therefor until the
expiration of the Registration Period as defined in the Registration Rights
Agreement.

         8.9 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto. Neither the terms "successors" nor "assigns" as used herein
shall include any Person who purchases Shares from any Investor after the
Closing and is not an affiliate of an Investor.

         8.10 ENTIRE AGREEMENT. This Purchase Agreement and other documents
delivered pursuant hereto, including the exhibits, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.

         8.11 PAYMENT OF FEES AND EXPENSES. Each of the Company and the
Investors shall bear its own expenses and legal fees incurred on its behalf with
respect to this Purchase Agreement, the Registration Rights Agreement and the
transactions contemplated hereby and thereby; provided, however, that the
Company shall (i) pay the costs of one legal counsel for all Investors up to a
maximum of $25,000; (ii) bear the costs in connection with the Registration
Statement (pursuant to the Registration Rights Agreement) and (iii) reimburse
the Placement Agent for certain fees and expenses incurred by the Placement
Agent in connection with the transactions contemplated hereby, as set forth in
the engagement letter with the Placement Agent. If any action at law or in
equity is necessary to enforce or interpret the terms of this Purchase
Agreement, the prevailing party shall be entitled to reasonable attorney's fees,
costs and necessary disbursements in addition to any other relief to which such
party may be entitled.

         8.12 CONFIDENTIALITY. Each Investor acknowledges and agrees that any
information or data it has acquired or hereafter shall acquire pursuant to this
Agreement or the Registration Rights Agreement from the Company was received and
shall be received by such Investor in confidence except any such information or
data which at the time of disclosure was in the public domain or was readily
available through public sources other than as a result of any breach of the
terms hereof or the Registration Rights Agreement or was known to the Investor
prior to receipt from the Company or was obtained from a third party not in
violation of any confidentiality, non-disclosure or similar obligations of such
third party or the Investor (the "CONFIDENTIAL INFORMATION"). Except to the
extent authorized by the Company and required by any federal or state law, rule
or regulation or any decision or order of any court or regulatory authority,
each Investor agrees that it will refrain from disclosing any such Confidential
Information to any Person other than to any agent, attorneys, accountants,
employees, officers and directors of Investor (collectively, "AGENTS") who need
to know such information in connection with



                                      -21-


Investor's purchase of the Shares, and who agree to be bound by the
confidentiality provisions of this Purchase Agreement. In the event that
Investor or its agents are required by federal or state or other law, rule or
regulation or any decision or order of any court or regulatory authority to
release such information or data, it shall give the Company sufficient prior
notice so that the Company may seek a stay or other release or waiver from
disclosing such information. Each Investor agrees not to use to the detriment of
the Company or for the benefit of any other Person or Persons, or misuse in any
way, any Confidential Information of the Company.

         8.13 KNOWLEDGE. The phrases "KNOWLEDGE," "TO THE COMPANY'S KNOWLEDGE,"
"TO THE COMPANY'S BEST KNOWLEDGE," "OF WHICH THE COMPANY IS AWARE" and similar
language as used herein shall mean the actual knowledge and current awareness,
or knowledge which a reasonable person would have acquired following a
reasonable investigation, of Richard T. Daley or Kingsley Thomas.

                [The rest of this page intentionally left blank]




                                      -22-



         If this Purchase Agreement is satisfactory to you, please so indicate
by signing the acceptance on a counterpart execution page to this Purchase
Agreement and return such counterpart to the Company whereupon this Purchase
Agreement will become binding between us in accordance with its terms.

                                    VISIBLE GENETICS INC.
                                    an Ontario corporation



                             By:
                                 -------------------------------------
                             Name:  Richard T. Daly
                             Title:  President and Chief Executive Officer






                        COMMON SHARES PURCHASE AGREEMENT
                           COUNTERPART EXECUTION PAGE

By signing below, the undersigned agrees to the terms of the Visible Genetics
Inc. Common Shares Purchase Agreement and to purchase the number of Shares set
forth below.

                                      Number of Shares being purchased:

                                      -------------------------------------


                                      INVESTORS:

                                      -------------------------------------

                                      By:
                                         ----------------------------------

                                      Name:


                                      Title:



                                      Address:
                                              -------------------------------

                                      ---------------------------------------

                                      ---------------------------------------

                                      Facsimile:
                                                -----------------------------

PLEASE COMPLETE THE FOLLOWING:


1.       The exact name that your Shares are
         to be registered in (this is the
         name that will appear on your          ------------------------------
         Shares certificate(s)). You may use
         a nominee name if appropriate:

2.       The relationship between the
         Investors of the Shares and the
         Registered Holder listed in            ------------------------------
         response to item 1 above:

3.       The mailing address and facsimile
         number of the Registered Holder        -----------------------------
         listed in response to item 1 above
         (if different from above):             -----------------------------

                                      Facsimile:
                                                -----------------------------

4.       (FOR UNITED STATES INVESTORS:) The     -----------------------------
         Social Security Number or Tax
         Identification Number of the
         Registered Holder listed in the
         response to item 1 above:







                                                                       EXHIBIT A

                              VISIBLE GENETICS INC.
                 INVESTORS'S CERTIFICATE OF RESALE OF THE SHARES

The undersigned, an officer of, or other person duly authorized
by ___________________________________________________ hereby certifies that
   [FILL IN OFFICIAL NAME OF INDIVIDUAL OR INSTITUTION]
he/she [said institution] is the Investors of the Shares evidenced by the
attached stock certificate(s) and as such, sold such Shares on________________
                                                                 [DATE]
in accordance with registration statement number _______________________________
      [FILL IN THE NUMBER OF OR OTHERWISE IDENTIFY REGISTRATION STATEMENT]
and the requirement of delivering a current prospectus of the Company has been
complied with in connection with such sale.

Print or Type:

Name of Investors (Individual or Institution):
                                                  ------------------------------
Name of Individual representing Investors
(if an Institution):
                                                  ------------------------------
Title of Individual representing Investors
(if an Institution):
                                                  ------------------------------
Signature by:

Individual Investors or Individual
representing Investors:
                                                  ------------------------------

EX-10.13

                                                                   Exhibit 10.13


                                                                  EXECUTION COPY


                              VISIBLE GENETICS INC.

                          REGISTRATION RIGHTS AGREEMENT

         THIS REGISTRATION RIGHTS AGREEMENT (this "REGISTRATION RIGHTS
AGREEMENT") is entered into as of December 14, 1999, by and among VISIBLE
GENETICS INC., an Ontario corporation (the "COMPANY"), and the purchasers of
Common Shares of the Company (the "SHARES") who are identified as "Investors" in
that certain Common Shares Purchase Agreement of even date herewith (the
"PURCHASE AGREEMENT") and whose signatures appear on the execution pages hereof.
The purchasers of the Shares shall be referred to hereinafter as the "INVESTORS"
and each individually as an "INVESTOR."

                                    RECITALS

         WHEREAS, the Company proposes to sell the Shares pursuant to the
Purchase Agreement;

         WHEREAS, as a condition of entering into the Purchase Agreement, the
Investors have requested that the Company extend to them certain registration
rights and other rights as set forth below; and

         NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Registration Rights Agreement and in the Purchase Agreement, the parties
mutually agree as follows:

         1. DEFINITIONS

         As used in this Registration Rights Agreement the following terms shall
have the following respective meanings:

         "CLOSING" has the meaning ascribed thereto under the Purchase
Agreement.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "FORM F-3" means such form under the Securities Act as in effect on the
date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

         "HOLDER" means any Investor or assignee permitted in accordance with
5.3 hereof owning of record Registrable Securities that have not been sold to
the public.

         "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.




         "REGISTRABLE SECURITIES" means the Shares or any Common Shares which
may be issued with respect to or in substitution for such Shares by reason of
dividend, stock split, combination of shares, recapitalization, reclassification
or reorganization.

         "REGISTRATION STATEMENT" means any registration statement of the
Company that covers the Shares and lists holders thereof as selling shareholders
pursuant to the provisions of this Registration Rights Agreement, including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference or deemed to be incorporated by reference therein.

         "SEC" or "COMMISSION" means the Securities and Exchange Commission.

         "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

         2. REGISTRATION OF SHARES

           2.1 REGISTRATION STATEMENT. Within 30 days after the date hereof, the
Company shall prepare and file with the Commission a Registration Statement on
Form F-3 pursuant to Rule 415 under the Securities Act covering the resale of
the Registrable Securities. In addition, the Company shall:

              (a) Use its best efforts to cause such Registration Statement to
become effective at the earliest possible time and to keep such Registration
Statement continuously effective for a period of two years following the date on
which the Registration Statement becomes effective under the Securities Act, or
such shorter period ending on the earlier of (i) when all Registrable Securities
covered by the Registration Statement have been sold or (ii) sixty (60) days
after the first date when all Registrable Securities covered by the Registration
Statement may immediately be sold during any 90-day period without registration
under the Securities Act pursuant to the exemptions provided by Rule 144 under
the Securities Act (the "REGISTRATION PERIOD"); PROVIDED, HOWEVER, that the
Company shall not be deemed to have kept a Registration Statement effective
during the applicable period if it voluntarily takes any action that results in
Holders not being able to sell such Registrable Securities pursuant to
applicable securities laws during that period (and the time period during which
such Registration Statement is required to remain effective hereunder shall be
extended by the number of days during which such Holders are not able to sell
Registrable Securities) unless such action is required under applicable law or
regulation or court order.

              (b) Prepare and file with the SEC such pre-effective and
post-effective amendments and supplements to such Registration Statement and the
prospectus used in connection with such Registration Statement as may be
necessary to cause the Registration Statement to become effective, to keep the
Registration Statement continuously effective during the Registration Period and
not misleading, and as may otherwise be required or applicable under, and to
comply with the provisions of, the Securities Act with respect to the
disposition of all securities covered by such Registration Statement during the
Registration Period.

              (c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, and each amendment or supplement thereto, in
conformity


                                      -2-



with the requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

              (d) Use its best efforts to register and qualify the securities
covered by such Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as shall be necessary to permit the sale of the
Registrable Securities.

              (e) Notify promptly the Holders of Registrable Securities to be
sold (and in any event within two (2) business days after) and (if requested by
any such Person) confirm such notice in writing, (i)(A) when a prospectus or any
prospectus supplement or post-effective amendment is proposed to be filed, and,
(B) with respect to a Registration Statement or any post-effective amendment,
when the same has become effective, (ii) of any request by the SEC or any other
federal, Canadian, state or provincial governmental authority for amendments or
supplements to a Registration Statement or related prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction, or the
initiation or threatening of any proceeding for such purpose, and (v) of the
happening of any event that makes any statement made in such Registration
Statement or related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement, prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
not misleading, and that in the case of the prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.

              (f) Use its reasonable best efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of, any order suspending the effectiveness of a
Registration Statement, or the lifting of any suspension of the qualification
(or exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.

              (g) If requested by the holders of a majority of the Registrable
Securities being sold in connection with such offering, (i) promptly incorporate
in a prospectus supplement or post-effective amendment such information as the
holders reasonably request should be included therein regarding such holders or
the plan of distribution of the Registrable Securities, and (ii) make all
required filings of the prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of such
matters to be incorporated in such prospectus supplement or post-effective
amendment; provided, however, that the Company shall not be required to take any
action pursuant to this Section 2.1(g) that would, in the opinion of outside
counsel for the Company, violate applicable law.

              (h) Upon the occurrence of any event contemplated by Section
2.1(e)(v), as promptly as practicable, prepare a supplement or amendment,
including a post-


                                      -3-



effective amendment, to each Registration Statement or a supplement to the
related prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

              (i) Use its reasonable best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on each
securities exchange or automated quotation system, if any, on which similar
securities issued by the Company are then listed.

           2.2 SELLER INFORMATION. The Company may require each selling Holder
of Registrable Securities as to which any registration is being effected to
furnish to the Company such information regarding such Holder, such Holder's
Registrable Securities and such Holder's intended method of disposition as the
Company may from time to time reasonably request; provided that such information
shall be used only in connection with such registration.

         If the Registration Statement refers to any Holder by name or otherwise
as the Holder of any securities of the Company, then such Holder shall promptly
(i) notify the Company and its counsel of the existence of any fact of which
such Holder becomes aware and the happening of any event which relates to Holder
or the distribution of the securities owned by such Holder which results in the
Registration Statement containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or necessary to
make any statements therein not misleading, or the Prospectus included in such
Registration Statement containing an untrue statement of material fact or
omitting to state a material fact required to be stated therein or necessary to
make any statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) provide to the Company such information which
relates to Holder or the distribution of the securities owned by such Holder as
shall be necessary to enable the Company to prepare a supplement or
post-effective amendment to such Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other documents
required so that such Registration Statement will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
such Prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

           2.3 NOTICE TO DISCONTINUE. Each holder of Registrable Securities
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 2.1(e)(ii) through (v), such Holder shall
forthwith discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.1(h) and, if so directed by the Company, such Holder shall deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies, then in such Holder's possession of the Prospectus covering such
Registrable Securities which is current at the time of receipt of such notice.
If the Company shall give any such notice, the Company shall extend the period
during which such Registration Statement shall be maintained effective


                                      -4-



pursuant to this Registration Rights Agreement by the number of days in excess
of ten (10) business days during the period from and including the date of the
giving of such notice pursuant to Section 2.1(e) to and including the date when
the Holder shall have received the copies of the supplemented or amended
prospectus.

           2.4 EXPENSES OF REGISTRATION. Except only as specifically provided
herein, all expenses incident to the performance of compliance with this
Registration Rights Agreement by the Company shall be borne by the Company,
regardless of whether the Registration Statement becomes effective, including,
without limitation, (i) all registration and filing fees and expenses (including
filings made with the National Association of Securities Dealers ("NASD"), if
applicable); (ii) fees and expenses (including fees and expenses of counsel) of
compliance with federal securities and state Blue Sky and other Canadian,
provincial or other securities laws; (iii) expenses of printing, messenger and
delivery services, duplication, word processing and telephone incurred by the
Company (but not by the holders of Registrable Securities); (iv) fees and
disbursements of counsel for the Company; (v) all application and filing fees in
connection with listing Common Shares on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and "cold comfort" letters
required by or incident to such performance). The Company will, in any event,
bear its own internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any person,
including special experts, retained by the Company. The Investors will bear
their own expenses not described above in connection with or arising out of the
registration of their Shares except that, as provided in the Purchase Agreement,
the Company will pay the costs of one legal counsel for all Investors in
connection with this Agreement and the Purchase Agreement of up to a maximum of
$25,000.

           2.5 INDEMNIFICATION.

              (a) INDEMNIFICATION BY COMPANY. To the extent permitted by law,
the Company will indemnify and hold harmless each Holder, the partners, officers
and directors of each Holder and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal,
Canadian, provincial or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"VIOLATION") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendments or supplements thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus (including any
preliminary, final or summary prospectus, amendment or supplement thereto)
included in such Registration Statement or any omission or alleged omission to
state a material fact required to be stated therein or necessary to make any
statement therein, in light of the circumstances under which they were made, not
misleading, or (iii) any violation or alleged violation of the Securities Act,
the Exchange Act, any Canadian, provincial or state


                                      -5-



securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any Canadian, provincial or state securities law in
connection with the offering covered by the Registration Statement; provided,
however, that the Company will not be liable for indemnification in any such
case to the extent that any losses, claims, damages or liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission of a material fact so made in reliance upon
and in conformity with written information furnished to the Company by such
Holder. Subject to Section 2.5(c), the Company will pay to each such Holder,
partner, officer, director or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action if it is judicially determined
that there was such a violation.

              (b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. To the
extent permitted by law, each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors, its officers, agents and each person, if any,
who controls the Company within the meaning of the Securities Act against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, agent or controlling person may become subject
under the Securities Act, the Exchange Act or other federal, Canadian,
provincial or state law, insofar as such losses, claims, damages or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs as a
result of reliance by the Company upon and in conformity with written
information furnished by such Holder under an instrument duly executed by such
Holder and stated to be specifically for use in connection with such
registration; and each such Holder will pay any legal or other expenses
reasonably incurred by the Company or any such director, officer, agent,
controlling person or other person in connection with investigating or defending
any such loss, claim, damage, liability or action if it is judicially determined
that there was such a Violation; provided, however, that in no event shall any
indemnity under this Section 2.5(b) exceed the dollar amount of proceeds from
the offering received by such Holder.

              (c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt
by an indemnified party under this Section 2.5 of notice of the commencement of
any action (including any governmental action), such indemnified party will, if
a claim in respect thereof is to be made against any indemnifying party under
this Section 2.5, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; PROVIDED, HOWEVER,
that an indemnified party shall have the right to retain its own counsel, with
the fees and expenses to be paid by the indemnifying party, if, in the
reasonable judgment of any such indemnified party, based upon advice of counsel,
a conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claims (in which case, if the
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such indemnified party; provided, however, that the indemnified
party shall be entitled to elect only


                                      -6-



one counsel at the expense of the indemnifying party and such counsel shall be
reasonably acceptable to the indemnifying party). The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if it is finally determined in a court of competent
jurisdiction (which determination is not subject to appeal) that such failure is
materially prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
2.5, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.5. No indemnifying party shall be liable for
any settlement of any claim or action effected without its written consent,
which consent shall not be unreasonably withheld.

              (d) CONTRIBUTION. If the indemnification provided for in this
Section 2.5 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, that in no event shall any contribution by
a Holder hereunder exceed the dollar amount of proceeds from the offering
received by such Holder.

              (e) SURVIVAL; SETTLEMENT. The obligations of the Company and
Holders under this Section 2.5 shall survive completion of any offering of
Registrable Securities in a registration statement, the termination of this
Registration Rights Agreement and any sale by the Holders of Registrable
Securities. No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each indemnified party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.

           2.6 TERMINATION OF REGISTRATION RIGHTS. Notwithstanding anything
herein to the contrary, a Holder shall not be entitled to any registration
rights, rights to liquidated damages or other rights hereunder (a) if all
Registrable Securities held by such Holder have been sold or (b) beginning sixty
(60) days after the first date on which all Registrable Securities held by such
Holder may immediately be sold during any 90-day period without registration
under the Securities Act pursuant to the exemptions provided by Rule 144 under
the Securities Act ("TERMINATION EVENT"); PROVIDED, HOWEVER, that any right to
liquidated damages, indemnification or any other right that had accrued to the
benefit of such Holder prior to the Termination Event


                                      -7-



but had not been satisfied as of the Termination Event, shall remain in effect
after the Termination Event until satisfied.

         3. RULE 144

         During the Registration Period, the Company covenants that it will file
the reports required to be filed by it (if so required) under the Securities Act
and the Exchange Act and the Rules and Regulations adopted by the SEC thereunder
in a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Registrable Securities, make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144 under the Securities Act. The Company further covenants
that it will take such further action as any Holder of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act pursuant to the exemptions provided by Rule 144 under the
Securities Act. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such information requirements.

         4. LIQUIDATED DAMAGES

              (a) The Company acknowledges and agrees that the Holders of
Registrable Securities will suffer damages, and that it would not be feasible to
ascertain the extent of such damages with precision, if the Company fails to
fulfill certain of its obligations hereunder. Accordingly, if (i) the
Registration Statement has not been declared effective by the Commission within
120 days after the Closing, or (ii) the Registration Statement is declared
effective but shall thereafter cease to be effective without being succeeded
within 30 days by any additional Registration Statement filed and declared
effective (each such event referred to in clauses (i) and (ii), a "REGISTRATION
DEFAULT"), the Company agrees to pay liquidated damages (for loss of benefit of
a bargain and not as a penalty) to each Holder of Registrable Securities an
amount equal to .75% of the dollar amount of such Holder's investment in the
Registrable Securities for each full month commencing on the 121st day in the
case of clause (i) and on the 31st day in the case of clause (ii) until the
Registration Statement is declared effective, or the successor Registration
Statement is filed and declared effective or until 180 days after the Closing,
whichever occurs first. Commencing on the 181st day of the Closing, if the
Registration Default persists, the foregoing required percentage payment by the
Company for each full month shall increase to 1.5% until the Registration
Statement is declared effective.

              (b) All accrued liquidated damages ("DEFAULT PAYMENT") shall be
paid to Holders by the Company on the sooner of the day the Registration
Statement or successor Registration Statement is declared effective or every 30
days by wire transfer of immediately available funds or by federal funds check
by the Company. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease to accrue. In the event of a Registration Default,
if the Default Payment is not paid as set forth above, such Default Payment
shall be deemed indebtedness of the Company due upon demand and bearing interest
at an annual rate equal to 18% (or such lesser amount that is the maximum
permitted by applicable law) until paid in full (the "INDEBTEDNESS"). Any
Indebtedness shall be deemed senior to all "SUBORDINATED INDEBTEDNESS";
provided; however, that if the characterization or treatment of the


                                      -8-



Default Payment as senior or prior to any Subordinated Indebtedness would result
in a default (or upon giving of notice or passage of time or both would result
in a default) under any Senior Indebtedness (a "SENIOR INDEBTEDNESS DEFAULT")
then the priority of the Indebtedness shall automatically be adjusted to the
most senior position possible which will not result in or cause a Senior
Indebtedness Default. "SUBORDINATED INDEBTEDNESS" means all indebtedness for
borrowed money of the Company other than Senior Indebtedness and any Default
Payment. "SENIOR INDEBTEDNESS" means: (i) any obligations of the Company to the
Royal Bank of Canada arising under the Credit Facility extended by it to the
Company, as the same may be amended from time to time; (ii) any obligations of
the Company to any other commercial bank, financial institution or institutional
lender or other person which is or is intended to be senior indebtedness or
senior subordinated indebtedness, as the same may be amended from time to time;
and (iii) any extension, renewals, amendments or restatements of any of the
foregoing.

              (c) All of the obligations of the Company set forth in this
Section 4 that are outstanding with respect to any Registrable Security at the
time such security ceases to be a Registrable Security shall survive until such
time as all such obligations with respect to such security shall have been
satisfied in full.

         5. MISCELLANEOUS

            5.1 GOVERNING LAW; EXCLUSIVE JURISDICTION. This Registration Rights
Agreement shall be governed by and construed under the laws of the State of New
York as applied to agreements among New York residents entered into and to be
performed entirely within New York. The parties hereto (a) agree that any suit,
action or other proceeding arising out of this Agreement shall be brought only
in the courts of the State of New York or the courts of the United States
located within the State of New York, in each case in the County of New York,
(b) consent and submit to the exclusive jurisdiction of each such court in any
such suit, action or proceeding and (c) waive any objection which they, or any
of them, may have to personal jurisdiction or the laying of venue of any such
suit, action or proceeding in any of such courts, and agree not to seek to
change venue.

            5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby.

            5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
Permitted Assignee of Registrable Securities from time to time. A "PERMITTED
ASSIGNEE" shall mean (i) with respect to any Investor, any other person directly
or indirectly controlling or controlled by or under direct or indirect, common
control with such Investor, (ii) the spouse, sibling, child, step-child,
grandchild, niece, nephew or parent of the Investor, or the spouse thereof, and
(iii) any transferee or assignee of not less than 75,000 shares of Registrable
Securities (as presently constituted and subject to subsequent adjustment for
stock splits, stock dividends, reverse stock splits, and the like). The Company
may not assign the rights or obligations hereunder without the prior written
consent of each Holder of Registrable Securities.


                                      -9-



            5.4 ENTIRE AGREEMENT. This Registration Rights Agreement, including
any exhibits hereto, the Purchase Agreement and the other documents delivered
pursuant thereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations, warranties,
covenants and agreements except as specifically set forth herein and therein.

            5.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

            5.6 AMENDMENT AND WAIVER. The provisions of this Registration Rights
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that Sections 2.1 and 2.5 shall not be amended,
modified or supplemented, and waivers or consents to departures from this
proviso may not be given, unless the Company has obtained the written consent of
each Holder of the then outstanding Registrable Securities.

            5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Registration Rights Agreement
shall impair any such right, power or remedy, nor shall it be construed to be a
waiver of any such breach, default or noncompliance, or any acquiescence
therein, or of any similar breach, default or noncompliance thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character on any Holder's part of any breach, default or
noncompliance under the Agreement or any waiver on such Holder's part of any
provisions or conditions of this Registration Rights Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Registration Rights Agreement, by law,
or otherwise afforded to Holders, shall be cumulative and not alternative.

            5.8 NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed effectively
given: (a) upon personal delivery to the party to be notified, (b) when sent by
confirmed facsimile if sent during normal business hours of the recipient; if
not, then on the next business day, (c) upon receipt when sent by first-class
registered or certified mail, return receipt requested, postage prepaid, or (d)
upon receipt after deposit with a nationally recognized overnight express
courier, postage prepaid, specifying next day delivery with written verification
of receipt. All communications shall be sent to the party to be notified at the
address as set forth below or at such other address as such party may designate
by ten (10) days advance written notice to the Company. All communications shall
be addressed as follows:


                                      -10-



              (a) if to the Company, to:

                   VISIBLE GENETICS INC.
                   700 Bay Street, Suite 1000
                   Toronto, Ontario
                   M5G 1Z6
                   Telephone: (416) 813-3242
                   Facsimile: (416) 813-3250
                   Attention:  Chief Executive Officer

                   with a copy so mailed to:

                   BAER MARKS & UPHAM LLP
                   805 Third Avenue
                   New York, New  York  10022
                   Telephone: (212) 702-5700
                   Facsimile: (212) 702-5941
                   Attention: Steven S. Pretsfelder

                   and to:

                   GOLDMAN, SPRING, SCHWARTZ & KICHLER
                   Suite 700
                   40 Sheppard Avenue West
                   North York, Ontario
                   M2N 6K9
                   Attention:  Samuel Schwartz

              (b) if to the Investors, at the address as set forth on the
Counterpart Execution Page of this Registration Rights Agreement.

            5.9 ATTORNEYS' FEES. In the event that any dispute among the parties
to this Registration Rights Agreement should result in litigation, the
prevailing party in such dispute shall be entitled to recover from the losing
party all fees, costs and expenses of enforcing any right of such prevailing
party under or with respect to this Registration Rights Agreement, including
without limitation, such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.

            5.10 SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its affiliates (as such term is defined in Rule 405 under the Securities Act)
(other than the Holders or subsequent Holders of Registrable Securities if such
Holders or subsequent Holders are deemed to be such affiliates solely by reason
of their holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.


                                      -11-



            5.11 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Registration Rights Agreement are for convenience of
reference only and are not to be considered in construing this Registration
Rights Agreement.

            5.12 COUNTERPARTS. This Registration Rights Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall constitute one instrument.

         If this Registration Rights Agreement is satisfactory to you, please so
indicate by signing a counterpart execution page to this Registration Rights
Agreement and a Registration Statement Questionnaire and return such counterpart
and questionnaire to the Company whereupon subject to the Company's acceptance
of your subscription, this Registration Rights Agreement will become binding
between us in accordance with its terms.


                                 Visible Genetics Inc.
                                 an Ontario corporation

                                 By:
                                    --------------------------------------
                                    Name:  Richard T. Daly
                                    Title: President and Chief Executive Officer


                                      -12-




                          REGISTRATION RIGHTS AGREEMENT
                           COUNTERPART EXECUTION PAGE

            By signing below, the undersigned agrees to the terms of the Visible
Genetics Inc. Registration Rights Agreement.

                                  INVESTOR:

                                 By:
                                    --------------------------------------
                                    Name:
                                    Title:

                                    Address:
                                                 -------------------------

                                                 -------------------------

                                                 -------------------------

                                    Facsimile:
                                                 -------------------------





                                                                      APPENDIX I

                              VISIBLE GENETICS INC.
                      REGISTRATION STATEMENT QUESTIONNAIRE

         In connection with the preparation of the Registration Statement,
please provide us with the following information:

         1. Please state your or your organization's name exactly as it should
appear in the Registration Statement:
                                      ----------------------------------------

         2. Please provide the following information, as of December 13, 1999:

            a) Number of Shares that you are purchasing:

            b) Number of Shares that you seek to include in the Registration
               Statement:

            c) Number of Common Shares that you already beneficially own:

            d) Number of Shares of Series A Preferred Shares that you already
               beneficially own:

            e) Number of Warrants that you already beneficially own:

            f) Total Number of Securities that you already beneficially own:

         3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates other than as disclosed in the Company's 1998 Annual Report on
Form 20-F?  Yes       No
                ---      ---

If yes, please indicate the nature of any such relationships:

         4. Please describe your Plan of Distribution for the shares you
wish to sell:
              -----------------------------------------------------------

- - -------------------------------------------------------------------------


                                    INVESTOR:

                                    By:
                                         ---------------------------------

                                    Print Name:
                                                  ------------------------

                                    Title:
                                            ------------------------------

         The foregoing constitutes the only information furnished to the Company
for inclusion in the Registration Statement for purposes of Section 2.5(b) of
the Registration Rights Agreement.

EX-10.14

                                                                   EXHIBIT 10.14

STATE OF GEORGIA

GWINNETT COUNTY

      This Lease Agreement is made this 22nd day of Dec., 1999, by and between
DUKE-WEEKS REALTY LIMITED PARTNERSHIP, an Indiana limited partnership,
hereinafter referred to as "Landlord", and VISIBLE GENETICS CORP. hereinafter
referred to as "Tenant".

                                 LEASED PREMISES

      1.01 Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the property hereinafter referred to as the LEASED PREMISES, described
as approximately 99,822 rentable square feet of office/warehouse at 100
Crestridge Drive, Suwanee, Georgia, Gwinnett County, in Horizon Park, as shown
on the plan attached hereto as Exhibit "A" and by reference incorporated herein.
The building in which the Leased Premises are located is herein referred to as
the "Building"; and the real property on which the building is situated is
herein referred to as the "Land".

                                      TERM

      2.01 TO HAVE AND TO HOLD said Leased Premises for a term of ten (10) years
one (1) month, commencing on February 15, 2000 as this date may be adjusted as
set forth herein ("Commencement Date"), and continuing until March 15, 2010.

                                     RENTAL

      3.01 As rental for the Leased Premises, Tenant agrees to pay to Landlord,
without offset or abatement (except as otherwise provided herein), the base
rental as set forth below:

21,000 square feet ("Initial Space")

      February 15, 2000 -- March 14, 2000 $7,367.50/month

Entire Leased Premises:

March 15, 2000 -- March 14, 2001    $35,020.89/month    $420,250.68/year
March 15, 2001 -- March 14, 2002    $36,102.29/month    $433,227.48/year
March 15, 2002 -- March 14, 2003    $37,183.70/month    $446,204.40/year
March 15, 2003 -- March 14, 2004    $38,265.10/month    $459,181.20/year
March 15, 2004 -- March 14, 2005    $39,429.69/month    $473,156.28/year
March 15, 2005 -- March 14, 2006    $40,594.28/month    $487,131.36/year
March 15, 2006 -- March 14, 2007    $41,842.06/month    $502,104.72/year
March 15, 2007 -- March 14, 2008    $43,089.83/month    $517,077.96/year
March 15, 2008 -- March 14, 2009    $44,420.79/month    $533,049.48/year
March 15, 2009 -- March 14, 2010    $45,751.75/month    $549,021.00/year


on or before the first day of each calendar month beginning on February 15, 2000
and thereafter for the remainder of the term, together with any other additional
rental as hereinafter set forth. Tenant shall pay interest at a rate of twelve
percent (12%) per annum on all late payments of rent. If the Lease shall
commence on any date other than the first day of a calendar month, or end on any
date, other than the last day of a calendar month, rent for such month shall be
prorated. Tenant has deposited with Landlord, upon delivery of this Lease
Agreement, an amount equal to Two Hundred Forty Five Thousand One Hundred Forty
Six and 14/100 ($245,146.14) Dollars, a portion of which, or Thirty Five
Thousand Twenty and 80/100 ($35,020.80) Dollars, is to be applied as first
month's rental, the remaining portion, or Two Hundred Ten Thousand One



Hundred Twenty Five and 34/100 ($210,125.34) Dollars, shall be held as a
refundable interest bearing security deposit. At Tenant's option, Landlord shall
obtain a Certificate of Deposit in a federally-insured bank ("CD") with the
Tenant's security deposit, in which event Tenant shall be entitled to receive
all interest as paid unless and until such CD is used to cure a default
hereunder, but with payment to Tenant of any unpaid, accrued or future interest
commencing thereafter again if the security deposit is fully restored by Tenant.
Landlord may apply all or any pan of the security deposit to cure any default by
Tenant hereunder and Tenant shall promptly restore to the security deposit all
amounts so applied upon invoice therefor. If Tenant shall fully perform each
provision of this Lease, any portion of the security deposit which has not been
appropriated by Landlord in accordance with the provisions hereof shall be
returned to Tenant, with interest, within thirty (30) days after the expiration
of the term of this Lease. If at the commencement of the fourth year of the
Lease term there has been no breach of any undertaking by Tenant under the Lease
beyond any applicable notice and grace period and Visible Genetics, Inc.,
("Guarantor") has achieved "tangible net worth" (as hereinafter defined) of
Thirty Million Dollars ($30,000,000.00), then the Landlord agrees to refund
fifty percent (50%) of the security deposit together with accrued interest to
Tenant. Tangible Net Worth for the purpose of this Lease shall mean Tangible Net
Worth as determined by generally accepted accounting principles ("GAAP") which
for purposes hereof shall include cash and account receivables, and as certified
by the Chief Financial Officer of the Tenant.

      In addition, within thirty days of Lease execution, Tenant shall cause
Visible Genetics, Inc., ("Guarantor") to issue to Landlord, or its affiliate, a
warrant to purchase 10,000 shares of common stock of the Guarantor at a strike
price equal to the closing price of the Guarantor's common stock on the date of
Lease execution, said warrant to be in the form attached hereto as Exhibit "H".
For the purposes of this section, the date of Lease execution shall be the day
on which Tenant has executed the Lease.

      3.02 As consideration for Tenant's performance of all obligations to be
performed by Tenant under this Lease, Landlord shall contribute $5.50 per
rentable square foot contained in the Leased Premises, which is the sum of Five
Hundred Forty Nine Thousand Twenty One and 00/100 ($549,021.00) (the
"Allowance") towards the cost of tenant improvements to the Leased Premises on
the basis set forth in the plans and specifications attached, or to be attached,
hereto in Exhibit "B" (`Tenant improvements"). A construction management fee
equal to a $.25 per square foot contained in the Leased Premises shall be
deducted from the Allowance and paid to Landlord. The Allowance shall be used
for the construction of the Tenant improvements, alterations, improvements,
fixtures and equipment which become part of or are attached or affixed to the
Leased Premises, including walls, wall coverings and floor coverings, but
excluding trade fixtures, furniture and furnishings or other personal property.
In the event the cost of the Tenant Improvements exceeds the Allowance, the
excess shall be paid by Tenant. The construction management fee shall not apply
to such excess paid by Tenant.

      Landlord will disburse the Allowance to Tenant (in two equal draws), upon
compliance by Tenant with the following conditions:

      (a) The first draw shall be made when Tenant has approval by Gwinnett
County of all rough in inspections (framing, electrical, plumbing and HVAC) and
all walls have been double-sided.

            (i) Tenant shall submit to Landlord an application and certificate
for payment, showing the amount of the improvements installed or constructed
through the date of the draw request. The form shall be signed by Tenant and its
contractor and shall be accompanied by such documentation as is reasonably
required by Landlord to verify and ensure that the work shown on the draw
request has been completed.

            (ii) Tenant shall submit to Landlord such lien waivers and
affidavits as are necessary, in Landlord's opinion, to ensure that the Leased
Premises, the Building and the Land remain free and clear of all liens and other
encumbrances arising as a result of the installation and construction of the
Improvements. All such lien waivers and affidavits shall be satisfactory in form
and substance to Landlord.


                                        2



      (b) The final draw will be paid to Tenant upon satisfaction of the
following conditions:

            (i) Tenant shall provide to Landlord such documentation as is
reasonably required by Landlord to verify and ensure that the Tenant
Improvements have been substantially completed (so called punch list items
excepted);

            (ii) a certificate of occupancy or a temporary certificate of
occupancy for the Leased Premises has been issued by the Gwinnett County and
City of Suwanee, if applicable. (Tenant agrees it will not occupy the Leased
Premises until a certificate of occupancy or a temporary certificate of
occupancy for the Leased Premises has been issued by the appropriate
governmental authority(ies).)

            (iii) Tenant shall submit to Landlord such lien waivers and
affidavits as are necessary, in Landlord's opinion, to ensure that the Leased
Premises, the Building and the Land remain free and clear of all liens and other
encumbrances arising as a result of the installation and construction of the
Tenant Finish Improvements. All such lien waivers and affidavits shall be
satisfactory in form and substance to Landlord.

      3.03 In addition to the base rental, Tenant agrees to pay Landlord as
additional rental, its pro rata share of the amounts described in subparagraphs
(a) and (b) below. Each year during the term hereof, Landlord shall give Tenant
written notice of its estimate of the amount of common area maintenance charges
and common area utility charges (collectively "Charges") for the Leased Premises
for the calendar year. Tenant shall, thereafter, during that calendar year, pay
to Landlord one-twelfth (1/12) of the amount set forth in said statement at such
time as its monthly installments of base rental hereunder are due and payable.
At such time as Landlord is able to determine the actual Charges for such
calendar year, Landlord shall deliver to Tenant a statement thereof and in the
event the estimated Charges differ from the actual Charges, any adjustment
necessary shall be made to additional rental payments next coming due under this
paragraph.

      (a) Landlord agrees to maintain those areas around the Building and in the
Project, including parking areas, planted areas, signs and landscaped areas.
Tenant agrees to pay to Landlord as additional rental its pro rata share of all
ground maintenance charges and other common area charges and expenses for the
Building and the Land ("CAM Charges"), estimated to be $.25 per square foot per
year. The term "grounds maintenance" shall include, without limitation, all
landscaping, planting, lawn and grounds care, irrigation costs, all repairs and
maintenance to the grounds, signs and other common areas around the Building and
in the Project and to all sidewalks, driveways, loading areas and parking areas,
all of which Landlord agrees to perform. CAM Charges shall not include items of
a capital nature.

      (b) Tenant shall pay directly to the utility provider the charges for gas,
water, electricity, fuel, light and heat, garbage collection services and for
all other separately metered utilities and sanitary services rendered to the
Leased Premises and used by Tenant. In the event any utilities furnished to the
Building or the Leased Premises are not separately metered, Tenant shall pay to
Landlord, as additional rental, the charges for all such services rendered to
the Leased Premises used by Tenant, unless Landlord reasonably determines that
Tenant's use of the Leased Premises justifies a disproportionate allocation of
utility costs to Tenant.

      3.04 Tenant agrees to pay as additional rent to Landlord, upon demand, its
pro rata share of any utility surcharges, or any other costs levied, assessed or
imposed by, or at the direction of, or resulting from statutes or regulations,
or interpretations thereof, promulgated by any Federal, State, Municipal or
local governmental authorities in connection with the use or occupancy of the
Leased Premises.

                         DELAY TN DELIVERY OF POSSESSION

      4.01 If Landlord cannot deliver the Initial Space to Tenant in such a
condition that allows the Tenant's contractor to obtain an interior finish
building permit for construction of the Tenant Improvements on or before the day
that Tenant executes the Lease, and the delay is in no way attributable to
Tenant Delays or an event of Force Majeure (as hereinafter defined) this Lease
shall not be void or voidable, however Landlord shall pay Tenant on demand, as
agreed upon


                                       3



liquidated damages, the sum of Three Thousand and 00/100 ($3,000.00) Dollars for
each business day thereafter until the Initial Space is delivered to Tenant.
Landlord and Tenant agree the above amount is a reasonable estimate of the
damages Tenant would sustain if the completion of the Initial Space is delayed,
and that it is not and shall not be construed as a penalty. Provided, however,
in the event the Commencement Date is delayed due to Tenant Delays (as
hereinafter defined), than Tenant shall commence payment of rent as set forth
herein on the date that the Commencement Date would have occurred but for the
Tenant Delays.

      4.02 If Landlord cannot deliver the remaining Leased Premises to Tenant in
such a condition that allows the Tenant's contractor to obtain an interior
finish building permit for construction of the Tenant Improvements on January
15, 2000, and the delay is in no way attributable to Tenant Delays or an event
of Force Majeure (as hereinafter defined) this Lease shall not be void or
voidable, however Landlord shall pay Tenant on demand, as agreed upon liquidated
damages, the sum of Three Thousand and 00/100 ($3,000.00) Dollars for each
business day thereafter until the Initial Space is delivered to Tenant. Landlord
and Tenant agree the above amount is a reasonable estimate of the damages Tenant
would sustain if the completion of the Initial Space is delayed, and that it is
not and shall not be construed as a penalty. Provided, however, in the event the
Commencement Date is delayed due to Tenant Delays (as hereinafter defined), than
Tenant shall commence payment of rent as set forth herein on the date that the
Commencement Date would have occurred but for the Tenant Delays.

      4.03 In the event the Initial Space cannot be delivered to Tenant by the
date set forth in Section 4.01 above because of a Force Majeure event, then
notwithstanding any other provision herein Tenant's obligation to pay rent for
the Initial Space shall be abated until sixty (60) days after the date the
Initial Space is delivered to Tenant. In the event the remaining Leased Premises
cannot be delivered to Tenant by the date set forth in Section 4.02 above
because of a Force Majeure event, then notwithstanding any other provision
herein Tenant's obligation to pay rent for the remaining Leased Premises shall
be abated until sixty (60) days after the date the remaining Leased Premises is
delivered to Tenant.

      4.04 "Tenant Delays", as used herein, shall mean and refer to delays
directly or substantially attributable to or caused by Tenant or Tenant's
employees or agents. "Force Majeure", as used herein, shall mean a delay, not
within Landlord's control, in a party s performance hereunder due to act of God,
adverse weather, fire, earthquake, flood, explosion, war, invasion,
insurrection, riot, mob violence, sabotage, vandalism, failure of
transportation, strikes, lockouts, litigation, condemnation, requisition,
governmental restrictions including inability or delay in obtaining governmental
consents or permits, laws or orders of governmental, civil, military or naval
authorities, or any other cause, whether similar or dissimilar to the foregoing,
not within Landlord's control.

                             USE OF LEASED PREMISES

      5.01 The Leased Premises may be used and occupied only for manufacturing,
assembly, testing, warehousing and distribution of medical test and diagnostic
kits, medical diagnostics and screening, molecular biology laboratory, training,
showroom and general office purposes, some of which purposes may involve the
use, handling and storage of Class One, Class Two and Class Three biohazard
materials ("Permitted Biohazards") and for no other purpose or purposes, without
Landlord's prior written consent. Tenant shall promptly comply at its sole
expense with all laws, ordinances, orders, and regulations affecting the Leased
Premises and their cleanliness, safety, occupation and use. Tenant shall not do
or permit anything to be done in or about the Leased Premises that will in any
way increase the fire insurance upon the building. Tenant will not perform any
act or carry on any practices that may injure the building or be a nuisance or
menace to tenants of adjoining premises. Tenant shall not cause, maintain or
permit any outside storage on or about the Leased Premises, including pallets or
other refuse. The rear loading areas of the Tenant's unit must be clean and
unobstructed. On or before the Commencement Date, Tenant shall take possession
of, and, thereafter, continuously occupy the Leased Premises (if delivered as
provided herein) during the term of this Lease, and operate thereon the normal
business operations of Tenant.

       5.02 Tenant shall, at Tenant's sole cost and expense, comply fully with
all environmental laws and regulations, and all other legal requirements,
applicable to Tenant's operations at, on or


                                        4


within, or to Tenant's use and occupancy of, the Leased Premises. Tenant shall
not (either with or without negligence) cause or permit the escape, disposal or
release of any biologically or chemically active or other hazardous substances,
or materials. Tenant shall not allow the storage or use of such substances or
materials in any manner not sanctioned by law or by the typical standards
prevailing in the industry for the storage and use of such substances or
materials, nor allow to be brought into the Project any such materials or
substances except to use in the ordinary course of Tenant's business, and then
only after written notice is given to Landlord of the identity of such
substances or materials. Notwithstanding the above, Landlord understands and
agrees that Tenant's ordinary course of business may involve and require the use
of the Permitted Biohazards, and that Tenant may bring to, store on and use the
Leased Premises for its purposes such Permitted Biohazards without the further
consent of Landlord being required. Without limitation, hazardous substances and
materials shall include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Section 6901 et seq., any applicable state or local laws and the regulations
adopted under these acts. If any lender or governmental agency shall ever
require testing to ascertain whether or not there has been any release of
hazardous materials, then the reasonable costs thereof shall be reimbursed by
Tenant to Landlord upon demand as additional charges if such requirement applies
to the Leased Premises. In addition, Tenant shall execute affidavits,
representations and the like from time to time at Landlord's request concerning
Tenant's best knowledge and belief regarding the presence of hazardous
substances or materials on the Leased Premises. In all events, Tenant shall
indemnify Landlord in the manner elsewhere provided in this lease from any
release of hazardous materials on the Leased Premises occurring while Tenant is
in possession, or elsewhere if caused by Tenant or persons acting under Tenant.
The within covenants shall survive the expiration or earlier termination of the
lease term.

