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<SEC-DOCUMENT>0000947871-02-001462.txt : 20020726
<SEC-HEADER>0000947871-02-001462.hdr.sgml : 20020726
<ACCEPTANCE-DATETIME>20020726160917
ACCESSION NUMBER:		0000947871-02-001462
CONFORMED SUBMISSION TYPE:	S-8
PUBLIC DOCUMENT COUNT:		9
FILED AS OF DATE:		20020726
EFFECTIVENESS DATE:		20020726

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CAE INC
		CENTRAL INDEX KEY:			0001173382
		STANDARD INDUSTRIAL CLASSIFICATION:	MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690]
		IRS NUMBER:				000000000

	FILING VALUES:
		FORM TYPE:		S-8
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-97185
		FILM NUMBER:		02712196

	BUSINESS ADDRESS:	
		STREET 1:		ROYAL BANK PLAZA
		STREET 2:		SUITE 3060
		CITY:			TORONTO ONTARIO
		STATE:			A6
		ZIP:			00000
		BUSINESS PHONE:		4168650070

	MAIL ADDRESS:	
		STREET 1:		ROYAL BANK PLAZA
		STREET 2:		SUITE 3060
		CITY:			TORONTO ONTARIO
		STATE:			A6
		ZIP:			00000
</SEC-HEADER>
<DOCUMENT>
<TYPE>S-8
<SEQUENCE>1
<FILENAME>s8_071802.txt
<DESCRIPTION>FORM S-8
<TEXT>
As filed with the Securities and Exchange Commission on July 26, 2002

                                                         Registration No. 333-
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            -------------------------
                                    FORM S-8
                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933
                          ----------------------------
                                    CAE INC.
             (Exact name of registrant as specified in its charter)

  Canada                                          Not Applicable
  (State or other jurisdiction of                 (I.R.S. Employer
  incorporation or organization)                  Identification No.)


                          Royal Bank Plaza, South Tower
                                   Suite 3060
                                Toronto, Ontario
                                 Canada M5J 2J1
                                 (416) 865-0070

          (Address of principal executive offices, including zip code)
                          -----------------------------
                      CAE Inc. Employee Stock Purchase Plan
          CAE Inc. Employee Stock Option Plan (as Amended and Restated)

                           (Full titles of the plans)

                              CT Corporation System
                           111 8th Avenue, 13th Floor
                            New York, New York, 10011
                                 (212) 894-8700
 (Name, address and telephone number, including area code, of agent for service)

                         CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
  Title of                       Amount       Proposed       Proposed Maximum      Amount
Securities                       to be         Maximum           Aggregate           of
  to be                       Registered    Offering Price       Offering        Registration
Registered                        (1)         Per Share           Price             Fee
- -----------------------------------------------------------------------------------------------
<S>                              <C>            <C>             <C>                <C>
Common Shares, no par value      17,000 (2)     U.S.$4.22 (3)   U.S.$   71,740 (3)  U.S.$  6.61
                                 62,250 (2)     U.S.$7.75 (3)   U.S.$  482,438 (3)  U.S.$ 44.39
                                 14,500 (2)     U.S.$8.98 (3)   U.S.$  130,210 (3)  U.S.$ 11.98
                                221,000 (2)     U.S.$8.07 (3)   U.S.$1,783,470 (3)  U.S.$164.08
                                800,000 (4)     U.S.$6.40 (5)   U.S.$5,120,000 (5)  U.S.$471.04
- -----------------------------------------------------------------------------------------------
    Total                     1,114,750                         U.S.$7,587,858      U.S.$698.10
- -----------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

(1)  This registration statement on Form S-8 (this "Registration Statement")
     shall also cover any additional common shares, no par value (the "Common
     Shares"), of CAE Inc. (the "Registrant") which become issuable under any of
     the Registrant's plans registered pursuant to this Registration Statement
     by reason of any stock dividend, stock split, recapitalization or any other
     similar transaction or similar transaction effected without the receipt of
     consideration which results in an increase in the number of the
     Registrant's outstanding Common Shares. Pursuant to Rule 416(c) under the
     Securities Act of 1933, as amended (the "Securities Act"), this
     Registration Statement also covers an indeterminate amount of plan
     interests to be offered or sold pursuant to the CAE Inc. Employee Stock
     Purchase Plan.

(2)  Represents 314,750 Common Shares subject to outstanding awards under the
     CAE Inc. Employee Stock Option Plan (as Amended and Restated).

(3)  Pursuant to Rules 457(c) and 457(h) under the Securities Act, the Proposed
     Maximum Offering Price Per Share and the Proposed Maximum Aggregate
     Offering Price are based on the per share exercise price of the stock
     options, translated into U.S. dollars at the noon buying rate in New York
     City on July 24, 2002, for cable transfers in Canadian dollars as
     certified for customs purposes by the Federal Reserve Bank of New York on
     that date.

(4)  Represents an aggregate of 800,000 Common Shares, of which 500,000 Common
     Shares are available for future issuance under the CAE Inc. Employee Stock
     Option Plan (as Amended and Restated) and 300,000 Common Shares are
     available for future purchase under the CAE Inc. Employee Stock Purchase
     Plan.

(5)  Pursuant to Rules 457(c) and 457(h) under the Securities Act, the Proposed
     Maximum Offering Price Per Share and the Proposed Maximum Aggregate
     Offering Price for an aggregate of 800,000 Common Shares available for
     future awards under the CAE Inc. Employee Stock Option Plan (as Amended and
     Restated) and the CAE Inc. Employee Stock Purchase Plan are estimated based
     on the average of the high and low prices of the Common Shares reported on
     the Toronto Stock Exchange on July 24, 2002, translated into U.S. dollars
     at the noon buying rate in New York City on July 24, 2002, for cable
     transfers in Canadian dollars as certified for customs purposes by the
     Federal Reserve Bank of New York on that date. Such estimate is being
     utilized solely for the purpose of calculating the registration fee.

<PAGE>



                                     PART I

              INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS


ITEM 1.  Plan Information.*

ITEM 2.  Registrant Information and Employee Annual Information.*












- --------------------------------
*    Information  required  by  Part  I to be  contained  in the  Section  10(a)
     prospectus is omitted from this  Registration  Statement in accordane  with
     Rule 428 under the Securities Act and the "Note" to be Part I of Form S-8.


<PAGE>


                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS


ITEM 3.  Incorporation of Documents by Reference.

               The following documents  previously filed with the Securities and
          Exchange  Commission (the "SEC") by the Registrant are incorporated by
          reference in this Registration Statement:

               (a) the Registrant's Registration Statement on Form 40-F (No.
          1-31402), as filed with the Commission on July 25, 2002 (the
          "Registration Statement on Form 40-F"), pursuant to Section 12 of the
          Securities Exchange Act of 1934, as amended (the "Exchange Act"),
          which contains audited financial statements for the Registrant's
          latest financial year for which such statements have been filed; and

               (b) the description of the Registrant's Common Shares set forth
          in Exhibit 14 to the Registration Statement on Form 40-F, including
          any amendment or report for the purpose of updating such description.

                 All documents subsequently filed by the Registrant pursuant to
         Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the
         filing of a post-effective amendment which indicates that all
         securities offered have been sold or which deregisters all securities
         remaining unsold, shall be deemed to be a part hereof from the date of
         filing such documents. In addition, reports on Form 6-K furnished by
         the Registrant to the SEC shall be deemed to be incorporated by
         reference in this Registration Statement and to be a part hereof from
         the date such documents are furnished to the SEC.

                  Any statement contained in a document incorporated or deemed
         to be incorporated by reference herein shall be deemed to be modified
         or superseded for purposes of this Registration Statement to the extent
         that a statement incorporated by reference herein modified or
         supersedes such statement. Any such statement so modified or superseded
         shall not be deemed, except as so modified or superseded, to constitute
         a part of this Registration Statement.

ITEM 4.  Description of Securities.

                  Not applicable.

ITEM 5.  Interests of Named Experts and Counsel.

                  Not applicable.



<PAGE>


ITEM 6.  Indemnification of Directors and Officers.