      5.03 Landlord represents and warrants that on the Commencement Date, the
Leased Premises shall either be in compliance with all governmental codes,
ordinances, rules and regulations, including environmental laws, or if required
at such time, shall be brought into such compliance. Landlord hereby agrees to
indemnify, defend and hold Tenant harmless from and against any claim, action,
damage or liability incurred by, or filed or asserted against, Tenant, and
arising out of the presence of hazardous materials in, on, about or underneath
the Leased Premises and resulting from the actions or omissions of (i) any
parties in possession of the Leased Premises prior to Tenant's possession, or
(ii) Landlord or its servants, employees, agents, representatives, contractors
or invitees. Landlord shall hold harmless and indemnify Tenant for, from and
against any clean-up costs, remedial costs, preventative costs, and or
governmental fees, costs, expenses, charges or the like arising from any
presence or alleged presence of any hazardous or toxic substances (as those
terms are defined in any state or federal statute or regulation) on, in or under
the Leased Premises which were present on the Leased Premises prior to the
commencement of the term of the Lease or which were released by Landlord or any
third parties unrelated to Tenant at the property containing the Leased
Premises. Notwithstanding anything in the foregoing to the contrary, Tenant
shall have no liability to Landlord or to any other party with respect to the
presence of hazardous materials in, on, about or underneath the Leased Premises
unless directly caused by the acts or omissions of Tenant, its servants,
employees, agents, representatives, contractors, or invitees. Nothing in this
paragraph shall be interpreted as imposing any liability on Landlord for any
other costs or expenses incurred by Tenant including any consequential damages
or lost sales or profits of Tenant resulting from any such presence or alleged
presence.

                                    UTILITIES

      6.01 Landlord shall not be liable in the event of any interruption in the
supply of any utilities. Tenant agrees that it will not install any equipment
which will exceed or overload the capacity of any utility facilities and that if
any equipment installed by Tenant shall require additional utility facilities,
the same shall be installed by Tenant at Tenant's expense in accordance with
plans and specifications approved in writing by Landlord. Tenant shall be solely
responsible for and shall pay all charges for use or consumption of sanitary
sewer, water, gas, electricity and any other utility services. In the event
Landlord determines that it is advisable to separately meter any utility
services provided to the Leased Premises, Landlord shall have the right to
install a sub-meter and bill Tenant for the actual cost thereof, which shall be
paid to Landlord within fifteen days (15) following billing.


                                        5


                          ACCEPTANCE OF LEASED PREMISES

      7.01 Upon delivery of possession of the Leased Premises to Tenant, Tenant
agrees to execute and deliver to Landlord a Tenant's Acceptance of Premises, in
the form attached hereto as Exhibit "C", acknowledging that it has examined the
Leased Premises and accepts the same as being in the condition called for by
this Lease, and as suited for the uses intended by Tenant.

      7.02 A. Once the base building structure of the Initial Space is completed
and thereafter once the base building structure is completed as to the remaining
portion of the Leased Premises, the base building requirements are described in
Exhibit "G" attached hereto Tenant may enter upon the Initial Space or the
remaining portion of the Leased Premises for purposes of completing the Tenant
Improvements and for installing trade fixtures and telephones, erecting
temporary or permanent signs and doing such other work as may be appropriate or
desirable without being deemed thereby to have taken possession or obligated
itself to pay rent but Tenant agrees that: (a) Landlord shall have no liability
to Tenant for injury to any person or damage to any property of Tenant stored on
the Leased Premises except for damages caused by or resulting from the willful
acts, omissions or negligence of Landlord or its employees or agents, (b) Tenant
shall not interfere with Landlord's construction work on the Leased Premises,
(c) Tenant shall indemnify, protect and hold harmless Landlord from and against
any and all claims, demands, damages, losses, costs, expenses, liabilities and
actions at law or in equity based upon any occurrence or condition arising out
of or attributable to Tenant's acts, omissions, or negligence of Tenant or its
employees, contractors, agents or invitees exercise of such right, and (d)
Tenant shall be solely responsible for the permitting of any such work it
performs.

      B. Tenant and it's contractor, or contractors, shall be responsible for
the design, installation and construction of the Tenant Improvements to the
Leased Premises as shown on the plans and specifications (herein referred to as
the "Plans") set forth on Exhibit "B" attached hereto or as subsequently
attached hereto. Prior to the Tenant's commencing construction of the Tenant
Improvements, the Tenant must obtain the Landlord's approval of the Plans.
Landlord shall have three (3) business days after Tenant has submitted the
Plans, to review and approve the same. Landlord will notify Tenant in writing at
the time it approves the Plans which specific improvement, alteration, addition
or installation must be removed at the expiration or termination of this Lease,
provided that Landlord agrees that the Tenant Improvements identified on Exhibit
"B", or as they may be changed or added to prior to occupancy of the Leased
Premises by Tenant, need not be removed at the end of the term or any renewal or
extension thereof. Tenant shall have the right to make changes to the Plans with
Landlord's approval; however, changes to the Plans which increase the time for
completion of the Tenant Improvements, shall not delay commencement of payment
of rent under this Lease.

      C. All construction work done ,by Tenant in the Leased Premises shall be:
(i) completed by contractors previously approved by Landlord, Landlord
acknowledges that it approves of S&E Contractors, (ii) pursued diligently to
completion, and (iii) performed in a good and workmanlike manner, and in
compliance with all governmental regulations including, but not limited to, all
OSHA requirements. Tenant covenants and agrees that all contractors,
subcontractors and other persons or entities performing work for Tenant at the
Leased Premises will carry (i) liability insurance in the amount of
$1,000,000.00, and (ii) worker's compensation insurance in the amounts required
by law. In addition, Tenant and Landlord each shall use reasonable measures to
ensure that their contractors abide by the terms and conditions contained within
the Exhibit F attached hereto.

      D. Tenant covenants and agrees that all contractors, subcontractors and
other persons or entities performing work for Tenant at the Leased Premises
shall:

            (i) acknowledge Landlord as the general contractor on the shell and,
as such, Landlord shall be entitled to the final decision in all aspects of
Tenant's work which might impact the structural aspects of the Building;

            (ii) cooperate with Landlord in coordinating all work which might
interfere with that of the other;


                                        6


             (iii) take all precautions to protect the work of Landlord and its
subcontractors; and

            (iv) adhere to Landlord's safety requirements as detailed on the
attached Exhibit F.

      E. Tenant covenants and agrees that the contractor shall be required to
clean up and haul away all debris and trash generated in the construction of the
Tenant Improvements and to maintain a clean jobsite. Should Tenant's contractor
not remove trash and debris within three (3) days of written notice to comply,
Landlord shall have the right to perform this work and charge all costs to
Tenant.

      F. Landlord will cooperate with Tenant and its contractors in a timely
manner, including requesting that the architect and engineers be available as
reasonably needed to facilitate completion of the Tenant Improvements by Tenant
in a timely manner.

      G. Tenant hereby indemnifies Landlord against, and shall keep all portions
of the Leased Premises, the Building and the Land free from liens for any work
performed, material furnished or obligations incurred by Tenant. Should any
liens or claims be filed against all or any portion of the Leased Premises, the
Building or the Land by reason of Tenant's acts, omissions or work performed by
any person or entity, Tenant shall cause same to be discharged by bond or
otherwise within sixty (60) days following notice thereof. If Tenant fails to
cause any such lien or claim to be so discharged within the required time,
Landlord may cause same to be discharged and may make any payment that Landlord,
in its reasonable judgment, considers necessary, desirable or proper in order to
do so. All amounts paid by Landlord shall bear interest at the lower of (i)
twelve percent (12%) per annum, or (ii) the highest rate permitted under
applicable law, from the date of payment by Landlord and shall be payable by
Tenant to Landlord upon written demand.

                          ALTERATIONS, MECHANICS' LIENS

      8.01 Alterations may not be made to the Leased Premises without prior
written consent of Landlord, and any alterations of the Leased Premises
excepting movable furniture and trade fixtures, manufacturing, assembly, test,
laboratory and similar equipment shall at Landlord's option become part of the
realty and belong to Landlord.

      8.02 Should Tenant desire to alter the Leased Premises and Landlord gives
written consent to such alterations, at Landlord's option, Tenant shall contract
with a contractor approved by Landlord for the construction of such alterations.
Upon completion of the work, Tenant shall provide lien waivers from the
subcontractors or a final affidavit of lien waiver from the general contractor.
(Lien waivers and the Affidavit of Lien Waiver shall be in a form acceptable to
Landlord.)

      8.03 Notwithstanding anything in paragraph 8.02 above, Tenant may, upon
written consent of Landlord, install trade fixtures, machinery or other trade
equipment in conformance with all applicable laws, statutes, ordinances, rules,
regulations, and the same may be removed upon the termination of this Lease
provided Tenant shall not be in default under any of the terms and conditions of
this Lease, and the Leased Premises are not damaged by such removal. Tenant
shall return the Leased Premises on the termination of this Lease in the same
condition as when rented to Tenant, reasonable wear and tear and fire and
casualty only excepted. Tenant shall keep the Leased Premises, the building and
property in which the Leased Premises are situated free from any liens arising
out of any work performed for, materials furnished to, or obligations incurred
by Tenant. All such work provided for above, shall be done at such times and in
such manner as Landlord may from time to time designate. Tenant shall give
Landlord written notice five (5) days prior to employing any laborer or
contractor to perform work resulting in an alteration of the Leased Premises so
that Landlord may post a notice of non-responsibility. Tenant will pay or cause
to be paid all costs and charges for work done by Tenant or caused to be done by
Tenant in or to the Leased Premises or any property in which Landlord may hold
any interest, and for all materials furnished for or in connection with such
work. Tenant will indemnify Landlord against, and hold harmless Landlord against
the liens and claims of lien and all other liabilities, liens, claims and
demands on account of such work by or on behalf of Tenant. If any such lien at
any time is filed against the Leased Premises or any part of the Building,
Tenant shall immediately cause such lien to be discharged of record, or at its
discretion bond off the lien pursuant to O.C.G.A. Sec. 44-14-364. Nothing
herein will be deemed the consent or agreement of Landlord to subject Landlord's
interest in the Leased Premises or Building to liability under any mechanics or
other lien law. In the event that Tenant fails to cause a lien which has been
filed to be discharged, or shall fail to bond off said lien as herein provided,
within ten (10) days of notice of said lien, in addition to all other rights and
remedies it may have under the Lease or at law, Landlord may, at its option, pay
such charge and related costs and interests and said amount and expenses,
including reasonable attorneys' fees shall be immediately due from Tenant to
Landlord as additional rent.

                          QUIET CONDUCT/QUIET ENJOYMENT

      9.01 Tenant shall not commit, or suffer any waste upon the Leased
Premises, or any nuisance, or other act or thing which may disturb the quiet
enjoyment of any other tenant in the Building or any building in the project in
which the Leased Premises are located.

      9.02 So long as Tenant is not in default in the payment of rent, or other
charges or in the performance of any of the other terms, covenants, or
conditions of the Lease, Tenant shall not be disturbed by Landlord or anyone
claiming by, through or under Landlord in Tenant's possession, enjoyment, use
and occupancy of the Leased Premises during the original or any renewal term of
the Lease or any extension or modification thereof

                             FIRE INSURANCE, HAZARDS

      10.01 No use shall be made or permitted to be made of the Leased Premises,
nor acts done which might increase the existing rate of insurance upon the
building or cause the cancellation of any insurance policy covering the
building, or any part thereof, nor shall Tenant sell, or permit to be kept, used
or sold, in or about the Leased Premises, any article which may be prohibited by
the Standard form of fire insurance policies. Tenant shall, at its sole cost and
expense, comply with any and all requirements pertaining to the Leased Premises,
of any insurance organization or company, necessary for the maintenance of
reasonable fire and public liability insurance, covering the Leased Premises,
building and appurtenances. Tenant's permitted uses as described elsewhere
herein shall be deemed not to be in violation of this Section but if there are
increased insurance premium costs resulting therefrom Tenant shall be
responsible for paying such costs.

       10.O2 Tenant shall maintain in full force and effect on all of its Tenant
Improvements, inventory, fixtures and equipment in the Leased Premises a policy
or policies of fire and extended coverage insurance with standard coverage
endorsement to the extent of at least eighty percent (80%) of their insurable
value.. Landlord will not carry insurance on Tenant's possessions. Tenant shall
furnish Landlord with a certificate of such policy within thirty (30) days of
the commencement of this Lease, and whenever required, shall satisfy Landlord
that such policy is in full force and effect.

                                 INDEMNIFICATION

      11.01 Except to the extent of claims arising from the negligence,
omissions or willful misconduct of Landlord or its agents, contractors or
employees Tenant shall indemnify and hold harmless Landlord against and from any
and all claims arising from Tenant's use of the Leased Premises, or the conduct
of its business or from any activity, work, or thing done, permitted or suffered
by the Tenant in or about the Leased Premises, and shall further indemnify and
hold harmless Landlord against and from any and all claims arising from any
breach or default in the performance of any obligation on Tenant's part to be
performed under the terms of this Lease, or arising from any act, neglect, fault
or omission of the Tenant, or of its agents or employees, and from and against
all costs, attorney's fees, expenses and liabilities incurred in or about such
claim or any action or proceeding brought relative thereto and in case any
action or proceeding be brought against Landlord by reason of any such claim,
Tenant upon notice from Landlord shall defend the same at Tenant's expense by
counsel, chosen by Tenant and who is reasonably acceptable to Landlord. Tenant,
as a material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons in or about the Leased Premises from any
cause whatsoever except that which is caused by the failure of Landlord to
observe any of the terms and conditions of this Lease where such failure has
persisted for an unreasonable period of time after written notice of such
failure, and Tenant hereby waives all claims in respect thereof against
Landlord. B


                                       8


      11.02 Landlord shall indemnify Tenant and hold Tenant harmless against and
from all claims arising from the negligence, omissions or willful misconduct of
Landlord, its agents, employees or contractors, with respect to the Leased
Premises.

      11.03 The obligations of Landlord and Tenant under this paragraph arising
by reason of any occurrence taking place during the term of this Lease shall
survive the termination or expiration of this Lease.

                                 WAIVER OF CLAIMS

      12.01 Notwithstanding any indemnity granted herein, and notwithstanding
any other term or provision of the Lease to the contrary, Landlord and Tenant
hereby both release the other and their respective employees, agents and
invitees from and waive any claims either may have against the other and their
employees, agents, servants or invitees for any loss or damage to the Building,
Leased Premises, Land, Project, improvements on or to the Building, Leased
Premises, Land, Project, or the contents of the foregoing, and any personal
property stored or placed thereon by either of them caused by any of the perils
insurable against under fire and extended coverage insurance policies with "all
risks" endorsement, whether such damage or loss was caused by the negligence of
either of them or their respective employees, agents, servants or invitees. The
foregoing mutual release and waiver of subrogation shall apply whether or not
such insurance on the Building, Leased Premises, Land, Project improvements,
contents, and/or personal property was in force at the time of the loss of
damage. Moreover, each party agrees to take all actions necessary to make the
foregoing release effective and binding upon their respective insurance carriers
so that such carriers specifically waive any right of subrogation that such
carriers might otherwise have against the other party and/or their respective
employees, agents, servants or invitees.

                                     REPAIRS

      13.01 Tenant shall, at its sole cost, keep and maintain the Leased
Premises and appurtenances and every part thereof (excepting foundations,
exterior walls, exterior glass and frames (to extent installed by Landlord) and
structural elements including roofs which Landlord agrees to repair) including
by way of illustration and not by way of limitation all windows, doors, any
store front and the interior of the Leased Premises, including all plumbing,
heating, air conditioning, sewer, electrical systems and all fixtures and all
other similar equipment serving the Leased Premises in good and sanitary order,
condition, and repair, reasonable wear and tear and fire and casualty excepted.
Tenant shall be responsible for all pest control within the Leased Premises,
including, but not limited to the eradication of any ants or termites should
infestation be observed during the term of the Lease. Tenant shall, at its sole
cost, keep and maintain all utilities, fixtures and mechanical equipment used by
Tenant in good order, condition, and repair, reasonable wear and tear and fire
and casualty excepted. All windows shall be washed and cleaned as often as
necessary to keep them clean and free from smudges and stains. In the event
Tenant fails to maintain the Leased Premises as required herein or fails to
commence repairs (requested by Landlord in writing) within thirty (30) days
after such request, or fails diligently to proceed thereafter to complete such
repairs, Landlord shall have the right in order to preserve the Leased Premises
or portion thereof, and/or the appearance thereof, to make such repairs or have
a contractor make such repairs and charge Tenant for the cost thereof as
additional rent, together with interest at the rate of twelve percent (12%) per
annum from the date of making such payments.

      13.02 Landlord agrees to keep in good repair the foundations, exterior
walls, exterior glass and frames (to extent installed by Landlord) and
structural elements including roof of the Leased Premises except repairs
rendered necessary by the negligence of Tenant, its agents, employees or
invitees. Landlord gives to Tenant exclusive control of Leased Premises and
shall be under no obligations to inspect said Leased Premises. Tenant shall
promptly report in writing to Landlord any defective condition known to it which
Landlord is required to repair, and Landlord shall move with reasonable
diligence to repair such item. Failure to report such defects shall make Tenant
responsible to Landlord for any additional liability incurred by Landlord by
reason of Tenant's failure to report such defects.


                                        9


      13.03 Tenant shall obtain upon occupancy and keep current during the lease
term a service maintenance contract on the heating, ventilation and air
conditioning (HVAC) equipment serving the Leased Premises. The contract shall
be between Tenant and a dealer-authorized company acceptable to Landlord, and
shall at a minimum provide for an equipment check and tune-up service each
spring and fall, and filter and lubrication service every three months. A copy
of said contract shall be provided to Landlord, as well as any modification,
extension, renewal or replacement thereof.

      13.04 Landlord shall assign to Tenant all warranties which are legally
assignable, and if not assignable, shall cooperate with Tenant to enforce such
warranties. Landlord agrees to assign any and all manufacturers' warranties
directly to the Tenant, which warranties shall include, but not be limited to,
warranties for heating, ventilating and air conditioning systems, which shall be
the standard warranties available from the manufacturers.

                               SIGNS, LANDSCAPING

      14.01 Landlord shall have the right to control landscaping and Tenant
shall make no alterations or additions to the landscaping. Tenant shall have the
right, at their sole cost and expense, to construct a monument sign for the
Building comparable to other monument signs in the Project provided, Landlord
shall have the right to approve the placing of such signs and the size and
quality of the same. So long as Tenant occupies at least sixty percent (60%) of
the Building, Tenant shall be able to have exclusive use of any monument size
installed by Tenant. Tenant shall place no exterior signs on the Leased Premises
without the prior written consent of Landlord. Any signs not in conformity with
the Lease may be immediately removed by Landlord. Tenant shall have the right to
install a fence around the perimeter of the Building, provided however, Landlord
shall have the right to approve the size, materials, installation and appearance
of said fence, which approval shall not be unreasonably withheld, conditioned or
delayed. The Landlord agrees to pay for fifty percent (50%) of the fence up to a
maximum amount of Two Thousand Five Hundred Dollars ($2,500.00). Upon the
expiration of this Lease, if Landlord requests, Tenant shall promptly remove
said fence and correct any damage to the Property in any manner whatsoever
caused by the same.

                                ENTRY BY LANDLORD

      15.01 Tenant shall permit Landlord and Landlord's agents to enter the
Leased Premises at all reasonable times for the purpose of inspecting the same
or for the purpose of maintaining the building, or for the purpose of making
repairs, alterations, or additions to any portion of the building, including the
erection and maintenance of such scaffolding, canopies, fences and props as may
be required, or for the purpose of posting notices of non-responsibility for
alterations, additions, or repairs, or for the purpose of showing the Leased
Premises to prospective tenants, or placing upon the building any usual or
ordinary "for sale" signs, without any rebate of rent and without any liability
to Tenant for any loss of Occupation or quiet enjoyment of the Leased Premises
thereby occasioned; and shall permit Landlord at any time within six (6) months
prior to the expiration of this Lease, to place upon the Leased Premises any
usual or ordinary "to let" or "to lease" signs. Any entry by Landlord shall be
made during regular business hours or as otherwise acceptable to Tenant and
shall be made with not less than 24 hours. Written notice to Tenant (other than
in an emergency). In an emergency, Landlord shall have the right to enter the
Leased Premises for any proper purpose. Tenant shall have the right to install
an electronic or other security system, provided however it is previously
approved by Landlord and, Landlord shall at all times have and retain a key or
mechanism for the security system for the ability to unlock all of the exterior
doors about the Leased Premises. Notwithstanding the foregoing, Landlord shall
only have access to areas of the Leased Premises that contain the Permitted
Biohazards when accompanied by an employee or an agent of the Tenant that is
trained in the proper handling of such materials. Tenant shall have quiet
enjoyment and possession of the Leased Premises throughout the term of this
Lease, subject, however, to the terms and conditions hereof.

                                      TAXES

      16.01(a) Tenant shall, without notice or demand, as additional rent, pay
and discharge, on or before the last day on which the same may be paid without
penalty, "all taxes", (as hereinafter defined) which shall or may during the
term be levied, assessed or imposed on or become a lien


                                       10


upon or grow due or payable out of or for or by reason of the Leased Premises
or any part thereof, or the Landlord's interest in the real property described
on Exhibit "A" hereto. For the purposes hereof "taxes" means all taxes at any
time imposed by the United States of America or by any state, city, county or
other political or taxing subdivision thereof upon or against this Lease, the
Leased Premises, the use or occupancy thereof, the buildings, improvements or
personality thereon, and all assessments imposed subsequent to the execution and
delivery of this lease by both Landlord and Tenant (including assessments for
benefits from public works or improvements, whether commenced or completed prior
to the commencement of the term hereof and whether or not to be completed within
said term), levies, license fees, permit fees, water rents and charges, sewer
rents, excises, franchises, imposts, interest, costs, penalties and charges,
general and special, ordinary and extraordinary, of whatever name, nature and
kind, and whether or not within the contemplation of the parties hereto, which
are now or may hereafter be levied, assessed, charged or imposed upon or against
this Lease, the Leased Premises, the use or occupancy thereof, or the building,
improvements or personal property thereon or which are or may become a lien on
any thereof. Notwithstanding anything hereinabove to the contrary, "taxes" shall
not include any penalties or interest imposed or incurred because of Landlord's
dilatory payment, unless the delay in payment is due to Tenant's breach of its
obligations under this Section 16.

      (b) All assessments imposed upon the Leased Premises during the term of
this Lease for public improvements which shall benefit the Leased Premises after
the expiration of this Lease shall be equitably pro rated, so that only the
portion of such assessments properly allocable to the term of this Lease shall
be included in determining Tenant's share of "taxes" in accordance with Section
16.01 (a) above.

      16.02 Tenant shall pay as additional rent the amount of all taxes, other
than income taxes, upon or measured by the rent payable hereunder, whether as a
sales tax, transaction privilege tax, excise tax, or otherwise, which additional
rent shall be due and payable at the same time as each installment of basic
rent.

      16.03 Joint Assessment. If the Leased Premises are not separately
assessed, Tenant's liability shall be an equitable proportion of the real
property taxes for all of the land and improvements included with the tax parcel
assessed, such proportion to be determined by Landlord from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Landlord's reasonable determination thereof, in
good faith, shall be conclusive.

      16.04 Personal Property Taxes. Tenant shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property of Tenant contained in the Leased Premises or
elsewhere.

                                    INSURANCE

      17.01 Liability Insurance. Tenant, at its own expense, shall provide and
keep in force with companies acceptable to Landlord public liability insurance
for the benefit of Tenant against liability for bodily injury and property
damage in the amount of not less than One Million Dollars ($1,000,000.00)
combined single limit in respect to injuries to or death of more than one person
in any one occurrence, and Two Million Dollars ($2,000,000.00 in the aggregate,
Tenant shall also maintain an umbrella policy in the amount of One Million
Dollars ($1,000,000.00), such limits to be for any greater amounts as may be
reasonably indicated by circumstances from time to time existing. Tenant shall
furnish Landlord with a certificate of such policy within thirty (30) days of
the commencement date of this Lease and whenever required shall satisfy Landlord
that such policy is in full force and effect. Such policy shall name Landlord as
an additional insured with respect to liabilities arising out of the use of the
Leased Premises by Tenant and shall be primary and noncontributing with any
insurance carried by Landlord. The policy shall further provide that it shall
not be cancelled or altered without twenty (20) days prior written notice to
Landlord. The limits of said insurance shall not, however, limit the liability
of Tenant hereunder. if Tenant shall fail to procure and maintain said insurance
Landlord may, but shall not be required to procure and maintain the same but at
the expense of Tenant.


                                       11


      17.02 Property Insurance. (a) Tenant shall maintain in full force and
effect on all of its Tenant Improvements, fixtures and equipment in the Leased
Premises a policy or policies of fire and extended coverage insurance with
standard coverage endorsement to the extent of at least eighty percent (80%) of
their insurable value. Landlord will not carry insurance on Tenant's
possessions. Tenant shall furnish Landlord with a certificate of such policy
within thirty (30) days of the commencement of this Lease, and whenever
required, shall satisfy Landlord that such policy is in full force and effect.

      (b) At Tenant's cost, Landlord shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or damage to
the Leased Premises and Building, in the amount of the full replacement value
thereof, as the same may exist from time to time, but in no event less than the
total amount of promissory notes secured by liens on the Leased Premises against
all perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, special extended perils (all risk) and sprinkler
leakage. Said insurance shall provide for payment of loss thereunder to Landlord
or to the holders of mortgages or deeds of trust on the Leased Premises.
Landlord shall, in addition, obtain at Tenant's expense and keep in force during
the term of this Lease a policy of rental income insurance covering a period of
one (1) year, which insurance shall also cover all real estate taxes and
insurance costs for said period.

      (c) if the Leased Premises are part of a larger building, or if the Leased
Premises are part of a group of buildings owned by Landlord, which are adjacent
to the Leased Premises, then Tenant shall pay for any increase in the property
insurance of such other building or buildings if said increase is caused by
Tenant's acts, omissions, use or occupancy of the Leased Premises.

      (d) All policies of property insurance insuring Landlord or Tenant's
property shall provide that the insurers waive any right of subrogation against
Landlord or Tenant and that any such waiver shall not adversely affect said
policies or prejudice the rights of the insured to recovery thereunder.

                                   ABANDONMENT

      18.01 Tenant shall not vacate nor abandon the Leased Premises at any time
during the term of this Lease; and if Tenant shall abandon, vacate or surrender
the Leased Premises, or be dispossessed by process of law, or otherwise, any
personal property belonging to Tenant and left on the Leased Premises shall, at
the option of the Landlord, be deemed abandoned and be and become the property
of Landlord.

                                   DESTRUCTION

      19.01 If the Building or Leased Premises or any portion thereof are
destroyed by storm, fire, lightning, earthquake or other casualty, Tenant shall
immediately notify Landlord. In the event the Building or the Leased Premises
cannot, in Landlord's reasonable judgment, be restored within one hundred eighty
(180) days of the date of such damage or destruction, this Lease shall terminate
as of the date of such destruction, and all rent and other sums payable by
Tenant hereunder shall be accounted for as between Landlord and Tenant as of
that date. Landlord shall notify Tenant within thirty (30) days of the date of
the damage or destruction whether the Building and the Leased Premises can be
restored within one hundred eighty (180) days. If this Lease is not terminated
as provided in this Paragraph, Landlord shall, to the extent insurance proceeds
payable on account of such damage or destruction are available to Landlord (with
the excess proceeds belonging to Landlord), using reasonable diligence, repair,
restore, rebuild, reconstruct or replace the damaged or destroyed portion of the
Leased Premises to a condition substantially similar to the condition which
existed prior to the damage or destruction. Provided, however, Landlord shall
only be required to repair, restore, rebuild, reconstruct and replace the base
building as shown on Exhibit "B" and detailed in Exhibit "G" ("Landlord's
Work"). Tenant shall, at its sole cost and expense, upon completion of the
Landlord's Work, repair, restore, rebuild, reconstruct and replace, as required,
any and all Tenant Improvements installed in the Leased Premises by Tenant and
all trade fixtures, personal property, inventory, signs and other contents in
the Leased Premises, and all other repairs not specifically required of Landlord
hereunder, in a manner and to at least the condition substantially similar to
that existing prior to the damage, provided however, if the destruction has
occurred in the lab or the


12



manufacturing area, the Tenant shall have the option to either restore such
areas to the condition that existed prior to the damage or restore the damaged
area to be standard office space similar to the existing office space within the
Leased Premises, the plans and specifications for such office space would
require Landlord's prior review and approval. Tenant's obligation to pay Base
Rent and additional rent shall abate until the earlier of Tenant's occupancy or
sixty (60) days after Landlord has repaired, restored, rebuilt, reconstructed or
replaced the Leased Premises, as required herein, in proportion to the part of
the Leased Premises which are unusable by Tenant. In the event of any dispute
between Landlord and Tenant relative to the provisions of this paragraph, they
may each select an arbitrator, the two arbitrators so selected shall select a
third arbitrator and the three arbitrators so selected shall hear and determine
the controversy and their decision thereon shall be final and binding on both
Landlord and Tenant who shall bear the cost of such arbitration equally between
them. Landlord shall not be required to repair any property installed in the
Leased Premises by Tenant. Tenant waives any right under applicable laws
inconsistent with the terms of this paragraph. Notwithstanding the provisions of
this paragraph, if any such damage or destruction occurs within the final two
(2) years of the term hereof, and such damage affects a material portion of the
Leased Premises or Tenant's use thereof then Landlord or Tenant may, without
regard to the aforesaid 180-day period, terminate this Lease by written notice
to the other party.

                            ASSIGNMENT AND SUBLETTING

      20.01 Landlord shall have the right to transfer and assign, in whole or in
part its rights and obligations in the building and property that are the
subject of this Lease. Tenant shall not assign this Lease or sublet all or any
part of the Leased Premises without the prior written consent of the Landlord,
which shall not be unreasonably withheld or delayed. In the event of any
assignment or subletting, Tenant shall nevertheless at all times, remain fully
responsible and liable for the payment of the rent and for compliance with all
of its other obligations under the terms, provisions and covenants of this
Lease. If all or any part of the Leased Premises are then assigned or sublet,
Landlord, in addition to any other remedies provided by this Lease or provided
by law, may at its option, collect directly from the assignee or subtenant all
rents becoming due to Tenant by reason of the assignment or sublease. Any
collection directly by Landlord from the assignee or subtenant shall not be
construed to constitute a novation or a release of Tenant from the further
performance of its obligations under this Lease. In the event that Tenant
sublets the Leased Premises or any part thereof, or assigns this Lease and at
any time receives rent and/or other consideration which exceeds that which
Tenant would at that time be obligated to pay to Landlord, Tenant shall pay to
Landlord 100% of the gross excess in such rent as such rent is received by
Tenant and 100% of any other consideration received by Tenant from such
subtenant in connection with such sublease or, in the case of any assignment of
this Lease by Tenant, Landlord shall receive 100% of any consideration paid to
Tenant by such assignee in connection with such assignment; notwithstanding the
foregoing, Tenant shall be entitled to the excess profit earned from a sublease
or an assignment above a rental rate of $6.00 per square foot for the space that
is the subject of any such sublease or assignment. In addition, should Landlord
agree to an assignment or sublease agreement, Tenant will pay to Landlord on
demand the sum of $500.00 to partially reimburse Landlord for its costs,
including reasonable attorneys' fees, incurred in connection with processing
such assignment or subletting request.

                              INSOLVENCY OF TENANT

      21.01 Either (a) the appointment of a trustee in a Chapter 7 bankruptcy
proceeding to take possession of all or substantially all of the assets of
Tenant, or (b) a general assignment by Tenant for the benefit of creditors, or
(c) any action taken or suffered by Tenant under Chapter 7 of the bankruptcy act
shall, if any such appointments, assignments or action continues for a period of
sixty (60) days, constitute a breach of this Lease by Tenant, and Landlord may
at its election upon fifteen (15) days notice, terminate this Lease and in that
event be entitled to immediate possession of the Leased Premises and damages as
provided below.

                                BREACH BY TENANT

      22.01 In the event that (i) Tenant shall not make payment of any
installment of rent or other sum herein specified and such failure shall
continue for five business days after written notice


                                       13


thereof from Landlord, but if a failure to pay Base Rent shall occur more than
twice in any twelve month period then no notice shall be required for any
subsequent failure to pay Base Rent when due, or (ii) Tenant shall fail to
observe or perform any other of Tenant's obligations hereunder and such failure
shall not be corrected within thirty days after written notice thereof from
Landlord (or such longer period if reasonably required and Tenant is proceeding
diligently to correct such failure), then this shall be considered a default
hereunder. In the event of a default, Landlord in addition to any and all other
rights or remedies that it may have hereunder, at law or in equity shall have
the right to either terminate this Lease or from time to time, without
terminating this Lease relet the Leased Premises or any part thereof for the
account and in the name of Tenant or otherwise, for any such term or terms and
conditions as Landlord in its sole discretion may deem advisable with the right
to make reasonable alterations and repairs to the Leased Premises. Tenant shall
pay to Landlord, as soon as ascertained, the costs and expenses reasonably
incurred by Landlord in such reletting or in making such reasonable alterations
and repairs. Should such rentals received from time to time from such reletting
during any month be less than that agreed to be paid during that month by Tenant
hereunder, the Tenant shall pay such deficiency to Landlord. Such deficiency
shall be calculated and paid monthly.

      22.02 No such reletting of the Leased Premises by Landlord shall be
construed as an election on its part to terminate this Lease unless a notice of
such intention be given to Tenant or unless the termination thereof be decreed
by a court of competent jurisdiction. Notwithstanding any such reletting without
termination, Landlord may immediately or at any time thereafter terminate this
Lease, and this Lease shall be deemed to have been terminated upon receipt by
Tenant of notice of such termination; upon such termination Landlord shall
recover from Tenant all damages that Landlord may suffer by reason of such
termination including, without limitation, all arrearages in rentals, costs,
charges, additional rentals, and reimbursements, the cost (including court costs
and attorneys' fees actually incurred) of recovering possession of the Leased
Premises, the actual or estimated (as reasonably estimated by Landlord) cost of
any alteration of or repair to the Leased Premises which is necessary or proper
to prepare the same for reletting and, in addition thereto, Landlord shall have
and recover from Tenant the difference between the present value (discounted at
a rate per annum equal to the discount rate of the Federal Reserve Bank of
Atlanta at the time the Event of Default occurs) of the rental to be paid by
Tenant for the remainder of the lease term, and the present value (discounted at
the same rate) of the rental for the Leased Premises for the remainder of the
lease term, taking into account the cost, time and other factors necessary to
relet the Leased Premises; provided, however that such payment shall not
constitute a penalty or forfeiture, but shall constitute full liquidated damages
due to Landlord as a result of Tenant's default. Landlord and Tenant
acknowledge that Landlord's actual damages in the event of a default by Tenant
under this Lease will be difficult to ascertain, and that the liquidated damages
provided above represent the parties' best estimate of such damages. The parties
expressly acknowledge that the foregoing liquidated damages are intended not as
a penalty, but as full liquidated damages, as permitted by Section 13-6-7 of the
Official Code of Ga. Annotated.

      22.03 Landlord agrees that the payment by the Guarantor of any rent or
other amount due Landlord hereunder, or the performance by Guarantor of any
obligation of Tenant hereunder, shall be deemed to be the making of a payment by
Tenant or the performance of the obligation by the Tenant.

                                 ATTORNEY'S FEES

      23.01 If Landlord and Tenant litigate or arbitrate any provision of this
Lease or the subject matter of this Lease, each party will pay its own legal
costs and expenses. If, without fault, either Landlord or Tenant is made a party
to any litigation instituted by or against the other, the other will indemnify
the faultless one against all loss, liability, and expense, including reasonable
attorneys' fees and court costs, incurred by it in connection with such
litigation.

                                  CONDEMNATION

      24.01 If, at any time during the term of this Lease, title to the entire
Leased Premises should become vested in a public or quasi-public authority by
virtue of the exercise of expropriation, appropriation, condemnation or other
power in the nature of eminent domain, or by voluntary transfer from the owner
of the Leased Premises under threat of such a taking then this Lease shall


                                       14


terminate as of the time of such vesting of title, after which neither party
shall be further obligated to the other except for occurrence antedating such
taking. The same results shall follow if less than the entire Leased Premises be
thus taken, or transferred in lieu of such a taking, but to such extent that it
would be legally and commercially impractical for Tenant to occupy the portion
of the Leased Premises remaining, and impractical for Tenant to reasonably
conduct his trade or business therein.

      24.02 Should there be such a partial taking or transfer in lieu thereof,
but not to such an extent as to make such continued occupancy and operation by
Tenant an impracticality, then this Lease shall continue on all of its same
terms and conditions subject only to an equitable reduction in rent and other
expenses proportionate to such taking.

      24.03 In the event of any such taking or transfer, whether of the entire
Leased Premises, or a portion thereof, it is expressly agreed and understood
that all sums awarded, allowed or received in connection therewith shall belong
to Landlord, and any rights otherwise vested in Tenant are hereby assigned to
Landlord, and Tenant shall have no interest in or claim to any such sums or any
portion thereof, whether the same be for the taking of the property or for
damages, or otherwise. Nothing herein shall be construed, however, to preclude
Tenant from prosecuting any claim directly against the condemning authority for
loss of business, moving expenses, damage to, and cost of, trade fixtures,
furniture and other personal property belonging to Tenant; provided, however,
that Tenant shall make no claim which shall diminish or adversely affect any
award claimed or received by Landlord.

                                     NOTICES

      25.01 All notices, statements, demands, requests, consents, approvals,
authorization, offers, agreements, appointments, or designations under this
Lease by either party to the other shall be in writing and shall be sufficiently
given and served upon the other party, (i) by depositing same in the United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested; (ii) by recognized
overnight, third party prepaid courier service (such as Federal Express),
requiring signed receipt; (iii) by delivering the same in person to such party;
or (iv) by telecopy with delivery of an original copy of any such notice
delivered pursuant to (ii) or (iii) above to be received no later than the next
business day. Notice personally delivered or sent by courier service, or
telecopy shall be effective upon receipt. Any notice mailed in the foregoing
manner shall be effective three (3) business days after its deposit in the
United States mail. Either party may change its address for notices by giving
notice to the other as provided above. For purposes of notice, the addresses of
the parties shall be as follows:

      (a)   To Tenant at the Leased Premises; addressed to the attention of the
            Chief Operating Officer; with a copy to Visible~Genetics, Inc., 700
            Bay Street, Suite 1000, Toronto, Ontario, Canada M5G1Z6, Attention
            Chief Executive

      (b)   To Landlord, addressed to Landlord at 4497 Park Drive, Norcross,
            Georgia 30093, with a copy to such other place as Landlord may from
            time to time designate by notice to Tenant.

                                     WAIVER

      26.01 The waiver by either party of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant, or condition or any subsequent breach of the same or any other term,
covenant, or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant, or condition of this Lease, other than the
failure of Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.

                             EFFECT OF HOLDING OVER

      27.01 If Tenant should remain in possession of the Leased Premises after
the expiration of the lease term and without executing a new lease, then such
holding over shall be construed as a tenancy from month to month, subject to all
the conditions, provisions, and obligations of this


                                       15



Lease insofar as the same are applicable to a month to month tenancy, except
that the rent payable pursuant to subparagraph 3.01 hereof shall be 150% of the
rent payable pursuant to subparagraph 3.01.

                                  SUBORDINATION

      28.01 This Lease, at Landlord's option, shall be subordinate to any ground
lease, first priority mortgage, first priority deed of trust, or first priority
security deed now or hereafter placed upon the real property of which the Leased
Premises are a part and to any and all advances made on the security thereof and
to all renewals, modifications, consolidations, replacements and extensions
thereof.

      28.02 Tenant agrees to execute any documents reasonably required to
effectuate such subordination or to make this Lease prior to the lien of any
such ground lease, mortgage, deed of trust, or security deed, as the case may
be, including specifically a subordination, non-disturbance and attornment
agreement in the form hereto attached as Exhibit "D", and failing to do so
within ten (10) days after written demand, does hereby make, constitute and
irrevocably appoint Landlord as Tenant's attorney in fact and in Tenant's name,
place and stead, to do so. if requested to do so, Tenant agrees to attorn to any
person or other entity that acquires title to the real property encompassing the
Leased Premises, whether through judicial foreclosure, sale under power, or
otherwise, and to any assignee of such person or other entity.

                              ESTOPPEL CERTIFICATE

      29.01 Upon ten (10) days notice from Landlord to Tenant, Tenant shall
deliver a certificate dated as of the first day of the calendar month in which
such notice is received, executed by an appropriate officer, partner or
individual, in the form as Landlord may reasonably require and stating but not
limited to the following: (i) the commencement date of this Lease; (ii) the
space occupied by Tenant hereunder; (iii) the expiration date hereof; (iv) a
description of any renewal or expansion options; (v) the amount of rental
currently and actually paid by Tenant under this Lease; (vi) the nature of any
default or claimed default hereunder by Landlord and (vii) that Tenant is not in
default hereunder nor has any event occurred which with the passage of time or
the giving of notice would become a default by Tenant hereunder.

                                     PARKING

      30.01 Tenant shall have exclusive use of the parking areas designated as
parking areas on the site plan attached hereto as Exhibit "A". Tenant agrees to
park all Tenant's trucks in the parking spaces provided at the rear of the
building. "Parking" as used herein means the use by Tenant's employees, its
visitors, invitees, contractors and customers for the parking of motor vehicles
for such periods of time as are reasonably necessary in connection with use of
and/or visits to the Leased Premises. No vehicle may be repaired or serviced in
the parking area and any vehicle deemed abandoned by Landlord will be towed from
the project and all costs therein shall be borne by the Tenant. No area outside
of the Leased Premises shall be used by Tenant for storage without Landlord's
prior written permission. There shall be no parking permitted on any of the
streets or roadways located in Horizon.

                              MORTGAGEE PROTECTION

      31.01 In the event of any default on the part of Landlord, Tenant will
give notice by registered or certified mail to any beneficiary of a deed or
trust or holder of a security deed or mortgage covering the Leased Premises
whose name and address shall have been furnished to Tenant by Landlord in
writing prior to the default, and shall offer such beneficiary or holder a
reasonable opportunity to cure the default, including time to obtain possession
of the Leased Premises by power of sale or a judicial foreclosure, if such
should prove necessary to effect a cure.

                              PROTECTIVE COVENANTS

      32.01 This Lease is subject to the Protective Covenants of Horizon, and to
such rules and regulations as may hereafter be adopted and promulgated. In
addition, Tenant shall comply with all


16



covenants, restrictions and other matters of record in the deed records of the
county in which the Leased Premises are located which affect or encumber the
Leased Premises, the Building or the Land.

                                   RELOCATION

      33.01 Intentionally deleted.

                              BROKERAGE COMMISSIONS

      34.01 Tenant's Agent and Landlord's Agent (collectively, "Agent") shall
each be entitled to receive a commission in the amounts, and upon the terms and
conditions, contained in a separate commission agreement between Landlord and
such parties.

      34.02 Tenant warrants and represents to Landlord that, other than Agent,
no other party is entitled, as a result of the actions of Tenant, to a
commission or other fee resulting from the execution of this Lease. Landlord
warrants and represents to Tenant that, except as set forth above, no other
party is entitled, as a result of the actions of Landlord, to a commission or
other fee resulting from the execution of this Lease. Landlord and Tenant agree
to indemnify and hold each other harmless from any loss, cost, damage or expense
(including reasonable attorneys' fees) incurred by the nonindemnifying party as
a result of the untruth or incorrectness of the foregoing warranty and
representation, or failure to comply with the provisions of this subparagraph.

      34.03 Tenant's Agent is representing Tenant in connection with this Lease,
and is not representing Landlord. Landlord's Agent, or employees of Landlord or
its affiliates, are representing Landlord and are not representing Tenant.

      34.04 The parties acknowledge that certain officers, directors,
shareholders, or partners of Landlord or its general partner(s), are licensed
real estate brokers and/or salesmen under the laws of the State of Georgia.
Tenant consents to such parties acting in such dual capacities.