         Under the Canada Business Corporations Act (the "CBCA"), a corporation
may indemnify a current or former director or officer of the corporation or
another individual who acts or acted at the corporation's request as a director
or officer, or an individual acting in a similar capacity, of another entity
(each, an "Indemnified Individual"), against all costs, charges and expenses,
including an amount paid to settle an action or satisfy a judgment, reasonably
incurred by the individual in respect of any civil, criminal, administrative,
investigative or other proceeding in which the individual is involved because of
that association with the corporation or other entity (collectively, "Costs"). A
corporation may advance moneys to an Indemnified Individual for the Costs
referred to above. A corporation may not indemnify an Indemnified Individual as
aforesaid unless the individual (a) acted honestly and in good faith with a view
to the best interests of the corporation, or, as the case may be, to the best
interests of the other entity for which the individual acted as a director or
officer or in a similar capacity at the corporation's request and (b) in the
case of a criminal or administrative action or proceeding that is enforced by a
monetary penalty, the individual had reasonable grounds for believing that the
individual's conduct was lawful. If the Indemnified Individual does not fulfill
conditions (a) and (b) referred to above, the individual shall repay the moneys
advanced by the corporation. A corporation may, with the approval of a court,
indemnify or advance moneys as aforesaid in connection with a derivative action.
An Indemnified Individual is not entitled to indemnity from the corporation in
respect of all Costs if the individual seeking indemnity was not judged by the
court or other competent authority to have committed any fault or admitted to do
anything that the individual ought to have done and does not fulfill the
conditions (a) and (b) referred to above.

         In accordance with the CBCA, the by-laws of the Registrant indemnify a
director or officer of the Registrant, a former director or officer of the
Registrant or a person who acts or acted at the Registrant's request as a
director or officer of a body corporate of which the Registrant is or was a
shareholder or creditor and his heirs and legal representatives, against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment reasonably incurred by him in respect of any civil, criminal
or administrative action or proceeding to which he is made a party by reason of
being or having been a director or officer of the Registrant or such body
corporate, if (i) he acted honestly and in good faith with a view to the best
interests of the Registrant, and (ii) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, he
had reasonable grounds for believing that his conduct was lawful.

         A policy of directors' and officers' liability insurance is maintained
by the Registrant which insures its directors and officers for losses as a
result of claims based upon their acts or omissions as directors and officers of
the Registrant, and also reimburses the Registrant for amounts paid by the
Registrant to indemnify its directors and officers as a result of such claims.

ITEM 7.  Exemption from Registration Claimed.

                  Not applicable.



<PAGE>


ITEM 8.  Exhibits.

                  See attached exhibit list.

ITEM 9.  Undertakings.

                  (a)   The Registrant hereby undertakes:

                  (1)   To file, during any period in which offers or sales
                  are  being  made, a   post-effective   amendment  to  this
                  Registration Statement:

                                 (i)     To include any prospectus required
                        by Section 10(a)(3) of the Securities Act;

                                 (ii)    To reflect in the prospectus any facts
                        or events arising after the effective date of this
                        Registration Statement (or the most recent
                        post-effective amendment thereof) which, individually
                        or in the aggregate, represent a fundamental change
                        in the information set forth in this Registration
                        Statement; and

                                 (iii)    To include any material information
                        with respect to the plan of distribution not
                        previously disclosed in this Registration Statement
                        or any material change to such information in the
                        Registration Statement;

                  (2)   That, for the purpose of determining any liability under
                  the Securities Act, each such post-effective amendment shall
                  be deemed to be a new registration statement relating to the
                  securities  offered  therein,   and  the  offering  of  such
                  securities  at that time  shall be deemed to be the  initial
                  bona fide offering thereof, and

                  (3)   To remove from registration by means of a post-effective
                  amendment  any  of the  securities  being  registered  which
                  remain unsold at the termination of the offering.

                  (b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

                  (c) Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by

<PAGE>

such director,  officer or controlling  person in connection with the securities
being registered,  the Registrant will, unless in the opinion of its counsel the
matter  has  been  settled  by  controlling  precedent,  submit  to a  court  of
appropriate  jurisdiction  the question  whether such  indemnification  by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.



<PAGE>


                                   SIGNATURES

                  Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Toronto, Province of Ontario, Country of Canada,
on this 26th day of July, 2002.

                                     CAE INC.



                                     By:    /s/  D.H. Burney
                                       -----------------------------------------
                                         Name:   D.H. Burney
                                         Title:  President and Chief Executive
                                                 Officer



<PAGE>



                  Pursuant to the requirements of the Securities Act of 1933,
this Registration statement on Form S-8 has been signed by the following persons
in the capacities indicated on the date indicated.

      Signature                      Title                          Date

                                  *  President and Chief           7/26/02
- -----------------------------------  Executive Officer and
D.H. Burney                          and Director (Principal
                                     Executive Officer)
                                  *                                7/26/02
- -----------------------------------  Director
John A. (Ian) Craig

                                  *                                7/26/02
- -----------------------------------  Director
Richard (Dick) J. Currie, C.M.

                                  *                                7/26/02
- -----------------------------------  Director
R. Fraser Elliott, C.M., Q.C

                                  *                                7/26/02
- -----------------------------------  Director
H. Garfield Emerson, Q.C.

                                  *                                7/26/02
- -----------------------------------  Director
Anthony S. Fell

                                  *                                7/26/02
- -----------------------------------  Director
The Honourable James A. Grant,
P.C., Q.C.


- -----------------------------------  Director
James F. Hankinson

                                  *                                7/26/02
- -----------------------------------  Director
E. Randolph (Randy) Jayne II

                                  *                                7/26/02
- -----------------------------------  Director
James W. McCutcheon, Q.C.


- -----------------------------------  Director
George K. Petty

                                  *                                7/26/02
- -----------------------------------  Executive Vice President, Chief
Paul G. Renaud                       Financial Officer and Secretary
                                     (Principal Financial Officer and
                                     Principal Accounting Officer)
<PAGE>


- -----------------------------------  Director
Lawrence N. Stevenson

                                  *                                7/26/02
- -----------------------------------  Chairman of the Board of Directors
Lynton R. Wilson




*By:     /s/ Paul G. Renaud                                        7/26/02
         ---------------------------
         Paul G. Renaud
         (Attorney-in-fact)







<PAGE>


                CAE Inc. Employee Stock Purchase Plan. Pursuant to the
requirements of the Securities Act, the trustee (or other persons who administer
the employee benefit plan) has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Montreal, Province of Quebec, Country of Canada, on this 26th day of July,
2002.


                                  CAE INC. EMPLOYEE STOCK PURCHASE PLAN


                                       By:  /s/  Genevieve Faribault
                                           ----------------------------------
                                           Name:  Genevieve Faribault
                                           Title: Secretary for Standard Life
                                                  Assurance Company




<PAGE>



                            AUTHORIZED REPRESENTATIVE

                  Pursuant to the requirements of Section 6(a) of the Securities
Act of 1933, as amended, the Authorized Representative has duly caused this
Registration Statement to be signed on its behalf by the undersigned, solely in
its capacity as the duly authorized representative of CAE Inc. in the United
States, in the City of Toronto, Province of Ontario, Country of Canada, on this
26th day of July, 2002.

                                              CAE (US) INC.
                                              (Authorized U.S. Representative)



                                              By:     /s/ Paul G. Renaud
                                                  ------------------------------
                                                  Name:   Paul G. Renaud
                                                  Title:  Director


<PAGE>



                                  Exhibit Index


Exhibit
Number    Description

4.1*      Registrant's Articles of Amalgamation.

4.2*      Registrant's By-laws.

4.3*      Registrant's Amended and Restated Shareholder Rights Plan Agreement
          dated June 14, 2000 and Assignment of Agencies Agreement dated
          January 15, 2001.

4.4*      CAE Inc. Employee Stock Purchase Plan.

4.5*      CAE Inc. Employee Stock Option Plan (as Amended and Restated).

5.1*      Consent of Stikeman Elliot as to the Legality of the Common Shares.**

23.1*     Consent of PricewaterhouseCoopers LLP, Montreal, Quebec.

23.2*     Consent of Stikeman Elliot (contained in Exhibit 5.1).