                            MISCELLANEOUS PROVISIONS

      A. Whenever the singular number is used in this Lease and when required by
the context, the same shall include the plural, and the masculine gender shall
include the feminine and neuter genders, and the word "person" shall include
corporation, firm or association. If there be more than one tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.

      B. The headings or titles to paragraphs of this Lease are for convenience
only and shall have no effect upon the construction or interpretation of any
part of this Lease.

      C. This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any other
manner than by agreement in writing signed by all parties to this Lease.

      D. Where the consent of a party is required, such consent will not be
unreasonably withheld or delayed.

      E. This Lease shall create the relationship of Landlord and Tenant between
Landlord and Tenant; no estate shall pass out of Landlord; Tenant has only a
usufruct, not subject to levy and/or sale and not assignable by Tenant except as
provided in paragraph 20.01 hereof.

      F. Except as otherwise expressly stated, each payment required to be made
by Tenant shall be in addition to and not in substitution for other payments to
be made by Tenant.

      G. All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent.


17


      H. No payment by Tenant or receipt by Landlord of a lesser amount than any
installment or payment of rent due shall be deemed to be other than on account
of the amount due, and no endorsement or statement on any check or payment of
rent shall be deemed an accord and satisfaction. Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of such
installment or payment of rent, or pursue any other remedies available to
Landlord.

      I. Subject to paragraph 20, the terms and provisions of this Lease shall
be binding upon and inure to the benefit of the heirs, executors,
administrators, successors, and assigns of Landlord and Tenant. In the event of
any conveyance by Landlord of its interest in and to the Leased Premises, the
Building or the Land, all obligations under this Lease of the conveying party
shall cease and Tenant shall thereafter look solely to the party to whom the
Leased Premises were conveyed for performance of all of Landlord's duties and
obligations under this Lease.

      J. Tenant acknowledges and agrees that Landlord shall not provide guards
or other security protection for the Leased Premises and that any and all
security protection shall be the sole responsibility of Tenant.

      K. This Lease shall be governed by Georgia law.

      L. Time is of the essence of each term and provision of this Lease.

      M. Tenant shall not record this Lease or a memorandum thereof without the
written consent of Landlord. Upon the request of Landlord, Tenant shall join in
the execution of a memorandum or so-called "short form" of this Lease for the
purpose of recordation. Said memorandum or short form of this Lease shall
describe the parties, the Leased Premises and the lease term, and shall
incorporate this Lease by reference.

      N. Landlord's liability for performance of its obligations under the terms
of this Lease shall be limited to its interest in the Leased Premises.

      0. It is a condition to Landlord's obligations under this Lease that
Tenant, and Tenant agrees to, obtain and deliver to Landlord a fully executed
guaranty in the form attached to this Lease as Exhibit "I".

                    (SIGNATURES CONTAINED ON FOLLOWING PAGE)

                                       18




      IN WITNESS WHEREOF, the parties hereto who are individuals have set their
hands and seals, and the parties who are corporations have caused this
instrument to be duly executed by its proper officers and its corporate seal to
be affixed, as of the day and year first above written.


Signed, sealed and delivered                LANDLORD:
as to Landlord, in the
presence of:                                DUKE-WEEKS REALTY LIMITED
                                            PARTNERSHIP,
                                            an Indiana limited partnership
- - ----------------------------
Unofficial Witness                          By: Duke-Weeks Realty Corporation
                                                an Indiana corporation,
                                                its sole general partner
- - ----------------------------
Notary Public                               By:
                                               -----------------------------
                                            Name:
                                                 ---------------------------
                                            Its:
                                                ----------------------------


Signed, sealed and delivered                TENANT:
as to Tenant, in the presence
of                                          VISIBLE GENETICS CORP.
         [ILLEGIBLE]
- - ----------------------------                By:        [ILLEGIBLE]
Unofficial Witness                             -----------------------------
                                            Name:      [ILLEGIBLE]
         [ILLEGIBLE]                             ---------------------------
- - ----------------------------                Its:       [ILLEGIBLE]
Notary Public                                   ----------------------------


                                            ATTEST:

                                             By:        [ILLEGIBLE]
                                                -----------------------------
                                             Name:      [ILLEGIBLE]
                                                  ---------------------------
                                             Its:       [ILLEGIBLE]
                                                 ----------------------------

                                                     (Corporate Seal)


                                       19


                                  EXHIBIT "A"
                                    SITE PLAN

[GRAPHIC OMITTED]

                        Horizon Business Distribution III
                     100 Crestridge Drive, Lawrenceville, GA

Building Specifications

o 99,822 square feet on 9.66 acres

o 40' x 40' column spacing; 200' depth

o Brick and block construction

o 22 dock-high doors with 7 knock-outs

o 24' minimum clear height

o Ballasted EPDM roof

o 128 parking spaces

o Class IV sprinkler system

 For more information, please call Duke-Weeks Realty Corporation
                             Mal Hill 770-717-3215
                                                              www. dukerelt.com



                                   EXHIBIT "B"

                                   FLOOR PLAN

As shown on plans and specifications dated 12/17/99 and prepared for Tenant by
KG Architects.




                                   EXHIBIT "C"

                             ACCEPTANCE OF PREMISES

Lessee:_______________________________________

Lessor:_______________________________________

Date Lease Signed:____________________________

Term of Lease:________________________________

Address of Leased Premises: Suite ____ containing approximately ____ square
feet, located at

      ________________________________________

      ________________________________________


Commencement Date:____________________________

Expiration Date:______________________________

The above described premises are accepted by Lessee as suitable for the purpose
for which they were let. The above described lease term commences and expires on
the dates set forth above. Lessee acknowledges that it has been received from
Lessor _________ number of keys to the leased premises. It is understood that
there is a punch list which will be completed after move-in and will be an
exhibit to the Tenant Estoppel.

LESSEE

________________________
 (Type Name of Lessee)
                                       WITNESS

By:_____________________           ______________________
      (Signature)                       (Signature)

________________________           ______________________
 (Type Name and Title)                   (Company)


                                       2

                                   EXHIBIT "D"

             SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

      THIS AGREEMENT, made as of the _ day of____ , 1995, between _____________
with offices at _____________________________ ("Tenant") and
______________________ (herein, together with its successors, transferees and
assigns, the "Mortgagee");

                                   WITNESSETH:

      WHEREAS, Mortgagee is about to or has heretofore granted to
_____________,a Georgia limited partnership (the "owner") a first mortgage loan,
which loan is secured by a security deed (herein "Mortgage") dated as of
_______, 199_ and duly recorded on _______, 199_ in the land records of Gwinnett
County, Georgia; and

      WHEREAS, the Mortgage is to be a first and prior lien upon the Owner's fee
estate in the real property described in Exhibit "A" annexed hereto ("Mortgaged
Premises"); and

      WHEREAS, Tenant is occupying a portion of the Mortgaged Premises under a
lease dated as of ____________, 199_. in which Owner is Landlord (the "Lease")
covering that portion of the Mortgaged Premises therein more particularly
described (the "Leased Premises"); and

      WHEREAS, Tenant desires to be assured of its continued and undisturbed
occupancy of the Leased Premises should the Mortgage be foreclosed or the
Mortgaged Premises sold pursuant to any power of sale contained therein and
Mortgagee is agreeable thereto.

      NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and in further consideration of the sum of ONE DOLLAR ($1.00) each to
the other in hand paid, the receipt whereof is hereby acknowledged, Tenant and
Mortgagee mutually covenant and agree as follows:

      FIRST: The Lease and all of Tenant's rights, interest and estate therein
and thereunder are hereby made subject and subordinate to the lien of the
Mortgage and to any extensions, renewals, replacements, modifications, additions
or consolidations thereof and to all rights, title and interest of Mortgagee and
its successors and assigns therein and thereunder.

      SECOND: In the event, however, proceedings shall ever be instituted by
Mortgagee to foreclose or liquidate the Mortgage, the Tenant's possession of its
leased portion of the Mortgaged Premises shall not be disturbed by the
foreclosure proceedings and the Mortgaged Premises shall be sold at any
foreclosure sale subject to Tenant's possession on condition that:

      (a)   there shall be, at the time of commencement of foreclosure
            proceedings, as well as all subsequent times, no default by Tenant
            in the due and timely observance and performance of any covenant and
            agreement in the Lease to be observed and performed by Tenant; and

      (b)   the Tenant shall not have entered into any agreement modifying any
            term, condition or agreement of the Mortgagee-approved Lease without
            the prior written consent of Mortgagee.

       THIRD: Tenant shall attorn to Mortgagee while Mortgagee is in possession
of the Mortgaged Premises, or to a Receiver appointed in any action or
proceeding to foreclose the Mortgage. In the event of the completion of
foreclosure proceedings and sale of the Mortgaged Premises or in the event the
Mortgagee should otherwise acquire possession of the Mortgaged Premises, the
Tenant will promptly upon demand attorn to the purchaser at the foreclosure sale
or to the Mortgagee, as the case may be, and will recognize such purchaser or
the Mortgagee as the Tenant's landlord. The Tenant agrees to execute and
deliver, at any time and from time to time, upon the request of the Mortgagee or
the purchaser at the foreclosure sale, as the case may be, any




instrument which may be necessary or appropriate to such successor landlord to
evidence such attornment. The Tenant shall, upon demand of the Mortgagee or any
Receiver or purchaser at the foreclosure sale, pay to the Mortgagee or to such
Receiver or purchaser, as the case may be, all rental monies then due or as they
thereafter become due.

       FOURTH: Upon the attornment provided for in preceding Paragraph THIRD the
Tenant's occupancy shall thereafter be in full force and effect as under a
direct Lease between Mortgagee, the Receiver or the purchaser at the foreclosure
sale, as the case may be, and Tenant. It is specifically understood and agreed
that Mortgagee or any such Receiver or purchaser shall not be:

      (a)   liable for any act, omission, negligence or default of any prior
            landlord, or

      (b)   subject to any offsets, claims or defenses which Tenant might have
            against any prior landlord; or

      (c)   bound by any rent or additional rent which Tenant might have paid
            for more than one month in advance to any prior landlord; or

      (d)   bound by any amendment or modification of the Lease made without
            the prior written consent of the Mortgagee.

      FIFTH: On and after the date Tenant in good standing attorns to Mortgagee
or any Receiver or subsequent owner in pursuance of its agreement herein set
forth, Mortgagee, the Receiver or such subsequent owner will undertake and
perform all subsequent obligations of the Landlord as set forth in the Lease for
the benefit of and undisturbed occupancy of Tenant under the Lease.

      SIXTH: Tenant agrees it will not amend, modify nor abridge the Lease in
any way, nor cancel or surrender the same without prior written approval of the
Mortgagee other than by reason of a continued uncured material default of the
landlord under the Lease, nor will the Lease ever merge into the fee in the
event that Mortgagee acquires fee title to the Mortgaged Premises.

      SEVENTH: Any notices or other communication to be given hereunder by
either party shall be in writing and shall be deemed to have been sufficiently
given or served for all purposes if sent by registered or certified mail with
return receipt requested to the other party hereto at its address above stated
or such other address of which written notification has been timely given to the
other party.

      EIGHTH: Mortgagee has and shall have the continuing right to execute and
record in the Land Records of Gwinnett County, Georgia at any time, in its
unilateral discretion, a Declaration of Subordination for the purpose of thereby
subordinating its rights, title and interest in and under the Mortgage to the
rights, title and interest of Tenant under the Lease. Such Declaration of
Subordination shall, at Mortgagee's election, operate, function and be in full
force and effect for whatever period of time Mortgagee declares therein that it
shall be in force not exceeding the term of the Lease and any extensions thereof
and the said Declaration may be voided unilaterally by Mortgagee when it so
elects.

      NINTH: Tenant waives any and all rights it may have to execute and record
after the date hereof any document purporting to again or further subordinate
its right, title or interest under the Lease to the lien of either the Mortgage
or any other mortgage or deed of trust or any ground lease or any agreement
modifying or amending the Mortgage except with the written consent of Mortgagee.

      TENTH: This Agreement cannot be changed orally but only in writing signed
by both parties hereto.

      ELEVENTH: This Agreement may be recorded by either party at its own
expense in the Land Records of Gwinnett County, Georgia whenever, in its sole
discretion, either party elects so to do.


                                       2


      TWELFTH: All of the terms, covenants and conditions hereof shall run with
the Mortgaged Premises and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, acknowledged and delivered the day and year first above written.

SIGNED, SEALED AND DELIVERED              TENANT:
in the presence of:

_____________________________

_____________________________              BY:_____________________________

                                           MORTGAGEE:

_____________________________              BY:_____________________________

_____________________________


       The undersigned Owner of the leased and mortgaged premises hereby
consents to the foregoing Agreement and agrees to be bound by and subject to the
terms thereof.

                                           BY:_____________________________


                                        3


                                   EXHIBIT "E"

                              SPECIAL STIPULATIONS

                                      NONE




                                   EXHIBIT "F"

                            CONSTRUCTION REQUIREMENTS

INSURANCE: Contractor/Subcontractor shall maintain at least the following
insurance coverages in addition to any other coverages or any greater limits
required by the Contract Documents. The policies shall also provide that it
shall not be canceled or altered without twenty (20) days prior written notice
to Tenant.

1.    Type of Insurance - Worker's Compensation and Employer's Liability.
      Minimum Limits of Liability - In accordance with the laws of the state or
      states in which the work is performed, but with employers' liability
      limits of at least $100,000.00 per occurrence.

2.    Type of Insurance - Comprehensive General Liability. Minimum Limits of
      Liability - Bodily Injury (and death): $1,000,000.00 each occurrence;
      $1,000.000.00 aggregate.* Property Damage; $1,000,000.00 each occurrence;
      $1,000,000.00 aggregate.* Or Bodily Injury and Property Damage combined:
      $1,000,000.0O.

3.    Type of Insurance - Comprehensive Automobile Liability. Minimum Limits of
      Liability-Bodily Injury (and Death): $500,000.00 each person; $500.000.00
      each occurrence. Property Damage: $100,000.00 each occurrence. Or, Bodily
      Injury and Property Damage combined: $500,000.00.

If checked, the above insurance policies shall provide coverage against the
following risks:

COMPREHENSIVE GENERAL LIABILITY:
- - -------------------------------
[X]    a.    Broad Form Property Damage.
[X]    b.    Independent Contractors
[X]    c.    XCU Hazards (explosions, collapse and underground damage)
[X]    d.    Contractual liability (arising from indemnity agreement in
             Subcontract).
[X]    e.    Completed Operations (for 24 months following completion of Work).

COMPREHENSIVE AUTOMOBILE LIABILITY:
- - ----------------------------------
[X]    a.    All owned vehicles
[X]    b.    Non-ownership Liability
[X]    c.    Hired vehicles

Evidence of insurance coverages shall be furnished in duplicate on a Standard
ACORD Form, Certificate of Insurance, or on the attached Certificate of
Insurance form, naming Contractor as "Addressee", unless a different form is
required by Contract Documents.




Contractor's/Subcontractor's Certificate of Insurance This certificate is
issued as a matter of information only and confers no rights upon the
certificate holder. This certificate does not amend, extend or alter the
coverage afforded by the policies listed below

- - --------------------------------------------------------------------------------
NAME & ADDRESS OF AGENCY         COMPANIES AFFORDING COVERAGE
- - --------------------------------------------------------------------------------
___________________________      COMPANY
___________________________      LETTER      A
PHONE NO, (_______)              COMPANY
                                 LETTER      B
- - --------------------------------------------------------------------------------
NAME & ADDRESS OF INSURED        COMPANY
                                 LETTER      C
- - --------------------------------------------------------------------------------
___________________________      COMPANY
                                 LETTER      D
___________________________      COMPANY
                                 COMPANY
                                 LETTER      E
PHONE NO. (______)
- - --------------------------------------------------------------------------------

       THIS IS TO CERTIFY THAT POLICIES OF INSURAJCE USTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY period INDICATED, NOT
WITHSTANDING ALLY REQUIREMENT, TERMOR CONDITIONS OP ANY CONtRACT OR OTHER
DOCIMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OP MAY PERTAIN:
THE INSURanCE AFFORdED BY THE POLICES DESCRIBED HEREIN IS SUBJECT TO ALL TILE
TERMS,



- - ---------------------------------------------------------------------------------------------------------------------------
                                           POLICY          POLICY         LIMITS OF LIABILITY
CO.       TYPE OF INSURANCE    POLICY   EFFECTIVE DATE   EXPERATION          IN THOUSANDS
LTR.                           NUMBER                       DATE             (000 OMITTED)
- - ---------------------------------------------------------------------------------------------------------------------------
                                                                                                          
      General Liability                                               General Aggregate-BVPD                    $1,000
      Commercial General Liability                                    Personal & Advertising Injury             $1,000
                                                                      Each Occurrence                           $1,000
      [_] Occurrence (required)                                       Fire Damage (My One Fire)                 $   50
        Any exclusion to the basic form to                            Medical Expense (My One Person)           $
        be noted below:
        _______________                                               The above are REOUIBED limits for
        _______________                                               each project.
        _______________
- - ---------------------------------------------------------------------------------------------------------------------------
      Automobile Liability                                            Bodily Injury
      o Any Auto                                                      and Property
      0 All Owned Autos                                               Damage                 $ 500
      o Scheduled Autos                                               Combined              (REQUIRED)
      0 Hired Autos
      0 Non-Owned Autos                                               Bodily Injury
                                                                      Each Person)          $
                                                                      Bodily Injury
                                                                      (Each                 $
                                                                      Occurrence)
- - ---------------------------------------------------------------------------------------------------------------------------
      Excess Liability                                                Property Damage       $
      [_] Umbrella Form
      [_] Other Than Umbrella
          Form
- - ---------------------------------------------------------------------------------------------------------------------------
      Workers Compensation                                            Bodily Injury and     Ea. Occurrence      Aggregate
      AND                                                             Properly Damage
      Employers Liability                                             Combined              $                   $
- - ---------------------------------------------------------------------------------------------------------------------------
      OTHER                                                                               STATUTORY
                                                                                 $100 (Required) Each Accident
                                                                                 $500 (Required) Disease/Polic Limit
                                                                                 $100 (Required) Disease/Each Employee
- - ---------------------------------------------------------------------------------------------------------------------------
Description of operations, locations, vehicles, restrictions,         Amount sufficient to cover difference in limits when
special items to which this certiticate applies:                      compared to minimum coverage required.
Type of work to be performed by insured:                              Certificate Holder:  DUKE-WEEKS REALTY CORPORATION
                                                                      4497 Park Drive / Norcross GA 30093
- - ---------------------------------------------------------------------------------------------------------------------------
CANCELLATION: The above poiloes have been endorsed to provide rwenty (20) days when notice of carcellation to the
certificate holder designated herein.
             [                                    ]
MAIL
TO  >        [                                    [       Date Issued:______________________________________

                                                          Authorized Representative:________________________




                                                              Project: "Project"

                  CONTRACTOR/SUBCONTRACTOR SAFETY REQUIREMENTS

CONTRACTOR/SUBCONTRACTOR:

All Contractors'/Subcontractors' personnel shall conform to the following safety
requirements while working on a Duke-Weeks Project. The following are not all
the rules required, but consists of those Duke-Weeks considers most important.
These requirements do not, in any way, relieve you of responsibility to carry
out Federal, State and Local safety rules and regulations which might be
required of you while performing your work on a Weeks construction project.

The Contractor/Subcontractor shall provide a written safety program to the
Duke-Weeks Project Manager prior to commencement of any work on the Subcontract.
This program shall address the safety orders applicable to the subcontracted
work.

The Duke-Weeks Project Managers and Superintendents may issue a "safety
violation notice for repeated or serious violations. The
Contractor/subcontractor shall correct the violation by the abatement date and
furnish Duke-Weeks, In writing, the results of his actions. If the
Contractor/Subcontractor has not corrected the violation by the abatement date,
Duke-Weeks may suspend that portion of work until such correction is made.

Any questions or comments you have regarding Duke-Week's policies and procedures
relative to safety should be directed to the Vice President, Philip W. Cobb.

The Contractor/Subcontractor shall be responsible for all citations issued by
Federal, State, and Local authorities or any outside inspection agencies.

1)    The Contractor/Subcontractor is responsible for requiring and providing
      the use of personal protective equipment for their employees.

2)    Approved hard hats shall be worn at all times while on the construction
      site. Hard hats shall be worn properly with the bill forward, unless the
      wearing of eye protection prevents this; as in the case of welders. The
      bill forward is designed for facial and eye protection from falling
      objects, dust, etc.

3)    Long hair shall be contained under hard hat or net if working where it may
      get tangled.

4)    Full length pants without excessive length or flare bottoms will be
      required. Shirts must cover the entire mid-section and the sleeves must
      cover the entire shoulder. Sleeveless shirts, tank-tops, net shirts,
      halter tops, etc. shall not be worn on the construction site.

5)    Serviceable pair of work shoes or boots, made of leather or similar
      material, shall be worn. Tennis shoes, sandals, and other similar shoes
      are not permitted.

6)    Gambling, fighting and/or horseplay shall not be tolerated.

7)    No employee shall possess, use, or be under the influence of drugs or
      alcohol while on the project.

8)    No firearms are to be brought on the construction site or Duke-Weeks
      property.

9)    Trash shall be disposed of properly in designated containers. Good
      housekeeping shall be maintained in all work areas.

10)   Glass containers (jars, soda bottles, etc.) shall not be brought on the
      site.

11)   The speed limit on the site is 10 mph. This speed limit shall not be
      exceeded. Drive slower on rough terrain and in congested areas,

12)   Safety meetings shall be held on a regular basis, Documentation of topic
      and atendees shall be maintained. Minutes of the meeting shall be
      forwarded to the job site office or project manager.

13)   Any employees exposed to hazardous conditions must be protected in
      accordance with OSHA regulations.

14)   No scaffold forms shall be erected, moved, dismantled, or altered except
      under the supervision of competent persons.

15)   All electrical tools, cords, appliances, etc., must comply with applicable
      OSHA and the National Electrical Code Standards.

16)   All equipment with an obstructed view to the rear must be equipped with an
      audible reverse signal alarm. Equipment must be maintained in safe
      operation condition.

17)   Fire prevention must Conform to OSHA and NFPA Standards. Approved safety
      cans shall be used for flammable and combustible liquids. "NO SMOKING NEAR
      OPEN FLAME" signs and fire extinguishers shall be provided where required.

18)   Hearing protection shall be worn where required.




"Project"
CONTRACTOR/SUBCONTRACTOR SAFETY REQUIREMENTS
(continued)
Page 2

19)   Respiratory protection shall be established and implemented by
      Contractor/Subcontractors as required.

20)   All open holes, excavations, floor openings, etc., shall be properly
      covered or barricaded. It shall be the responsibility of the
      Contractor/Subcontractor to reinstall any barricade or open cover that
      must be removed to perform their work.

21)   Compressed gas cylinders shall be secured in an upright position at all
      times valve caps shall be in place when not in use, Cylinders shall be
      transported and stored in accordance with Federal and State Standards.

22)   Only vehicles approved by the Project Superintendent or Project Manager
      will be allowed on site.

23)   All ladders must be inspected prior to use. Defective ladders must be
      removed from service immediately. All ladders shall have firm footing, be
      made secure at the top and extend 36 inches above landing.

24)   No material shall be dropped outside the exterior wall of the building
      where the drop distance Is more that 20 feet high, unless contained in a
      chute enclosed on all sides. If the drop distance is more than 20 feet
      high, the landing area must be barricaded. Material may be dropped through
      openings in the building, but the opening must be protected with
      barricades at least 42 inches high and back 6 feet or more from the edge
      of each opening.

25)   All tools and equipment used by Contractor/Subcontractor shall comply with
      OSHA Standards while being used on Weeks sites.

26)   Any Contractor's/Subcontractors employees who are found to be in violation
      of these safety rules, or other company policies or procedures, are
      subject to being removed from the job site.

27)   The Contractor/Subcontractor is responsible for providing safe access to
      all of its work locations and maintaining a safe work area for its
      employees.

28)   It is the policy of Duke-Weeks to maintain a safe and secure place to work
      which requires the cooperation of all Contractors/Subcontractors'
      employees.

I acknowledge that I have read the above and agree to comply with the Duke-Weeks
Safety and Security policies and procedures.

                                                 Contractor/Subcontractor

                                               By:_____________________________


                                              Title____________________________

                                              Date:____________________________




                                                              PROJECT:"Project"

                      Duke-Weeks Realty Limited Partnership

                           DISCIPLINARY ACTION PROGRAM

The purpose of this program is to establish a procedure for documented warnings
to persons employed on Duke-weeks Realty Limited Partnership projects.
Reprimands will be Issued to persons who are found to be in violation of
prescribed federal, state and Duke- Weeks Realty Limited Partnership safety
standards as well as any specific job site rules and regulations.

The limits of this procedure shall include any person who is employed by
Duke-weeks Realty Limited Partnership, Contractor/subcontractor personnel,
Manufacturers representatives, vendor representatives and visitors, if deemed
necessary by the Project Superintendent or Project Manager.

A reprimand may be issued to an individual when noncompliance with safety
standards and/or regulations is detected and is to be issued at the direction of
the Project Superintendent, Project Manager or other Management Personnel.

Safety violations are categorized into two classifications:

      1.    UNSAFE ACT. The act of performing in a manner that is in violation
            of the safety standards or regulations which could result in a
            serious injury or property damage.

      2.    UNSAFE CONDITIONS. The act of performing when subjected to a
            condition that is in violation of the safety standards or
            regulations which could result in a serious injury or property
            damage.

A reprimand may also be issued to an employee for failure to report an accident
or Injury in a timely manner.

If a reprimand Is issued to an employee or a Contractor/Subcontractor, a copy
shall be given to supervisory personnel within that company.

The following steps shall be taken when an individual is detected violating a
safety standard or regulation by Project Superintendent, Project Manager or
other Management Personnel.

      1.    Inform the individual at the time that a safety violation is evident
            the details of the violation and request immediate corrective action
            be taken to prevent recurrence.

      2.    Inform the individual that a safety reprimand may be issued.

      3.    If a reprimand is issued, inform the individual to come by the
            issuer's office and the issuer shall explain the reprimand in
            detail.

      4.    Request the violating individual to sign the reprimand and that they
            may write their comments on the reprimand if they so desire, If the
            person refuses to comment or sign the reprimand, the issuer shall
            note their refusal on the reprimand.

CONSTRUCTION DEPARTMENT

Vice President, Phil Cobb shall receive and maintain a log of all reprimands
related to safety.

JOB SITE

Shall maintain a copy of all reprimands in personnel or subcontract files.

                ACTION TAKEN AS RESULT OF REPRIMAND BEING ISSUED

1.    One (1) reprimand issued to an individual within a 12-month period will be
      considered a warning. However, one (1) may be sufficient for dismissal
      depending upon the seriousness of the violation and evaluation by the
      Project Superintendent, Project Manager and the vice President of
      Construction.

2.    Two (2) reprimands issued to an individual within a 12-month period will
      warrant a three (31 day lay off without pay. The second reprimand may also
      be sufficient for dismissal depending upon the seriousness of the
      violation and evaluation by the Project Superintendent, Project Manager
      and the vice President of Construction.

3.    Three (3) reprimands Issued to an individual within a 12-month period will
      result in termination for the violating individual. All safety related
      reprimands resulting in termination will be evaluated by the Project
      Superintendent, Project Manager and the Vice President of Construction.

This Disciplinary Action Program is very important to our Safety Program. All
employees must be made aware they are required to work in a safe manner at all
times while on a Duke-Weeks Realty Limited Partnership job site.

       CONTRACTOR/SUBCONTRACTOR


BY_________________________________________

TITLE______________________________________

Date:______________________________________




                                   EXHIBIT "G"

                           Base Building Requirements

       As shown on the plans and specifications prepared by Randall Paulson
Architects, last revised August 6, 1999.




                                   EXHIBIT "H"

                                  Warrant form

      Neither this Warrant nor the securities issuable upon exercise hereof have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), the securities laws of any state, or the securities laws of Canada or any
province thereof. Such securities may not be sold or otherwise disposed of
unless pursuant to a registered offering or by transfer exempt from registration
under the Securities Act and applicable state, Canadian and provincial
securities laws.

                              VISIBLE GENETICS INC.

                          Common Share Purchase Warrant

No. W-1

      This certifies that, for value received, _______________________ or its
registered assigns (the "holder"), upon due exercise of this Warrant, is
entitled to purchase from Visible Genetics Inc., a corporation organized under
the laws of the province of Ontario, Canada (the "Company"), at any time on or
after the third anniversary of the date hereof (the "Initial Exercise Date") and
before the close of business on the ninth anniversary of the date hereof (the
"Expiration Date"), all or any part of 10,000 fully paid and nonassessable
Common Shares, no par value, of the Company (the "Common Shares"), at a purchase
price of U.S. $___ per share (the "Initial Purchase Price"), the number of
Common Shares issuable upon exercise of this Warrant being subject to possible
adjustment as provided below.

      This Warrant is hereinafter called the "Warrant." The holder hereof and
all subsequent holders of this Warrant, shall be entitled to all rights and
benefits provided to the holder or holders hereof pursuant to the terms of this
Warrant.

      Section 1. Exercise of Warrant. The holder of this Warrant may, at any
time on or after the Initial Exercise Date and on or before the Expiration Date,
exercise this Warrant in whole at any time or in part from time to time for the
purchase of the Common Shares or other securities which such holder is then
entitled to purchase hereunder ("Warrant Securities") at the Purchase Price (as
hereinafter defined). In order to exercise this Warrant in whole or in part, the
holder hereof shall deliver to the Company (i) a written notice of such holder's
election to exercise this Warrant, which notice shall specify the number of
Common Shares to be purchased, (ii) payment of the aggregate purchase price of
the Common Shares being purchased by certified or bank cashier's check, and
(iii) this Warrant, provided that, if such Common Shares or other Warrant
Securities have not then been registered under the Securities Act of 1933, as
amended, or, if applicable, Canadian securities laws, the Company may require
that such holder furnish to the Company a written statement that such holder is
purchasing such Common Shares or other Warrant Securities for such holder's own
account for investment and not with a view to the distribution thereof, that
none of such shares will be offered or sold in violation of the provisions of
the Securities Act and applicable Canadian securities laws and as to such other
matters relating to the holder as the Company may reasonably request to permit
the issuance of such Common Shares or other Warrant Securities without
registration under the Securities Act and applicable Canadian securities laws.
Upon receipt thereof, the Company shall, as promptly as practicable, execute or
cause to be executed and deliver to such holder a certificate or certificates
representing the aggregate number of Common Shares (or if applicable, other
Warrant Securities) specified in said notice. The stock certificate or
certificates so delivered shall be registered in the name of such holder.

      No fractional Common Shares are to be issued upon the exercise of this
Warrant, but the Company shall pay a cash adjustment in respect of any fraction
of a share which would otherwise be issuable in an amount equal to the same
fraction of the market price per share of the Common Shares on the day of
exercise, as reasonably determined by the Company. If this Warrant shall




have been exercised only in part, the Company shall, at the time of delivery of
said certificate or certificates, deliver to such holder a new Warrant
evidencing the rights of such holder to purchase the remaining Common Shares
called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant, or, at the request of such holder, appropriate
notation may be made on this Warrant and same returned to such holder. The
Company shall pay all expenses, taxes and other charges payable in connection
with the preparation, execution and delivery of share certificates under this
Section, except that, if such share certificates are requested to be registered
in a name or names other than the name of the holder of this Warrant, funds
sufficient to pay all stock transfer taxes which shall be payable upon the
execution and delivery of such share certificates shall be paid by the holder
hereof at the time of delivering the notice of exercise mentioned above.

      The Company represents, warrants and agrees that all Common Shares
issuable upon any exercise of this Warrant in accordance with all of the terms
of this Warrant shall be validly authorized and issued, fully paid and
nonassessable.

      This Warrant shall not entitle the holder hereof to any of the rights of a
shareholder of the Company prior to exercise in the manner herein provided.

      Section 2. Transfer, Division and Combination. The Company shall keep at
its principal executive office a register for the registration and registration
of transfers of Warrants. The name and address of each holder of one or more
Warrants and each permitted transferee thereof shall be registered in such
register. Prior to due presentment for registration of transfer, the person in
whose name any Warrants shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof, and the Company shall not be
affected by any notice or knowledge to the contrary.

      Subject to the provisions of Section 3, upon surrender of any Warrant at
the principal executive office of the Company for registration of transfer or
exchange (and in the case of a surrender for registration of a permitted
transfer, duly endorsed or accompanied by a written instrument of transfer duly
executed by the registered holder of such Warrant or his attorney duly
authorized in writing and accompanied by the address for notices of each
transferee of such Warrant or part thereof), the Company shall execute and
deliver, at the Company's expense, one or more new Warrants (as requested by the
holder thereof) in exchange therefor, exercisable for an aggregate number of
Common Shares equal to the number of shares for which the surrendered Warrant is
exercisable and issued to such person or persons as such holder may request,
which Warrant or Warrants shall in all other respects be identical with this
Warrant.

      Upon receipt by the Company of evidence reasonably satisfactory to it of
the ownership of and the loss, theft, destruction or mutilation of any Warrant,
and (a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it, or (b) in the case of mutilation, upon surrender and
cancellation thereof, the Company shall execute and deliver, in lieu thereof, a
new Warrant identical in all respects to such lost, stolen, destroyed or
mutilated Warrant.

      Section 3. Compliance with Securities Act; Restrictions on Transfer. Each
Warrant issued in exchange for this Warrant and each certificate for Common
Shares (or other Warrant Securities) initially issued upon the exercise of this
Warrant and each certificate for Common Shares (or other Warrant Securities)
issued to subsequent transferees of any such certificate shall be stamped or
otherwise imprinted with legend in substantially the following form:

          THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
          BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
          AMENDED (THE "SECURITIES ACT"), THE SECURITIES LAWS OF
          ANY STATE, OR THE SECURITIES LAWS OF CANADA OR ANY
          PROVINCE THEREOF. SUCH SECURITIES MAY NOT BE SOLD OR
          OTHERWISE DISPOSED OF UNLESS PURSUANT TO A REGISTERED
          OFFERING OR BY TRANSFER EXEMPT FROM REGISTRATION UNDER
          THE SECURITIES ACT AND APPLICABLE STATE, CANADIAN AND
          PROVINCIAL SECURITIES LAWS."

      Section 4. Anti-Dilution. As used herein:




            (i)"Purchase Price" at any time shall mean the price per share of
      Common Shares of the Company at which this Warrant shall then be
      exercisable (including the Initial Purchase Price) in accordance with the
      provisions hereof.

            (ii) "Shares" means, collectively, Common Shares (A) issued or
      issuable upon exercise of the Warrants and (B) exchanged for, or
      distributed, issued or issuable with respect to, the shares included in
      clause (A) of this definition. In case by reason of the operation of this
      Section 4 this Warrant shall be exercisable for any other shares of stock
      or other securities or property of the Company or of any other
      corporation, any reference herein to the exercise of this Warrant shall be
      deemed to refer to and include the exercise of this Warrant for such other
      shares of stock or other securities or property.

      The Purchase Price and the number of Common Shares and the number or
amount of any other securities and property as hereinafter provided for which
this Warrant may be exercisable shall be subject to adjustment from time to time
effective upon each occurrence of any of the following events.

      (a) If the Company shall declare or pay any dividend with respect to its
Common Shares payable in Common Shares, subdivide the outstanding Common Shares
into a greater number of Common Shares, or reduce the number of Common Shares
outstanding (by stock split, reverse stock split, reclassification or otherwise
than by repurchase of its Common Shares) (any of such events being hereinafter
called a "Stock Split"), the Purchase Price and number of Common Shares issuable
upon exercise of this Warrant shall be appropriately adjusted so as to entitle
the holder hereof to receive upon exercise of this Warrant, for the same
aggregate consideration provided herein, the same number of Common Shares (plus
cash in lieu of fractional shares) as the holder would have received as a result
of such Stock Split had such holder exercised this Warrant in full immediately
prior to such Stock Split.

      (b) If the Company shall merge or consolidate with or into one or more
corporations partnerships and the Company is the sole surviving corporation, or
the Company shall adopt a plan of recapitalization or reorganization in which
Common Shares are exchanged for or changed into another class of stock or other
security or property of the Company, the holder of this Warrant shall, for the
same aggregate consideration provided herein, be entitled upon exercise of this
Warrant to receive in lieu of the number of Common Shares as to which this
Warrant would otherwise be exercisable, the number of Common Shares or other
securities (plus cash in lieu of fractional shares) or property to which such
holder would have been entitled pursuant to the terms of the agreement or plan
of merger, consolidation, recapitalization or reorganization had such holder
exercised this Warrant in full immediately prior to such merger, consolidation,
recapitalization or reorganization.

      (c) If the Company is merged or consolidated with or into one or more
corporations or other entities under circumstances in which the Company is not
the sole surviving corporation, or if the Company sells or otherwise disposes of
substantially all its assets, and in connection with any such merger,
consolidation or sale the holders of Common Shares receive stock or other
securities convertible into equity of the surviving or acquiring corporations or
entities, or other securities or property after the effective date of such
merger, consolidation or sale, as the case may be, the holder of this Warrant
shall, for the same aggregate consideration provided herein, be entitled upon
exercise of this Warrant to receive, in lieu of Common Shares as to which this
Warrant would otherwise be exercisable, shares of such stock or other securities
(plus cash in lieu of fractional shares) or property as the holder of this
Warrant would have received pursuant to the terms of the merger, consolidation
or sale had such holder exercised this Warrant in full immediately prior to such
merger, consolidation or sale. In the event of any consolidation, merger or sale
as described in this Section 4(d), provision shall be made in connection
therewith for the surviving or acquiring corporations or other entities to
assume all obligations and duties of the Company hereunder or to issue
substitute warrants in lieu of this Warrant with all such changes and
adjustments in the number or kind of shares of stock or securities or property
thereafter subject to this Warrant or in the Purchase Price as shall be required
in connection with this Section 4(c).

      (d) If the Company shall declare or pay any dividend, or make any
distribution, with respect to its Common Shares that is payable in preferred
stock or other securities, assets (other




than cash) or rights to subscribe for or purchase any security of the Company
other than Common Shares, or that is payable in debt securities of the Company
convertible into Common Shares, preferred stock or other equity securities of
the Company, the holder hereof shall, for the same aggregate consideration
provided herein, be entitled to receive upon exercise of this Warrant in lieu of
the Common Shares as to which this Warrant would otherwise be exercisable, the
same amount of Common Shares, preferred stock and other securities, assets or
rights to subscribe for or purchase any security (plus cash in lieu of
fractional shares) as the holder would have received had the holder exercised
this Warrant in full immediately prior to any such dividend or distribution;
provided that no such adjustment shall be made pursuant to this Section 4(d) if
this Warrant is exercisable by the holder on or prior to the record date for
such dividend or distribution.

      (e) If the Company (other than in connection with a sale described in
Section 4(d)) proposes to liquidate and dissolve, the Company shall give notice
thereof as provided in Section 5(b) hereof and shall permit the holder of this
Warrant to exercise any unexercised portion hereof at any time within the 10 day
period following delivery of such notice, if such holder should elect to do so,
and participate as a stockholder of the Company in connection with such
dissolution.

      (f) Whenever any adjustment is made as provided in any provision of this
Section 4:

            (i) the Company shall compute the adjustments in accordance with
            this Section 4 and shall prepare a certificate signed by an officer
            of the Company setting forth the adjusted number of shares or other
            securities or property, as applicable, and showing in reasonable
            detail the facts upon which such adjustment is based, and such
            certificate shall forthwith be filed with the Company or its
            designee; and

            (ii) a notice setting forth the adjusted number of shares or other
            securities or property, as applicable, shall forthwith be required,
            and as soon as practicable after it is prepared, such notice shall
            be delivered by the Company to the holder of record of each Warrant.

      (g) If at any time, as a result of any adjustment made pursuant to this
Section 4, the holder of this Warrant shall become entitled, upon exercise
hereof, to receive any shares other than Common Shares or to receive any other
securities, the number of such other shares or securities so receivable upon
exercise of this Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
contained in this Section 4 with respect to the Common Shares.

      Section 5. Notices. Any notice or other document required or permitted to
be given or delivered to holders of Warrants and holders of Common Shares (or
other Warrant Securities) shall be in writing and sent (a) by telecopy if the
sender on the same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), or (b) by registered or certified
mail with return receipt requested (postage prepaid) or (c) by a recognized
overnight delivery service (with charges prepaid).

            (i) if to the Company, at 700 Bay Street, Toronto, Ontario MSG 1Z6,
      Attention: Chief Financial Officer, Telecopy No.: (416) 813-3250, or such
      other address as it shall have specified to the holders of Warrants in
      writing; or

            (ii) to a holder, at its address set forth below, or such other
      address as it shall have specified to the Company in writing.

Notices given under this Section 5 shall be deemed given only when actually
received.

      Section 6. Limitation of Liability. No provision hereof, in the absence of
affirmative action by the holder to purchase Common Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Purchase Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.




       Section 7. Amendment. This Warrant may not be amended, modified or
otherwise altered in any respect except by the written consent of the registered
holder of this Warrant and the Company.

       Section 8. Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the Company and the holder of this Warrant and their
respective successors and permitted assigns.

       Section 9. Governing Law. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York, without reference to the
conflicts of law principles thereof. The holder irrevocably submits to the
jurisdiction of any court of the State of New York or the United State District
Court for the Southern District of the State of New York for the purpose of any
suit, action, or other proceeding arising out of this Warrant. The holder
irrevocably and unconditionally waives and agrees not to plead, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of venue or the convenience of the forum of any action or proceeding with
respect to this Warrant in any such courts.

       IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officers and accepted by the holder of this
Warrant this -- day of December, 1999.

Attest:                                  VISIBLE GENETICS INC.


By: ___________________________          By:_________________________________
Name:__________________________          Name:_______________________________
Title: Secretary                         Title: _____________________________

Holder:
Address for Notices:

_______________________________

_______________________________

_______________________________




                                   ASSIGNMENT

                  TO BE EXECUTED BY THE REGISTERED HOLDER IF IT
                         DESIRES TO TRANSFER THE WARRANT

            FOR VALUE RECEIVED, _____________ hereby sells, assigns and
transfers unto __________________________________ the right to purchase
_________________ shares of stock ________ , evidenced by the within Warrant,
and does hereby irrevocably constitute and appoint _________ Attorney to
transfer the said Warrant on the books of the Company, with full power and
substitution.

                                    ____________________________________________
                                    Signature


                                    ____________________________________________

                                    ____________________________________________

                                     Address
Dated:_____________, 19___
In the presence of:

__________________________


                                     NOTICE

            The signature of the foregoing Assignment must correspond to the
name as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.




                                SUBSCRIPTION FORM

                      TO BE EXECUTED BY THE REGISTERED HOLDER IF IT
                         DESIRES TO EXERCISE THE WARRANT

             The undersigned hereby exercises the right to purchase
_________shares of stock covered by this Warrant according to the conditions
thereof and herewith makes payment of the Purchase Price of such shares in full.


                                    ____________________________________________
                                    Signature

                                    ____________________________________________
                                    Name
                                    ____________________________________________

                                    ____________________________________________

Dated:____________, 19___.




                                   EXHIBIT "I"

                         UNCONDITIONAL GUARANTY OF LEASE

      This Unconditional Guaranty of Lease is entered into as of the _____ day
of ,1999, by the undersigned, VISIBLE GENETICS, INC., ("Guarantor").

                                    RECITALS

      WHEREAS, VISIBLE GENETICS CORP., a(n) Pennsylvania corporation ("Tenant")
desires to enter into a certain Lease with DUKE-WEEKS REALTY LIMITED
PARTNERSHIP, a(n) Indiana limited partnership ("Landlord"), for certain space
described therein and more commonly known as 100 Crestridge Drive, Suwanee,
Georgia, (the "Lease"); and

      WHEREAS, Landlord is willing to enter into the Lease only if it receives a
guaranty of obligations thereunder from the undersigned upon the terms and
conditions set forth below; and

      WHEREAS, in order to induce Landlord to enter into the Lease, Guarantor is
willing and agrees to enter into this Unconditional Guaranty of Lease upon the
following terms and conditions; and

      WHEREAS, Guarantor is a shareholder of Tenant and will be benefited by the
Lease;

      NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor agrees as follows:

      1. Within thirty days of Lease execution Guarantor agrees to issue to
Landlord, or its affiliate, a warrant to purchase 10,000 shares of common stock
of the Guarantor at a strike price equal to the closing price of the Guarantor's
common stock on the date of Lease execution, said warrant to be in the form
attached to the Lease as Exhibit "H". For the purposes of this section, the date
of Lease execution shall be the day on which Tenant has executed the Lease.

      2. Guarantor hereby becomes surety for and unconditionally guarantees (i)
the prompt payment of all rents, additional rents and other sums to be paid by
Tenant under the terms of the Lease; and (ii) the performance by Tenant of the
covenants, conditions and terms of the Lease (such payment and performance to be
referred to collectively as "Obligations"). In the event Tenant defaults in the
performance of the Obligations during the term of the Lease, Guarantor hereby
promises and agrees to pay to Landlord all rents and any arrearages thereof and
any other amounts that may be or become due and to fully satisfy all conditions
and covenants of the Lease to be kept and performed by Tenant.

      3. As conditions of liability pursuant to this Guaranty, Guarantor hereby
unconditionally waives (a) any notice of default by Tenant in the payment of
rent or any other amount or any other term, covenant or condition of the Lease;
(b) any requirement that Landlord exercise or exhaust its rights and remedies
against Tenant or against any person, firm or corporation prior to enforcing its
rights against Guarantor, and (c) any and all rights of reimbursement,
indemnity, subrogation or otherwise which, upon payment under this Guaranty,
Guarantor may have against Tenant.

      4. Landlord may, without notice to Guarantor, and Guarantor hereby
consents thereto, (a) modify or otherwise change or alter the terms and
conditions of the Lease; and (b) waive any of its rights under the Lease or
forbear to take steps to enforce the payment of rent or any other term or
condition of the Lease against Tenant.




      5. Guarantor hereby agrees, upon the request of Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing certifying, if this
be the fact, that this Guaranty of the referenced Lease is unmodified, in full
force and effect, and there are no defenses or offsets thereto; certifying that
the referenced Lease is unmodified, in full force and effect, and there are no
defenses or offsets to such Lease (or if modified, that the Lease is in full
force and effect as modified and that this Guaranty extends to and fully covers
such Lease, as modified); and certifying the dates to which Minimum Annual Rent,
Annual Rental Adjustment, if any, and any other additional rentals have been
paid.

      6. In the event Tenant fails during the term of this Lease to pay any
rent, additional rent or other payments when due or fails to comply with any
other term, covenant or condition of the Lease, Guarantor, upon demand of
Landlord, shall make such payments and perform such covenants as if they
constituted the direct and primary obligations of Guarantor; and such
obligations of Guarantor shall be due with attorneys' fees and all costs of
litigation and without relief from valuation or appraisement laws.

      7. The rights and obligations created by this Guaranty shall inure to the
benefit of and be binding upon the successors, assigns and legal representatives
of Guarantor and Landlord.

      8. Anything herein or in the Lease to the contrary notwithstanding,
Guarantor hereby acknowledges and agrees that any security deposit or other
credit in favor of the Tenant may be applied to cure any Tenant default or
offset any damages incurred by Landlord under the Lease, as Landlord determines
in its sole and absolute discretion, and Landlord shall not be obligated to
apply any such deposit or credit to any such default or damages before bringing
any action or pursuing any remedy available to Landlord against Guarantor.
Guarantor further acknowledges that its liability under this Guaranty shall not
be affected in any manner by such deposit or credit, or Landlord's application
thereof.

      IN WITNESS WHEREOF, Guarantor has executed this Unconditional Guaranty of
Lease as of the date set forth above.

                                      "GUARANTOR"

                                       VISIBLE GENETICS, INC.

                                       By:______________________________
                                       Name:____________________________
                                       Title:___________________________

                                                 (Corporate Seal)

                                       Address:_________________________
                                       _________________________________

                                       Tax Identification Number
                                       _____-_____-_____




STATE OF_________ )
                  )SS:
COUNTY OF________ )

      Before me, a Notary Public in and for said County and State, personally
appeared _______ , by me known to be the ___________________ of Guarantor, a(n)
_________________________, who acknowledged the execution of the foregoing on
behalf of said ______________________

      WITNESS my hand and Notarial Seal this ______ day of _______________,
1999.

                                         __________________________________
                                         Notary Public

                                         __________________________________
                                         (Printed)

My County of Residence: _________________________

My Commission Expires: __________________________




                                   COVER PAGE
       The capitalized terms in this Lease shall have the meanings ascribed to
them below, and each reference to such term in the Lease shall incorporate such
meaning therein as if fully set forth therein.

LANDLORD: DUKE-WEEKS REALTY LIMITED PARTNERSHIP, an Indiana limited partnership,
          with an office located at 4497 Park Drive, Norcross, Georgia 30093


TENANT: VISIBLE GENETICS CORP., a corporation duly organized and existing under
        the laws of the State of Pennsylvania.


LEASED
PREMISES    (a)   Address: 100 Crestridge Drive, Suwanee, Georgia

            (b)   Suite: N/A

            (c)   Rentable Area: 99,822 square feet

            (d)   Project: Horizon

TERM: Ten (10) years

COMMENCEMENT DATE:       February 15, 2000

TERMINATION DATE:        February 14, 2010

BASE RENT (FIRST YEAR):  $420,250.62

SECURITY DEPOSIT:        $210,125.34

GUARANTOR:               Visible Genetics, Inc.

TENANT'S AGENT:          Ben Bittan Realty




                             VISIBLE GENETICS CORP.
                                 LEASE AGREEMENT
                                TABLE OF CONTENTS
SECTION                                                                     PAGE
- - -------                                                                     ----

 1 LEASED PREMISES ........................................................    1

 2 TERM ...................................................................    1

 3 RENTAL .................................................................    1

 4 DELAY IN DELIVERY ......................................................    2

 5 USE OF LEASED PREMISES .................................................    3

 6 UTILITIES ..............................................................    3

 7 ACCEPTANCE OF PREMISES .................................................    4

 8 ALTERATIONS, MECHANICS' LIENS ..........................................    4

 9 QUIET CONDUCT/QUIET ENJOYMENT ..........................................    4

10 FIRE INSURANCE, HAZARDS ................................................    4

11 INDEMNIFICATION

12 WAIVER OF CLAIMS .......................................................    5

13 REPAIRS ................................................................    6

14 SIGNS, LANDSCAPING .....................................................    6

15 ENTRY BY LANDLORD ......................................................    6

16 TAXES ..................................................................    7

17 INSURANCE ..............................................................    8

18 ABANDONMENT

19 DESTRUCTION ............................................................    9

20 ASSIGNMENT AND SUBLETTING ..............................................   10

21 INSOLVENCY OF TENANT ...................................................   10

22 BREACH BY TENANT .......................................................   10

23 ATTORNEYS' FEES/COLLECTION CHARGES .....................................   11


                                        3



24 CONDEMNATION ...........................................................   11

25 NOTICES ................................................................   12

26 WAIVER .................................................................   12

27 EFFECT OF HOLDING OVER .................................................   12

28 SUBORDINATION ..........................................................   12

29 ESTOPPEL CERTIFICATE ...................................................   13

30 PARKING ................................................................   13

31 MORTGAGEE PROTECTION ...................................................   13

32 PROTECTIVE COVENANTS ...................................................   13

33 RELOCATION .............................................................   14

34 BROKERAGE COMMISSIONS ..................................................   14

MISCELLANEOUS PROVISIONS ..................................................   14

EXHIBITS:

EXHIBIT "A":       Site Plan
EXHIBIT "B":       Floor Plan of the Leased Premises
EXHIBIT "C":       Tenant's Acceptance of Premises
EXHIBIT "D":       Subordination, Non-disturbance and
                   Attoment Agreement
EXHIBIT "E":       Special Stipulations
EXHIBIT "F":       Construction Requirements
EXHIBIT "G":       Base Building Requirements
EXHIBIT "H":       Warrant form
EXHIBIT "I":       Guaranty


                                        4




                         UNCONDITIONAL GUARANTY OF LEASE

      This Unconditional; Guaranty of Lease is entered into as of the 22nd day
of December, 1999, by the undersigned, VISIBLE GENETICS, INC., ("Guarantor").

                                    RECITALS

      WHEREAS, VISIBLE GENETICS CORP., a(n) Pennsylvania corporation ("Tenant")
desires to enter into a certain Lease with DUKE-WEEKS REALTY LIMITED
PARTNERSHIP, a(n) Indiana limited partnership ("Landlord"), for certain space
described therein and more commonly known as 100 Crestridge Drive, Suwanee,
Georgia, (the "Lease"); and

      WHEREAS, Landlord is willing to enter into the Lease only if it receives a
guaranty of obligations thereunder from the undersigned upon the terms and
conditions set forth below; and

      WHEREAS, in order to induce Landlord to enter into the Lease, Guarantor is
willing and agrees to enter into this Unconditional Guaranty of Lease upon the
following terms and conditions; and

      WHEREAS, Guarantor is a shareholder of Tenant and will be benefited by the
Lease;

      NOW, THEREFORE, in consideration of the foregoing recitals and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Guarantor agrees as follows:

      1. Within thirty days of Lease execution Guarantor agrees to issue to
Landlord, or its affiliate, a warrant to purchase 10,000 shares of common stock
of the Guarantor at a strike price equal to the closing price of the Guarantor's
common stock on the date of Lease execution, said warrant to be in the form
attached to the Lease as Exhibit "H". For the purposes of this section, the date
of Lease execution shall be the day on which Tenant has executed the Lease.

      2. Guarantor hereby becomes surety for and unconditionally guarantees (i)
the prompt payment of all rents, additional rents and other sums to be paid by
Tenant under the terms of the Lease; and (ii) the performance by Tenant of the
covenants, conditions and terms of the Lease (such payment and performance to be
referred to collectively as "Obligations"). In the event Tenant defaults in the
performance of the Obligations during the term of the Lease, Guarantor hereby
promises and agrees to pay to Landlord all rents and any arrearages thereof and
any other amounts that may be or become due and to fully satisfy all conditions
and covenants of the Lease to be kept and performed by Tenant.

      3. As conditions of liability pursuant to this Guaranty, Guarantor hereby
unconditionally waives (a) any notice of default by Tenant in the payment of
rent or any other amount or any other term, covenant or condition of the Lease;
(b) any requirement that Landlord exercise or exhaust its rights and remedies
against Tenant or against any person, firm or corporation prior to enforcing its
rights against Guarantor, and (c) any and all rights of reimbursement,
indemnity, subrogation or otherwise which, upon payment under this Guaranty,
Guarantor may have against Tenant.

      4. Landlord may, without notice to Guarantor, and Guarantor hereby
consents thereto, (a) modify or otherwise change or alter the terms and
conditions of the Lease; and (b) waive any of its rights under the Lease or
forbear to take steps to enforce the payment of rent or any other term or
condition of the Lease against Tenant.

      5. Guarantor hereby agrees, upon the request of Landlord, to execute,
acknowledge and deliver to Landlord a statement in writing certifying, if this
be the fact, that this Guaranty of the referenced Lease is unmodified, in full
force and effect, and there are no defenses or offsets thereto; certifying that
the referenced Lease is unmodified, in full force and




effect, and there are no defenses or offsets to such Lease (or if modified, that
the Lease is in full force and effect as modified and that this Guaranty extends
to and fully covers such Lease, as modified); and certifying the dates to which
Minimum Annual Rent, Annual Rental Adjustment, if any, and any other additional
rentals have been paid.

        6. In the event Tenant fails during the term of this Lease to pay any
rent, additional rent or other payments when due or fails to comply with any
other term, covenant or condition of the Lease, Guarantor, upon demand of
Landlord, shall make such payments and perform such covenants as if they
constituted the direct and primary obligations of Guarantor; and such
obligations of Guarantor shall be due with attorneys' fees and all costs of
litigation and without relief from valuation or appraisement laws.

        7. The rights and obligations created by this Guaranty shall inure to
the benefit of and be binding upon the successors, assigns and legal
representatives of Guarantor and Landlord.

        8. Anything herein or in the Lease to the contrary notwithstanding,
Guarantor hereby acknowledges and agrees that any security deposit or other
credit in favor of the Tenant may be applied to cure any Tenant default or
offset any damages incurred by Landlord under the Lease, as Landlord determines
in its sole and absolute discretion, and Landlord shall not be obligated to
apply any such deposit or credit to any such default or damages before bringing
any action or pursuing any remedy available to Landlord against Guarantor.
Guarantor further acknowledges that its liability under this Guaranty shall not
be affected in any manner by such deposit or credit, or Landlord's application
thereof.

       IN WITNESS WHEREOF, Guarantor has executed this Unconditional Guaranty of
Lease as of the date set forth above.

                                       "GUARANTOR"

                                       VISIBLE GENETICS, INC.

                                       By: /s/ Thomas J. Clarke
                                           -------------------------------------
                                       Name: Thomas J. Clarke
                                             -----------------------------------
                                       Title: Chief Financial Officer
                                              ----------------------------------
                                                 (Corporate Seal)

                                        Address:___700 Bay St._______________
                                                _Suite 1000, Toronto_________
                                                Ontario, Canada

                                       Tax Identification Number

                                       _____-_____-_____





PROVINCE OF_ONTARIO____}
                       }SS.
COUNTY OF __YORK_______}


      Before me, a Notary Public in and for said County and Province of Ontario
personally appeared __Thomas J. Clark__, by me known to be the __C.F.O.__ of
Guarantor, a(n) __Company__, who acknowledged the execution of the foregoing on
 behalf of said __Company__.

WITNESS my hand and Notarial Seal this _22nd_ day of _December_, 1999.

                                                     /s/ M. Jason August
                                                     ---------------------------
                                                     Notary Public
                                                     M. Jason August
                                                     ---------------------------
                                                      (Printed)

My County of Residence:__York , Province of Ontario__

My Commission Expires:__no expiry__

EX-10.15

                                                                   Exhibit 10.15

                                                                  100 Bay Street

                                  LuCLIFF PLACE

                                  OFFICE LEASE

                                      INDEX
ARTICLE   SECTION  ITEM                                                     PAGE
- - -------   -------  ----                                                     ----

1                  DEFINITIONS

          1.01     Additional Rent                                           1
          1.02     Basic Rent                                                1
          1.03     Building                                                  1
          1.04     Business Hours                                            1
          1.05     Common Areas                                              1
          1.06     Landlord's Taxes                                          2
          1.07     Leased Premises                                           2
          1.08     Office Section                                            2
          1.09     Operating Costs                                           2
          1.10     Proportionate Share                                       3
          1.11     Rent                                                      3
          1.12     Rentable Floor Area                                       3
          1.13     Service Areas                                             4
          1.14     Stipulated Rate of Interest                               4
          1.15     Taxes                                                     4
          1.16     Tenant's Taxes                                            4

2                  NET LEASE AND SECURITY DEPOSIT

          2.01     Net Lease                                                 5
          2.02     Security Deposit                                          5

3                  DEMISE AND TERM

          3.01     Demise and Term                                           5

4                  RENT

          4.01     Basic Rent                                                6
          4.02     Additional Rent                                           6
          4.03     Payment of Additional Rent                                6
          4.04     Accrual of Rent                                           7
          4.05     No Set-Off                                                7
          4.06     Additional Rent Treated as Rent                           7
          4.07     Rent Past Due                                             7

5                  OPERATING, CARETAKING,
                   AND ELECTRICITY COSTS

          5.01     Operating Costs                                           7
          5.02     Caretaking Costs                                          7
          5.03     Electricity Costs                                         8

6                  TAXES

          6.01     Payment of Tenant's Taxes                                 8
          6.02     Tenant's Proportionate Share
                   of Landlord's Taxes                                       8
          6.03     Payment of Landlord's Taxes -
                   Appeals                                                   8


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          6.04     Determination of Taxes                                    8
          6.05     Receipts                                                  8

7                  TENANT'S FURTHER COVENANTS

          7.01     Repair                                                    9
          7.02     State of Repair                                           9
          7.03     Notice of Accident, Defects, Etc.                         9
          7.04     Repair Where Tenant at Fault                              9
          7.05     Rules and Regulations                                     9
          7.06     Use of Premises                                          10
          7.07     Cancellation of Insurance                                10
          7.08     Observance of Law                                        10
          7.09     Waste and Nuisance                                       10
          7.10     Inflammable or Dangerous Substances                      10
          7.11     No Defacing                                              10
          7.12     Additional Services                                      11
          7.13     Entry By Landlord                                        11
          7.14     Indemnity                                                11
          7.15     Exhibiting Premises                                      11
          7.16     Alterations, Liens                                       11
          7.17     Supervision Cost                                         12
          7.18     Glass                                                    12
          7.19     Window Coverings                                         12
          7.20     Signs                                                    12
          7.21     Name of Building                                         12
          7.22     Keep Tidy                                                13

8                  LANDLORD COVENANT

          8.01     Quiet Enjoyment                                          13

9                  LANDLORD'S FURTHER COVENANTS

          9.01                                                              13
          9.02     Landlord's Repairs                                       13
          9.03     Heating                                                  14
          9.04     Air-Conditioning                                         14
          9.05     Elevator                                                 14
          9.06     Access                                                   14
          9.07     Washrooms                                                15
          9.08     Caretaking                                               15
          9.09     Maintenance of Common Areas                              15
          9.10     Lighting                                                 15
          9.11     Directory Board                                          15

10                 FIXTURES, INSURANCE

          10.01    Fixtures                                                 15
          10.02    Tenant's Insurance                                       16

11                 LICENSES, ASSIGNMENTS
                   AND SUBLETTINGS

          11.01    Licences, Etc.                                           16
          11.02    Assignments and Sublettings                              16
          11.03    Release of Tenant                                        18


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                                     - 3 -


12                 DAMAGE AND DESTRUCTION

          12.01    Abatement and Termination                                18

13                 LOSS AND DAMAGE TO PROPERTY

          13.01                                                             19

14                 LIABILITIES

          14.01    Impossibility of Performance                             19
          14.02    Claims for Compensation                                  19

15                 TENANT'S DEFAULT

          15.01    Re-Entry                                                 20
          15.02    Landlord's Right to Perform                              20
          15.03    Bankruptcy, Etc.                                         20
          15.04    Vacated or Improperly Used                               21
          15.05    Distress                                                 21
          15.06    Right of Re-Entry to Relet                               21
          15.07    Remedies Cumulative                                      21
          15.08    Legal Expense                                            21

16                 NON-WAIVER, OVERHOLDING

          16.01    Non-Waiver                                               22
          16.02    Overholding                                              22

17                 SUBORDINATION, ACKNOWLEDGEMENT, ETC.

          17.01    Subordination                                            22
          17.02    Tenant's Acknowledgements                                22
          17.03    Registration                                             23

18                 MISCELLANEOUS

          18.01    Recovery of Adjustments                                  23
          18.02    Lease Entire Agreement                                   23
          18.03    Covenants, Severability                                  23
          18.04    Captions                                                 23
          18.05    Agency                                                   23
          18.06    Notice                                                   24
          18.07    Interpretation                                           24
          18.08    Binding, Enuring and Interpretation                      24

19                 ADDITIONAL
                   DEFINITIONS
                   AND AMENDMENTS TO STANDARD
                   LEASE FORM

20                 ADDITIONAL PROVISIONS


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            THIS INDENTURE made the 31 day of March, 1992.

IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT.

B E T W E E N:

                            LuCLIFF COMPANY LIMITED

                      (hereinafter called the "Landlord")

                                                    THE PARTY OF THE FIRST PART,

                                    - and -

                          VISIBLE GENETICS, INC.,
                          a corporation duly incorporated
                          under the laws of the
                          Province of Ontario

                          (hereinafter called the "Tenant")

                                                   THE PARTY OF THE SECOND PART.

            WHEREAS the Landlord has agreed to lease to the Tenant and the
Tenant has agreed to lease from the Landlord the hereinafter described premises
forming part of LuCliff Place, an integrated residential and commercial
development, located at the South West intersection of Bay and Gerrard Streets
in the City of Toronto, in the Municipality of Metropolitan Toronto;

                                    ARTICLE 1

                                  DEFINITIONS

            The parties hereto agree that when used in this Lease the following
words or expressions have the meaning hereinafter set forth:

Section 1.01 "Additional Rent" means any and all sums of money or charges
required to be paid by the Tenant under this Lease (except Basic Rent), whether
or not the same are designated "Additional Rent" or whether or not payable to
the Landlord or otherwise, and all such sums are payable in lawful money of
Canada without deduction, abatement, set-off or compensation whatsoever.
Additional Rent may be estimated by the Landlord from time to time and such
estimated amount is due and payable in equal monthly instalments in advance on
the same day as monthly instalments of Basic Rent.

Section 1.02 "Basic Rent" means the rent specified in Section 4.01 hereof.

Section 1.03 "Building" means the Office Section and the lobbies, corridors,
elevators and facilities serving same.

Section 1.04 "Business Hours" means the period from 8 a.m. to 6 p.m. on Monday
to Friday, inclusive, and 8 a.m. to 1 p.m. on Saturdays unless Saturday is a
holiday.

Section 1.05 "Common Areas" mean the common areas, facilities, utilities,
improvements, equipment and installations intended and designated from time to
time by the Landlord for the common use and enjoyment of all the tenants of the
Office Section of the Building, including their respective agents, invitees,
servants and employees in common with others entitled to the use or benefit
thereof in the manner and for the purposes permitted by this Lease, and includes
the pedestrian mall of the Building.


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                                     - 2 -


Section 1.06 "Landlord's Taxes" shall mean the aggregate of all Taxes charged
against the Office Section or the Landlord in respect thereof including Common
Areas and parking facilities and the lands reasonably attributable to the Office
Section, plus all costs and expenses (including legal and other professional
fees and interest and penalties or deferred payments) incurred, in good faith,
by the Landlord, in contesting, resisting or appealing any of the foregoing, and
including any amounts imposed, assessed, levied or charged in substitution for
or in lieu of any such Taxes, but excluding such taxes as capital gains taxes,
corporate, income, profit or excess profit taxes to the extent such taxes are
not levied in lieu of any of the foregoing against the Office Section or the
Landlord in respect thereof and shall also include any and all taxes which may
in the future be levied in lieu of Taxes are herein defined. The Landlord shall
be entitled to adjust the Landlord's Taxes to an amount that would have been
paid had the Building been fully assessed in the year to which the taxes are
attributable as a fully occupied office building.

Section 1.07 "Leased Premises" means subject to the provisions of Section 3.01
below that portion of the Office Section of the Building as is outlined in
colour on the floor plan attached hereto as Schedule "A" forming a part hereof,
comprising the entire 10th and 11th floors, having a Rentable Floor Area of
approximately 13,752 square feet.

Section 1.08 "Office Section" means those portions of the Building comprising a
part of LuCliff Place intended by the Landlord to be leased for office purposes
and the Common Areas and facilities serving same.

Section 1.09 "Operating Costs" means the Landlord's cost of operating the
Building as a first-class office building which shall include all costs properly
attributable in accordance with generally accepted accounting practise
determined by the Landlord's auditors to the operation, maintenance and
management of the Building and the lands appurtenant thereto and shall, without
limiting the generality of the foregoing, include:

      (a)   all monies reasonably paid or incurred to persons, firms, companies
            or corporations employed in the maintenance, security and cleaning
            of the Building and the lands appurtenant thereto;

      (b)   all costs of repairs;

      (c)   the cost of running, maintaining and repairing the heating,
            ventilating and air-conditioning plants, distribution systems and
            associated equipment, including the cost of all fuel, gas and steam;

      (d)   elevator maintenance and operations costs;

      (e)   the cost of providing hot and cold water;

      (f)   the cost of providing electricity not otherwise payable by tenants
            which shall include without limitation the cost of electricity used
            in Common Areas and shall exclude the cost of electricity used in
            premises within the Building which are leased to other tenants.

      (g)   window cleaning costs;

      (h)   cost of all-risk, fire, extended perils, liability, boiler and
            rental insurance;

      (i)   telephone and other public utility costs;

      (j)   service contracts with independent contractors;

      (k)   cost of watchmen, reception staff and other on-site personnel,
            including salaries, wages and fringe benefits;

      (l)   remuneration paid at competitive rates to managing agents;

* See Section 5.03 regarding the Tenant's obligation to pay for electricity used
in the Leased Premises which is limited to the escalation of such cost over the
cost for the base year 1995 as described in said Section 5.03.


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                                     - 3 -


      (m)   audit costs and accounting services including such costs incurred
            for the imposition and determination of charges in tenants;

      (n)   costs of legal fees on a solicitor and his own client basis;

      (o)   costs of capital improvements and other costs determined by the
            Landlord's auditor to be properly chargeable to the capital account
            to the extent that such capital improvements reduce or avoid
            Operating Costs;

      (p)   costs of capital improvements and other costs determined by the
            Landlord's auditor to be properly chargeable to replace or upgrade
            any fixtures, furnishing and equipment in the common areas,
            including the fixtures and equipment of and for the heating,
            ventilation and air conditioning system, such depreciation being
            calculated as may be designated by the Landlord's auditors and in
            accordance with generally accepted principles.

Operating Costs shall exclude debt service, depreciation except as mentioned
above and expenses properly chargeable to capital account except as mentioned
above. In the event any cost or expense is included as an integral part of an
expense applicable to a portion of LuCliff Place in addition to the Building or
is attributable to part of the Building used in common with tenants of the
retail or commercial portions, the Landlord acting reasonably shall make an
allocation of such cost or expense which is reasonably attributable to the
Building. In the event of any dispute by the Tenant as to the amount of such
costs and allocation, an opinion of the Landlord's auditors shall be final and
binding as to the amount and allocation for the period. The landlord and Tenant
acknowledge and agree that notwithstanding the foregoing definition of Operating
Costs the Tenant shall not be required to pay its Proportionate Share of
Operating Costs but only its Proportionate Share of Operating Costs Escalation
as that term is defined in paragraph 19.01 (a) in accordance with the provisions
of Article 4 and Section 5.01 of this Lease.

Section 1.10 "Proportionate Share" means the fraction which has as its numerator
the Rentable Floor Area of the Leased Premises and has as its denominator the
total Rentable Floor Area of the Building whether rented or not, subject only to
the adjustments which follow. The total Rentable Floor Area of the Building
shall be calculated as if the Building were entirely leased by tenants renting
whole floors. The Rentable Floor Area of the Leased Premises, if the Leased
Premises consists of or includes a part of a floor, shall be increased by the
fraction of the total area of the Service Areas (as hereinafter defined) if any,
on such floor, which has as it numerator the Rentable Floor Area contained in
the Leased Premises on such floor and has as its denominator the sum of the
Rentable Floor Areas of such floor. The lobby and entrances on the ground floor
and subsurface floors used in common by tenants and mechanical equipment areas
shall be excluded from the foregoing calculations. The calculation of the total
Rentable Floor Area of the Building whether rented or not shall be determined by
the Landlord's architect and shall be adjusted from time to time to give effect
to any structural or functional change affecting the same. The calculation of
the Rentable Floor Area of the Leased Premises shall be adjusted from time to
time to give effect to any change therein during the Term of the Lease.

Section 1.11 "Rent" means the Basic Rent and Additional Rent.

Section 1.12 "Rentable Floor Area"

      (i)         in the case of a whole floor of the Building shall include all
                  areas within the outside walls and shall be computed by
                  measuring to the insider surface of the glass outer building
                  walls without deduction for columns and projections necessary
                  to the Building and shall include Service Areas, but shall not
                  include stairs and elevator shafts supplied


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                                     - 4 -


                  by the Landlord and flues, stacks, pipe shafts or vertical
                  ducts with their enclosing walls within the area occupied.

      (ii)        in the case of a part of a floor of the Building shall include
                  all areas occupied and shall be computed by measuring from the
                  inside surface of the glass outer building walls to the office
                  side of corridors or other permanent partitions and to the
                  centre of partitions which separate the area occupied from
                  adjoining rentable areas without deduction for columns and
                  projections necessary to the Building and shall include
                  Service Areas exclusively serving only the area occupied, plus
                  a proportionate share of the non-exclusive Service Areas
                  located on such floor, but shall not include stairs and
                  elevator shafts supplied by the Landlord and flues, stacks,
                  pipe shafts or verticle ducts with their enclosing walls
                  within the area occupied.

Section 1.13 "Service Areas" shall mean the area of corridors, elevator lobbies,
service elevator lobbies, toilets, air-conditioning rooms, fan rooms, janitor's
closets, telephone and electrical closets serving the Leased Premises in common
with other premises.

Section 1.14 "Stipulated Rate of Interest" means the prime rate of interest
charged from time to time by The Royal Bank of Canada at its head office in
Toronto to its most preferred borrowers, plus three percent (3%) per annum.

Section 1.15 "Taxes" shall mean all real property taxes, rates, duties, levies,
fees, charges, sewer levies, local improvement rates, and assessments whatsoever
imposed, assessed, levied or charged by any school, municipal, regional,
provincial, federal, parliamentary or other governmental body, corporation,
authority, agency or commission (including, without limitation, school boards
and utility commissions) and including all costs and expenses (including legal
and other professional fees and interest and penalties on deferred payments)
incurred by the Landlord in good faith in contesting, resisting or appealing any
of the foregoing, and including any amounts imposed, assessed, levied or charged
in substitution for or in lieu of any such taxes, rates, duties, levies, fees,
charges or assessments, but excluding such taxes as capital gains taxes,
corporate, income, profit or excess profit taxes to the extent such taxes are
not levied in lieu of any of the foregoing against the Building or the Landlord
in respect thereof and shall also include any and all taxes which may in the
future be levied in lieu of taxes as hereinbefore defined.

Section 1.16 "Tenant's Taxes" shall mean the aggregate of:

      (a)   all Taxes (whether imposed upon the Landlord or the Tenant)
            attributable to the personal property, trade fixtures, business,
            income, occupancy and/or turnover of the Tenant or any other
            occupant of the Leased Premises, and to any leasehold improvements
            or fixtures installed by or on behalf of the Tenant within the
            Leased Premises and to the use by the Tenant of any of the Common
            Areas; and,

      (b)   the amount by which Taxes (whether imposed upon the Landlord or the
            Tenant) are increased above the Taxes which would have otherwise
            been payable, which increase is as a result of the use of the Leased
            Premises or the Tenant or any other occupant of the Leased Premises
            being taxed or assessed in support of separate schools.

Please see Article 19 for further Definitions.


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                                     - 5 -


                                   ARTICLE 2

                       NOT NET LEASE AND SECURITY DEPOSIT

Section 2.01 NOT NET LEASE

            The Landlord and Tenant acknowledge and agree that it is intended
that this Lease is not a net carefree lease to the Landlord, and the Tenant
shall not be required to contribute to the Landlord's cost of maintaining,
operating and managing the Building, including Taxes, utilities, caretaking,
insurance and maintenance, except as expressly provided for in this Lease.

Section 2.02 SECURITY DEPOSIT - DELETED

                                   ARTICLE 3

                                 DEMISE AND TERM

Section 3.01 DEMISE AND TERM - DELETED

Continued on 5A


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                                     - 5A -


                                   ARTICLE 3

                                DEMISE AND TERM

Section 3.01 DEMISE AND TERM

            In consideration of the rents, covenants and agreements herein
contained on the part of the Tenant to be paid, observed and performed:

            (a)   the Landlord leases to the Tenant and the Tenant leases from
                  the Landlord that portion of the Leased Premises comprising
                  the entire 10th floor of the Building for and during the term
                  (hereinafter referred to as the "Term") of five (5) years
                  computed from the first day of June, 1995, and from
                  thenceforth next ensuing and fully to be completed and ended
                  on the 31st day of May, 2000, and

            (b)   the Landlord leases to the Tenant and the Tenant leases from
                  the Landlord that portion of the Leased Premises comprising
                  the entire 11th floor of the Building for and during the term
                  (hereinafter referred to as the "11th Floor Term") of four (4)
                  years and five (5) months computed from the first day of
                  January, 1996 and from thenceforth next ensuing and fully to
                  be completed and ended on the 31st day of May, 2000, subject
                  to the provisions for the advancement of the commencement date
                  of the 11th Floor Term set out in Section 3.02 below.

Until the commencement date of the 11th Floor Term the expression "Leased
Premises" shall mean and refer to the entire 10th floor of the Building, and
from and after the commencement date of the 11th Floor Term the expression
Leased Premises shall mean and refer to the entire 10th and 11th floors of the
Building. Notwithstanding that the 11th Floor Term shall commence later than the
Term the lease of the 10th floor of the Building and the lease of the 11th floor
of the Building shall for all purposes be considered a single lease, by the
Tenant, and in the event of any default by the Tenant whether before or after
the commencement date of the 11th Floor Term and whether in respect of the 10th
floor or the 11th floor of the Building, the Landlord shall be entitled to
exercise all of its rights and remedies hereunder or at law with respect to the
entire Leased Premises, being both the 10th floor and the 11th floor of the
Building.

Section 3.02 EARLY OCCUPANCY

      (a)   Following the execution of this Lease by both the Landlord and the
            Tenant the Tenant shall be entitled to occupy both the 10th floor of
            the Building and the 11th floor of the Building prior to the
            commencement date of the Term, but not less than one (1) business
            day's written notice to the Landlord, for the purposes of
            installation of its trade fixtures, furniture, equipment, and
            telephone and computer cabling. The Tenant shall be bound by all of
            the terms, conditions, covenants and provisos of this Lease during
            any such period of occupation prior to the commencement date of the
            Term, and with respect to the 11th Floor of the Building prior to
            the commencement date of the 11th Floor Term, save and except that
            during such period or periods the Tenant shall not be required to
            pay (subject to subparagraph (b) below) any Basic Rent or Additional
            Rent. The Tenant shall be required to pay Tenant's Taxes and to pay
            for any Additional Services during any such period of early
            occupancy;


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                                     - 5B -


      (b)   If the Tenant occupies any portion of the 11th floor of the Building
            for the purposes of carrying on business prior to January 1st, 1996,
            the commencement date of the 11th Floor Term shall be advanced to
            the date that the Tenant first so occupies a portion of the 11th
            floor of the Building for the purposes of carrying on its business,
            and the twelve (12) month Basic Rent free period described in
            Section 4.01 hereof shall commence on the same date, but the
            expiration date of the 11th Floor Term shall remain May 31, 2000.

            The commencement date of the Term and the Basic Rent free period for
            the 10th floor shall not be advanced if the Tenant carries on
            business on the 10th Floor of the Building prior to the commencement
            date of the Term.


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                                     - 6 -


                                   ARTICLE 4

                                      RENT

Section 4.01 BASIC RENT - Continued on 6A

            The Tenant shall pay yearly and every year during the Term to the
Landlord, without any deduction, abatement, set-off or diminution whatsoever, a
Basic Rent.

Section 4.02 ADDITIONAL RENT

            The Tenant shall pay to the Landlord, yearly and every year during
the Term, as additional rent ("Additional Rent"):

      (a)   the amount of any Taxes payable by the Tenant to the Landlord
            pursuant to Article 6 hereof; plus

      (b)   the amount of any payments required to be made by the Landlord on
            account of the cost of utilities supplied to the Leased Premises,
            together with the cost of lamp and bulb replacements, in accordance
            with the provisions of Section 5.03 hereof; plus

      (c)   The tenant's Proportionate Share of the Operating Costs Escalation
            in accordance with Section 5.01, including, without limitation, the
            cost of providing caretaking and cleaning services to the Leased
            Premises in accordance with the provisions of Section 5.02 hereof;
            plus

      (d)   the cost of Additional Services in accordance with the provisions of
            Section 7.12 hereof.

Section 4.03 PAYMENT OF ADDITIONAL RENT

            The Additional Rent specified in Section 4.02 hereof, shall be paid
and adjusted with reference to a period of twelve (12) calendar months. The
Landlord shall have the options from time to time to select a different fiscal
period of twelve months or broken portion thereof by notice to the Tenant. After
the commencement of the Term, the Landlord shall advise the Tenant, in writing,
of its estimate of the Additional Rent to be payable by the Tenant for the
period which commenced upon the commencement date of the Term until the end of
the respective calendar year, and the 90 days after the commencement of each
succeeding calendar period (which commences during the Term) the landlord shall
advise the Tenant in writing of its estimate for the Additional Rent to be
incurred in such period or broken portion thereof. Such estimate shall in every
case by a reasonable estimate and based wherever possible upon previous
operating expenses and, if required by the Tenant, shall be accompanied by
reasonable particulars of the manner on which it was arrived at. The Additional
Rent payable by the Tenant shall be paid in equal monthly instalments in advance
of the first day of each and every month during the Term based on the Landlord's
estimate as aforesaid. From time to time the Landlord may re-estimate on a
reasonable basis, the amount of Additional Rent for any calendar year or broken
portion thereof, in which case the Landlord shall advise the Tenant in writing
of such re-estimate and fix new equal monthly instalments for the remaining
balance of such calendar year or broken portion thereof such that, after giving
credit for the instalment paid by the Tenant on the basis on the previous
estimate or estimates, all the Additional Rent will have been paid during such
calendar year or broken portion thereof. Within ninety (90) days after the end
of each of the Landlord's fiscal period or broken period thereof (or with
respect to any component of Additional Rent which cannot be computed within such
ninety (90) day period, within thirty (30) days after the Landlord shall have
received the information necessary to compute such component of Additional
Rent), the Landlord shall submit to the Tenant a detailed statement of actual
additional rent payable and a calculation of the amounts by which the Additional
Rent


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                                     - 6A -


Section 4.01 BASIC RENT, BASIC RENT FREE PERIOD continued

      .......subject to the Basic Rent free period described in subparagraph (b)
below Basic Rent of:

      (i)   from the commencement date of the Term until the commencement date
            of the 11th Floor Term the annual sum of ONE HUNDRED AND SIXTEEN
            THOUSAND EIGHT HUNDRED NINETY-TWO DOLLARS ($116,892.00) of lawful
            money of Canada payable in equal monthly instalments of NINE
            THOUSAND SEVEN HUNDRED FORTY-ONE DOLLARS ($9,741.00) each in advance
            on the first day of each and every month during the said period; and

      (ii)  from and after the commencement date of the 11th Floor Term until
            the expiration of the Term the annual sum of TWO HUNDRED AND
            THIRTY-TREE THOUSAND SEVEN HUNDRED EIGHTY-FOUR DOLLARS ($233,784.00)
            of lawful money of Canada payable in equal monthly instalments of
            NINETEEN THOUSAND FOUR HUNDRED AND EIGHTY-TWO DOLLARS ($19,482.00)
            each in advance on the first day of each and every month during the
            said period.

Such payments of Basic Rent to be made by the cheque or money order payable to
the Landlord at 700 Bay Street, Toronto, Ontario or as the Landlord may direct
from time to time.

            It is acknowledged and agreed that the Basic Rent is based on an
annual rental of SEVENTEEN DOLLARS ($17.00) per square foot of Rentable Floor
Area of the Leased Premises. The Landlord shall provide the Tenant with an
architect's certificate of measurement setting out the Rentable Floor Area of
the Leased Premises which shall be determined by the Landlord's Architect acting
reasonably, in accordance with the Building Owners and Managers Association
definition of rentable area of office premises. The Landlord's Architect's
Certificate as to the Rentable Floor Area of the Leased Premises shall be
conclusive and binding upon the parties hereto. If the certificate of
measurement prepared by the architect reveals that the number of square feet of
Rentable Floor Area of the Leased Premises is greater or less than Six Thousand
Eight Hundred Seventy-Six (6,876) square feet with respect to the 10th floor of
the Building and Six Thousand Eight Hundred Seventy-Six (6,876) square feet with
respect to the 11th floor of the Building and Thirteen Thousand Seven Hundred
and Fifty-Two (13,752) square feet in the aggregate the Basic Rent payable
pursuant to this section shall not be the amount set out above, but shall be an
amount equal to SEVENTEEN DOLLARS ($17.00) times the number of square feet of
Rentable Floor Area of the 10th floor of the Building as set out in the said
architect's certificate for the period from and after the commencement date of
the Term until the commencement date of the 11th Floor Term, and shall be an
amount equal to SEVENTEEN DOLLARS ($17.00) times the number of square feet of
Rentable Floor Area of the 10th floor and the 11th floor of the Building as set
out in the said architect's certificate for the period from and after the
commencement date of the 11th Floor Term.

      (b) Notwithstanding the provisions of subparagraph 4.01(a) above the
Tenant shall not be required to pay any Basic Rent with respect to the 10th
floor of the Building for the first twelve (12) months of the Term, being the
period from and including June 1st, 1995 to May 31st, 1996, and the Tenant shall
not be required to pay any Basic Rent with respect to the 11th floor of the
Building during the first twelve (12) months following the commencement date of
the 11th Floor Term. The parties acknowledge and agree that the said Basic Rent
free period with respect to the 10th floor of the Building will probably expire
prior to the expiration of the said Basic Rent free period with respect to the
11th floor of the Building. In such case from June 1st, 1996 until the
expiration of the said Basic Rent free period with respect to the 11th floor of
the


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                                     - 6B -


Building the Tenant will pay Basic Rent at the rental rate per square foot of
Rentable Floor Area described above with respect to the 10th floor of the
Building and upon the expiration of the said Basic Rent free period with respect
to the 11th floor of Building the Tenant shall pay the full Basic Rent based on
the Rentable Floor Area of the 10th floor and 11th floor of the Building as
described above. If the commencement date of the 11th Floor Term is not the
first day of a calendar month Basic Rent of the 11th floor of the Building at
the rate per square foot of Rentable Floor Area described above will be
pro-rated on a daily basis and Basic Rent for the broken part of the month in
which such Basic Rent free period expires will be paid on the day that is one
year after the commencement date of the 11th Floor Term.


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                                     - 7 -


payable by the Tenant exceeds or falls short, as the case may be, of the
aggregate instalments paid by the Tenant on account of Additional Rent for the
calendar year.

            Within thirty (30) days after the receipt of such statement either
the Tenant shall pay to the Landlord any amount by which the amount found
payable by the Tenant with respect to such calendar year or broken portion
thereof, exceeds the aggregate of the monthly payments made by it on account
thereof during such calendar year or broken portion thereof or the Landlord
shall pay to the Tenant any amount by which the amount found payable as
aforesaid is less than the aggregate of such monthly payments. In the event of
any dispute by the Tenant of the amount of Additional Rent payable, an opinion
of the Landlord's auditors shall be conclusive as to the amount thereof for any
period to which such opinion relates.

Section 4.04 ACCRUAL OF RENT

            Rent shall be considered as accruing from day to day hereunder, and
where it becomes necessary to calculate such Rent for an irregular period of
less than one year or less than one calendar month, an appropriate apportionment
and adjustment shall be made, including an apportionment and adjustment of
Additional Rent. Where the calculation of Additional Rent cannot be made until
after the termination of this Lease, the obligation of the Tenant to pay such
Additional Rent shall survive the termination hereof, and such amount shall be
payable by the Tenant upon demand by the Landlord.

Section 4.05 NO SET-OFF

            The Tenant hereby expressly waives the benefits of Section 35 of the
Landlord and Tenant Act and any amendments thereto and any present of future Act
of the Province of Ontario permitting the Tenant to claim a set-off against Rent
for any case whatsoever.

Section 4.06 ADDITIONAL RENT TREATED AS RENT

            All Additional Rent shall be payable and recoverable as Rent, but in
the manner as herein provided, and the Landlord shall have all rights against
the Tenant for default in any such payment as in the case of arrears in Rent.

Section 4.07 RENT PAST DUE

            If the Tenant fails to pay, when the same is due and payable, any
Basic Rent, Additional Rent or other amounts payable by the Tenant under this
Lease, such unpaid amounts bear interest at an annual rate equal to the
Stipulated Rate of Interest.

                                   ARTICLE 5

                  OPERATING, CARETAKING, AND ELECTRICITY COSTS

Section 5.01 OPERATING COSTS

            The Tenant covenants to pay to the Landlord, as Additional Rent, its
Proportionate Share of Operating Costs. Escalation Payments shall be made in
accordance with the provisions of Section 4.02 and 4.03 hereof and Section 19.

Section 5.02 CARETAKING COSTS

            The Tenant acknowledges that the Landlord is permitted to include
the cost of providing caretaking and cleaning services mentioned in Section 9.08
and 9.09 of the Lease within the definition of "Operating Costs" contained in
Section 1.09 hereof. Provided, however, that if the Landlord is not providing
such caretaking and cleaning services for all premises leased to tenants of the
Building then the Landlord, acting reasonably, shall make an allocation of that
portion of such costs which is reasonably attributable to the Leased Premises
and, to the extent that the same are not including in Operating Costs, the
Tenant covenants to pay to the Landlord as additional rent the amount by which
the cost of providing caretaking and cleaning services to the Leased Premise
mentioned in Section 9.08 and 9.09 hereof exceeds the amount of such costs for
the calendar year 1995 reasonably attributable to the Leased Premises as
estimated by the Landlord acting reasonably. In the event of any dispute by the
Tenant of the amount


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exceeds the amount that such costs would have been for the calendar year 1995 if
the 10th floor and 11th floor of the Building had been occupied by the Tenant
for the purposes of carrying on business for the entire calendar year 1995, as
reasonably estimated by the Landlord.