24.1*     Powers of Attorney.













- ---------------------------------
*        Filed herewith.

** The Common Shares registered on this Registration Statement with respect to
the CAE Inc. Employee Stock Purchase Plan are not original issuance securities.
Pursuant to Item 8(a) of Part II of Form S-8, an opinion of counsel as to the
legality of the Common Shares with respect to such plan is not required.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>3
<FILENAME>ex4_1-072202.txt
<DESCRIPTION>EX-4.1, CERTIFICATE OF AMALGAMATION
<TEXT>
                                                                     EXHIBIT 4.1

[Canadian Flag] Industry Canada                  Industrie Canada


CERTIFICATE                                      CERTIFICAT
OF AMALGAMATION                                  DE FUSION

CANADA BUSINESS                                  LOI CANADIENNE SUR
CORPORATIONS ACT                                 LES SOCIETES PAR ACTIONS
- ------------------------------------------------------------------------------



CAE INC.                                              387674-8
- ----------------------------------      ---------------------------------------
Name of corporation - Denomination      Corporation number - Numero de la de la
         de la societe                                 societe


I hereby certify that the above-named   Je certifie que la societe
corporation resulted from an            susmentionnee est issue d'une fusion,
amalgamation, under section 185 of the  en vertu de l'article 185 de la LOI
CANADA BUSINESS CORPORATIONS ACT, of    CANADIENNE SUR LES SOCIETES PAR
the corporations set out in the         ACTIONS, des societes dont les
attached articles of amalgamation.      denominations apparaissent dans les
                                        statuts de fusion ci-joints.



By: /s/ Director of Industry Canada     APRIL 1, 2001 / LE 1 AVRIL 2001

                                        Date of Amalgamation - Date de fusion

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

[Canada logo]

<PAGE>


                        CANADA BUSINESS CORPORATIONS ACT

                                     FORM 9
                            ARTICLES OF AMALGAMATION
                                 (SECTION 185)

1.   Name of amalgamated corporation:

     CAE Inc.

2.   The place in Canada where the registered office is to be situated:

     City of Toronto.

3.   The classes and any maximum number of shares that the Corporation is
     authorized to issue:

     An unlimited number of common shares ("Common Shares") and an unlimited
     number of preferred shares, issuable in series ("Preferred Shares").

     3.1   The Preferred Shares shall have attached thereto, as a class, the
     following rights, privileges, restrictions and conditions:

     3.1.1   DIRECTORS TO ISSUE IN ONE OR MORE SERIES:

          The Preferred Shares may at any time or from time to time be issued in
     one or more series, each series to consist of such number of shares as may,
     before the issue thereof, be determined by resolution of the board of
     directors of the Corporation and confirmed and declared by certificate and
     articles of amendment.

     3.1.2   DIRECTORS TO FIX TERMS OF EACH SERIES:

          The directors of the Corporation shall have the right, by resolution,
     but subject to the provisions of the laws governing the Corporation, as now
     existing or hereafter amended (such laws being herein referred to as the
     "Act") and subject to the provisions herein contained and to any conditions
     in that regard attaching to any outstanding series of Preferred Shares,
     from time to time before issue, to fix the number of shares in, the
     designation of, and to determine the respective rights, privileges,
     restrictions and conditions attaching to each series of Preferred Shares,
     including, but without in any way limiting or restricting the generality of
     the foregoing:

     (a)  provisions, if any, with respect to the rights of the holders of the
          shares of the series to receive notice of or to attend any meeting of
          the shareholders of the Corporation or to vote at any such meeting;


<PAGE>

                                     - 2 -

     (b)  the rate or amount of preferential dividends and whether or not they
          are cumulative or non-cumulative, the currency or currencies of
          payment, the date or dates from or on which such preferential
          dividends shall accrue or be payable;

     (c)  the rights of the Corporation, if any, to purchase or redeem the
          Preferred Shares of the series and the consideration therefor, premium
          (if any) and the terms and conditions of any such purchase or
          redemption;

     (d)  the conversion rights, if any;

     (e)  the terms and conditions, if any, under which a series of the
          Preferred Shares shall or may be purchased by the Corporation; and

     (f)  the restrictions, if any, respecting payment or dividends on Common
          Shares or on any other shares ranking junior to the Preferred Shares;

     the whole to be subject to the issue of a certificate and articles of
     amendment setting forth the designation of and the rights, privileges,
     restrictions and conditions attaching to such series of Preferred Shares.