                                     - 8 -


of such costs, an opinion of the Landlord's auditors shall be conclusive as to
the amount thereof for any period to which such opinion relates. Payments shall
be made in accordance with the provisions of Section 4.02 and 4.03 hereof.
Payment shall be made in accordance with the provisions of Section 4.02 and 4.03
hereof.

Section 5.03 ELECTRICITY COSTS

            The Tenant covenants to pay to the Landlord as Additional Rent the
amount by which, the cost of electric current supplied to the Leased Premises,
but not including the cost of electric current included in Operating Costs, as
defined.* The Tenant further covenants to pay to the Landlord the total cost of
any replacement of electric light bulbs, tubes and ballasts in the Leased
Premises to replace those installed at the commencement of the Term. The
Landlord may adopt a system of re-lamping and re-ballasting periodically on a
group basis in accordance with good practise in this regard and the Tenant shall
pay the actual cost, including parts and labour. "For greater clarity the
Tenant's obligation to pay the escalation of the cost of supplying electric
current as set out in this Section 5.03 is limited to increases in the cost of
electric current supplied to the Leased Premises. The cost of electric current
supplied to Common Areas is included in the calculation of Operating Costs
pursuant to Section 1.09 (f) of this Lease, and pursuant to Section 5.01 above
the Tenant's obligation with respect to such Operating Costs is limited to
payment of its Proportionate Share of the Operating Costs Escalation."

                                   ARTICLE 6

                                     TAXES

Section 6.01 PAYMENT OF TENANT'S TAXES

            The Tenant covenants to pay all Tenant's Taxes, as and when the same
become due and payable. Where any Tenant's Taxes are payable by the Landlord to
the relevant taxing authorities, the Tenant covenants to pay the amount thereof
to the Landlord, as Additional Rent, within ten (10) day after written demand.

Section 6.02 TENANT'S PROPORTIONATE SHARE OF LANDLORD'S TAXES

            The Tenant covenants to pay to the Landlord, as Additional Rent the
Landlord's Taxes Escalation in each calendar year. Payments shall be made in
accordance with the provisions of Section 4.02 and 4.03 hereof.

Section 6.03 PAYMENT OF LANDLORD'S TAXES - APPEALS

            The Landlord covenants to pay all Landlord's Taxes, subject,
nevertheless, to the payments on account of Landlord's Taxes required to be made
by the Tenant elsewhere in this Lease. The Landlord may appeal any official
assessment or the amount of any Taxes or other taxes based on such assessment
and relating to the Building. In connection with any such appeal, the Landlord
may defer payment of any Taxes or other taxes, as the case may be, payable by it
under the provisions of this Section 6.03 to the extent permitted by law, and
the Tenant shall co-operate with the Landlord and provide the Landlord with all
relevant information reasonably required by the Landlord in connection with any
such appeal.

Section 6.04 DETERMINATION OF TAXES

            In the event that the Landlord is unable to obtain from the taxing
authorities any separate allocation of Landlord's Taxes, Tenant's Taxes,
assessment or Landlord's Taxes attributable to the Office Section and the land
attributable thereto, such allocation shall be made by the Landlord, acting
reasonably. In the event of any dispute as to the amount of such allocation, an
allocation made by a professional tax consultant appointed by the Landlord shall
be conclusive.

Section 6.05 RECEIPTS

            Whenever requested by the Landlord, the Tenant will deliver to it
receipts for payment of all the Tenant's Taxes and furnish such other
information in connection therewith as the Landlord may reasonably require.


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                                     - 9 -


                                   ARTICLE 7

                           TENANT'S FURTHER COVENANTS

            THE TENANT FURTHER COVENANTS WITH THE LANDLORD as follows:

Section 7.01 REPAIR

            To keep in a good and reasonable state of repair, and consistent
with the general standards of first-class office buildings in Metropolitan
Toronto, but subject to Section 10.01 and with the exception of reasonable wear
and tear, the Leased Premises including all leasehold improvements and all trade
fixtures therein and all glass therein (excluding the glass portions of exterior
walls thereof) but with the exception of structural members or elements of the
Leased Premises and defects in construction performed or installations made by
the Landlord and insured damage therein.

Section 7.02 STATE OF REPAIR

            That the Landlord may enter and view the state of repair, and that
the tenant will repair according to notice in writing, and that the Tenant will
leave the Leased premises in a good and reasonable state of repair, subject
always to the exceptions referred to in Section 7.01.

Section 7.03 NOTICE OF ACCIDENT, DEFECTS, ETC.

            To give to the Landlord prompt written notice of any accident to or
defect in the plumbing, water pipes, heating and/or any air-conditioning
apparatus, electrical equipment, conduits or wires or other wires or of any
damage or injury to the Leased Premises or any part thereof howsoever caused;
provided that nothing herein shall be construed so as to require repairs to be
made by the Landlord except as expressly provided in this Lease.

Section 7.04 REPAIR WHERE TENANT AT FAULT

            If the Building including the Leased Premises, the glass portions of
exterior walls elevators, boilers, engines, pipes and other apparatus (or any of
them) used for the purpose of heating or air-conditioning the Building or
operating the elevators, or if the water pipes, drainage pipes, electric
lighting or other equipment is destroyed through negligence, carelessness or
misuse of the Tenant, his servants, agents, employees or anyone permitted by him
to be in the Building, or through him or them in any way stopping up or injuring
the heating apparatus, elevators, water pipes, drainage pipes or other equipment
or part of the Building, the expense of the necessary repairs, replacements or
alterations plus a 15% surcharge for administration costs shall be borne by the
Tenant who shall pay the same to the Landlord forthwith on demand.

Section 7.05 RULES AND REGULATIONS

            The Tenant and his employees and all persons visiting or doing
business with him on the Leased Premises shall be bound by and shall observe the
Rules and Regulations attached to this Lease. The Landlord shall have the right
at any time and from time to time to make or vary such reasonable Rules and
Regulations on Schedule "B" as may be desirable in the sole judgement of the
Landlord (but not inconsistent with the provisions of this Lease) for the
safety, care, cleanliness, operation and maintenance of the Building and
premises and accessories, and for the preservation of good order therein. The
Landlord may waive or vary such Rules and Regulations for any one or more
tenants without waiving or varying them for all. The Landlord shall not be
responsible to the Tenant for the non-observance of any such Rules and
Regulations by any other tenant. The Landlord agrees to notify the Tenant in
writing of any changes in Rules and Regulations.


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                                     - 10 -


Section 7.06 USE OF PREMISES

            The Leased Premises shall be used only for business offices, a small
scale custom workshop, and research laboratory or for any other use permitted by
the applicable zoning by-laws and other legislation and which has the prior
written approval of the Landlord and the Tenant shall not carry on or permit to
be carried on therein any other trade or business, and the Tenant shall not do
or permit to be done or omitted upon the Leased Premises anything which shall
cause the rate of insurance upon the Building to be increased and if the rate of
insurance on the Building shall be increased by reason of the use made of the
Leased Premises or by reason of anything done or omitted or permitted to be done
or omitted by the Tenant or by anyone permitted by the Tenant to be upon the
Leased Premises, the Tenant shall on demand pay to the Landlord the amount of
such increase.

See Section 19.02(b) for further provisions regarding Use of Premises.

Section 7.07 CANCELLATION OF INSURANCE

            If any insurance policy upon the Building shall be about to be
cancelled by the insurer by reason of the use of the Leased Premises, the
Landlord shall give written notice of such proposed cancellation to the Tenant,
and the Tenant shall not later than five (5) days prior to the cancellation date
set forth in such notice, stop such use or otherwise arrange for reinstatement
of such policy, otherwise the Landlord may, in addition to all other rights it
may have, at its option terminate this Lease and upon such termination Rent
shall be apportioned and paid in full to the date of such termination, and the
Tenant shall deliver possession of the Leased Premises forthwith in a neat and
tidy condition to the Landlord, and the Landlord may re-enter and take
possession of same.

Section 7.08 OBSERVANCE OF LAW

            To comply with all provisions of law including without limitation,
federal and provincial legislative enactments, building by-laws, and any other
governmental or municipal regulations which relate to the partitioning,
equipment, operation and use of the Leased Premises, and to the making of any
repairs, replacements, alterations, additions, changes, substitutions or
improvements of or to the Leased Premises. And to comply with all police, fire
and sanitary regulations imposed by any federal, provincial or municipal
authorities or made by fire insurance underwriters, and to observe and obey all
governmental and municipal regulations and other requirements governing the
conduct of any business conducted in the Leased Premises.

Section 7.09 WASTE AND NUISANCE

            No to do or suffer any waste or damage, disfiguration or injury to
the Leased Premises or the fixtures and equipment thereof or permit or suffer
any overloading of the floors thereof; and not to place therein any safe, heavy
business machine or other heavy object without first obtaining the consent in
writing of the Landlord (not to be unreasonably withheld); and not to use or
permit to be used any part of the Leased Premises for any dangerous, noxious or
offensive trade or business and not to cause or permit any nuisance in, at or on
the Leased Premises.

Section 7.10 INFLAMMABLE OR DANGEROUS SUBSTANCES

            The Tenant covenants not to bring into or store in the Leased
Premises any inflammable liquid or dangerous or explosive materials.

Section 7.11 NO DEFACING

            The Tenant shall not drill, drill into, or in any way deface the
walls, ceilings, partitions, floors, wood, stone or ironwork within the Leased
Premises without the prior written consent of the Landlord, such consent not to
be unreasonably withheld. Boring, cutting or stringing of wires or pipes shall
not be done except with the prior written consent of the Landlord, and as it may
direct. In the event of any violation of the provisions hereof, the Landlord
may, in addition to any other remedies it may have hereunder, repair any


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                                     - 11 -


damage and the Tenant shall pay the cost thereof plus an administrative charge
of fifteen percent (15%) of such cost, to the Landlord, forthwith upon demand,
as Additional Rent.

Section 7.12 ADDITIONAL SERVICES

            The cost of additional services provided to the Tenant shall be paid
to the Landlord upon the Tenant receiving invoices for such additional services.
Additional services means any service and/or supervision requested by the tenant
and supplied by the Landlord and not otherwise provided for as a service to
tenants generally the costs of which are included in Operating Costs under this
Lease. By way of example, additional services may include steam cleaning or
carpets, moving furniture and making repairs or alterations to the Tenant's
leasehold improvements. The amount charged to the Tenant for an additional
services shall include all direct costs incurred by or on behalf of the Landlord
in rendering the additional service plus fifteen (15%) of the aforementioned
costs to cover the Landlord's overhead.

Section 7.13 ENTRY BY LANDLORD

            To permit the Landlord, its servants or agents or contractors, to
enter upon the Leased Premises at any time and from time to time for the purpose
of inspecting and making repairs, alterations or improvements to the Leased
Premises or to the Building, or for the purpose of having access to the
utilities and services (which the Tenant agrees not to obstruct), and the Tenant
shall not be entitled to compensation for any inconvenience, nuisance or
discomfort occasioned thereby. The Landlord, its servants or agents may at any
time from time to time enter upon the Leased Premises to remove any article or
remedy any condition which in the opinion of the Landlord, reasonably arrived
at, would be likely to lead to cancellation of any policy of insurance as
referred to in Section 7.07 and such entry by the Landlord shall not be deemed
to be a re-entry. Provided that the Landlord shall proceed hereunder in such
manner as to minimize interference with the Tenant's use and enjoyment of the
Leased Premises.

Section 7.14 INDEMNITY

            To indemnify and save harmless the Landlord against and from any and
all claims, including without limiting the generality of the foregoing, all
claims for personal injury and property damage, arising from the conduct of any
work or by or through any act or omission of the Tenant or any assignee,
subtenant, agent, contractor, servant , employee, invitee or licensee of the
Tenant, and against and from all costs, counsel fees, expenses and liabilities
incurred in or about any such claim or any action or proceeding brought thereon.
This indemnity shall survive the expiry or sooner determination of this Lease.

Section 7.15 EXHIBITING PREMISES

            To permit the Landlord or its agents to exhibit the Leased Premises
to prospective tenants or other persons having written authority from the
Landlord or the agents of the Landlord to view the premises during normal
business hours of the last ten (10) months of the Terms. The Landlord shall have
the further right to enter upon the Leased Premises during the Term to exhibit
the Building to any prospective purchaser or mortgagee thereof.

Section 7.16 ALTERATIONS, LIENS

            Not to make or erect in or to the Leased Premises any installations,
alterations, additions or partitions without submitting drawings and
specifications to the Landlord and obtaining the Landlord's prior written
consent in each instance, which the Landlord shall not unreasonably withhold,
(and the Tenant must further obtain the Landlord's prior written consent to any
change or changes in such drawings and specifications submitted as aforesaid,
subject to payment of the cost to the Landlord of having its architects approve
of such changes, prior to proceeding with any work based on such drawings or
specifications); such work may be performed by contractors engaged by the Tenant
but in each case only under written contract approved in writing by the Landlord
and subject to all reasonable conditions


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                                     - 12 -


which the Landlord may impose, provided nevertheless that the Landlord may at
its option require that the Landlord's contractors be engaged for any mechanical
or electrical work; without limiting the generality of the foregoing, any work
performed by or for the Tenant shall be performed by competent workmen whose
labour union affiliations are not incompatible with those of any workmen who may
be employed in the Building by the Landlord, its contractors or subcontractors;
the Tenant shall submit to the Landlord's reasonable supervision over
construction and promptly pay to the Landlord's or the Tenant's contractors, as
the case may be, when due, the cost of all such work and of all materials,
labour and services involved therein and of all decoration and all changes in
the Building, its equipment or services, necessitated thereby. The Tenant
covenants that he will not suffer or permit during the Term hereof any
Construction Lien for work, labour, services or materials, ordered by him or for
the cost of which he may be in any way obligated to attach to the Leased
Premises or to the Building and that whenever and so often as any such liens
shall attach or claims therefor shall be filed the Tenant shall within seven (7)
days after the Tenant has notice of the claim for lien procure the discharge
thereof by payment or by giving security or in such other manner as is or may be
required or permitted by law. And the Tenant further covenants that whenever and
so often as a certificate of action or Construction Lien is registered relating
to any of the liens referred to in the next preceding sentence, the Tenant shall
within seven (7) days after the Tenant has notice of the registration of such
certificate of action have the same vacated.

If the Tenant fails to discharge or vacate as aforesaid the Landlord may vacate
or discharge same, and any amounts paid by the Landlord in vacating or
discharging as aforesaid shall immediately become payable by the Tenant as Rent.

Section 7.17 SUPERVISION COST

            To pay the Landlord its actual costs paid to third parties for plan
and drawing review, granting of approvals, and supervision in connection with
any leasehold improvements or alterations carried out by or on behalf of the
Tenant including engineering and legal costs if any; Provided that no such costs
shall be payable by the Tenant in connection with its initial installation of
its leasehold improvements.

Section 7.18 GLASS

            To pay the cost of replacement of glass with as good quality and
size of any glass broken on the Leased Premises during the continuance of this
Lease, unless the Tenant can prove that such breakage is the result of an act of
the Landlord, its employees, servants, agents, contractors, licensees or
invitees.

Section 7.19 WINDOW COVERINGS

            To comply with the Landlord's scheme of uniform window covers for
the windows of the Building and not use any drapes or curtains except such as
have lining on the side thereof facing the interior surface of exterior windows
of a colour, shade and material approved by the Landlord.

Section 7.20 SIGNS

            Not to erect or maintain any sign, picture, advertisement, notice,
lettering, flag, decoration or direction upon any part of the outside walls of
the Building or in any common area of the Building or upon either the outside or
inside of the windows or doors of the Leased Premises except such as are
provided by the Landlord under the provisions of Section 9.12.

Section 7.21 NAME OF BUILDING

            Not to refer to the Building by any name other than that designated
from time to time by the Landlord nor to use such name for any purpose other
than the business address of the Tenant, and the Tenant may use the name of the
Building for the business address of the Tenant for no other purpose, provided
the Tenant may use the municipal number instead of the name of the Building.


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                                     - 13 -


Section 7.22 KEEP TIDY

            At the end of each business day to leave the Leased Premises in a
reasonably tidy condition for the purpose of the performance of the Landlord's
cleaning services.

                                   ARTICLE 8

                               LANDLORD COVENANT

Section 8.01 Quiet Enjoyment

            THE LANDLORD COVENANTS WITH THE TENANT for quiet enjoyment.

                                   ARTICLE 9

                          LANDLORD'S FURTHER COVENANTS

Section 9.01

            THE LANDLORD FURTHER COVENANTS WITH THE TENANT AS FOLLOWS:

Section 9.02 LANDLORD'S REPAIRS

      (a)   To keep in a good and reasonable state of repair, and consistent
            with the general standards of first-class office buildings in
            Metropolitan Toronto, but subject to Section 12.01 and with the
            exception of reasonable wear and tear:

            (i)   Those portions of LuCliff Place consisting of lobbies,
                  landscaped areas, entrances and other facilities from time to
                  time provided for common use and enjoyment, and the exterior
                  portions of all buildings and structures from time to time
                  forming part of LuCliff Place and affecting its general
                  appearance.

            (ii)  The buildings and structures comprising LuCliff Place (other
                  than the Leased Premises) and premises of other tenants,
                  including the residential and retail portions of LuCliff
                  Place) including the foundation, roof, exterior walls
                  including glass portions thereof, the systems for interior
                  climate control, the elevators, entrances, stairways,
                  corridors and lobbies and washrooms from time to time provided
                  for use in common by the Tenant and other tenants of the
                  Building and LuCliff Place and the systems provided for
                  bringing utilities to the Leased Premises;

            (iii) The structural members or elements of the Leased Premises; and

      (b)   To repair defects in construction performed or installations made by
            the Landlord in the Leased Premises and insured damage therein;

      (c)   The Landlord shall not be liable for any damages, direct, indirect
            or consequential, or for damages for personal discomfort, illness or
            inconvenience of the Tenant, or the Tenant's servants, clerks,
            employees, invitees or other persons or by reason of failures of
            equipment, facilities or systems or reasonable delays in the
            performance of repairs, replacements and maintenance, unless caused
            by the deliberate act or omission, or the negligence of the
            Landlord, its servants, agents or employees.


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                                     - 14 -


Section 9.03 HEATING

            To provide heating of the Leased Premises to an extent sufficient to
maintain therein at all time during normal business hours, except during the
making of repairs, a reasonable temperature; but should the Landlord make
default in so doing, it shall not be liable for indirect or consequential
damages or damages for personal discomfort or illness.

Section 9.04 AIR-CONDITIONING

            To operate, as reasonably necessary during business hours the
air-conditioning equipment and systems serving the Leased Premises; in case such
equipment or systems be damaged or destroyed, or, in the opinion of the
Landlord, require repairs, inspections, overhauling or replacement, the Landlord
shall carry out such work with all reasonable speed, but shall not be liable for
any damages, direct, indirect or consequential, or for personal discomfort or
illness of the Tenant or his, its or their servants, clerks, employees,
invitees, or other persons by reason of the resulting interruption in
air-conditioning nor shall Rent abate during any such interruptions. The
Tenant's interior office layout, submitted to the Landlord for approval pursuant
to Section 7.16 hereof, shall be modified by the Tenant, if necessary, in
accordance with the reasonable requirements of the heating and air-conditioning
engineers of the Landlord, in order to secure maximum efficiency of the heating
and air-conditioning systems serving the Leased Premises. The Tenant covenants
to keep all air-conditioning vents within the Leased Premises free and clear of
all obstructions and objects. The Tenant acknowledges that 6 months may be
required after the Tenant has fully occupied the Leased Premises in order to
adjust and balance the heating and air-conditioning systems.

Section 9.05 ELEVATOR

            To furnish, except when repairs are being made, passenger elevator
service during normal business hours; operatorless automatic elevator service,
if used, shall be deemed "elevator service" within the meaning of this
paragraph; and to permit the Tenant and the employees of the Tenant to have the
free use of such elevator service in common with others, but the Tenant and such
employees and all other persons using the same shall do so at their sole risk
and under no circumstances shall the Landlord be held responsible for any damage
or injury happening to any person while using the same or occasioned to any
person by any elevator or any of its appurtenances except for such damage or
injury resulting from the negligence of the Landlord, its servants or employees.
In case the elevators of the Building shall be injured or destroyed or be in the
course of replacement or rebuilding, the Landlord shall commence the repair
thereof as soon as may be conveniently done and shall repair or replace the same
and put the same in working order. There shall be no liability on the Landlord
for any claim in respect of any failure by the Landlord to provide elevator
service during any power failure or other cause beyond the control of the
Landlord or by reason of the carrying out of any repairs, maintenance or
replacement of elevators, nor shall there be, consequent upon the foregoing, any
repayment or reduction in the Rent reserved hereby.

Section 9.06 ACCESS

            To permit the Tenant and the employees of the Tenant and all persons
lawfully requiring communication with them to have the use during normal
business hours in common with others of the common areas of the Building,
including the main lobby of LuCliff Place, stairways, corridors on the floor or
floors on which the Leased Premises are situate, elevators and washrooms
therein. It is agreed that the Tenant and all other persons permitted to use
such common areas shall do so at his, her or their sole risk with no liability
attributable to the Landlord in any circumstances. At times other than during
normal business hours the Tenant and the employees of the Tenant and persons
lawfully requiring communications with the Tenant shall have access to the
Building and to the Leased Premises and use of the elevators only in accordance
with the Rules and Regulations.


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Section 9.07 WASHROOMS

            To permit the Tenant and the employees of the Tenant in common with
others entitled thereto to use those washrooms in the Building on the floor or
floors on which the Leased Premises are situated, and which are not entirely
within the premises of another Tenant.

Section 9.08 CARETAKING

            To provide janitor and cleaning services, including outside window
washing, to the Building including the Leased Premises and common areas of the
Building, such services to be rendered substantially in accordance with the
standards of office buildings of a similar type in Toronto as of the date of
this Lease. The Tenant acknowledges and agrees that it shall be solely
responsible for the cleaning and maintenance of all carpets, broadloom or drapes
in the Leased Premises. It is further agreed that the Landlord shall not be
responsible for any act or omission on the part of any person or persons
employed to perform such work, and shall not be responsible for any loss or
damages occasioned by any such persons.

Section 9.09 MAINTENANCE OF COMMON AREAS - Deleted

Section 9.10 LIGHTING

            To light adequately, when reasonably required, the common areas of
the Building except at such times as electric current may not be supplied to the
Landlord and except during breakdowns in equipment, and during the making of
repairs.

Section 9.11 DIRECTORY BOARD

            The Landlord shall install a directory board in the main lobby of
the Building containing the names of tenants of space in the Building. The
Tenant shall be entitled to have his name shown upon the directory board, but
the Landlord shall, in its sole discretion, design the style of such
identification and allocate the space of the directory board for each Tenant.
The Landlord shall, at the request and cost of the Tenant, cause to be painted
on or affixed to the entrance door of the Leased Premises the name of the Tenant
in accordance with the Landlord's uniform scheme of lettering for such doors.

                                   ARTICLE 10

                              FIXTURES, INSURANCE

Section 10.01 FIXTURES

            All installations, alterations, additions, partitions and fixtures
in or upon the Leased Premises, whether placed there by the Tenant or Landlord,
shall, immediately upon such placement, be the Landlord's property without
compensation therefor to the Tenant and, except as hereinafter mentioned in this
Section 10.01, shall not be removed from the Leased Premises by the Tenant at
any time either during or after the Term. Notwithstanding anything herein
contained, the Landlord shall be under no obligation to repair or maintain the
Tenant's installations, alterations, additions, partitions and fixtures or
anything in the nature of a leasehold improvement made or installed by the
Tenant; and further notwithstanding anything herein contained, the Landlord
shall have the right upon the termination of the Lease by effluxion of time or
otherwise to require the Tenant to remove his


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installations, alterations, additions, partitions and fixtures or anything in
the nature of a leasehold improvement made or installed by the Tenant and to
make good any damage caused to the Leased Premises by such installation or
removal. Provided that the Tenant may, if it is not in default, remove its trade
fixtures at the expiration or sooner termination of this Lease, making good any
damage caused to the Leased Premises by such installation or removal. The
Landlord agrees that the Tenant's fumehoods shall be deemed to be Tenant's trade
fixtures.

Section 10.02 TENANT'S INSURANCE

            The Tenant shall take out and keep in force during the Term:

      (a)   Comprehensive general public liability (including bodily injury,
            death and property damage) insurance on an occurrence basis with
            respect to the business carried on, in or from the Leased Premises
            and the Tenant's use and occupancy thereof not less than ONE MILLION
            DOLLARS ($1,000,000.00) which insurance shall include the Landlord
            as a named insured and shall protect the Landlord in respect of
            claims by the Tenant as if the Landlord were separately insured; and

      (b)   Insurance in respect of fire and other such perils as are from time
            to time defined in the usual extended coverage endorsement covering
            the Tenant's trade fixtures and the furniture and equipment of the
            Tenant and all leasehold improvements of the Tenant, and which
            insurance shall include the Landlord as a named insured as the
            Landlord's interest may appear with respect to insured leasehold
            improvements and provide that any proceeds recoverable in the event
            of loss to leasehold improvements shall be payable to the Landlord
            (but the Landlord agrees to make available such proceeds towards the
            repair or replacement of the insured property if this Lease is not
            terminated pursuant to any other provision hereof).

            All insurance required to be maintained by the Tenant hereunder,
shall contain full replacement cost coverage and shall be on terms and with
insurers to which the Landlord has no reasonable objection. The Tenant shall
furnish to the Landlord if and whenever requested by it, certificates or other
evidence acceptable to the Landlord as to the insurance from time to time
required to be effected by the Tenant and its renewal or continuation in force.
If the Tenant shall fail to take out, renew and keep in force such insurance the
Landlord may do so as the agent of the Tenant and the Tenant shall repay to the
Landlord any amounts paid by the Landlord as premiums forthwith upon demand.

                                   ARTICLE 11

                     LICENCES, ASSIGNMENTS AND SUBLETTINGS

Section 11.01 LICENCES, ETC.

            The Tenant shall not permit any part of the Leased Premises to be
used or occupied by any person other than the Tenant, and the employees of the
Tenant, or permit any part of the Leased Premises to be used or occupied by a
licensee or concessionaire, or permit any persons to be upon the Leased Premises
other than the Tenant, and its employees, customers and others having lawful
business with them.

Section 11.02 ASSIGNMENTS AND SUBLETTINGS

            The Tenant shall not assign this Lease or sublet the whole or any
part of the Leased Premises unless:

      (1)   it shall have received or procured a bona fide written offer
            therefor to take an assignment or sublease which is not inconsistent
            with, and the acceptance of which would not breach any provisions of
            this Lease if this Section 11.02 is complied with and which the
            Tenant has determined to accept subject to this Section 11.02 being
            complied with, and


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      (2)   it shall have first requested and obtained the consent in writing of
            the Landlord thereto;

      (3)   total rent to be paid by the assignee or subtenant which exceeds the
            Basic Rent and Additional Rent, on a proportionate basis relative to
            the space occupied, to be paid by the present Tenant to the Landlord
            under the terms of the Lease, shall be paid to the Landlord;

      (4)   any fee, payment, charge or other consideration payable by the
            subtenant or assignee in respect of the Tenant's assignment of this
            Lease or subletting of the Leased Premises shall accrue to the
            benefit of and shall be paid to the Landlord.

            Any request for such consent shall be in writing and accompanied by
a true copy of such offer, and the Tenant shall furnish to the Landlord all
information available to the Tenant or any additional information requested by
the Landlord, as to the responsibility, reputation, financial standing and
business of the proposed assignee or subtenant. Within fifteen (15) days after
the receipt by the Landlord of such request for consent and of all information
which the Landlord shall have requested hereunder (and if no such information
has been requested, within fifteen (15) days after receipt of such request for
consent) the Landlord shall have the right upon notice in writing to the Tenant,
if the request is to assign this Lease or sublet the whole of the Leased
Premises, to cancel and terminate this Lease, or if the request is to sublet a
part of the Leased Premises only, to cancel and terminate this Lease with
respect to such part, in each case as of a termination date sixty (60) days
following the giving of such notice, and in such event the Tenant shall
surrender the whole or part, as the case may be, of the Leased Premises in
accordance with such notice and Rent shall be apportioned and paid on the date
of surrender and, if a part only of the Leased Premises is surrendered, Rent
shall thereafter abate proportionately. If the Landlord shall not exercise the
foregoing right of cancellation then the Landlord's consent to the Tenant's
request for consent to assign or sublet shall not be unreasonably withheld and
if such consent shall be given, the Tenant shall assign or sublet, as the case
may be, only upon the terms set out in the offer submitted to the Landlord as
aforesaid and not otherwise, and within six (6) months after the Tenant's
request for consent and only upon the assignee or sub-tenant entering into an
agreement with the Landlord in form satisfactory to the Landlord's solicitors to
perform, observe and keep each and every covenant, proviso, condition and
agreement in this Lease on the part of the Tenant to be performed, observed and
kept including payment of Rent and all other sums and payments agreed to be paid
or payable under this Lease on the days and at the times and in the manner
herein specified.

            Whether or not the Landlord consents to any request as aforesaid,
the Tenant shall pay to the Landlord all reasonable costs incurred by the
Landlord in considering any request for consent and in completing any of the
documentation involved in implementing any such assignment or sublet including
the agreements between the Landlord and each of the Tenants and any assignee or
subtenant.

            Without limitation, the Tenant shall for purposes of this paragraph
11 be considered to assign or sublet in any case where it permits the Leased
Premises or any portion thereof to be occupied by persons other than the Tenant,
its employees and others engaged in carrying on the business of the Tenant,
whether pursuant to the assignment, subletting, license or other right, and
shall also include any case where any of the aforegoing occurs by operation of
law. The Tenant shall also be considered to assign or sublet if the Tenant is a
corporation of which this Lease is, in the reasonable opinion of the Landlord, a
material asset or a material liability and control of such corporation changes,
and to permit the application of this provision the Tenant (if a corporation)
covenants to notify the Landlord of any proposed change of control.


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Section 11.03 RELEASE OF TENANT

            In no event shall any assignment or subletting to which the Landlord
may have consented, release or relieve the Tenant from its obligations to fully
perform all the terms, covenants and conditions of this Lease on its part to be
performed. No consent by the Landlord to any assignment or subletting shall be
construed to mean that the Landlord has consented or will consent to any further
assignment or subletting. The tenant agrees that it will sign the agreement
which is to be signed by any assignee or sub-tenant as described in Section
11.02 above, and will agree to be jointly and severally liable with such
assignee or subtenant.

                                   ARTICLE 12

                             DAMAGE AND DESTRUCTION

Section 12.01 ABATEMENT AND TERMINATION

            It is agreed between the Landlord and the Tenant that:

      (a)   In the event of damage to the Leased Premises or to the Building or
            other portions of LuCliff Place affecting access or services
            essential to the Leased Premises, and if the damage is such that the
            Leased Premises or any substantial part thereof is rendered not
            reasonably capable of use and occupancy by the Tenant for the
            purposes of its business for any period of time in excess of ten
            (10) days, then

            (i)   Unless the damage was caused by the fault or negligence of the
                  Tenant or its employees, invitees or others under its control,
                  from and after the expiration of ten (10) days after the
                  occurrence of the damage and until the Leased premises are
                  again reasonably capable of use and occupancy as aforesaid,
                  Basic Rent (but not any other payments required to be made by
                  the Tenant hereunder) shall abate from time to time in
                  proportion to the part or parts of the Leased Premises not
                  reasonably capable of such use and occupancy, and

            (ii)  Unless this Lease is terminated as hereinafter provided, the
                  Landlord or the Tenant, as the case may be (according to the
                  nature of the damage and their respective obligations to
                  repair as provided in Sections 9.03 and 7.01, shall repair
                  such damage with all reasonable diligence, but to the extent
                  that any part of the Leased Premises is not reasonably capable
                  of such use and occupancy by reason of damage which the Tenant
                  is obligated to repair hereunder, any abatement of rent to
                  which the Tenant is otherwise entitled hereunder shall not
                  extend later than the time by which, in the reasonable opinion
                  of the Landlord, repairs by the Tenant ought to have been
                  completed with reasonable diligence, and

      (b)   If either:

            (i)   the Leases Premises, or

            (ii)  premises whether of the Tenant or other tenants of LuCliff
                  Place comprising in the aggregate half on more of the Rentable
                  Area of the Building or of LuCliff Place,

            are substantially damaged or destroyed by any cause to the extent
            such that in the reasonable opinion of the Landlord they cannot be
            repaired or rebuilt within one hundred and eighty (180) days after
            the occurrence of the damage or destruction, the Landlord or Tenant
            may at its option, exercisable by written notice to the other given
            within thirty (30) days of the occurrence of such damage or
            destruction, terminate this lease, in which event neither the
            Landlord nor the Tenant shall be bound to repair as provided in
            clauses 9.03 and 7.01 and the


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            Tenant shall instead deliver up possession of the Leased Premises to
            the Landlord forthwith but in any event within sixty (60) days after
            delivery of such notice of termination, and rent shall be
            apportioned and paid to the date upon which possession is so
            delivered up (but subject to any abatement to which the Tenant may
            be entitled under Subsection 12.01 (a) of this Section by reason of
            the Leased Premises having been rendered in whole or in part not
            reasonably capable of use and occupancy), but otherwise the Landlord
            or the Tenant as the case may be (according to the nature of the
            damage and their respective obligations to repair) shall repair such
            damage with all reasonable diligence.

                                   ARTICLE 13

                          LOSS AND DAMAGE TO PROPERTY

Section 13.01

            Saving and excepting any loss, damage or injury arising out of the
negligence of the Landlord, its servants or employees and against which the
Tenant is not insured and is not required to be insured under this Lease, the
Landlord shall not be liable or responsible in any way for any loss of or damage
or injury to any property belonging to the Tenant or to employees of the Tenant
or to any other person while such property is on the Leased Premises or in the
Building or in or on the surrounding area owned by the Landlord comprising
LuCliff Place, whether or not such property has been entrusted to employees of
the Landlord and without limiting the generality of the foregoing, the Landlord
shall not be liable for any damage to any such property caused by steam, water,
rain or snow which may leak into, issue or flow from any part of the Building or
from the water, steam or drainage pipes or plumbing works of the Building, or
from any other place or quarter or for any damage caused by or attributable to
the condition or arrangement of any electric or other wiring or for any damage
caused by anything done or omitted by any other tenant.

                                   ARTICLE 14

                                  LIABILITIES

Section 14.01 IMPOSSIBILITY OF PERFORMANCE

            It is understood and agreed that whenever and to the extent that the
Landlord shall be unable to fulfil, or shall be delayed or restricted in the
fulfilment of any obligation hereunder in respect of the supply or provision of
any service or utility or the doing of any work or the making of any repairs by
reason of being unable to obtain the material, goods, equipment, service,
utility or labour required to enable it to fulfil such obligations or by reason
of any statute, law or order-in-council or any regulation or order passed or
made pursuant thereto or by reason of the order or direction of any
administration, controller or board, or any governmental department or officer
or other authority or by reason of not being able to obtain any permission or
authority required thereby, or by reason of any other cause beyond its control
whether of the foregoing character or not, the Landlord shall be entitled to
extend the time for fulfilment of such obligation by a time equal to the
duration of such delay or restriction and the Tenant shall not be entitled to
compensation for any inconvenience, nuisance or discomfort thereby occasioned.

Section 14.02 CLAIMS FOR COMPENSATION

            No claim for compensation shall be made by the tenant by reason of
inconvenience, damage or annoyance arising from the necessity of repairing any
portion of LuCliff Place of which the Leased Premises form a part, howsoever the
necessity may arise.


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                                   ARTICLE 15

                                TENANT'S DEFAULT

Section 15.01 RE-ENTRY

            Provided and it is hereby expressly agreed that if and whenever the
Rent hereby reserved or any part thereof shall not be paid on the days appointed
for payment thereof, whether lawfully demanded or not, or in the case of breach
or non-observance or non-performance of any of the covenants, agreements,
provisos, conditions or Rules and Regulations on the part of the Tenant to be
kept, observed or performed, for a period of ten (10) days following receipt of
written notice of such breach or non-observance or non-performance, or in the
case the Leased Premises shall be vacated or remain unoccupied for fifteen (15)
consecutive days or in case the term shall be taken in execution or attachment
for any cause whatever, then and in every such case, it shall be lawful for the
Landlord thereafter to enter into and upon the Leased Premises or any part
thereof in the name of the whole and the same to have again, repossess and enjoy
as of its former estate, anything in this Lease contained to the contrary
notwithstanding other than proviso to this Section 15: Provided that
notwithstanding anything to the contrary hereinbefore in this Section 15
contained, the Landlord shall not at any time have the right to re-enter and
forfeit this Lease by reason of the Tenant's default in the payment of Basic
Rent and Additional Rent, hereby reserved by this Lease, unless and until the
Landlord shall have given to the Tenant at least five (5) business days' written
notice of its intention so to do and setting forth the default complained of and
the Tenant shall have the right during such five (5) business days to cure any
such default in payment of Rent, provided that in the event of a breach,
non-observance or non-performance by the Tenant which is capable of being cured,
but is not reasonable capable of being cured within the ten (10) day notice
period described above the Tenant shall not be deemed to be in default if it
has commenced to remedy such breach or non-observance or non-performance and has
diligently thereafter proceeded to complete the remedying thereof.

Section 15.02 LANDLORD'S RIGHT TO PERFORM

            In addition to all other remedies the Landlord may have by this
Lease, at law or in equity, if the Tenant shall make default in any of its
obligations hereunder, the Landlord may as its option perform any such
obligations after fifteen (15) days' written notice to the Tenant and in such
event the cost of performing such obligations plus an administrative charge of
fifteen percent (15%) of such cost, shall be payable by the Tenant to the
Landlord on the next ensuing Rent payment date as Additional Rent, together with
interest at the Stipulated Rate of Interest from the date of the performance of
such obligations by the Landlord. On default of such payment, the Landlord shall
have the same remedies as on default of payment of Rent. In addition, the
Landlord shall be entitled to collect to pro-rated amount of interest computed
at the Stipulated Rate of Interest upon all arrears of Rent with a minimum of
one (1) month's interest as aforesaid, if the Rent is in arrears for more than
five (5) working days. Such interest shall be computed from the day following
the due date(s) of such Rent to the date of payment thereof.

Section 15.03 BANKRUPTCY, ETC.

            Provided further that in case without the written consent of the
Landlord the Leased Premises shall be used by any other person than the Tenant,
the Tenant's permitted assigns or permitted subtenant, or shall be used for any
other purpose than that for which the same were let or in case the Term or any
of the goods and chattels of the Tenant shall be at any time seized in execution
or attachment by any creditor of the Tenant or the Tenant shall make any
assignment for the benefit of creditors or any bulk sale or become bankrupt or
insolvent or take the benefit of any Act now or hereafter in force for bankrupt
or insolvent debtors, or, if the Tenant is a corporation and any order shall be
made for the winding-up of the Tenant, or other termination of the corporate
existence of the Tenant, then in any such case this Lease shall at the option of
the Landlord cease and determine and the Term shall immediately become forfeited
and void and the then current month's rent and the next ensuing three (3)
months' shall immediately become due and be paid and the Landlord may re-enter
and take possession of the Leased Premises as though the Tenant or other
occupant or occupants of the Leased Premises was or were holding over after the
expiration of the Term without any right whatever.


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Section 15.04 VACATED OR IMPROPERLY USED

            It is hereby declared and agreed by and between the Landlord and
tenant that in case the said Leased Premises shall be come abandoned or if the
Leased Premises shall become vacant or not used for the purpose aforesaid and
remain so for a period of fifteen (15) consecutive days or if the Leased
Premises shall be used by any other person or persons than the Tenant or for any
other purpose than that for which the same were let without the written consent
of the Landlord this Lease shall at the option of the Landlord forthwith cease
and determine and thereupon the instalments of Basic Rent and Additional Rent
accruing due during the next ensuing three (3) months shall immediately become
due and payable to the Landlord and the Landlord may re-enter and take
possession of the demised premises.

Section 15.05 DISTRESS

            The Tenant waives and renounces the benefit of any present or future
statute taking away or limiting the Landlord's right of distress and covenants
and agrees that notwithstanding any such statute none of the goods and chattels
of the Tenant on the Leased Premises at any time during the Term shall be exempt
from levy by distress for Rent in arrears. The Tenant will not sell, dispose of
or remove any of the fixtures, goods or chattels of the Tenant from or out of
the Leased Premises during the Term without the consent of the Landlord, unless
the Tenant is substituting new fixtures, goods and chattels of equal value or is
bona fide disposing of individual items which have become extras for the
Tenant's purposes; and the Tenant will be the owner of its fixtures, goods and
chattels and will not permit them to become subject to any lien, mortgage,
charge or encumbrance.

Section 15.06 RIGHT OF RE-ENTRY TO RELET

            The Tenant further covenants and agrees that on the Landlord's
becoming entitled to re-enter upon the Leased Premises under any of the
provisions of this Lease, the Landlord in addition to all other rights shall
have the right to enter the Leased Premises as the agent of the tenant either by
force or otherwise, without being liable for any prosecution therefor and to
relet the Leased Premises as the agent of the Tenant, and to receive the Rent
therefor and as the agent of the Tenant, to take possession of any furniture or
other property on the Leased Premises and to sell the same at public or private
sale without notice and to apply the proceeds of such sale and any Rent derived
from reletting the Leased Premises upon account of the Rent under this Lease,
and the Tenant shall be liable to the Landlord for the deficiency, if any.

Section 15.07 REMEDIES CUMULATIVE

            The Landlord may from time to time resort to any or all of the
rights and remedies available to it in the event of any default hereunder by the
Tenant, either by any provision of this Lease or by statute or the general law,
all of which rights and remedies are intended to be cumulative and not
alternative, and the express provisions hereunder as to certain rights and
remedies are not to be interpreted as excluding any other of additional rights
and remedies available to the Landlord by statute or the general law.

Section 15.08 LEGAL EXPENSES

            In the event that is shall be necessary for the Landlord to commence
an action for the collection of Rent herein reserved or any portion thereof, or
any other sum hereunder or if the same must be collected upon the demand of a
solicitor, or in the event that it becomes necessary for the Landlord to
commence an action to compel performance of any of the terms, conditions,
covenants or provisos contained herein, then unless the Landlord shall lose such
action it shall be entitled to collect from the Tenant all reasonable expenses
incurred therefor, including reasonable legal fees.


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                                   ARTICLE 16

                            NON-WAIVER, OVERHOLDING

Section 16.01 NON-WAIVER

            No condoning, excusing or overlooking by the Landlord or Tenant of
any default, breach or non-observance by the Tenant of the Landlord at any time
or times in respect of any covenant, proviso or condition herein contained shall
operate as a waiver of the Landlord's or the Tenant's rights hereunder in
respect of any continuing or subsequent default, breach or non-observance, or so
as to defeat or affect in any way the rights of the Landlord or the Tenant
herein in respect of any such continuing or subsequent default or breach, and no
waiver shall be inferred from or implied by anything done or omitted by the
Landlord or the Tenant save only express waiver in writing.

Section 16.02 OVERHOLDING

            If the Tenant remains in possession of the Leased Premises after the
expiration or sooner termination of the Term without any further written
agreement but with the express or implied consent of the Landlord, and in
circumstances in which a tenancy other than a weekly tenancy would thereby be
implied by implication of law, the Tenant shall be deemed to be a weekly tenant
only upon and subject to the same terms and conditions as herein contained,
except that the weekly Basic Rent shall be 150% of a prorated portion of Basic
Rent payable during the last month of the Term, and nothing, including the
acceptance of any Rent by the Landlord, shall extend to the contrary except a
specific agreement in writing between the Landlord and the Tenant, and the
Tenant hereby authorizes the Landlord to apply any monies received from the
Tenant in payment of such weekly Basic Rent.

                                   ARTICLE 17

                      SUBORDINATION, ACKNOWLEDGEMENT, ETC.

Section 17.01 SUBORDINATION

      (a)   This Lease is subject and subordinate to all mortgages (including
            any deed of trust and mortgage securing bonds and all indentures
            supplemental thereto) which may now or hereafter affect LuCliff
            Place, and to all renewals, modifications, consolidations,
            replacements and extensions throughout. The Tenant agrees to execute
            promptly any certificate in confirmation of such subordination as
            the Landlord may request and hereby constitutes the Landlord the
            agent and attorney of the Tenant for the purpose of executing any
            such certificate and of making application at any time and from time
            to time register postponements in favour of any such mortgage in
            order to give effect to the provisions of this Section. Each and
            every time that the Landlord requests that the Tenant execute a
            subordination certificate as aforesaid, the Landlord agrees to
            request and to use reasonable efforts to obtain from any such
            mortgagee a written non-disturbance agreement wherein the mortgagee
            agrees that the possession by the Tenant of the Leased Premises
            shall not be disturbed, affected, or impaired by the mortgagee
            provided that the Tenant is not in default under this Lease.

      (b)   Without limiting the general rights of the Landlord to assign this
            Lease, the Landlord shall be entitled to assign this Lease as
            collateral security for any mortgage or mortgages upon LuCliff Place
            or any part thereof, and the Tenant covenants, if requested to do,
            to acknowledge in writing any notice of assignment of this Lease by
            the Landlord.

Section 17.02 TENANT'S ACKNOWLEDGEMENTS

            The Tenant agrees that it will at any time and from time to time
upon not less than ten (10) days' prior notice execute and deliver to the
Landlord a statement in writing certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the modifications and that the
same is in full force and effect as modified), the amount of the annual rental
then being paid hereunder, the dates to which the same, by instalments or


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                                      -23-

otherwise, and other charges hereunder have been paid, and whether or not there
is any existing default on the part of the Landlord of which the Tenant has
notice and any other matter pertaining to this Lease as to which the Landlord
shall request a statement.

Section 17.03 REGISTRATION

            The Tenant covenants and agrees with the Landlord that the Tenant
will not register this Lease in this form in the Registry Office or the Land
Titles Office.

The Tenant shall not register or cause to be registered any notice of this Lease
except in a form which shall have been approved prior to registration by the
solicitors for the Landlord acting reasonably. It is the intent of the parties
that such Notice of Lease shall disclose the minimum amount of information
regarding the terms and conditions of this Lease that is necessary to protect
the Tenant's interest in the lands, and shall not disclose the amount of Rent
being paid.

                                   ARTICLE 18

                                  MISCELLANEOUS

Section 18.01 RECOVERY OF ADJUSTMENTS

            The Landlord shall have (in addition to any other right or remedy of
the Landlord) the same rights and remedies in the event of default by the Tenant
in payment of any amount payable by the Tenant hereunder, as the Landlord would
have in the case of default in payment of Rent.

Section 18.02 LEASE ENTIRE AGREEMENT

            The Tenant acknowledges that there are no covenants,
representations, warranties, agreements or conditions expressed or implied,
collateral or otherwise forming part of or in any way affecting or relating to
this Lease save as expressly set out in this Lease and that this Lease
constitute the entire agreement between the Landlord and the tenant and may not
be modified except as herein explicitly provided or except by subsequent
agreement in writing of equal formality hereto executed by the Landlord and the
Tenant. Notwithstanding the foregoing, the Tenant shall remain liable to pay for
those improvements in the Leased Premises which have been made by the Landlord
for or on behalf of the Tenant and which are in excess of the work otherwise
required to be done by the Landlord.

Section 18.03 COVENANTS, SEVERABILITY

            The Landlord and the Tenant agree that all of the provisions of this
Lease are to be construed as covenants and agreements as though the words
importing such covenants and agreements were used in each separate paragraph
hereof. Should any provision or provisions of this Lease be illegal or not
enforceable it or they shall be considered separate and severable from the Lease
and its remaining provisions shall remain in force and be binding upon the
parties hereto as though the said provision or provisions had never been
included.

Section 18.04 CAPTIONS

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

Section 18.05 AGENCY

            The Landlord may perform all or any of its obligations hereunder by
or through such managing or other agency or agencies as it may from time to time
determine and the Tenant shall, as from time to time determine and the Tenant
shall, as from time to time directed by the Landlord, pay to any such agent any
moneys payable hereunder to the Landlord.


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                                      -24-

Section 18.06 NOTICE

      Any notice required or contemplated by any provision of this Lease shall
be given in writing enclosed in a sealed envelope addressed, in the case of
notice to the Landlord to it at 700 Bay Street, Toronto, Ontario, and in the
case of notice to the Tenant to it at the Leased Premises, and mailed in
Metropolitan Toronto registered and postage prepaid. The time of giving of such
notice shall be conclusively deemed to be the second business day after the day
of such mailing. Such notice shall also be sufficiently given if and when the
same shall be delivered, in the case of notice to the Landlord, to an executive
officer of the Landlord, and in the case of notice to the Tenant, to him
personally or to an executive officer of the Tenant if the Tenant is a
corporation. Such notice, if delivered, shall be conclusively deemed to have
been given and received at the time of such delivery. If in this Lease two or
more persons are named as Tenant, such notice shall also be sufficiently given
if and when the same shall be delivered personally to any one of such persons.
Provided that either party may, by notice to the other, from time to time
designate another address in Canada to which notices mailed more than ten (10)
days thereafter shall be addressed.

Section 18.07 INTERPRETATION

      In this Indenture "herein", "hereof", "hereby", "hereunder", "hereto",
"hereinafter", and similar expressions refer to this Indenture and not to any
particular paragraph, section or other portion thereof, unless there is
something in the subject matter or context inconsistent therewith.

Section 18.08 BINDING, ENURING AND INTERPRETATION

      This Indenture and everything contained hereinafter shall enure to the
benefit of and be binding upon the respective heirs, executors, administrators,
successors, assigns and other legal representatives as the case may be, of each
and every of the parties hereto, subject to the granting of consent by the
Landlord as provided in Article 11 to any assignment or sublease, and every
reference to any party hereto shall include the heirs, executors,
administrators, successors, assigns and other legal representatives of such
party, and where there is not more than one Tenant or there if a female party or
a corporation, the provisions hereof shall be read with all grammatical changes
thereby rendered necessary and all covenants shall be deemed joint and several.


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                                      -25-

                                   ARTICLE 19

          ADDITIONAL DEFINITIONS AND AMENDMENTS TO STANDARD LEASE FORM

Section 19.01 Additional Definitions

            The parties agree that when used in this Lease the following words
or expressions have the meaning hereinafter set forth:

(a)   "Operating Costs Escalation" means the amount by which Operating Costs for
      any fiscal year of the Landlord (as described in Section 4.03 of this
      Lease) exceed Operating Costs for the calendar year 1995.

(b)   "Landlord's Taxes Escalation" means:

      (i)   If the Leased Premises are separately assessed, the amount by which
            Landlord's Taxes levied or charged against the Leased Premises in
            any calendar year during the Term exceeds the amount of Landlord's
            Taxes levied or charged against the Leased Premises for the calendar
            year 1995, together with Tenant" Proportionate Share of Landlord"'s
            Taxes levied or charged against areas of the Building which are not
            leased or set aside by the Landlord for leasing including the
            parking facilities and Common Areas; or

      (ii)  If the Leased Premises are not separately assessed the Tenant's
            Proportionate Share of the amount by which Landlord's Taxes in any
            calendar year during the Term exceed the amount of Landlord's Taxes
            for the calendar year 1995.

(c)   "Additional Services" shall have the meaning ascribed thereto in Section
      7.12.

Section 19.02 Further Use of Premises Provisions

(a)   The Landlord warrants and represents that the Tenant's proposed use of the
      Leased Premises describe in Section 7.06 herein, including the required
      plumbing, electrical, fume hoods, mechanical and auto clave rooms is
      permitted, as of the date hereof, by the applicable zoning by-laws and any
      legislation regulating the use of the Leased Premises.

(b)   Exclusive Use.

      The Tenant acknowledges that the Landlord has granted certain exclusive
use privileges to some tenants of the Building, including to Toronto Vascular
Associates Limited relating to ultrasound, x-ray and angiography services
(hereinafter collectively called "TVAL's Exclusive Uses") within the Building
and to RDS Diagnostics Ltd. and to Dr. Roger Stronell relating to ultrasound
(including the use of mobile ultrasound units) and mammography (hereinafter
collectively called "RDS's Exclusive Uses"). The Tenant covenants that it will
not at any time during the Term or any renewal thereof perform or allow to be
performed from, in or upon the Leased Premises, or any portion thereof, any
ultrasound, x-ray, angiography, mammography or catscan services or procedures.
The Tenant covenants that it will not at any time during the Term or any renewal
thereof, occupy or use or permit the Leased Premises or any portion thereof to
be used or occupied for the purpose of TVAL's Exclusive Uses or RDS's Exclusive
Uses.


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                                      -26-

                                   ARTICLE 20

                              ADDITIONAL PROVISIONS

Section 20.01 OPTION TO RENEW

      Provided that the Tenant is not then, and has not been, in breach of any
of the terms, conditions, covenants, provisos and agreements of this Lease,
including the covenant to pay Rent, and has not become insolvent or bankrupt or
had a receiver appointed in respect of its assets or business, the Tenant shall
have the option to renew this Lease for one further term of five (5) years;
Provided that in order to exercise its option to renew the Tenant shall be
required to give the Landlord notice thereof in writing not later than November
30, 1999 and not earlier than May 31, 1999. If the Tenant does not deliver the
notice as aforesaid this Lease shall terminate upon the expiration of the Term.
Any renewal pursuant to this proviso shall be upon the same terms, conditions,
covenants, provisos and agreements as contained in this Lease except that:

      (a)   there shall be no further right to renew this Lease;

      (b)   the Basic Rent payable shall not be as set out in this Lease, but
            shall be the market gross rental (including all net rents and
            additional rents) per square foot for similar premises in or in the
            vicinity of the Building at the commencement of the renewal term
            multiplied by the number of square feet of Rentable Floor Area of
            the Leased Premises. If any dispute arises between the Landlord and
            the Tenant as to the said current market gross rental the issue
            shall be refereed to arbitration pursuant to the Arbitrations Act,
            R.S.O. 1990;

      (c)   for the purposes of calculating Operating Costs Escalation,
            Landlord's Taxes Escalation, caretaking costs, and electricity
            charges, the base year shall be the year 2000, so that the Tenant
            shall be responsible for all escalations of such expenses from and
            after the commencement of the renewal term;

      (d)   the Leased Premises shall be leased on an "as is" basis and the
            Landlord shall not be required to do any work in connection
            therewith, and there shall be no leasehold improvement allowance or
            inducement payment, nor any rent free period nor fixturing period.

SECTION 20.02 RIGHT OF FIRST REFUSAL TO LEASE TWELFTH FLOOR PREMISES

(a)   Provided that the Tenant is not then and has not been n breach of any of
      its covenants and obligations under this Lease, the Landlord grants to the
      Tenant a right of first refusal to lease any space which becomes available
      to lease on the Twelfth Floor of the Building during the Term on the terms
      and conditions hereinafter set out.

(b)   If the Landlord receives a bona fide offer to lease any premises on the
      12th Floor of the Building which the Landlord is willing to accept or has
      accepted conditional upon the Tenant not exercising its right of first
      refusal herein, (such bona fide written offer to lease being hereinafter
      referred to as a "12th Floor Offer") the Landlord shall forward to the
      Tenant a true copy of the 12th Floor Offer.


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                                      -27-

(c)   The delivery of such copy of a 12th Floor Offer shall be deemed to be an
      offer by the Landlord to the Tenant to lease the premises described in
      such 12th Floor Offer upon and subject to the terms and conditions therein
      set out.

      The Tenant shall have a period of five (5) business days after receipt of
      any such 12th Floor Offer to accept the same by delivery of notice in
      writing to the Landlord. If the Tenant delivers written notice of
      acceptance to the Landlord within the said five (5) business day period,
      the Tenant shall lease from the Landlord and the Landlord shall lease to
      the Tenant the premises described in the 12th Floor Offer on the terms and
      conditions therein set out.

(d)   If the Tenant fails to deliver a notice of acceptance within the said time
      period, the Landlord shall be free to accept the 12th Floor Offer (or to
      waive the condition, as the case may be) and to lease the premises
      described therein to the third party described in such 12th Floor Offer on
      the terms and conditions therein set out.

(e)   Provided, however, this right of first refusal shall be exercisable only
      during the Term or any renewal thereof, from time to time as space on the
      12th floor of the Building becomes available to lease. This right of first
      refusal shall terminate on the expiration or sooner termination of this
      Lease or any renewal thereof.

SECTION 20.03 PARKING

(a)   The Landlord shall allocate to the Tenant and the Tenant shall have the
      right to rent during the Term and any renewal thereof any number of
      unreserved parking spaces up to a maximum of ten (10) in the underground
      parking garage located at LuCliff Place. Such right may be exercised at
      any time throughout the Term of this Lease. If the Tenant is not renting
      the maximum number of parking spaces at the end of the first year of the
      Term of this Lease its right to rent spaces shall be limited to the number
      then rented, and if the tenancy of any space or spaces is terminated
      thereafter, the Tenant's right to rent spaces shall be further reduced by
      the number of tenancies so terminated. The Tenant may terminate the rental
      of any parking space or spaces at any time upon delivery to the Landlord
      of one (1) month's prior written notice.

(b)   The rental for such unreserved underground parking spaces shall be the
      parking space rental charged from time to time by the Landlord to third
      parties for unreserved monthly parking in the said underground parking
      garage. The rent for the unreserved underground parking spaces shall be
      payable monthly in advance on the first day of each and every month as
      Additional Rent and initially shall be ONE HUNDRED DOLLARS ($100.00) per
      parking space per month plus applicable taxes (including, without
      limitation GST) for daily use for an eleven (11) hour time period (7:00
      a.m. to 6:00 p.m.) and ONE HUNDRED AND FIFTY DOLLARS ($150.00) per parking
      space per month plus applicable taxes for daily use for a twenty-four (24)
      hour time period.

(c)   The Landlord shall not be responsible for any loss or damage to property
      or any personal injury which shall be sustained by the Tenant or any
      employee, customer, or other persons who may be in the said underground
      parking garage or the entrances and driveways appurtenant thereto, or
      occasioned in connection with the use of the said underground parking
      garage. All risks of any such injury or loss are assumed by the Tenant who
      shall hold the Landlord harmless and indemnified therefrom. The Tenant
      acknowledges and agrees that not security services shall be provided and
      that the use of the parking spaces shall be at the risk of the Tenant, its
      employees and its customers.


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                                     - 28 -


(d)   Notwithstanding any other provision of this Lease the Tenant shall not
      have the right to assign or sublet the right to use the said unreserved
      parking spaces or any individual parking space without the written consent
      of the Landlord which may be arbitrarily and unreasonably withheld. Any
      purported subletting or assigning of, or permission to occupy, any parking
      space rented by the tenant hereunder without the Landlord's permission to
      occupy, any parking space rented by the Tenant hereunder without the
      Landlord's written consent shall be null and void. If the Tenant purports
      to so assign, sublet, or permit occupancy without the Tenant's written
      consent the Landlord shall have the right to rent all parking spaces
      hereunder forthwith by delivery of written notice to the Tenant.

(e)   The Tenant shall comply with all rules and regulations with respect to the
      use of the parking facility provided for the Building made by the Landlord
      from time to time.

SECTION 20.04 RECREATIONAL FACILITIES

      The Tenant's employees shall be permitted to use the exercise room and
      swimming pool located in LuCliff Place (hereinafter called "Recreational
      Facilities") only during the term and any renewal thereof upon the terms
      set out in this Lease. The tenant shall pay a charge for the use of the
      Recreational Facilities calculated at the rate of Fifteen Dollars ($15.00)
      per person per month payable monthly in advance on the first day of each
      and every month of the term and any renewal thereof as Additional Rent.
      Use of the Recreational Facilities by the Tenant shall be limited to use
      by existing employees of the Tenant only and shall be restricted to a
      three (3) hour time period commencing at 11:00 a.m. and ending at 2:00
      p.m., Mondays to Fridays (business days only) inclusive, and excluding
      Saturdays, Sundays and statutory holidays.

      All employees shall abide by the Landlord's rules and regulations relating
      to the use of the Recreational Facilities. The Landlord shall have the
      right in its discretion to refuse any of the Tenant's employees use of the
      Recreational Facilities based on a prior breach of the rules and
      regulations or other inappropriate conduct of such individual within the
      Recreational Facilities.

SECTION 20.05 DEPOSIT

      The Tenant shall pay to the Landlord the sum of FIFTY EIGHT THOUSAND, FOUR
      HUNDRED AND FORTY SIX DOLLARS ($58,446.00) to be held by the Landlord and
      applied to the last payments of Basic Rent payable hereunder. The Landlord
      acknowledges receipt of the Tenant's cheque post-dated to May 1, 1995 in
      the amount of FIFTY EIGHT THOUSAND, FOUR HUNDRED AND FORTY SIX DOLLARS
      ($58,446.00). Interest accrued on the deposit at the rate of six per cent
      (6%) per annum from the commencement date of the Term will be credited to
      the Tenant at the end of the Term or, if all Basic Rent and Additional
      Rent have been paid to the end of the Term, the Landlord shall pay the
      said accrued interest to the Tenant.

SECTION 20.06 SECURITY

      The Tenant may install at its own expense new locks on the exterior doors
      and stair well doors which provide access to Leased Premises, together
      with other security devices acceptable to the Landlord acting reasonably,
      including access cards and access codes, provided that immediately
      following the installation of such locks and other security devices the
      Tenant will provide the Landlord with such keys, information relating to
      codes and access cards as are necessary to permit the Landlord to enter
      upon the Leased Premises promptly and without any inconvenience in the
      absence of the Tenant from the Leased Premises.

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                                     - 29 -


SECTION 20.07 QUALITY OF AIR

      The Landlord and Tenant acknowledge that the Landlord has provided to the
      Tenant a letter from the Landlord's Consulting Professional Engineers,
      M.V. Shore Associates (1993) Limited, dated May 30, 1995 regarding the
      ability of the heating ventilating and air-conditioning system (the "HVAC
      System") to satisfy the Tenant's proposed requirements, and confirming the
      upgrading work being carried out to the HVAC System. The Landlord and
      Tenant further acknowledge that the said letter was prepared by the said
      engineers after a review of the Tenant's design proposals for the space
      including details of the Tenant's space plan, the laboratory equipment,
      instruments, and fumehoods intended to be installed by the Tenant in the
      Leased Premises and the type of research chemicals and materials to be
      handled by the Tenant. A copy of said letter is attached as Schedule "C"
      to this Lease.

      The Landlord covenants and agrees that it shall at its own expense
      forthwith commence and diligently proceed with the completion of the
      upgrading of HVAC System as described in the said letter attached as
      Schedule "C". Subject to the provisions of paragraph 9.02(c) hereof,
      Landlord covenants that throughout the term and any renewal thereof it
      will operate and maintain the existing HVAC System serving the Leased
      Premises, as upgraded in accordance with the said letter attached as
      Schedule "C", in reasonable condition and repair. The Landlord further
      covenants that provided that the Tenant's leasehold improvements, space
      plan, and equipment are not altered from those described to M.V. Shore
      Associates (1993) Limited so as to place a greater load on the HVAC System
      and provided that the occupany of the Leased Premises does not exceed the
      maximum number of persons per square foot permitted by the Building Code
      as of the date of this lease, then the Landlord shall cause the HVAC
      System to maintain within the Leased Premises the level of air quality
      temperature and relative humidity described in the said letter attached as
      Schedule "C".

      The Tenant acknowledges that the air quality standards referred to in the
      letter attached as Schedule "C" relate to quantities of fresh air and not
      to odour containment, which is the responsibility of the Tenant. The
      Tenant covenants and agrees that without limiting its other obligations
      under the lease all odour or fume generating activity on the Leased
      Premises will be performed under fumehoods with sufficient capacity to
      contain the escape or migration of contaminants and odours form the Leased
      Premises, that it will at all times maintain its fumehoods and chemical
      neutralizing system in good working order, and that all of its activities
      in or about the Leased Premises, including the handling, transportation
      and storage of chemicals and other materials used in its business, shall
      be carried out in accordance with all laws and regulations and in such a
      manner as to prevent the escape or migration (whether airborne, personel
      borne, or otherwise) of odours and contaminents from the Leased Premises.

SECTION 20.08 LANDLORD'S WORK, MERGER

      The Landlord and Tenant acknowledge that this Lease has been entered into
      pursuant to an Offer to Lease dated the 20th day of February, 1995 between
      the Landlord and Tenant relating to the Leased Premises (hereinafter
      referred to as the "Offer"). The Landlord and Tenant covenant and agree
      that upon execution of this Lease by the Landlord and Tenant all
      covenants, agreements and provisions contained in the Offer shall be
      extinguished and shall merge with and be superseded by this Lease, save
      and except for the covenants, agreements and provisions of paragraph 9 of
      the Offer which relate to the Landlord's Work to the Leased Premises,
      which shall survive the execution of this Lease. The said Landlord's Work
      will be constructed to a building standard turnkey finish level. All
      upgrades above the said building standard will be completed by the Tenant
      at its sole expense.

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SECTION 20.09 CHANGES TO STANDARD FORM LEASE

      The Landlord and Tenant acknowledge that certain changes have been made to
the Landlord's Standard Form of Lease by deleting certain covenants, agreements
and provisions contained in the Landlord's Standard Form of Lease, and by typing
in changes to the Standard Form, by inserting pages 5A, 5B, 6A and 6B, and by
adding Articles 19 and 20 (hereinafter collectively referred to as "Lease
Changes"). The Landlord and Tenant agree that in the event of any inconsistency
between the provisions of the Landlord's Standard Form of Lease and the Lease
Changes, the Lease Changes shall prevail.

            IN WITNESS WHEREOF the parties hereto have executed this Indenture.

SIGNED, SEALED AND DELIVERED

in the presence of:


                                          LuCLIFF COMPANY LIMITED

                                          By: /s/ [ILLEGIBLE]
                                              ----------------------------


                                          VISIBLE GENETICS INC.

                                          By: /s/ John Stevens
                                              ----------------------------
                                              President

                                          By: /s/ [ILLEGIBLE]
                                              ----------------------------
                                              Chief Financial Officer

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                                  SCHEDULE "A"

                                   FLOOR PLAN

                                [GRAPHIC OMITTED]

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                                  SCHEDULE "B"

                             RULES AND REGULATIONS

1.    The Tenant shall not permit any cooking in the Leased Premises without the
      written consent of the Landlord, provided that the Tenant shall be
      entitled to boil water in the Leased Premises.

2.    All persons entering and leaving the Building at any time other than
      during the normal business hours shall register in the books kept by the
      Landlord at or near the night entrance and the Landlord will have the
      right to prevent any person from entering or leaving the Building unless
      provided with a key to the premises to which such person seeks entrance or
      a pass in a form to be approved by the Landlord. Any person found in the
      building at such time without keys or passes will be subject to the
      surveillance of the employees and agents of the Landlord. The Landlord
      shall be under no responsibility for failure to enforce this rule.

3.    The sidewalks, entries, passages, elevators and staircases shall not be
      obstructed or used by the Tenant, its agents, servants, contractors,
      invitees or employees for any purpose other than ingress to the egress
      from the offices. The Landlord reserves entire control of all parts of the
      Building employed for the common benefit of the tenants and without
      restricting the generality of the foregoing, the sidewalks, entries,
      corridors and passages not within the Leased Premise, washrooms,
      lavatories, air-conditioning closets, fan rooms, janitor's closets,
      electrical closets and other closets, stairs, escalators, elevators,
      elevator shafts, flues, stacks, pipe shafts and ducts and shall have the
      right to place such signs and appliances therein, as it may deem advisable
      provided that the ingress to and egress from the Leased Premises is not
      unduly impaired thereby.

4.    The Tenant, its agents, servants, contractors, invitees or employees,
      shall not bring in or take out, position, construct, install or move any
      safe, business machine or other heavy office equipment without first
      obtaining the consent in writing of the Landlord. In giving such consent,
      the Landlord shall have the right in its sole discretion, to prescribe the
      weight permitted and the position thereof, and the use and design of
      planks, skids, or platforms to distribute the weight thereof. All damage
      done to the Building by moving or using any such heavy equipment or
      furniture shall be repaired at the expense of the Tenant. The moving of
      all heavy equipment or other office equipment or furniture shall occur
      only between 6:00 p.m. and 8:00 a.m. or any other time consented to by the
      Landlord and the persons employed to move the same in and out of the
      Building must be acceptable to the Landlord and the Landlord shall
      prescribe the means of access. Safes and other heavy office equipment will
      be moved through the halls and corridors only upon steel bearing plates.
      No freight of bulky matter of any description will be received into the
      Building or carried in the elevators except during hours approved by the
      Landlord.

5.    The Tenant shall not place or cause to be placed any additional locks upon
      any doors of the Leased Premises without the approval of the Landlord and
      subject to any conditions imposed by the Landlord. Two keys shall be
      supplied to the Landlord for each entrance door to the Leased Premises. If
      additional keys are requested, they must be paid for by the Tenant.

6.    The water closets and other water apparatus shall not be used for any
      purpose other than those for which they were constructed, and no
      sweepings, rubbish, rags, ashes or other substances shall be thrown
      therein. Any damage resulting by misuse shall be borne by the Tenant by
      whom or by whose agents, servants, or employees the same is caused. Tenant
      shall not let the water run unless it is in actual use, and shall not
      deface or mark any part of the Building, or drive nails, spikes, hooks, or
      screws into the walls or woodwork of the Building.

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                                      - 2 -


7.    No Tenant shall do or permit anything to be done in the Leased Premises,
      or bring to keep anything therein which will in any way increase the risk
      of fire or the rate of fire insurance on the said Building or on property
      kept therein, or obstruct or interfere with the rights of other tenants or
      in any way injure or annoy them or the Landlord, or violate or act at
      variance with the laws relating to fires or with the regulations of the
      Fire Department, or with any insurance upon said Building or any part
      thereof, or violate or act in conflict with any of the rules and
      ordinances of the Board of Health or with any statute or municipal by-law.

8.    No one shall use the Leased Premises for sleeping apartments or
      residential purposes, of for the storage of personal effects or articles
      other than those required for business purposes.

9.    The Tenant shall permit window cleaners to clean the windows of the Leased
      Premises during normal business hours.

10.   Canvassing, soliciting and peddling in or about the Building and in the
      parking area are prohibited.

11.   In order that the Leased Premises may be kept in good state of
      preservation and cleanliness, each Tenant shall, during the continuance of
      this Lease, permit the janitor or caretaker to take charge of and clean
      the Leased Premises, but the Landlord shall not be responsible for any act
      of omission or commission on the part of the person or persons employed to
      perform such work. The Tenant shall not employ any person other than the
      janitor or caretaker of the Landlord for the purpose of cleaning or taking
      charge of the Leased Premises.

12.   The Tenant shall not receive or ship articles of any kind except through
      service access facilities and at hours designated by the Landlord and
      under the supervision of the Landlord.

13.   It shall be the duty of the respective tenants to assist and co-operate
      with the Landlord in preventing injury to the premises demised to them
      respectively.

14.   Any alterations, additions or changes made in the permanent partitions or
      divisions of the rooms furnished or supplied by the Landlord during the
      currency of the same shall, if made at the request of the Tenant, be at
      the expense of the Tenant but the same shall be subject to the approval
      and direction of the Landlord.

15.   No inflammable oils or other inflammable, dangerous, or explosive
      materials save those approved in writing by the Landlord's insurers shall
      be kept or permitted to be kept in the Leased Premises.

16.   No bicycles or other vehicles shall be brought within the Building.

17.   No animals or birds shall be brought into the Building.

18.   The Tenant shall not install or permit the installation or use of any
      machine dispensing goods for sale in the Leased Premises or the Building
      without the approval of the Landlord or in contravention of any
      regulations fixed or to be fixed by the Landlord. Only persons authorized
      by the Landlord shall be permitted to deliver or to use the elevators in
      the Building for the purpose of delivering food or beverages to the Leased
      Premises.

19.   If the Tenant desires telegraphic or telephonic connections, the Landlord
      will direct the electricians as to where and how the wires are to be
      introduced and without such directions no boring or cutting for wires will
      be permitted. No gas pipe or electric wire will permitted which has not
      been ordered or authorized in writing by the

                                     --------------
[INITIALS]  [INITIALS]  [INITIALS]   RUDERMAN, SHAW
                                     --------------

EX-10.16

                                                                   Exhibit 10.16

                                                                    Etobicoke #2

DATE: February 23, 1996

                                 OFFER TO LEASE

VISIBLE GENETICS INC. ("Tenant") hereby offers to lease from ROYAL TRUST
CORPORATION OF CANADA, AS TRUSTEE and RT PENSION PROPERTIES LIMITED ("Landlord")
certain premises being suite #2 ("Premises") in the building known as 29 CONNELL
COURT, ETOBICOKE, ONTARIO ("Building") located on the lands more particularly
described in the Lease (collectively called "Project"), on the terms and
conditions set out below.

1.    PREMISES: Shown as the shaded area on Schedule "A" and comprising
      approximately 8,482 square feet of Rentable Area, subject to measurement
      by Landlord's architect/space planner in accordance with the provision of
      the Lease. Tenant accepts the Premises "as is", save for the Landlord's
      work.

2.    TERM:

      The Lease shall be for a term of five (5) years commencing on June 1,
      1996.

3.    BASIC RENT: The basic annual rent, plus goods and services taxes, shall be
      payable monthly, in advance, by the Tenant on the first day of each month
      during the terms. The amount per square foot of rentable area of the
      Premises per annum shall be as follows:

      Year 1 @ $1.00 per square foot per annum, plus G.S.T.
      Year 2 @ $1.50 per square foot per annum, plus G.S.T.
      Year 3 @ $2.00 per square foot per annum, plus G.S.T.
      Year 4 @ $2.50 per square foot per annum, plus G.S.T.
      Year 5 @ $3.00 per square foot per annum, plus G.S.T.

4.    DEPOSIT: Together with this Offer, the Tenant shall deliver a deposit in
      the amount of $3,025.25 allocated as $756.31 representing first months
      basic rental of $706.83 plus 7% G.S.T. and $2,268.94 representing last
      months basic rental of $2,120.50 plus 7% G.S.T. payable to D & A Carter
      Property Management Inc. The Deposit shall be returned in full to the
      Tenant should this Offer not be accepted by the parties.

5.    USE: Throughout the Term, Tenant shall actively, diligently and
      continuously operate on the Premises, only under the name Visible Genetics
      Inc. ,the business of industrial/commercial premises for the specific
      purpose of light assembly of computer components, in keeping with
      first-class industrial/commercial building standards and for no other
      purpose.

      [ILLEGIBLE HANDWRITTEN MATERIAL]

                                                                          /s/ JA


                                       -2-


6.    NET LEASE: The Lease shall be absolutely net to Landlord, and Landlord
      shall have no obligations with respect to the Project except as expressly
      set out in the Lease. All Basic Rent and Additional Rent (as defined
      below) shall be payable monthly in advance by Tenant without deduction,
      set-off or abatement for any reason whatsoever. In addition to payment of
      Basic Rent, Tenant shall be responsible throughout the Term for:

(i)   All obligations and costs whatsoever in respect of the Premises and the
      business conducted thereon, including without limitation: utilities,
      insurance, maintenance, repairs and replacements to the Premises and all
      equipment and contents in or serving the Premises, all costs for heating,
      ventilation, air-conditioning, all Taxes attributable to the Premises,
      improvements, equipment and business therein and the rent, all as
      calculated in accordance with the Lease; and

(ii)  Tenant's Proportionate Share of (A) Operating Costs which shall include
      all operating costs incurred by Landlord in the operation, maintenance,
      repair, replacement and management of the Project, including insurance
      premiums and administration fees. and/or management fees, all as detailed
      in the Lease, and (B) Taxes on the Project.

      All amounts payable by Tenant hereunder in addition to Basic Rent
      ("Additional Rent") shall be deemed to be rent and shall be payable and
      collectible in the same manner as rent.

7.    LEASE: Within ten (10) business days after receipt from Landlord but in
      any event prior to occupancy being given, Tenant shall execute and return
      to Landlord the standard form of net lease for the Project. The Lease
      shall not conflict with any of the terms of this Offer, but the Tenant
      acknowledge that the terms of this Offer will be considerably elaborated
      upon in the Lease. If Tenant fails to execute and deliver the Lease within
      such time, all the terms of the Lease shall nevertheless apply, and
      Landlord shall have the right to prevent Tenant from occupying the
      Premises and, in addition, Landlord shall have all rights and remedies
      available to it under the Lease and at law for a default by Tenant
      including the right to terminate this Agreement and claim all deficiencies
      between all amounts which would have been payable by Tenant for what would
      have been the balance of the Term but for such termination, and all net
      amounts actually received by Landlord for such period, and Landlord shall
      have no further obligation to Tenant.

8.    NO TRANSFER: This Offer may not be assigned or otherwise transferred by
      Tenant.

9.    LAWS: This Offer shall be governed by the laws of the Province of Ontario.


                                       -3-


10.   OFFICER'S WARRANTY: The undersigned officers of Tenant hereby represent
      and warrant to Landlord that Tenant is a corporation in good standing and
      duly organized under the laws of the province of Ontario, or if chartered
      in a province other than Ontario, is a corporation in good standing and
      duly organized under the laws of such province and is authorized to do
      business in the province of Ontario and that this Offer has been validly
      executed and delivered by Tenant and Is valid and enforceable against
      Tenant.

11.   COMPLETE AGREEMENT: This Offer (including all Schedules) constitutes the
      complete agreement between the parties and there are no covenants,
      representations, agreements warranties or conditions in any way relating
      to the subject matter of this Offer or the Lease, express or implied,
      collateral or otherwise, except as expressly set forth herein.

12.   TIME OF ESSENCE: Time is of the essence of all terms of this Offer.

13.   SEVERABILITY: If any provision of this Offer is illegal, unenforceable or
      invalid, it shall be considered separate from this Offer and the remaining
      provisions hereof shall remain in full force and effect.

14.   SUCCESSORS AND ASSIGNS: This Agreement shall enure to the benefit of and
      be binding upon the parties hereto and their respective heirs, executors,
      administrators, successors and assigns, (subject to the express
      restrictions contained herein). If Tenant consists of more than one
      person, their obligations hereunder and under the Lease shall be joint and
      several.

15.   FINANCIAL CONDITION: Within five (5) business days after acceptance of
      this Offer, Tenant shall deliver to Landlord such information as the
      Landlord requires ("Information") to satisfy itself as to the financial
      strength of the Tenant and the Tenant hereby consent to the Landlord
      making independent credit inquiries for that purpose. This Offer is
      conditional for a period of fifteen (15) days after receipt by the
      Landlord of such information for the Landlord to satisfy itself as
      aforesaid. If the Landlord fails to notify the Tenant in writing that this
      condition has been either satisfied or waived by the Landlord within such
      fifteen (15) day period, this Offer shall be null and void and of no
      further force or effect. In the event of such termination the Landlord
      shall return all deposits received by it to the Tenant without interest or
      deduction and the Landlord shall not be liable for any losses, damages or
      costs whatsoever. This condition has been inserted for the sole benefit of
      the Landlord and may be waived by the Landlord at any time on notice in
      writing to the Tenant.

16.   OPTION TO EXTEND: In accordance with the terms of the Landlord's standard
      option to extend clause and provided Tenant has not been in default under
      the Lease, the Tenant shall have the option to renew the term of the
      Lease for one (1) additional period of five (5) years upon the Landlord's
      then current standard form of net lease which shall not include


                                      -6-


IN WITNESS WHEREOF Tenant have executed this Offer under seal, this 26th day of
1996, 1996.

                                VISIBLE GENETICS INC.


                                Per: /s/ John Augustus
                                     -------------------------------------------
                                     Name: John Augustus
                                     Title: Vice President c/s


                                Per:
                                     -------------------------------------------
                                     Name:
                                     Title:

                                I/We have the authority to bind the Corporation.

We hereby accept the foregoing Offer this _____ day of ______________, 1996.

                                ROYAL TRUST CORPORATION OF CANADA, as trustee


                                Per: ___________________________________________
                                                                             c/s


                                Per: ___________________________________________

                                I/We have the authority to bind the Corporation.

                                RT PENSION PROPERTIES LIMITED


                                Per: ___________________________________________
                                                                             c/s


                                Per: ___________________________________________

                                I/We have the authority to bind the Corporation.


                                       [MAP OMITTED]

EX-10.17

                                                                   EXHIBIT 10.17

                                                                    Etobicoke #3

This INDENTURE made the 20th day of July 1998
IN PURSUANCE OF THE SHORT FORM OF LEASES ACT

BETWEEN:

                                        COMWEST PROPERTIES LIMITED

                                        (hereinafter called the "Landlord")

                                        OF THE FIRST PART

                                        - and -

                                        VISIBLE GENETICS INC.

                                        (herein called the "Tenant")

                                        OF THE SECOND PART

                  WITNESSETH:

                  1. That in consideration of the rents, covenants and
                  agreements hereinafter reserved and contained on the part of
                  the Tenant to be paid, observed and performed, the Landlord
                  doth demise and lease unto the Tenant that designated portion
                  containing approximately 10,500 square feet of the buildings
                  erected upon the lands and premises situate, lying and being
                  in the City of Toronto and in the Province of Ontario
                  municipal known as 291 AND 295 Evans Avenue, including in
                  premises demised hereunder the windows and exterior doors
                  thereof, together with the right at all times with others
                  entitled thereto, to use the common driveways and the parking
                  areas appurtenant thereto (hereinafter called the "common
                  outside areas"), the said premises and rights being
                  hereinafter sometimes collectively called the "demised
                  premises"; provided that the Landlord shall have the right to
                  make such changes and improvements or alterations as the
                  Landlord may, from time to time, decide in respect of the
                  common outside areas, including the rights to change the
                  location and layout of the parking areas and to increase or
                  reduce the size thereof; further provided, however, that the
                  Landlord shall not reduce the number of parking spaces on the
                  said lands and premises to less than the minimum number
                  required by the applicable laws and regulations.

                  2. To have and to hold the demised premises unless such term
                  shall be sooner terminated as hereinafter provided, for and
                  during the term of two (5) years to be computed from and
                  inclusive of the 1st day of September, 1998 (hereinafter
                  called the "lease commencement date" and from henceforth next
                  ensuing and fully to be completed and ended on the 31st day of
                  August, 2003.

                  PROVIDED, and it is hereby agreed, that if the whole of the
                  demised premises are not ready for occupancy by the Tenant on
                  the lease commencement date, then the rent shall be
                  apportioned proportionately according to the amount of space
                  ready for occupancy and no responsibility whatsoever shall
                  attach to the Landlord if the demised premises are not so
                  ready by the lease commencement date. The certificate of the
                  Landlord's architect shall be final and binding upon both
                  parties as to whether or not the entire demised premises are
                  ready for occupancy and, if not, as to the proportion of space
                  therein that is available for occupancy. In such event the
                  term of this lease shall be extended by a number of days equal
                  to the number of days from and including the lease
                  commencement date to and including the date as of which the
                  demised premises are ready for occupancy as so certified.

Use of premises   3. The tenant shall use and occupy the demised premises only
                  for office and storage and for no other purpose; provided the
                  Tenant, in the use and occupation of any business therein,
                  shall comply with all requirements of all laws, orders,
                  ordinances, rules and regulations of the Federal, provincial
                  and Municipal authorities and with any direction or
                  certificate of occupancy issued pursuant to any law by any
                  public office or Officers. The Tenant covenants that it will
                  not use or permit the demised premises or any part thereof to
                  be used for any dangerous, noxious or offensive trade or
                  business and will not cause or maintain any nuisance in, at or
                  on the demised premises.


                                                                               2


Rent              4.    (a)   Yielding and paying therefor yearly and every year
                              during the term hereby granted the sum of
                              $62,425.00 of lawful money of Canada to be paid
                              without any deduction or set-off whatever in
                              advance in equal consecutive monthly installments
                              of $5,206.25 each on the first day of each month
                              in each year during the term hereby demised, (it
                              being understood that such annual rental is
                              calculated at the rate of $5.95 per sq. ft. per
                              annum), together with additional rent hereinafter
                              reserved.

                        (b)   Where the term of this lease commences other than
                              on the first day, or ends earlier than on the last
                              day, of a calendar month:

                                   (i)   the rent for the period or periods of
                                         less than a full calendar month shall
                                         be that fraction of the monthly
                                         installment of rent of which the
                                         numerator is the number of days of such
                                         month within the term of this lease and
                                         the denominator is the number of days
                                         of such month.

                                   (ii)  the rent for the period of less than
                                         one calendar month occurring at the
                                         commencement of the term of this lease
                                         shall be payable on or before the lease
                                         commencement date.

                                   (iii) the rent for the period of less than
                                         one calendar month occurring at the end
                                         of the term of this lease shall be
                                         payable on or before the first day of
                                         the last calendar month commencing
                                         during the term of this lease.

Payment           5.    All payments required to be made by the Tenant under or
                        in respect of this lease shall be made to the Landlord
                        at the Landlords office 365 Evans Avenue, Suite 601 in
                        Toronto 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.

Payment of              The Landlord acknowledges receipt of $13,750.00 from the
Security                Tenant to be held by the Landlord as security for the
                        due performance by the Tenant of all its covenants and
                        obligations on its part herein contained and to be
                        applied to the damages resulting from default by the
                        Tenant on any of its covenants and obligations
                        hereunder, or towards the payment or reduction of any
                        claim of the Landlord against the Tenant; provided that
                        the Tenant is not in default or in breach of any of its
                        covenants or obligations and has not been declared
                        bankrupt, then the aforesaid security deposit shall be
                        returned to the Tenant within fifteen (15) days after
                        the expiration of the lease term.

Free Rent               Notwithstanding any thing prior herein, there shall be
                        no rent payable for the month of September 1999 nor for
                        the month of September 2000. The Tenant shall still be
                        required to pay additional rent and utility charges for
                        the said two months.

Tenant's          6.    The Tenant covenants with the Landlord.
Covenants

Rent                    (a)   to pay rent:

Taxes and               (b)   (i) as additional rent, in each and ever year
Utilities                     during the term hereof, to pay and discharge in
                              the proportion that the area of the demised
                              premises within the said building (measured from
                              the outside of the outside walls to the centre of
                              the demising walls) bears to the total rentable
                              area (measured from and to the outside of all
                              outside walls) of all buildings erected on the
                              lands (hereinafter called the "Tenant's
                              proportion"), all taxes (including local
                              improvement rates), charges, rates, duties and
                              assessments that may be levied, rated, charges or
                              assessed against the lands and the buildings
                              erected thereon, the Tenant's proportion of all
                              business taxes, if any from time to time payable
                              in respect of the parking areas, entrances, exits,
                              pedestrian walkways, roadways, service areas or
                              any part thereof, and the whole of every other
                              tax, charge, rate, duty, assessment or payment
                              which may become a charge or encumbrance upon or
                              levied or collected upon or in respect of the
                              demised premises or any part thereof, whether
                              charged by any municipal, parliamentary or other
                              body during the said Term. The taxes, local
                              improvement rates, charges, rates, duties
                              assessments and payments as hereinbefore defined
                              are hereinafter referred to as the "real property
                              taxes" and shall include a tax or excise on rents
                              or other tax however described, levied by any
                              relevant governmental authority against the
                              Landlord or the rent, as a clearly ascertainable
                              substitute in whole or inpart for taxes assessed
                              or imposed on the land and buildings or either of
                              them, of which the demised


                                                                               3


                              premises form a part. The Landlord will, at the
                              commencement of this lease and thereafter by
                              calendar year, estimate the real property taxes
                              levied against the said lands and buildings and
                              the demised premises for the next ensuing year and
                              the Tenant shall pay one-twelfth (1/12) of the
                              Tenant's proportion hereof at the times at which
                              rent is payable hereunder.

                              Notwithstanding any thing hereinbefore contained,
                              in the event that at the time when the payment of
                              the real property taxes due, the Landlord shall
                              not have on deposit a sufficient sum to pay the
                              full amount thereof, the Tenant shall forthwith
                              upon demand pay the Tenant's proportion of the
                              amount of any deficiency to the Landlord. When
                              final bills for the real property taxes in any
                              year have been received, the Landlord and Tenant
                              will adjust such in accordance with such bills. If
                              the Tenant has not paid the full amount of the
                              Tenant's proportion thereof, the amount of the
                              underpayment shall be paid by the Tenant to the
                              Landlord forthwith without demand. If the Tenant
                              has overpaid the Tenant's proportion, the amount
                              of such overpayment shall be forthwith paid by the
                              Landlord to the Tenant. The certificate of the
                              Landlord's auditor as to any amount which may be
                              owing by either party to the other under this
                              subclause shall, in the event of dispute, be
                              binding on the Landlord and the Tenant.

                              As an alternative to the foregoing method of
                              determining the share of the real property taxes
                              which the Tenant is obligated to pay pursuant to
                              the provisions of this paragraph 6 the Landlord
                              may, in its sole discretion and at its option,
                              base the Tenant's share of the real properly Taxes
                              upon the value of the demised premises as compared
                              to the value of the buildings of which the demised
                              premises may form a part from time to time. As
                              information as to such value may be made
                              available, firstly, by the relevant municipal
                              authorities through the separate assessments of
                              the demised premises and the said building or,
                              secondly, as may be ascertained through the realty
                              or business tax assessment rolls of the City of
                              Toronto or, thirdly, if separate assessments are
                              not available in order to determine the aforesaid
                              values, the Tenant shall pay a share of the real
                              property taxes as allocated to the demised
                              premises by the Landlord, the Landlord shall
                              allocate the real property taxes firstly with
                              respect to said outside common areas and
                              facilities and secondly, with respect to premises
                              intended for leasing and the Landlord shall make a
                              further allocation of such taxes as between each
                              of the individual premises intended for leasing on
                              an equitable basis having regard, amongst other
                              things, to the various users of the premises
                              intended for leasing comprising the whole of the
                              lands and premises of which the demised premises
                              form a part as aforesaid; in making such
                              allocation, the Landlord shall, at all times, act
                              reasonably and as would a prudent owner and in no
                              event shall the real property taxes collected by
                              the Landlord from all tenants of the Building of
                              which the demised premises form a part and from
                              all tenants of other buildings located on the said
                              lands and premises exceed 100 per cent of the real
                              property taxes as may be levied by the relevant
                              taxing authority, in any given year, against the
                              whole of the said lands, premises and buildings;

                              (ii) to pay business and other governmental taxes,
                              charges, rates, duties and assessments levied in
                              respect of the Tenant's occupancy of the demised
                              premises, or in respect of the personal property
                              or business of the Tenant on the demised premises,
                              as and when the same become due; and also if the
                              Tenant or any permitted assignee or subtenant of
                              the Tenant shall elect to have the demised
                              premises, or any part thereof, assessed for
                              separate school taxes, the Tenant shall, on
                              demand, pay to the Landlord, notwithstanding
                              anything hereinbefore contained, as soon as the
                              amount of the separate school tax is ascertained,
                              any amount by which the separate school taxes
                              exceed the amount which would have been payable
                              for school taxes had such election not been made.

                              (iii) to pay as the same become due respectively
                              all charges for public and private utilities,
                              including without limitation, water, gas,
                              electrical power or energy, steam or hot water
                              used upon or in respect of time demised premises
                              and for fittings, machines, apparatus, meters or
                              other things leased in respect thereof, and for
                              all work or services performed by any corporation
                              or commission in connection with such public
                              utilities; if no separate meter is provided for
                              any such utility, the Tenant shall pay to the
                              Landlord the Tenant's proportion of the total cost
                              of such utility with respect to the buildings of
                              which the demised


                                                                               4


                              premises form a part, as estimated by the
                              Landlord, upon periodic demand of the Landlord;
                              provided in the event the Landlord should
                              determine, in its discretion, that the Tenant's
                              use of such commonly metered utility is in any way
                              unusual, the Landlord may, at its option, but at
                              the expense of the Tenant, install for the demised
                              premises a separate or sub-meter with respect to
                              such utility, whereupon the Tenant's cost in
                              connection with such utility shall be determined
                              in accordance with such separate or sub-meter;

                              (iv) the Tenant shall has the right to contest, by
                              appropriate legal proceedings, at its own expense,
                              the validity of any tax, rate (including local
                              improvement rates), assessment or other charges
                              referred to in this paragraph. Notwithstanding
                              anything in this lease to the contrary, such
                              contestation by the Tenant shall not be deemed to
                              be a default in the payment of such taxes, rates
                              (including local improvement rates), assessments
                              or other charges until the outcome thereof is
                              finally determined provided it is lawful to
                              postpone such payment until such time;

Cost of                 (c)   (i) as additional rent, in each and every year
Maintenance             during the term hereof, to pay to the Landlord in
                        addition to the rental specified in paragraph 4 hereof
                        its proportionate share (as hereinafter defined) of the
                        Landlord's actual costs and expenses of maintaining,
                        operating, repairing and administering the Buildings of
                        which the demised premises are a part, and the common
                        areas and facilities of the said buildings such costs
                        and expenses to include, without limitation;

                              (A) the total costs and expenses incurred by the
                              Landlord in insuring the lands, buildings,
                              improvements, equipment and other property from
                              time to time comprising the said buildings and the
                              common areas and facilities thereof, in such
                              manner and in such companies and form, and with
                              such coverage and in such amounts as the Landlord,
                              at its sole discretion, from time to time shall
                              determine including, without limitation, fire
                              insurance with extended coverage endorsement,
                              public liability and property damage insurance and
                              loss of rental insurance;

                              (B) real property taxes ( including school taxes
                              and local improvement rates) and all business and
                              other taxes, if any, from time to time payable by
                              the Landlord levied or assessed both against or
                              allocated by the Landlord pursuant to paragraph
                              6(b)(1) hereof, against or in respect of the
                              common areas and facilities of the said buildings
                              or against the Landlord on account of its
                              ownership thereof and capital tax imposed upon the
                              Landlord in respect of the capital employed by it
                              in the ownership of the buildings computed as if
                              the buildings were the only real property of the
                              Landlord;

                              (C) the total costs of operating, maintaining,
                              lighting, cleaning including snow and ice
                              removable and clearance), supervising, policing,
                              landscaping, repairing and replacing all common
                              areas and facilities of the said buildings
                              including, without limitation, all monies paid to
                              persons, firms or corporations employed by the
                              Landlord to perform same; and

                              (D) all expenses incurred or paid by the Landlord
                              in connection with the maintenance, repair,
                              replacement operation and management of the said
                              buildings and all services connected therewith,
                              together with an administrative fee of five
                              percent of such annual costs and expenses
                              aforesaid.

                        (ii)  The term "proportionate share" used in this
                              paragraph 6(c) shall mean a fraction, the
                              numerator of which is the rentable area of the
                              demised premises and the denominator of which
                              total rentable area of the said buildings of which
                              the demised premises form part.

                        (iii) The amounts payable by the Tenant pursuant to this
                              paragraph 6(c) may be estimated by the Landlord
                              for such period or periods as the Landlord may
                              determine and the Tenant agrees to pay to the
                              Landlord its proportionate share as so estimated,
                              of such amounts in monthly installments in advance
                              during such period(s) together with all other
                              rental payments provided for in this Lease.

                              Notwithstanding the foregoing, as soon as bills
                              for all or any portion of the said amounts so
                              estimated are received, the Landlord may bill the
                              Tenant for its proportionate share thereof (less
                              all amounts previously



                                                                               5


                              paid by the Tenant on the basis of the Landlord's
                              estimate aforesaid which have not already been so
                              applied) and the Tenant shall pay to the Landlord
                              such amounts so billed as additional rent on
                              demand. At the end of the period for which such
                              estimated payments have been made, the Landlord
                              shall deliver to the Tenant a statement of the
                              actual amounts and costs referred to in this
                              paragraph 6(c) and the determination of the
                              Tenant's proportionate share thereof, and if
                              necessary, an adjustment shall be made between the
                              parties hereto. If the Tenant shall have paid in
                              excess of such actual amounts, the excess shall be
                              refunded by the Landlord within a reasonable
                              period of time after delivery of the said
                              statement. If the amount the Tenant paid is less
                              than such actual amounts, the Tenant agrees to pay
                              to the Landlord any such extra amount or amounts
                              with the next monthly payment of rent.

Repairs                 (d) at its own expense, to maintain and keep the
                        interior of the demised premises and every part thereof
                        in good order and condition and promptly to make all
                        needed interior repairs and replacements (reasonable
                        wear and tear and damage by fire, lightning and tempest
                        only excepted) and, without limiting the foregoing, to
                        keep the demised premises well painted, clean and in
                        such condition as would a careful owner;

Inspection              (e) that it shall be lawful for the Landlord and its
                        agents at all reasonable times during the said term, to
                        enter the demised premises to inspect the condition
                        thereof and to make repairs, alterations, or
                        improvements to the demised premises or to the building
                        of which the demised premises form part and the Tenant
                        shall not be entitled to compensation for any
                        inconvenience, nuisance or discomfort caused thereby.
                        Where an inspection reveals repairs, which are the
                        obligation of the Tenant hereunder to make, are
                        necessary, the Landlord shall give to the Tenant notice
                        in writing, and thereupon the Tenant will, within one
                        (1) calendar month from the date of delivery of the
                        notice, make necessary repairs in a good and workmanlike
                        manner, failing which the Landlord may make such repairs
                        and the cost thereof shall be payable by the Tenant.

Leave                   (f) at the expiration or sooner determination of the
Premises                term hereof, peaceably to surrender and yield up to the
In Good                 Landlord the demised premises with the appurtenances,
Repair                  together with all buildings or erections which at any
                        time during the said term shall be made therein or
                        thereon, in good and substantial repair and condition,
                        reasonable wear and tear and damage by fire, lightning,
                        tempest and structural defect only excepted:

Heating and             (g) to heat the demised premises in a reasonable manner
Air                     at its own expense from heating equipment supplied by
Conditioning            the Landlord and to maintain, keep in good repair and
                        replace, if necessary, at its own expense, the said
                        heating equipment and such air conditioning equipment as
                        may be supplied by the Landlord. Heating of the demised
                        premises is to be maintained so that at all times the
                        demised premises and the contents thereof shall be
                        protected from damage by cold or frost. The Landlord
                        shall, to the extent the same are assignable, assign to
                        the Tenant all guarantees and warrants with respect to
                        such equipment;

Public Orders           (h) to comply promptly with all requirements of the
                        Local Board of Health, Police or Fire Department and
                        Municipal authorities respecting the demised premises:

Assignment              (i) (i) not to assign, sublet or part with possession of
Subletting              the demised premises or part thereof or permit the
                        demised premises or any part thereof to be occupied by
                        anyone other than the Tenant, without the prior written
                        consent of the Landlord, provided such consent shall not
                        be unreasonably withheld, and further provided that the
                        Landlord may, within ten (10) days of receiving a
                        request for such consent, give notice in writing to the
                        Tenant terminating this lease effective not earlier than
                        the proposed date of the assignment or commencement of
                        the subtenancy. The Landlord shall not be deemed to have
                        withheld such consent unreasonably if;

                              (A) the Tenant, when requesting such consent, does
                              not submit to the Landlord the full name and
                              address of the proposed sub-tenant or assignee, a
                              statement of the use to which the proposed
                              sub--tenant or assignee wishes to put the demised
                              premises, the proposed effective date of any
                              assignment or the proposed effective date of a
                              sublease, the net rent per square foot to be paid
                              by a proposed sub-tenant of the total
                              consideration to be paid by a proposed assignee
                              for an assignment of the Lease, a copy of the
                              proposed sub-lease for an assignment of the Lease,
                              a copy of the proposed sub-lease and either
                              reasonably satisfactory financial references from
                              a chartered bank or a copy of the



                                                                               6


                              latest audited financial statements of the
                              proposed sub--tenant or assignee which shall not
                              be in respect of a period ended more than Eighteen
                              (18) months prior to the date of the Tenant's
                              request:

                              (B) the proposed sub-tenant or assignee wishes to
                              use the demised premises for a use or uses other
                              than that or those permitted hereunder.

                        (ii)  the following shall be deemed to be conditions of
                              any consent given by the Landlord pursuant to the
                              provisions of this subparagraph 6(h) whether or
                              not expressed to be so in such consent;

                              (A)   notwithstanding the granting of consent to a
                                    sub-tenancy the Tenant shall remain liable
                                    to the Landlord on all the covenants and
                                    agreements herein contained;

                              (B)   if the net rent per square foot to be paid
                                    by a sub-tenant, whether in cash, goods,
                                    services or other consideration, exceeds the
                                    net rent per square foot, payable hereunder,
                                    the Tenant shall pay the Landlord monthly
                                    the amount of, or an amount equivalent to,
                                    such excess;

                              (C)   if the Tenant receives, whether directly or
                                    indirectly and whether in the form of cash,
                                    goods or services, any consideration for the
                                    assignment of this lease such amount, or the
                                    equivalent in money of such amount, shall be
                                    paid to the Landlord;

                              (D)   no sub-tenant or assignee shall further
                                    assign or sublet without the consent of the
                                    Landlord, which consent shall not be
                                    unreasonably withheld and the provisions of
                                    this subparagraph 6(h) shall apply, to all
                                    requests for such consent as if the
                                    sub-tenant or assignee seeking such consent
                                    were the Tenant named herein;

                        Upon an Assignee assuming all of the Tenant's
                        obligations and entering into an Agreement of Assignment
                        of Lease prepared by the Landlord at the cost of the
                        Tenant, which cost shall not be unreasonable in the
                        circumstances, the tenant shall be released from all
                        further obligations hereunder.

Nuisance                (j) that it will not do or omit or permit to be dome or
                        omitted upon or about the demised premises anything
                        which shall be or result in a nuisance or menace to the
                        Landlord or other any Tenant of the buildings located on
                        the lands and premises;

Insurance               (k) (i) that in the event the Tenant's use and
                        occupation of the demised premises, whether or not the
                        Landlord has consented to the same, causes any increase
                        in premiums for fire and extended coverage insurance,
                        rental, boiler, casualty and other types of insurance
                        carried by the Landlord from time to time on the
                        Building of which the demised premises from a part,
                        above the rate for the lease hazardous type of occupancy
                        legally permitted in the demised premises, the Tenant
                        shall pay the additional premium on the policies
                        aforementioned caused by reason thereof. The Tenant
                        shall also pay in such event, any additional premium on
                        the rent insurance policies that may be carried by the
                        Landlord for the Landlord's protection against rent lost
                        through fire or other casualty. If notice of
                        cancellation shall be given respecting any insurance
                        policy or any insurance policy on the said buildings or
                        any part thereof shall be cancelled or refused to be
                        renewed by an insurer by reason of the use or occupation
                        of the demised premises by the Tenant, whether or not
                        the Landlord has consented to such use and occupation,
                        the Tenant shall forthwith remedy or rectify such use or
                        occupation upon being requested to do so in writing by
                        the Landlord, and if the Tenant shall fail to do so
                        forthwith and before any such insurance is cancelled or
                        otherwise terminated, the Landlord may, at its option,
                        determine this lease forthwith by leaving upon the
                        demised premises notice in writing of its intention to
                        do so, 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 demised
                        premises to the Landlord;

                              (ii) in the event that any premiums for fire and
                              extended coverage insurance and all other types of
                              insurance carried by the Landlord from time to
                              time as aforesaid on the building of which the
                              demised premises form a part, be increased over
                              the rates established for the first year of the
                              term of this lease, the Tenant shall pay to the
                              Landlord the Tenant's proportion of such increase;



                                                                               7


                              (iii) bills for such additional premiums as
                              aforementioned shall be rendered by the Landlord
                              to the Tenant at such times as the Landlord may
                              elect, and shall be due from and payable by the
                              Tenant when rendered, and the amount thereof shall
                              be deemed to be, and paid as, additional rent;

                              (iv) the Tenant will provide the Landlord with a
                              certificate of liability insurance covering the
                              Tenant and the Landlord in respect of the demised
                              premises and its operations therein to the extend
                              of not less than $1,000,000 inclusive of all
                              injuries or death to persons and damage to
                              property of others arising from any one occurrence
                              and a certificate of fire and extended coverage
                              insurance on all improvements made by the Tenant
                              to the demised premises;

                              (v) the Tenant shall, at its own expense replace
                              any plate glass or other glass that has been
                              broken or removed during the said term or of any
                              renewal thereof, and will during the said term
                              keep the plate glass fully insured, pay the
                              premium such insurance and provide the Landlord
                              with a certificate of such plate glass insurance;

                              (vi) all policies of insurance required to be
                              taken out by the Tenant hereunder and all
                              certificates thereof required to be furnished to
                              the Landlord shall provide that the same are not
                              cancellable by the insurer without fifteen (15)
                              days prior written notice to the Landlord.

Seizure           7.    Provided, and it is hereby expressly agreed:
and
Bankruptcy              (a) that, in case, without written consent of the
                        Landlord, the demised premises shall become and remain
                        vacant or not used for a period of thirty (30) days
                        while the same are suitable for use by the Tenant, or if
                        the demised premises or any part thereof be used by any
                        other person than the Tenant and approved assignees or
                        subtenants, or in case the term hereby granted or any of
                        the goods and chattels of the Tenant shall be at any
                        time seized or taken in execution or in attachments by
                        any creditor of the Tenant, or the Tenant shall make any
                        assignment of the benefit of creditors or give any bill
                        of sale without complying with the Bulk Sales Act
                        (Ontario), or become bankrupt or insolvent, or take the
                        benefit of any act now or hereafter in force for
                        bankrupt or insolvent debtors or any Order shall be made
                        for the winding-up or the Tenant, then and in every such
                        case the then current month's rent and the next ensuing
                        there (3) months' rent shall immediately become due and
                        payable, and at the option of the Landlord, this lease
                        shall cease and determine and the said term shall
                        immediately become forfeited and void, in which event
                        the Landlord may re-enter and take possession of the
                        demised premises as thought the Tenant or any occupant
                        or occupants of the demised premises was or were holding
                        over after the expiration of the term without any right
                        whatever;

Distress                (b) that notwithstanding the benefit of any present or
                        future Statute taking away or limiting the Landlord's
                        right of distress none of the goods and chattels of the
                        Tenant on the demised premises at any time during the
                        said term shall be exempt from levy by distress for rent
                        in arrears;

Public                  (c) that save and except for structural defect, the
Liability               negligence or wrong doing of the Landlord, its
                        employees, workmen, agents, contractors or invitees, the
                        Landlord shall not in any event whatsoever be liable or
                        responsible in any way for any personal injury or death
                        that may be suffered or sustained by the Tenant or any
                        employees of the Tenant or any other person who may be
                        upon the demised premises or any truckways, platforms or
                        corridors in connection therewith or the common inside
                        areas or for any loss or damage or injury to any
                        property belonging to the Tenant or its employees or to
                        any other person while such property is on the demised
                        premises and, in particular, (but without limiting the
                        generality of the foregoing), the Landlord shall not be
                        liable for any damage, direct or consequential, to any
                        such property caused, either directly or indirectly, by
                        steam, water, rain or snow which may leak into, issue or
                        flow from any part of the building of which the demised
                        premises form part or adjoining premises or from the
                        water, steam, sprinkler or drainage pipes or plumbing
                        works thereof or from any other place or quarter or for
                        any damage caused by or attributable to the condition or
                        arrangement of any electrical or other wiring or for any
                        damage by anything done or omitted to be done by any
                        Tenant;

Indemnification         (d) The Tenant will indemnify and save harmless the
Of Landlord             Landlord from any and all liabilities, fines, suits,
                        claims, demands, costs and actions of any kind or nature
                        whatsoever to which the Landlord shall or may become
                        liable for, or suffer by reason of any breach, violation
                        or non-performance by the Tenant of



                                                                               8


                        any covenant, term or provision hereof, or by reason of
                        any injury, loss, damage or death resulting from,
                        occasioned to or suffered by any person or persons, or
                        any property by reason of any act, neglect or default on
                        the part of the Tenant, or any of its sub-lessees,
                        agents, customers, employees, contractors, licensee or
                        invitees, in or about the demised premises or any
                        truckways, platforms or corridors in connection,
                        therewith or the common outside areas; such
                        indemnification in respect of any such breach,
                        violation, non-performance, damage to property, loss,
                        injury or death occurring during the term of this Lease
                        shall survive any termination of this lease, anything in
                        this lease to the contrary notwithstanding;

Overholding             (e) that if the Tenant shall continue to occupy the
                        demised 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 a monthly rental herein reserved and
                        otherwise on the terms and conditions herein set forth,
                        except as to the length of Tenancy;

Overloading             (f) that the Tenant will not bring upon the demised
                        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 demised premises and
                        that if any damage is caused to the demised premises by
                        any machinery, equipment, article or thing or by
                        overloading or by any act, neglect or misuse on the part
                        of the Tenant or any of its 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;

Payments                (g) that in the event of the Tenant failing to pay any
Deemed Rent             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; all payments required to be
                        made by the Tenant pursuant to the terms of this lease
                        shall be deemed rent. All rent in arrears and all
                        amounts collectible hereunder as if rent in arrears
                        shall bear interest at an annual rate being five (5)
                        percentage points above the prime bank lending rate
                        being charged from time to time by the Chartered Banks
                        for commercial loans to its best commercial customers,
                        which shall be charged from the respective due dates of
                        such amounts until paid; provided that this shall in no
                        way affect any claim for damages by the Landlord for any
                        breach or default by the Tenant;

Refuse                  (h) that the Tenant will keep the demised 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;

Notice of Damage        (i) in the event of any substantial damage to the
                        demised premises or any part thereof or any appurtenance
                        thereto, including without limitation, damage to the
                        heating equipment, plumbing system, electrical equipment
                        or sprinkler system, the Tenant shall forthwith upon
                        becoming aware of such damage give notice in writing
                        thereof to the Landlord;

Loading and             (j) that all loading and unloading of merchandise,
Unloading               supplies, materials, garbage and other chattels shall be
                        effected only through or by means of such doorways or
                        corridors as the Landlord shall designate;

Demised                 (k) whenever in this lease reference is made to the
Premises Defined        demised premises, it shall include all structure,
                        improvements and erections, save and except Tenant's
                        fixtures and those Tenant's improvements the title to
                        which has not vested in the Landlord pursuant to
                        paragraph 16 hereof, in or upon the demised premises or
                        any part thereof from time to time;

Evidence of             (l) the Tenant shall from time to time at the request of
Payments by Tenant      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;

Adjustment Taxes        (m) the taxes and local improvement rates in respect of
                        the first and last calendar years falling within the
                        term hereof shall be adjusted between the Landlord and
                        the Tenant;

Expropriation           (n)   (i) if, at any time during the term hereof a
                              portion of the common areas and facilities
                              referred to in this lease or any portion of the
                              demised premises not covered by buildings or
                              structures are taken by expropriation or an
                              easement or right or license in the nature of an
                              easement over, upon or under a portion of the
                              lands expropriated, and




                                                                               9


                              such taking or expropriation does not materially
                              affect the Tenant's use or enjoyment of the
                              demised premises, then the whole of the
                              compensation awarded or settlement for the lands
                              so expropriated, whether fixed by agreement or
                              otherwise, shall be paid to or received by the
                              Landlord and the Tenant hereby assigns, transfers
                              and sets over unto the Landlord all the right,
                              title and interest of the Tenant therein and
                              thereto, and this lease shall thereafter continue
                              in effect with respect to the demised premises
                              without any abatement of rent;

                              (ii) in the event that any expropriation does
                              materially affect the Tenant's use or enjoyment of
                              the demised premises, the whole of the
                              compensation awarded or settlement, whether fixed
                              by agreement or otherwise for the said lands so
                              expropriated, shall nevertheless be paid to or
                              received by the Landlord, and the Tenant hereby
                              assigns, transfers and sets over unto the Landlord
                              all the right, title and interest of the Tenant
                              therein and thereto but the rent thereafter
                              payable by the Tenant shall abate accordingly;

                              (iii) if the landlord and the Tenant shall be
                              unable to agree, within thirty (30) days after the
                              amount of compensation, award or settlement as
                              aforesaid has been fixed, as to whether such
                              taking or expropriation materially affects the
                              Tenant's use or enjoyment of the demised premises
                              or as to the extent to which the rent shall abate,
                              then the same shall be determined by arbitration
                              as set out in paragraph 25 hereof;

                              (iv) in the event that such taking or
                              expropriation so affects the demised premises as
                              not to terminate this lease but as to require the
                              reconstruction or replacement of some portion of
                              the demised premises, such reconstruction or
                              replacement shall be carried out at the Landlord's
                              expense in a good and workmanlike manner and as
                              expeditiously as reasonably practicable, provided
                              the cost thereof does not exceed the amount of the
                              compensation awarded or fixed by agreement or
                              otherwise;

                              (v) if the entire demised premises are
                              expropriated or if so much thereof or of the
                              appurtenances thereof or such part of the means of
                              access to and egress from the demised premises
                              shall be taken that it shall not be practical or
                              feasible to use the part thereof not taken in the
                              operation of the Tenant's business, at the rent
                              and subject to the covenants and conditions of
                              this lease, this lease shall, upon vesting of
                              title in the expropriating authority, terminate
                              and rent, all other payments required to be made
                              hereunder as additional rent with respect to
                              periods after the vesting of title in the
                              expropriating authority shall be refunded and the
                              whole of the compensation awarded or settlement
                              whether fixed by agreement or otherwise, for the
                              said lands and premises or part thereof so
                              expropriated shall nevertheless be paid to or
                              received by the Landlord and the Tenant hereby
                              assigns, transfers and sets over unto the Landlord
                              all the right, title and interest of the Tenant
                              therein and thereto.

Removal of
Fixtures          8. Provided all rent due or to become due under the terms of
                  this lease is fully paid, the Tenant may remove its trade
                  fixtures and shall make good all damage caused by such
                  removal; provided further that the Tenant shall not remove or
                  carry away from the demised premises any building or plumbing,
                  heating or ventilation plant or equipment or other building
                  services or improvements.

Re-Entry          9. Proviso for re-entry by the said landlord on non-payment of
                  rent or non-performance of covenants.

                        The above powers may be exercised, whether legal demand
                  for the rent has been made or not. Provided that
                  notwithstanding anything hereinbefore contained, the
                  Landlord's right of re-entry hereunder for non-payment of
                  rent, non-performance of covenant's seizure or forfeiture of
                  the said term shall become exercisable immediately upon such
                  default being made. Provided, further, that upon such re-entry
                  by the Landlord under the term of this paragraph or any other
                  provision or provisions of this lease, the Landlord may, in
                  addition to any other remedies to which the Landlord may be
                  entitled at its option, at any time and from time to time
                  relet the demised premises or any part or parts thereof for
                  the account of the Tenant or otherwise and receive and collect
                  the rents therefor, applying the same first to the payment of
                  such expenses as the Landlord may have incurred in recovering
                  possession of the demised premises, including the legal
                  expenses and solicitor's fees and for putting the same into
                  good order or condition or preparing or altering the same for
                  re-rental and all other expenses, commissions and charges
                  paid, assumed or incurred by the Landlord in or about
                  reletting the premises



                                                                              10


                  and then to the fulfillment of the covenants of the Tenant
                  hereunder. Any such reletting herein provided for may be for
                  the remainder of the term as originally granted or for a
                  longer or shorter period. In any such case and whether or not
                  the demised premises or any part thereof be relet the Tenant
                  shall pay to the Landlord the rental hereby reserved and all
                  other sums required to be paid by the Tenant up to the time of
                  the termination of this lease or of recovery of possession of
                  the demised premises by the Landlord, as the case may be, and
                  if required by the Landlord thereafter the Tenant shall pay to
                  the Landlord until the end of the term of this lease the
                  equivalent of the amount of all the rentals hereby reserved
                  and all other sums required to be paid by the Tenant
                  hereunder, less the net avails of reletting, if any, and upon
                  each of the days herein provided for payment of rental, the
                  Tenant shall pay to the Landlord the amount of the deficiency
                  then existing.

Net Lease         10. It is the intention of this lease that, save as expressly
                  herein provided, the said rentals herein provided to be paid
                  shall be net and without set-off to the Landlord and clear of
                  all taxes, except the Landlord's income taxes, costs and
                  charges arising from or relating to the demised premises and,
                  save as aforesaid, that the Tenant shall pay all charges,
                  impositions, expenses of every nature and kind relating to the
                  demised premises and the Tenant covenants with the Landlord
                  accordingly.

Quiet Enjoyment   11. The Landlord covenants with the Tenant for quiet
                  enjoyment.

Snow Removal      12. The Landlord shall maintain and keep in good repair the
                  common outside areas and the landscaped areas and shall
                  provide reasonably adequate snow clearance of the parking
                  areas and of the entrances and exits to and from the demised
                  premises and the said parking areas.

Inspection        13. Provided that during the term hereof any person or persons
                  may inspect the demised Premises and all parts thereof at all
                  reasonable times, in producing a written order to that effect
                  signed by the Landlord or its agents.

Removal of        14. Provided that in case of removal by the Tenant of the good
Goods             and chattels of the Tenant from off the demised premises, the
                  Landlord may follow the same for thirty (30) days in the same
                  manner as is provided for in the Landlord and Tenant Act.

Notices for       15. Provided that the Landlord shall have the right during the
Sale or to Let    term of this lease to place upon the demised premises a notice
                  stating that the demised premises are for sale and shall,
                  within three (3) months from the termination of the said term,
                  have the right to place upon the demised premises a notice
                  stating that the demised premises are for Rent; and further
                  provided that the Tenant will not remove such notice or permit
                  the same to be removed.

Improvements      16. Any alterations, erections or improvements, save and
                  except Tenant's trade fixtures placed or erected upon the
                  demised premises, shall become a part thereof and shall not be
                  removed and shall be subject to all the provisions of this
                  lease. No alteration, erection or improvement shall be made or
                  erected upon the demised Premises without the written prior
                  consent of the Landlord. All improvements made to the demised
                  premises by the Tenant shall become part of the demised
                  premises and title therein shall vest in the Landlord on the
                  termination of this lease or, if the term of this lease is
                  renewed or extended, upon the termination of the original term
                  hereof.

Fire              17. Provided, and it is hereby expressly agree, that if and
                  whenever during the term hereof the building of which the
                  demised premises form a part shall be destroyed or damaged by
                  fire, lightning or tempest, or any of the perils normally
                  insured against under the provisions of standard extended
                  coverage fire insurance policies, then, and in every such
                  event:

                        (a) if the damage or destruction is such that in the
                        opinion of the Landlord, seventy five percent (75%) or
                        more of the building of which the demised premises form
                        a part is rendered wholly unfit for occupancy or
                        impossible or unsafe for use and occupancy, the Landlord
                        may, at its option to be exercised within twenty (20)
                        days of the happening of such damage or destruction,
                        terminate this lease by giving to the Tenant notice in
                        writing of its opinion and of such termination, in which
                        event, this lease and the term hereby demised shall
                        cease and be at any 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. Failing exercise
                        by the Landlord of the said option to terminate this
                        lease, the Landlord shall, as soon as circumstances
                        reasonably permit, commence to repair or rebuild the
                        demised premises and or the said buildings and rent
                        shall abate until repairs arc complete.




                                                                              11


                        (b) if the damage or destruction is such that in the
                        opinion of the Landlord, the portion of the said
                        buildings hereby demised is rendered wholly unfit for
                        occupancy or it is impossible or unsafe to use or occupy
                        it and if, in either event the damage, in the written
                        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 either
                        the Landlord or the Tenant may, within five (5) days
                        next succeeding the giving of the Landlord or the Tenant
                        may, within five (5) days next succeeding the giving of
                        the Landlord's opinion as aforesaid, terminate this
                        lease by giving to the other 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; if the
                        Landlord does not, within the time limited, give its
                        written opinion to the Tenant that the damage or
                        destruction cannot be so repaired within such one
                        hundred and twenty (120) day period or if neither the
                        Landlord nor the Tenant so terminate this lease, then
                        the Landlord shall repair the said building with all
                        reasonable speed and the rent hereby reserved shall
                        abate from the date of the happening of the damage until
                        the damage shall be made good to the extent of enabling
                        the Tenant to use and occupy the demised premises;

                        (c) if the damage or destruction be such that, in the
                        opinion of the Landlord, the portion of the building
                        hereby demised is wholly unfit for occupancy, or if it
                        is impossible or unsafe to use or occupy it but if in
                        either event the damage, in the written opinion of the
                        Landlord, to be given to the Tenant within twenty (20)
                        days from the happening of such damage or destruction,
                        can be repaired with reasonable diligence within one
                        hundred and twenty (120) days from the happening of such
                        damage, or if the Landlord gives no such written opinion
                        to the Tenant, then the rent hereby reserved shall abate
                        from the date of the happening of such damage until the
                        damage shall be made good to the extent of enabling the
                        Tenant to use and occupy the demised premises and the
                        Landlord shall repair the damage with all reasonable
                        speed;

                        (d) if in the 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 and the damage is such that the portion of the
                        building demised is capable of being partially used for
                        the purposes for which it is hereby demised, then until
                        such damage has been repaired, the rent shall abate in
                        the proportion that the area of the demised premises so
                        rendered unfit for occupancy bears to the whole of the
                        demised premises and the Landlord shall repair the
                        damage with all reasonable speed.

Assignment by     18. The Landlord may assign its rights under this lease to a
Landlord          Lending Institution as collateral security for a loan to the
                  Landlord and in the event that such an assignment is given and
                  executed by the Landlord and notification thereof is given to
                  the Tenant by or on behalf of the Landlord, it is expressly
                  agreed between the Landlord and the Tenant that this lease
                  shall not be cancelled, or modified for any reason whatsoever
                  except as provided for, anticipated or permitted by the terms
                  of this lease or by law, without the consent in writing of
                  such Lending Institution.

                        The Tenant covenants and agrees with the Landlord that
                  it will, if and whenever reasonably required by the Landlord
                  and at the Landlord's expense, consent to and become a party
                  to any instrument relating to this lease which may be required
                  by or on behalf of any purchase, bank or mortgagee from time
                  to time of the demised premises; provided always that the
                  rights of the Tenant as herein set out be not altered or
                  varied by the terms of such instrument or document and that
                  such instrument or document expressly so state.

Limitation of     19. The term "Landlord" as used in this lease so far as
Landlord's        covenants or obligations on the part of the Landlord are
Liability         concerned, shall be limited to mean and include only the owner
                  or owners at the time in question of the demised premises, and
                  in the event of any transfer or transfers of ownership, the
                  Landlord herein named, and in case of any subsequent transfer
                  or conveyances, the then vendor or transferor, shall be
                  automatically freed and relieved from and after the date of
                  such transfer or conveyance, of all liability as respects the
                  prformance of any convenants or obligations on the part of the
                  Landlord contained in the lease thereafter to be performed,
                  provided that:

                        (a) any funds in the hands of such Landlord or the then
                        vendor or transferor at the time of such transfer, in
                        which the Tenant has an interest, shall be turned over
                        to the purchaser or transferee and any amount then due
                        and payable to the Tenant by the Landlord or the then
                        vendor or transferor under any provision of this lease,
                        shall be paid to the Tenant; and


                                                                              12


                        (b) upon any such transfer, the purchaser or transferee
                        shall be deemed it have assumed, subject to the
                        limitations of this paragraph, all of the terms
                        covenants and conditions in this lease contained to be
                        performed on the part of the Landlord;

                  it being intended hereby that the covenants and obligations
                  contained in this lease on the part of the Landlord shall,
                  subject as aforesaid, be binding on the Landlord, its
                  successors and assigns, only during and in respect of their
                  respective successive periods of ownership.

Waiver of         20. The failure of the Landlord to insist upon a strict
Breach            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.

Notices           21. Any notice, request or demand herein provided for or given
                  hereunder, if given by Tenant to the Landlord shall be
                  sufficiently given if mailed by registered mail, addressed to
                  the Landlord.

                        Any notice herein provided for or given hereunder if
                  given by the Landlord to the Tenant shall be sufficiently
                  given if mailed as aforesaid addressed to the Tenant.

                        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, either
                  the Landlord, or the Tenant may at any time, give notice in
                  writing to the other or others of any change of address of the
                  party giving such notice. From and after the giving of such
                  notice, the address therein specified shall be deemed to be
                  the address of such party for the giving of such notices
                  thereafter.

Lease             22. Provided that this lease and everything herein contained
Subordinate       shall be deemed to be subordinate to any charge or charges
                  from time to time created by the Landlord with respect to the
                  building of which the demised premises form part, by way of
                  mortgage, and the Tenant hereby covenants and agrees that it
                  will promptly, at any time and from time to time, as required
                  by the Landlord during the term hereof, execute all documents
                  and give all further assurances to this proviso as may be
                  reasonably required to effectuate the postponement of its
                  rights and privileges hereunder to the holder or holders of
                  such charge or charges; provided, however, that no such
                  subordination by the Tenant shall have the effect of
                  permitting the holder or holders of any mortgage or lien or
                  other security, to disturb the occupation and possession by
                  the Tenant of the demised premises, so long as the Tenant
                  shall perform all of the terms, covenants, conditions,
                  agreements and provisos contained in this Lease.

Liens             23. If any Mechanics' or other liens or Order for the payment
                  of money shall be filed against the demised premises by
                  reason, or arising out of any labour or material, work or
                  service furnished to the Tenant or to anyone claiming through
                  the Tenant, the Tenant shall, within fifteen (15) days after
                  notice to the Tenant of the filing thereof, cause the the same
                  to be discharged by bonding, depostit, payment, Court Corder
                  or otherwise. The Tenant shall defend all suits to enforce
                  such lien or Order whether against the Tenant or the Landlord
                  at the Tenant's own expense. The Tenant hereby indemnifies the
                  Landlord against any expense or damage as a result of such
                  lien or Order.

Force             24. It is understood and agreed that whenever and to the
Majeure           extent that either party shall be unable to fulfil or shall be
                  delayed or restricted in the fulfilment of any obligation
                  hereunder in respect of the supply or provision of any service
                  or utility or the doing of work or the making of any repairs
                  by reason of being unable to obtain the material, goods,
                  equipment, service or labour required to enable it to fulfil
                  such obligation, or by reason of any Statute, law or Order in
                  Council, or any regulation or Order passed or made pursuant
                  thereto, or by reason of the Order of Direction of any
                  Administrator, Comptroller, Board, Governmental Department or
                  Officer, or other authority, or by reason of any other cause
                  beyond its control, whether of the foregoing character or not,
                  that party shall be relieved from the fulfillment of such
                  obligation and neither party shall be entitled to compensation
                  for any inconvenience, nuisance or discomfort thereby
                  occasioned.

Arbitration       25. Disputes arising under paragraph 7 (n) hereof shall be
                  determined by a single Arbitrator if the parties can agree on
                  one within seven (7) days after the submission to Arbitration.
                  If the parties cannot agree on a single arbitrator within such
                  seven (7) day period, the dispute shall be determined by the
                  award of three (3) arbitrators or a majority of them, one to
                  be named by the Landlord and one by the Tenant no later than
                  seven (7) days after the expiration of such first seven (7)
                  day period and two (2) Arbitrators so chosen shall forthwith
                  select a third and their award or the award by a majority of
                  them shall be final and binding. If either landlord or Tenant
                  shall fail to


                                                                              13


                  appoint its arbitrator within second seven (7) day period, the
                  single arbitrator appointed by the other party shall proceed
                  with the arbitration and the award of such single Arbitrator
                  shall be final and binding. If the two (2) arbitrators
                  appointed by the Landlord and the Tenant cannot agree in the
                  choice of a third arbitrator within seven (7) days of the
                  appointment of the latter of the first two (2) arbitrators,
                  such third arbitrator shall be appointed by a Judge of the
                  Supreme Court of Ontario.

Grammar           26. 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.

Marginal          27. The marginal notes contained herein are inserted for the
Notes             sake of convenience and reference only and do not form a part
                  of this lease.

Binding           28. This indenture and everything herein contained shall
Nature            extend to and bind and enure to the benefit of the respective
                  heirs, executors, administrators, successors and assigns, as
                  the case may be, of each and every of the parties hereto,
                  subject to the consent of the Landlord being obtained, as
                  hereinbefore provided, to any assignment or sublease by Tenant
                  and, where there is more than one Landlord or Tenant or where
                  the Landlord or Tenant is male, female or a corporation, the
                  provisions herein shall be read with all grammatical changes
                  thereby rendered necessary. All covenants herein contained
                  shall be deemed joint and several and all rights and powers
                  reserved to Landlord may be exercised by either Landlord or
                  its agent or representatives.

Renewal           29. The Tenant, provided it is not in default hereunder of any
Option            covenant or condition in in its lease at the time of giving
                  notice exercising its right to renew and provided it has duly
                  and on time throughout the initial term of the lease observed
                  and performed the covenants and conditions therein contained
                  and all payments of rent and additional rent have been paid in
                  full and on time shall be entitled to renew this lease for
                  further term of five (5) years from and after the expiration
                  of the term hereof, and the option may be exercised by the
                  tenant forwarding written notice to the Landlord no sooner
                  than six (6) months but no later than three (3) months prior
                  to the expiration of the term hereof. All of the terms and
                  conditions of this lease shall apply to the renewal of the
                  term hereof, save that:

                        (a) The rent for the renewal term shall be mutually
                        agreeed between the parties within two (2) months prior
                        to expiration of the term thereof, failing which the
                        question of quantum of rent shall be determined by
                        binding arbitration and it shall be a condition of such
                        submission to arbitration that:

                              (i) the rent for the renewal term shall not be
                              less than the rent for the term hereof; and

                              (ii) in making their award the arbitrator or
                              arbitrators shall have regard to the current real
                              estate market conditions as they affect rent for
                              premises similar to the demised premises,
                              including all improvements thereto, in the
                              municipality in which the demised premises are
                              located or in the nearest municipality in which
                              similar premises are located and the length of the
                              renewal term.

                        (b) The provisions of paragraph 25 of this lease shall
                        apply to arbitration under this clause.

Right to First    Provided that the Tenant has not been in breach of its
Refusal to Lease  covenants and obligations under the lease, the Landlord hereby
Adjoining Space   grants to the Tenant the right of first refusal, during the
                  term or any renewal thereofany space known as 295 Evans Avenue
                  that may become available to be leased on the terms and
                  conditions of a bona fide offer to lease that is acceptable to
                  the Landlord. The Landlord agrees to deliver a true copy of
                  any such bona fide offer to the Tenant. The Tenant shall have
                  three (3) days from such delivery within which to exercise the
                  right of first refusal to lease adjoining space. This right
                  may only be exercised within such time by the Tenant
                  delivering a notice in writing of its acceptance to the
                  Landlord, whereupon a binding agreement to lease such premises
                  shall exist between the Landlord and the Tenant on the terms
                  and conditions contained in the said bona fide offer.

                  If the Tenant shall not so exercise this right of first
                  refussal to lease the said premises, the said premises may
                  thereafter be leassed by the Landlord to the party identified
                  in the said bona fide offer and subject to the terms and
                  conditions therein, but not otherwise, and failing leasing as
                  aforesaid, the provisions of this section shall apply again
                  the tenant shall not have the right to assign this right of
                  first refusal to lease space known as 295 Evans Avenue except
                  in conjunction with a permitted assignment of all its rights
                  under this lease.


                                                                              14


Binding           There are no representations or terms of agreement between the
                  parties, save as expressed herein and there shall be no
                  amendment to these terms save as may be agreed to in writing
                  between the parties.

      IN WITNESS WHEREOF the parties hereto have executed these presents.

      SIGNED, SEALED AND
      DELIVERED
      in the presence of:               COMWEST PROPERTIES LIMITED


                                        ----------------------------------------
                                        Landlord: I have authority to bind the
                                        corporation


                                        VISIBLE GENETICS INC.


                                        ----------------------------------------
                                        Tenant: I have authority to bind the
                                        corporation


                                                                              16

                                  SCHEDULE "A"

Square Footage:

10,500 square feet approximately

Term:

5 years

Base Rent:

$5.95 per square foot, for a total of $62,475.00 per annum payable in equal
consecutive monthly installments of $5,206.25 on the first day of each and every
month of the term.

Estimated CAM and Realty Tax Costs:

$3.05 per square foot for a total of $36,750.00 per annum payable in equal
consecutive monthly installments of $3,062.50 on the first day of each and every
month of the term.

Total monthly rent has been calculated as follows:

$5,206.25      Base Rent
   306.25      CAM
 2,362.50      Property Tax
- - ---------
 7,875.00      Subtotal
   551.25      GST
- - ---------
$8,426.25      TOTAL

Commencement Date:

September 1, 1998

EX-10.18

                                                                   Exhibit 10.18

                                                               Pittsburgh, PA #5

                    [LETTERHEAD OF UNIVERSITY OF PITTSBURGH]

                                 March 31, 1997

Alan W. Seadler, Ph.D.
Visible Genetics Corp.
700 William Pitt Way
Pittsburgh, PA 15238

Dear Dr Seadler:

      Please be advised that effective March 31, 1997, the University of
Pittsburgh assigned to Oxford Development Company all property management
responsibilities at the University of Pittsburgh Applied Research Center
(U-PARC). Any future notice required under your lease with the University should
be addressed to:

                           Oxford Development Company
                           U-PARC
                           3170 William Pitt Way
                           Pittsburgh, PA 15238

      Additionally, all rental payments due under your lease, including any
unpaid charges invoiced by Baker Young Corporation, should be by check made
payable to "University of Pittsburgh/Oxford Development Company, Agent" and
addressed to:

                           Oxford Development Company
                           One Oxford Centre, Level 4
                           Pittsburgh, PA 15219
                           Attention: Accounts Receivable

      Oxford Development Company has assigned Jeff Bodnar to serve as our
on-site property manager. Jeff will be visiting your U-PARC offices in the near
future. If the need should arise to speak with Jeff prior to his visit, feel
free to contact him at (412) 826-5078.

      We assure you that this transition in management responsibilities will be
seamless, organized, and professional to ensure your quiet enjoyment at your
business home.

                                        Sincerely,


                                        /s/ Eli Shorak

                                        Eli Shorak
                                        Director, U-PARC



LEASE NO. 2994 -- ADDENDUM 3                                     REFERENCE: 3030

      BETWEEN The University of Pittsburgh of the Commonwealth System of Higher
Education (herein called "Lessor") and Visible Genetics Corp. (herein called
"Lessee").

      WITNESSETH THAT the parties hereto, intending to be legally bound, do
hereby amend and extend the Lease between them dated December 1,1996, as
follows:

      1. Article 1 of the Lease Agreement is hereby amended to add to the Leased
Premises and Lessor hereby leases to Lessee and Lessee hereby hires from Lessor
that certain space designated as Room 318, in the University of Pittsburgh
Applied Research Center in addition to the rooms previously included as the
Leased Premises.

      2. Article 2(A) of the Lease Agreement is amended to extend the Term of
the Lease Agreement through December 31, 1998, unless sooner terminated under
the provisions hereof.

      3. Article 3(A) of the Lease Agreement is hereby amended as follows:



                              Rentable Square Feet                      Monthly Rental
                         -----------------------------      ---------------------------------------
                         Increase     From        To        Increase         From            To
                         --------     ----        --        --------         ----            --
                                                                        
3/1/97 - 3/91/97             721      2,840      3,561      $  510.71      $2,874.42      $3,385.13
4/1/97 - 12/31/97            721      2,840      3,561      $1,021.42      $2,874.42      $3,895.84
1/1/98 - 12/31/98          3,561          0      3,561      $3,895.84      $     .00      $3,895.84


      4. Article 4 of the Lease Agreement is hereby amended to increase the
Security Deposit to Four Thousand One Hundred and No/100 Dollars ($4,100.00).

      Except as hereby modified, amended and extended, the Lease Agreement
remains in full force and effect in Accordance with the provisions therein set
forth.

      IN WITNESS WHEREOF, the parties have executed this Addendum effective the
15th day of March 1997.

                                        LESSOR:

                                        The University of Pittsburgh of the
WITNESS:                                Commonwealth System of Higher Education


/s/ Louise G. Scapel                    /s/ [ILLEGIBLE]
- - ------------------------------------    ----------------------------------------

                                        The University of Pittsburgh of the
                                        Commonwealth System of Higher
                                        Education by and through its agent
                                        for U-PARC Real Estate
WITNESS:                                Baker Young Corporation

/s/ Judith C. [ILLEGIBLE]               /s/ [ILLEGIBLE]
- - ------------------------------------    ----------------------------------------

                                        LESSEE:

WITNESS:                                Visible Genetics Corp.

/s/ [ILLEGIBLE]                         /s/ [ILLEGIBLE]                   3/6/96
- - ------------------------------------    ----------------------------------------
                                                                           Date



LEASE NO. 2994 -- ADDENDUM 4                                     REFERENCE: 3064

      BETWEEN The University of Pittsburgh of the Commonwealth System of Higher
Education (herein called "Lessor") and Visible Genetics Corp. (herein called
"Lessee").

      WITNESSETH THAT the parties hereto, intending to be legally bound, do
hereby amend and extend the Lease between them dated December 1, 1996, as
follows:

      1. Article 1 of the Lease Agreement is hereby amended to reflect the
Leased Premises as shown on Exhibit A, which is attached hereto and made a part
of this Lease Agreement.

      2. Article 2(A) of the Lease Agreement is amended to extend the Term of
the Lease Agreement through August 31, 2000, unless sooner terminated under the
provisions hereof.

      3. Article 3(A) of the Lease Agreement is hereby amended as follows:



                                Rentable Square Feet                     Monthly Rental
                          -----------------------------      ---------------------------------------
                          Increase     From        To        Increase         From            To
                          --------     ----        --        --------         ----            --
                                                                         
9/1/97 - 9/30/97            4,002      3,561      7,563      $1,765.09      $3,895.84      $5,660.93
10/1/97 - 8/31/98           4,002      3,561      7,563      $4,044.09      $3,895.84      $7,939.93
9/1/98 - 12/31/98           4,002      3,561      7,563      $4,202.88      $3,895.84      $8,098.72
1/1/99 - 8/31/99            7,563          0      7,563      $8,098.72      $     .00      $8,098.72
9/1/99 - 8/31/2000          7,563          0      7,563      $8,260.09      $     .00      $8.260.09


[ILLEGIBLE HANDWRITTEN MATERIAL IN RIGHT MARGIN OF TABLE ABOVE]

      4. Article 4 of the Lease Agreement is hereby amended to increase the
Security Deposit to Four Thousand One Hundred and No/100 Dollars
($8,400.00). 8,172.P3X102%=8,336.38

                                      7700

      Except as hereby modified, amended and extended, the Lease Agreement
remains in full force and effect in Accordance with the provisions therein set
forth.

                                      50-51

      IN WITNESS WHEREOF, the parties have executed this Addendum effective the
1st day of September 1997. [ILLEGIBLE]


                     [ILLEGIBLE]        LESSOR:

                                        The University of Pittsburgh - Of the
WITNESS:                                Commonwealth System of Higher Education


/s/ Judith C. [ILLEGIBLE]               /s/ [ILLEGIBLE]
- - ------------------------------------    ----------------------------------------
                                        LESSEE:

WITNESS:                                Visible Genetics Corp.


/s/ [ILLEGIBLE]               7-7-97    /s/ [ILLEGIBLE]                   7-7-97
- - ------------------------------------    ----------------------------------------
                                                                           Date

EX-10.22

                                                                   Exhibit 10.22

                          AMENDMENT NO. 1 TO GUARANTEE

         THIS AMENDMENT NO. 1, dated as of April 30, 1999 to the Guarantee,
dated as of April 30, 1998 (the "Guarantee") from VISIBLE GENETICS INC., an
Ontario corporation (the "Guarantor") to HILAL CAPITAL, LP, a Delaware limited
partnership, HILAL CAPITAL QP, LP, a Delaware limited partnership, HILAL CAPITAL
INTERNATIONAL, LTD., an exempted company formed under the laws of the Cayman
Islands, HIGHBRIDGE INTERNATIONAL LLC, a Cayman Islands company and HILAL
CAPITAL MANAGEMENT LLC, a Delaware limited liability company, as adviser for Leo
Holdings, Inc. ("LHI") (collectively, the "Lenders")

WHEREAS:

A.     Pursuant to a term loan agreement dated as of April 30, 1998 (the
       "Original Term Loan Agreement", and as amended by Amendment No. 1 thereto
       dated as of April 29, 1998 and by the Amendment (as defined below) and as
       may be further amended from time to time, the "Term Loan Agreement")
       between VISIBLE GENETICS CORP. (the "Borrower"), the Lenders, and C. J.
       Partners, L.P. ("CJP"), the Lenders and CJP made loans to the Borrower in
       the aggregate principal amount of U.S. $8 million (the "Loans ").

B.     Pursuant to the Guarantee, the Guarantor guaranteed payment and
       performance of all of the obligations of the Borrower pursuant to and in
       connection with the Term Loan Agreement.

C.     As security for its obligations under the Guarantee, the Guarantor
       granted various security to the Lenders and CJP (collectively, the
       "Security"), including, without limitation, by way of (i) a general
       security agreement dated April 30, 1998 between the Guarantor and Hilal
       Capital Management LLC, as security agent for the Lenders and CJP (the
       "Security Agent"), (ii) an assignment for security (trademarks) dated
       April 30, 1998 from the Guarantor in favour of the Lenders and CJP, (iii)
       an assignment for security (patents) dated April 30, 1998 from the
       Guarantor in favour of the Lenders and CJP, (iv) a notice of security
       interest-trade-marks dated April 30, 1998 by the Guarantor and the
       Security Agent, and (v) a notice of security interest-patents dated April
       30, 1998 by the Guarantor and the Security Agent.

D.     The Borrower and the Lenders have entered into Amendment No. 2 to the
       Term Loan Agreement dated as of the date hereof (the "Amendment")
       pursuant to which, among other things, (i) the Initial Maturity Date has
       been extended to December 31, 1999; (ii) the Tranche A Maturity Date has
       been accelerated to July 1, 1999, (iii) the Borrower has been permitted,
       subject to certain conditions, to borrow up to U.S.$5 million principal
       amount of Permitted Senior Indebtedness from lenders other than the
       Lenders which may be secured by Liens on Guarantor's assets that may be
       senior and prior to the Liens securing the Initial Loans; and (iv) the
       Borrower and Lenders have made certain other amendments to the Term Loan
       Agreement.




F.     As a condition to the Lenders agreeing to enter into the Amendment, among
       other things, the Guarantor is issuing to the Lenders concurrently
       herewith warrants to purchase an aggregate of 140,000 common shares of
       the Guarantor.

G.     It is a condition to the effectiveness of the Amendment that the
       Guarantor and the Lenders execute this Amendment No. 1 to the Guarantee
       ("Guarantee Amendment").

         NOW THEREFORE in consideration of the agreement of the parties to enter
into the Amendment, and for other good and valuable consideration (the receipt
and sufficiency of which are hereby acknowledged by the Guarantor and the
Lenders), the Guarantor and the Lenders hereby agree as follows:

1. All words and phrases capitalized in this agreement shall, unless otherwise
defined by this Guarantee Amendment, have the meanings assigned to them in the
Term Loan Agreement.

2. The Guarantor hereby consents to the execution and delivery of the Amendment
and to the changes to the Original Term Loan Agreement (as amended by Amendment
No. 1 thereto) and other documents effected thereby.

3. The Guarantor agrees that: (a) the Guarantee will continue to be a guarantee
of payment or performance, as the case may be, of all the debts, liabilities and
obligations, present or future, direct or indirect, absolute or contingent,
matured or not, at any time owing by the Borrower to any of the Lenders or
remaining unpaid or unperformed by the Borrower to any of the Lenders pursuant
to or in connection with the Term Loan Agreement, the Notes or any other Loan
Document, including, without limitation, the payment of the Initial Loans, the
Tranche A Loan, interest, fees, indemnification payments and expense
reimbursements, and (b) the execution and delivery of the Amendment or any other
document related thereto will not in any manner whatsoever reduce or otherwise
prejudice any of the rights of the Lenders pursuant to the Guarantee.

4. The Guarantor agrees that: (a) the Security will continue to secure payment
or performance, as the case may be, of all debts, obligations and liabilities of
any kind whatsoever of the Guarantor to the Lenders and the Security Agent or
any of them pursuant to or in connection with the Guarantee, the Term Loan
Agreement or any of the other Loan Documents to which the Guarantor is a party,
and (b) the execution and delivery of the Amendment or any other document
related thereto will not in any manner whatsoever reduce or otherwise prejudice
any of the rights of the Lenders or the Security Agent pursuant to the Security,
except as expressly provided herein.

5. Section 1.01 of the Guarantee is hereby amended by adding the following
additional definitions to the end thereof:

(l)    "PERMITTED SENIOR INDEBTEDNESS" means Indebtedness in a maximum principal
       amount not to exceed $5,000,000 in the aggregate outstanding at any time,
       plus premium, interest, fees, expenses, reimbursements and other amounts,
       direct or contingent, for which Borrower, Guarantor or any of their
       Affiliates may hereafter be under obligation to one or more Senior
       Lenders and any promissory note, security agreement, pledge


                                       2




       agreement, financing agreement, mortgage, deed of trust or other
       agreement or instrument related thereto, which by its terms is senior and
       prior to the Obligations pursuant to a Permitted Subordination Agreement.

(m)    "PERMITTED SUBORDINATION AGREEMENT" a Subordination Agreement among the
       Lenders and the Senior Lenders, in the form of Exhibit B to the
       Amendment, or such other agreement (i) containing substantially the same
       material terms and conditions, or (ii) to which the Lenders may agree,
       which agreement may not be unreasonably withheld.

(n)    "SENIOR LENDERS" means any bank, lending institution, financial
       institution, fund, investment partnership or other institutional lender
       or a group of lenders that holds Permitted Senior Indebtedness."

6. Section 6.03 of the Guarantee hereby is amended:

           (a) by deleting the word "and" from the end of Section 6.03(a)(vi);
    by adding the word "and" to the end of Section 6.03(a)(vii); and by adding
    the following clause 6.03(a)(viii);

              "(viii)  Liens securing Permitted Senior Indebtedness in favor of
              the Senior Lenders."

           (b) by deleting the word "and" from the end of Section 6.03(b)(vii);
    by adding the word "and" to the end of Section 6.03(b)(viii); and by adding
    the following Section 6.03(b)(ix):

              "(ix)  Permitted Senior Indebtedness."

7. The Guarantor and the Lenders agree that any other provision of the Guarantee
which is inconsistent with the terms and conditions set forth in this Guarantee
Amendment hereby is automatically deemed amended in such manner so at to make
such provision consistent with the terms hereof.

8. The Guarantor represents and warrants to the Lenders that:

    (a)    No event has occurred and is continuing, or would result from the
           execution and delivery of this Guarantee Amendment, which constitutes
           or would constitute a Default or an Event of Default.

    (b)    The Guarantor has the legal capacity to execute, deliver and perform
           this Guarantee Amendment and the other Loan Documents to which the
           Guarantor is a party and to perform the Guarantee, as amended hereby.

    (c)    The execution, delivery and performance by the Guarantor of this
           Guarantee Amendment and the other Loan Documents to which the
           Guarantor is a party, and the performance by the Guarantor of such
           documents:

                                       3




           (i)  do not and will not contravene any law or, to the Guarantor's
                knowledge, any contractual restriction binding on or otherwise
                affecting the Guarantor, or any of the Guarantor's properties,
                and

           (ii) do not and will not result in or require the creation of any
                Lien upon or with respect to any of the Guarantor's properties,
                other than the security interests created by the Loan Documents
                to which it is a party or as otherwise set forth herein,

           except in the case of either (i) or (ii) for any contravention or
           Lien which would not have a Material Adverse Effect.

    (d)    No authorization or approval or other action by, and no notice to or
           filing with, any Governmental Authority or other regulatory body, is
           required for the due execution, delivery and performance by the
           Guarantor of the Guarantee Amendment or any other Loan Document to
           which the Guarantor is a party.

    (e)    Each of this Guarantee Amendment, the other Loan Documents to which
           the Guarantor is a party and the Guarantee, as amended hereby,
           constitutes a legal, valid and binding obligation of the Guarantor,
           enforceable against the Guarantor in accordance with its respective
           terms, except as may be limited by applicable bankruptcy, insolvency,
           reorganization, moratorium and other similar laws affecting the
           enforcement of creditors' rights generally and general equitable
           principles (whether considered in a proceeding in equity or at law).

9. The parties acknowledge and agree that, concurrently with the transactions
contemplated by the Amendment, CJP is assigning to certain of the Lenders its
entire interest in its Initial Loan in the principal amount of $500,000 (after
the payment of interest by the Borrower contemplated by the Amendment) and LHI
is assigning to certain of the Lenders $100,000 principal amount of interest of
its Initial Loan, such that after giving effect to such assignments, the
ownership of the Initial Loans will be as set forth in Exhibit A to the
Amendment and, accordingly, CJP is no longer a beneficiary of the Guarantee and
is no longer entitled to any rights thereunder from and after the relevant
assignments taking effect.

10. The Guarantor acknowledges and agrees that the Additional Warrants when
issued shall each constitute Warrants under, and as defined in, the Registration
Rights Agreement and any Warrant Shares (as defined in the Registration Rights
Agreement) issued or issuable pursuant thereto shall constitute Registrable
Securities (as defined in the Registration Rights Agreement).

11. If any of the Lenders assigns or transfers all or any of its rights in
respect of the Initial Loans, the Tranche A Loan, the Notes, the Term Loan
Agreement or any other Loan Document to an assignee (the "Permitted Assignee")
in accordance with section 8.06 of the Term Loan Agreement (the "Assigned
Rights"), the Guarantor agrees that upon the assignment or transfer becoming
effective, the Permitted Assignee shall thereafter be treated as a Lender for
all purposes of the Loan Documents in respect of the Assigned Rights (including,
without limitation, for all purposes of the Guarantee and the Security) and the
Permitted Assignee shall


                                       4




be entitled to the full benefit thereof as if the Permitted Assignee were an
original party in respect of such benefits.

12. (a)    Except as otherwise expressly provided herein, the Guarantee shall
           continue to be in full force and effect and is hereby ratified and
           confirmed in all respects except that on and after the date hereof
           (i) all references in the Guarantee to "this Agreement", "hereto",
           "hereof", "hereunder" or words of like import referring to the
           Guarantee shall mean the Guarantee as amended by this Guarantee
           Amendment, and (ii) all references in the other Loan Documents to
           which any Loan Party is a party to the "Guarantee", "thereto",
           "thereof", "thereunder" or words of like import referring to the
           Guarantee shall mean the Guarantee as amended by this Guarantee
           Amendment. Except as expressly provided herein, the execution,
           delivery and effectiveness of this Guarantee Amendment shall not
           operate as a waiver of any right, power or remedy of the Lenders
           under the Guarantee or any other Loan Document, nor constitute a
           waiver of any provision of the Guarantee or any other Loan Document.

    (b)    This Guarantee Amendment may be executed in any number of
           counterparts and by different parties hereto in separate
           counterparts, each of which shall be deemed to be an original, but
           all of which taken together shall constitute one and the same
           agreement.

    (c)    Section headings herein are included for convenience of reference
           only and shall not constitute a part of this Guarantee Amendment for
           any other purpose.

13. The Guarantor and the Lenders will, from time to time, at the expense of the
Guarantor execute and deliver all such further documents and instruments and do
all acts and things as the Lenders or the Security Agent, on the one hand, or
the Guarantor, on the other hand, may reasonably require to effectively carry
out or better evidence or perfect the full intent and meaning of this Guarantee
Amendment.

14. This Guarantee Amendment shall enure to the benefit of, and shall be binding
upon, the parties and their respective successors and assigns.

15. This Guarantee Amendment shall be governed by the laws of the Province of
Ontario and the laws of Canada applicable therein.

                                       5




         DATED as of the 30th day of April, 1999.

                                    GUARANTOR

                                    VISIBLE GENETICS INC.

                                    By:
                                       -----------------------------------------
                                       Jeffrey Sherman
                                       Vice President-Finance

                                    LENDERS:

                                    HILAL CAPITAL, LP

                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:

                                    HILAL CAPITAL QP, LP

                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:

                                    HILAL CAPITAL INTERNATIONAL, LTD.

                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:

                                    HILAL CAPITAL MANAGEMENT LLC,
                                    as advisors to Leo Holdings, Inc.

                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:


                                       6




                                    HIGHBRIDGE INTERNATIONAL LLC

                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:

                                     As to Paragraph 10 only:

                                     C. J. PARTNERS L.P.

                                     By:
                                       -----------------------------------------
                                        Name:
                                        Title:

                                       7

EX-10.23

                                                                   Exhibit 10.23

                                 AMENDMENT NO. 2
                             TO TERM LOAN AGREEMENT

         THIS AMENDMENT NO. 2, dated as of April 30, 1999 (the "SECOND
AMENDMENT"), to the Term Loan Agreement, dated as of April 30, 1998, as amended
by Amendment No. 1 to the Term Loan Agreement (the "FIRST AMENDMENT") dated as
of September 29, 1998 (the Term Loan Agreement as amended by the First
Amendment, this Second Amendment and as may be further amended from time to
time, the "LOAN AGREEMENT") by and among VISIBLE GENETICS CORP., a Delaware
corporation (the "BORROWER"), and HILAL CAPITAL, LP, a Delaware limited
partnership, HILAL CAPITAL QP, LP, a Delaware limited partnership, HILAL CAPITAL
INTERNATIONAL, LTD., an exempted company formed under the laws of the Cayman
Islands, Highbridge International LLC, a Cayman Islands company, and HILAL
CAPITAL MANAGEMENT LLC, a Delaware limited liability company, as advisor for LEO
HOLDINGS, INC. ("LHI") (each, a "LENDER" and collectively the "LENDERS"). Unless
otherwise defined herein, terms defined in the Loan Agreement are used herein as
therein defined.

                              W I T N E S S E T H:

         The Borrower, the Lenders and C.J. Partners L.P. ("CJP") are parties to
the Loan Agreement, pursuant to which the Lenders and CJP have made the Initial
Loans and certain of the Lenders have made the Tranche A Loan to the Borrower.

         The Borrower and the Guarantor have requested that the Initial Maturity
Date be extended to December 31,1999.

         The Borrower and the Guarantor have also requested the Lenders to
permit Borrower, Guarantor and their Affiliates to incur secured Indebtedness
which may be senior to the Obligations.

         In consideration for the extension of the Initial Maturity Date and the
Lender's permission to incur secured Indebtedness senior to the Initial Loan,
the Guarantor has agreed to issue to the Lenders additional warrants to purchase
an aggregate of 140,000 common shares of the Guarantor.

         The Lenders have requested that the Tranche A Maturity Date be
accelerated to July 1, 1999.

         Concurrently with the transactions contemplated by this Second
Amendment, CJP is assigning to certain of the Lenders its entire interest in its
Initial Loan in the principal amount of $500,000 (after the repayment of
interest contemplated hereby) and LHI is assigning to certain of the Lenders
$100,000 principal amount of its Initial Loan, such that after giving effect to
such assignments, the ownership of the Initial Loans will be as set forth in
EXHIBIT A hereto, which replaces Exhibit A to the Loan Agreement.




         NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
Loan Parties and the Lender hereby agree as follows:

         1. AMENDMENTS. The Loan Agreement is hereby amended as follows:

              (a) DEFINITIONS MODIFIED. Section 1.01 of the Loan Agreement is
amended by modifying the following definitions:

                  (i) The definition of "INITIAL MATURITY DATE" is hereby
deleted in its entirety, and the following is hereby substituted therefor:

                      "INITIAL MATURITY DATE" means December 31, 1999.

                  (ii) The definition of "TRANCHE A MATURITY DATE" is deleted in
its entirety, and the following is hereby substituted therefor:

                       "TRANCHE A MATURITY DATE" means July 1, 1999.

              (b) DEFINITIONS ADDED. Section 1.01 of the Loan Agreement is
amended by inserting the following definitions in the appropriate alphabetical
order:

                  "PERMITTED SENIOR INDEBTEDNESS" means Indebtedness in a
     maximum principal amount not to exceed $5,000,000 in the aggregate
     outstanding at any time plus premium, interest, fees, expenses,
     reimbursements and other amounts, direct or contingent, for which Borrower,
     Guarantor or any of their Affiliates may hereafter be under obligation to
     one or more Senior Lenders and any promissory note, security agreement,
     pledge agreement, financing agreement, mortgage, deed of trust or other
     agreement or instrument related thereto, which by its terms is senior and
     prior to the Obligations pursuant to a Permitted Subordination Agreement.

                  "PERMITTED SUBORDINATION AGREEMENT" means a Subordination
     Agreement among the Lenders and the Senior Lenders, in the form of Exhibit
     B to this Amendment No. 2, or such other agreement (i) containing
     substantially the same material terms and conditions, or (ii) to which the
     Lenders may agree, which agreement may not be unreasonably withheld.

                  "SENIOR LENDERS" means any bank, lending institution,
     financial institution, fund, investment partnership or other institutional
     lender or a group of lenders that holds Permitted Senior Indebtedness

              (c) "SECTION 5.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF
LENDERS. The Lenders covenant and agree that if Borrower or Guarantor wish to
enter into Permitted Senior Indebtedness, Lenders shall execute and deliver to
the Senior Lenders a Permitted Subordination Agreement.

              (d) Section 6.02(a) of the Loan Agreement is hereby amended by:
deleting the word "and" from the end of Section 6.02(a)(vi); adding the word
"and" at the end of Section

                                       2




6.02(a)(vii); and inserting immediately after Section 6.02(a)(vii) new Section
6.02(a)(viii) to read in its entirety as follows:

                  "(viii) Liens securing Permitted Senior Indebtedness in favor
     of the Senior Lenders.

              (e) Section 6.02(b) of the Loan Agreement is hereby amended by
deleting the word "and" from the end of Section 6.02(b)(vii); adding the word
"and" at the end of Section 6.02(b)(viii); and inserting immediately after
Section 6.02(b)(viii) new Section 6.02(b)(ix) to read in its entirety as
follows:

                  "(ix)  Permitted Senior Indebtedness."

              (f) The Borrower and the Lenders agree that any other provision of
the Loan Agreement or any other Loan Document, which is inconsistent with the
terms and conditions set forth in this Second Amendment hereby is automatically
deemed amended in such manner so at to make such provision consistent with the
terms hereof.

         2. REPAYMENT OF INTEREST ON INITIAL LOANS. Concurrent herewith, the
Borrower has paid all accured and unpaid interest on the Initial Loans, in the
aggregate amount of $722,455, receipt of which hereby is acknowledged by the
Lenders and CJP.

         3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective
on the date (the "SECOND AMENDMENT EFFECTIVE DATE") as of which each of the
following conditions precedent shall have been satisfied in a manner
satisfactory to the Lender.

              (a) NO EVENT OF DEFAULT. No Default or Event of Default shall have
occurred and be continuing on the Second Amendment Effective Date or would
result from this Amendment becoming effective in accordance with its terms.

              (b) DELIVERY OF DOCUMENTS. The Lenders shall have received on or
before the Amendment Effective Date the following:

                  (i) Counterparts of this Amendment No. 2 signed by Borrower;

                  (ii) An agreement by the Guarantor, in the form of Exhibit C
hereto, pursuant to which the Guarantor (A) consents to this Second Amendment,
(B) acknowledges that the Guarantee and the Security Amendment remain in force
and effect and extend to the Loan Agreement as amended by this Second Amendment
and (C) acknowledges that the Additional Warrants (as defined below), and any
securities issuable pursuant thereto, constitute "Registrable Securities" under,
and as defined in, the Registration Rights Agreement; and

                  (iii) The Warrants between each Lender and the Guarantor,
representing warrants to purchase, in the aggregate, 140,000 common shares of
the Guarantor, issued pursuant to a Warrant Agreement substantially in the form
attached as Exhibit D hereto


                                       3




(the "Additional Warrants"), each duly executed by the Guarantor (the number of
warrants to be issued to each Lender is set forth on Exhibit A to this Second
Amendment)

         4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and
warrants to the Lenders as follows:

              (a) No event has occurred and is continuing, or would result from
the execution and delivery of this Second Amendment, which constitutes or would
constitute a Default or an Event of Default.

              (b) The Borrower has the legal capacity to execute, deliver and
perform this Second Amendment and the other Loan Documents to which the Borrower
is a party and to perform the Loan Agreement, as amended hereby.

              (c) The execution, delivery and performance by the Borrower of
this Second Amendment and the other Loan Documents to which the Borrower is a
party, and the performance by the Borrower of the Loan Agreement, as amended
hereby, (i) do not and will not contravene any law or, to the Borrower's
knowledge, any contractual restriction binding on or otherwise affecting the
Borrower, or any of the Borrower's properties, and (ii) do not and will not
result in or require the creation of any Lien upon or with respect to any of the
Borrower's properties, other than the security interests created by the Loan
Documents or as otherwise set forth herein, except in the case of either (i) or
(ii) for any contravention or Lien which would not have a Material Adverse
Effect.

              (d) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority or other regulatory body is
required for the due execution, delivery and performance by the Borrower of this
Second Amendment or any other Loan Document to which the Borrower is a party, or
the performance by the Borrower of the Loan Agreement, as amended hereby.

              (e) Each of this Second Amendment, the other Loan Documents to
which the Borrower is a party and the Loan Agreement, as amended hereby,
constitutes a legal, valid and binding obligation of the Borrower, enforceable
against such Loan Party in accordance with its respective terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally and
general equity principles (whether considered in a proceeding in equity or at
law).

         5. NEW NOTES. Against receipt of the Initial Notes, marked "Canceled",
Borrower shall issue to each Lender a note (collectively, the "New Notes"), in
the form of Exhibit E hereto, in the principal amounts set forth on Exhibit A
hereto. Pursuant to the Loan Agreement, the New Notes shall constitute the
"Initial Notes" as defined in the Loan Agreement.

         6. MISCELLANEOUS.

              (a) CONTINUED EFFECTIVENESS OF THE LOAN AGREEMENT. Except as
otherwise expressly provided herein, the Loan Agreement and the other Loan
Documents to which any Loan Party is a party are, and shall continue to be, in
full force and effect and are hereby ratified and confirmed in all respects
except that on and after the date hereof (i) all references in the Loan


                                       4




Agreement to "this Agreement", "hereto", "hereof', "hereunder" or words of like
import referring to the Loan Agreement shall mean the Loan Agreement as amended
by this Second Amendment, and (ii) all references in the other Loan Documents to
which any Loan Party is a party to the "Loan Agreement", "thereto", "thereof',
"thereunder" or words of like import referring to the Loan Agreement shall mean
the Loan Agreement as amended by this Second Amendment. Except as expressly
provided herein, the execution, delivery and effectiveness of this Second
Amendment shall not operate as a waiver of any right, power or remedy of the
Lender under the Loan Agreement or any other Loan Document, nor constitute a
waiver of any provision of the Loan Agreement or any other Loan Document.

              (b) COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.

              (c) HEADINGS. Section headings herein are included for convenience
of reference only and shall not constitute a part of this Amendment for any
other purpose.

              (d) GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

              (e) COSTS AND EXPENSES. The Borrower agrees to pay or cause to be
paid on demand, and to save the Lenders harmless against liability for the
payment of, all reasonable fees and expenses of counsel to the Lenders in
connection with the preparation, execution and delivery of this Second Amendment
and the other related agreements, instruments and documents.

              (f) AMENDMENT AS LOAN DOCUMENT. The Borrower hereby acknowledges
and agrees that this Second Amendment constitutes a "Loan Document."
Accordingly, it shall be an Event of Default under the Loan Agreement if (i) any
representation or warranty made by the Borrower under or in connection with this
Amendment shall have been untrue, false or misleading in any material respect
when made, or (ii) the Borrower shall fail to perform or observe any term,
covenant or agreement contained in this Amendment.

              (g) WAIVER OF JURY TRIAL. EACH LOAN PARTY AND THE LENDER HEREBY
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AMENDMENT AND WAIVER.

                                       5




         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.

                                    BORROWER:

                                    VISIBLE GENETICS CORP.

                                    By:
                                       ----------------------------------------
                                      Name:
                                      Title:

                                    LENDERS:

                                    HILAL CAPITAL, LP

                                    By:
                                       ----------------------------------------
                                      Name:
                                      Title:

                                    HILAL CAPITAL QP, LP

                                    By:
                                       ----------------------------------------
                                      Name:
                                      Title:

                                    HILAL CAPITAL INTERNATIONAL, LTD.

                                    By:
                                       ----------------------------------------
                                      Name:
                                      Title:

                                    HILAL CAPITAL MANAGEMENT LLC,
                                    as advisors to Leo Holdings, Inc.

                                    By:
                                       ----------------------------------------
                                      Name:
                                      Title:


                                       6




                                    HIGHBRIDGE INTERNATIONAL LLC

                                    By:
                                       ----------------------------------------
                                      Name:
                                      Title:

                                    C. J PARTNERS L.P. (solely with respect to
                                    Section 2 hereof)

                                    By:
                                       ----------------------------------------
                                      Name:
                                      Title:

                                       7




                                                                       EXHIBIT A

                       Lenders, Loan Amounts and Warrants



                                                       AMOUNT OF                NUMBER OF
LENDER                                                INITIAL LOAN         ADDITIONAL WARRANTS
- - ------                                                ------------         -------------------
                                                                            
Hilal Capital, LP                                        $564,217                  11,284
Hilal Capital QP, LP                                    1,434,136                  28,683
Hilal Capital International, Ltd                        1,901,647                  38,033
Highbridge International LLC                            3,000,000                  60,000

Hilal Capital Management, LLC
    as advisor for Leo Holdings, Inc                      100,000                   2,000
                                                       ----------                 -------
         Total                                         $7,000,000                 140,000
                                                       ==========                 =======



                                       8

EX-10.24

                                                                   Exhibit 10.24


                                                                   July 15, 1999

Hilal Capital Management, LLC
60 East 42nd Street, Suite 1946
New York, New York  10165
Attention:  Dr. Peter K. Hilal

Gentlemen:

         Reference is made to the Term Loan Agreement dated as of April 30,
1998, as amended (the "Loan Agreement") among Visible Genetics Corp., Hilal
Capital, LP, Hilal Capital QP, LP, Hilal Capital International, Ltd., Highbridge
International LLC, Hilal Capital Management LLC, as advisor for Leo Holdings,
Inc., and C.J. Partners L.P.

         All capitalized terms used in this letter which are not defined in this
letter and which are defined in the Loan Agreement shall have the same meaning
in this letter as in the Loan Agreement.

         Schedule A annexed hereto sets forth the outstanding principal amount
and accrued but unpaid interest as of the date hereof owed by the Borrower to
each Lender. Such schedule shall be amended to reflect additional accrued
interest if the Transaction is not completed on July 15, 1999.

         We have advised you that Visible Genetics Inc. (the "Company") and E.M.
Warburg, Pincus & Co. LLC ("Warburg Pincus") entered into a letter of intent
dated July 8, 1999 pursuant to which certain funds affiliated with Warburg,
Pincus intend to invest $30 million in the Company in exchange for the issuance
by the Company to such funds of (the "Transaction") (i) 30,000 Series A
Convertible Preferred Shares with a liquidation value of $30 million which are
convertible into common shares of the Company at a conversion price of $11.00
per share (the "Preferred Shares") and (ii) warrants to purchase 1,100,000
common shares of the Company exercisable for four years at a price of $12.60 per
share (the "Warrants").

         By signing this letter, each of us hereby agrees as follows:

         1. Effective upon the closing of the Transaction the Loans shall be
repaid as follows:




Hilal Capital Management, LLC
July 15, 1999
Page 2


              (a) the full principal amount and all interest owed to each of
     Highbridge International LLC ("Highbridge") and Leo Holdings, Inc. ("Leo")
     shall be repaid out of the proceeds of the Transaction and such Lenders
     shall deliver to the Company, in exchange therefore, the original copies of
     the notes evidencing such Loans, marked "Paid in Full."

              (b) Each of the Loans outstanding to each Lender other than
     Highbridge and Leo shall automatically be converted into (i) that number of
     Preferred Shares allocated to such Lender as set forth on Schedule A; and
     (ii) that number of Warrants allocated to such Lender as set forth on
     Schedule A, and shall be deemed to be paid in full. The Company shall
     deliver to such Lenders certificates evidencing such preferred shares and
     warrants in exchange for the original copies of the promissory notes
     evidencing such Loans, marked "Paid in Full."

              (c) Concurrent with, and as a condition to, the repayment of the
     Loans, the Lenders shall execute and deliver to the Borrower or Guarantor
     in form satisfactory for filing in the appropriate jurisdiction, such
     termination statements and other instruments as the Borrower and Guarantor
     shall request terminating any and all Liens in the assets of the Company,
     the Borrower and any of their respective subsidiaries in favor of Lenders,
     including but not limited to Liens in patents, trademarks and other
     intellectual property. To the extent that any such instrument is not
     executed or delivered at the time of repayment of Loans, the Lenders shall
     promptly thereafter execute and deliver such instrument to Borrower or
     Guarantor. Each Lender shall take any other action which Borrower or
     Guarantor may reasonably request so as to ensure that all Liens in favor of
     Lenders are released and any recording or other public evidence thereof is
     extinguished.

              (d) Upon repayment of the Loans as set forth herein, the Loan
     Agreement and the Guaranty shall be terminated and shall be of no further
     force and effect.

         2.   (a) The Company shall file a registration statement with the
Securities and Exchange Commission on or prior to October 30, 1999, covering the
common shares issuable upon conversion of the Preferred Shares and exercise the
Warrants and shall use its commercially reasonable best efforts to have such
registration statement declared effective by the Securities and Exchange
Commission on or prior to December 31, 1999.

              (b) The Company hereby agrees that the common shares issuable upon
     conversion of the Preferred Shares and exercise of the Warrants shall
     constitute Registrable Securities as such term is defined in the
     Registration Rights Agreement dated as of April 30, 1998, among the Company
     and the Lenders (the "Registration Rights Agreement").

                                       2




Hilal Capital Management, LLC
July 15, 1999
Page 3


                           (c) The Company and the Lenders hereby amend the
         Registration Rights Agreement by deleting Section 2.2(b) in its
         entirety and replacing it with a new Section 2(b) annexed as Exhibit A
         hereto. The Registration Rights Agreement as amended hereby remains in
         full force and effect.

         3. On the earlier of the date on which the Company or Warburg Pincus
have elected not to complete the Transaction or, if the Transaction shall not be
completed by September 30, 1999, this Agreement shall be of no further force and
effect. If the Transaction is not completed and the Company enters into an
alternative equity financing, the Lenders will have the right, at their
election, to participate in that Transaction by converting their outstanding
Loans on the same basis as the other participants in the Transaction.

         4.   (a) This Agreement shall be governed by the laws of the State of
New York without giving effect to the principle of conflicts of laws.

              (b) This Agreement constitutes the entire understanding of the
     parties hereto with respect to this subject matter hereof and supersedes
     all prior agreements and understanding among such parties with respect to
     the subject matter hereof.

                [The rest of this page intentionally left blank]

                                       3




Hilal Capital Management, LLC
July 15, 1999
Page 4

              (c) This Agreement may be executed in one or more counterparts,
     each of which shall be deemed an original and all of which together shall
     be considered one and the same agreement.

                                      Very truly yours,

                                      VISIBLE GENETICS CORP.

                                      By:
                                         ------------------------------------


                                      VISIBLE GENETICS INC.

                                      By:
                                         ------------------------------------


Agreed and Accepted:

HILAL CAPITAL, LP

By:
   ------------------------------

HILAL CAPITAL QP, LP

By:
   ------------------------------


HILAL CAPITAL INTERNATIONAL, LTD

By:
   ------------------------------


HIGHBRIDGE INTERNATIONAL, LLC

By:
   ------------------------------



                                       4




Hilal Capital Management, LLC
July 15, 1999
Page 5


HILAL CAPITAL MANAGEMENT LLC, as advisor to Leo Holdings, Inc.

By:
   ------------------------------


C.J. PARTNERS, L.P.

By:
   ------------------------------

                                       5




                                   SCHEDULE A



                                                               INTEREST                                NUMBER OF
                                             PRINCIPAL      AMOUNT OF LOAN      TOTAL PRINCIPAL         SERIES A         NUMBER OF
LENDER                                    AMOUNT OF LOAN    THROUGH 7/15/99      AND INTEREST       PREFERRED SHARES     WARRANTS
- - ----------------------------------------------------------------------------------------------------------------------------------
                                                                                                          
1.  Hilal Capital, LP                          564,217          12,057              576,274                 571           21,285

2.  Hilal Capital QP, LP                     1,434,136          30,647            1,464,783               1,452           54,088

3.  Hilal Capital International, Ltd.        1,901,647          40,638            1,942,285               1,925           71,725

4.  Highbridge International(1)              3,000,000          64,110            3,064,110

5.  Hilal Capital Management LLC
    advisor to Leo Holdings, Inc.              100,000           2,137              102,137
- - ----------------------------------------------------------------------------------------------------------------------------------
    TOTAL                                    7,000,000         149,589            7,149,589               3,948          147,098
- - ----------------------------------------------------------------------------------------------------------------------------------






                                      TRANCHE A LOAN ISSUED 9/29/98 DUE 7/15/99
- - ---------------------------------------------------------------------------------------------------------------
                          Amt Loaned   2 Day Adj.  Oct, Nov, Dec   Jan, Feb, Mar    Apr, May, June  15 Days/365
Entity                     9/29/98     = 2 days      Interest        Interest          Interest      7/1 - 7/15
- - ------                    ----------   ---------   -------------   -------------    --------------  -----------
                                                                                    
HILAL CAPITAL, LP         145,000         79          3,625           3,718             3,811           642
HILAL CAPITAL QP, LP      358,000        196          8,950           9,179             9,408         1,585
HILAL CAPITAL INT'L       497,000        272         12,425          12,742            13,061         2,201
- - ---------------------------------------------------------------------------------------------------------------
TOTAL                   1,000,000        548         25,000          25,639            26,280         4,428
- - ---------------------------------------------------------------------------------------------------------------






TRANCHE A LOAN ISSUED 9/29/98 DUE 7/15/99
- - ---------------------------------------------------
                        TOTAL INTEREST   TOTAL DUE
Entity                   RECEIVABLE       FROM VGI
- - ------                  --------------   ---------
                                    
HILAL CAPITAL, LP          11,875           156,875
HILAL CAPITAL QP, LP       27,733           385,733
HILAL CAPITAL INT'L        38,501           535,501
- - ---------------------------------------------------
TOTAL                      78,108         1,078,108
- - ---------------------------------------------------



- - -------------------------------      ------------------------------------------
    HILAL CAPITAL, LP                   HILAL CAPITAL INTERNATIONAL, LTD
       156,875                                     535,501
WIRE INSTRUCTIONS:                           WIRE INSTRUCTIONS:
Chase Manhattan Bank, N.Y.               Chase Manhattan Bank, N.Y.
   ABA # 021-000-021                         ABA # 021-000-021
F/A/O Goldman Sachs & Co, N.Y.            F/A/O Goldman Sachs & Co, N.Y.
   A/C # 930-1-011483                         A/C # 930-1-011483
F/F/C Hilal Capital, LP                 F/F/C Hilal Capital International, Ltd
   A/C # 002-04545-8                          A/C # 002-04675-3
- - -------------------------------      ------------------------------------------

- - -------------------------------
  HILAL CAPITAL QP, LP
       385,733
  WIRE INSTRUCTIONS:
Chase Manhattan Bank, N.Y.
     ABA # 021-000-021
F/A/O Goldman Sachs & Co, N.Y.
    A/C # 930-1-011483
F/F/C Hilal Capital QP, LP
   A/C # 002-04656-3
- - -------------------------------


                                    EXHIBIT A

         Section 2.2(b) of the Hilal Capital Registration Rights Agreement of
April 30,1999, as proposed to be amended;

         (b) PRIORITY IN INCIDENTAL REGISTRATION. If an Incidental Registration
involves an Underwritten Offering (on a firm commitment basis), and the sole or
the lead managing Underwriter, as the case may be, of such Underwritten Offering
shall advise the Company in writing (with a copy to each Holder requesting
registration) on or before the date five days prior to the date then scheduled
for such offering that, in its opinion, the amount of securities including
Registrable Securities) requested to be included in such registration exceeds
the amount which can be sold in such offering without materially interfering
with the successful marketing of the securities being offered (such writing to
state the basis of such opinion and the approximate number of such securities
which may be included in such offering without such effect), the Company shall
include in such registration, to the extent of the number which the Company is
so advised may be included in such offering without such effect, (I) in the case
of a registration initiated by the Company, (A) first, the securities that the
Company proposed to register for its own account, (B) second, the Registrable
Securities requested to be included in such registration by the Holder and THE
SECURITIES REQUESTED TO BE INCLUDED IN SUCH REGISTRATION by any other Person who
has been granted incidental or piggyback registration rights, allocated PRO RATA
in proportion to the number of securities requested to be included in such
registration by any Persons initiating such registration, allocated PRO RATA in
proportion to the number of securities requested to be included in such
registration by each of the, (B) second, the Registrable Securities of any
Holder and THE SECURITIES OF any other Persons who have been granted incidental
or piggyback registration rights (who have not initiated such registration)
requested to be included in such registration statement, allocated pro rata in
proportion to the nubmer of securities requested to be inclued in such
registration by each of the, (C) THIRD, THE SECURITIES THAT THE COMPANY PROPOSES
TO REGISTER FOR ITS OWN ACCOUNT, and (D) fourth, other securities of the Company
to be registered on behalf of any other Person; PROVIDED, HOWEVER, that in the
event the Company will not, by virtue of this Section 2.2(b), include in any
such registration all of the Registrable Securities of any


Holder requested to be included in such registration, such Holder may, upon
written notice to the Company given within three days of the time such Holder
first is notified of such matter, reduce the amount of Registrable Securities it
desires to have included in such registration, whereupon only the Registrable
Securities, if any, it desires to have included in such registration, whereupon
only the Registrable Securities, if any, it desires to have included will be so
included and the Holders not so reducing shall be entitled to a corresponding
increase in the amount of Registrable Securities to be included in such
registration.