     3.1.3   PRIORITY OF DIVIDENDS:

          The Preferred Shares of each series shall, with respect to the payment
     of dividends, be entitled to preference over the Common Shares and over any
     other shares of the Corporation ranking junior to the Preferred Shares.

     3.1.4   PRIORITY OF DISTRIBUTION:

          In the event of the liquidation, dissolution or winding-up of the
     Corporation or other distribution of the assets of the Corporation among
     shareholders for the purpose of winding-up its affairs, the holders of the
     Preferred Shares shall, before any amount shall be paid to or any property
     or assets of the Corporation distributed among the holders of the Common
     Shares or any other shares of the Corporation ranking junior to the
     Preferred Shares, be entitled to receive to the extent provided for with
     respect to each series:

     (a)  an amount equal to the price at which such shares were issued;

     (b)  such premium, if any, as has been provided for with respect to such
          series;


<PAGE>
                                     - 3 -


     (c)  in the case of any series of Preferred Shares entitled to cumulative
          dividends, all unpaid cumulative dividends (which for such purpose
          shall be calculated as if such cumulative dividends were accruing from
          day to day for the period from the expiration of the last period for
          which cumulative dividends have been paid up to and including the date
          of distribution); and

     (d)  in the case of any series of Preferred Shares entitled to
          non-cumulative dividends, all declared but unpaid dividends.

     After payment to the holders of Preferred Shares of the amounts so payable
     to them, they shall not be entitled to share in any further distribution of
     the property or assets of the Corporation.

     3.1.5   PARITY OF SERIES:

          The Preferred Shares of all series shall participate rateably in
     respect of the payment of accumulated dividends and the distribution of
     assets in the event of the liquidation, dissolution or winding-up of the
     Corporation, whether voluntary or involuntary; provided, however, that if
     such assets are not sufficient to pay in full the amount due on all the
     Preferred Shares, then such assets shall be distributed rateably as
     follows:

     (a)  firstly to the payment of an amount equal to the price at which the
          Preferred Shares of each series were issued and the premium if any
          payable thereon; and

     (b)  secondly if assets remain after the payment of all amounts to be paid
          pursuant to paragraph 3.1.5(a) above, to the payment of accrued and
          unpaid cumulative dividends and declared but unpaid non-cumulative
          dividends owing on the Preferred Shares.

     3.1.6   LIMITATION ON VOTING RIGHTS:

          Except as otherwise provided in the provisions attached to any
     Preferred Shares as a series, the holders of Preferred Shares shall not be
     entitled to receive any notice of or attend at any meeting of shareholders
     of the Corporation and shall not be entitled to vote at any such meeting.
     Holders of Preferred Shares shall not be entitled to vote separately as a
     class, nor shall the holders of any series of Preferred Share be entitled
     to vote separately as a series, in the case of an amendment to the articles
     of the Corporation referred to in paragraphs (a), (b) or (e) of subsection
     (1) of Section 176 of the Act as now existing.
<PAGE>


                                     - 4 -

     3.1.7 APPROVAL:

          Any approval to be given by the holders of Preferred Shares separately
     as a class or by the holders of a series thereof separately as a class, as
     the case may be, shall be deemed to have been sufficiently given if it
     shall have been given in writing by the holders of at least two-thirds
     (2/3) of the outstanding Preferred Shares or the outstanding shares of such
     series, as the case may be, or by a resolution passed at a meeting of
     holders of Preferred Shares or such series, as the case may be, duly called
     and held, by the affirmative vote of not less than two-thirds (2/3) of the
     votes cast at such meeting. The formalities to be observed with respect to
     the giving of notice of any meeting of the holders of the Preferred Shares
     or any series thereof, the conduct of such meeting and the quorum therefor
     shall be those prescribed in the by-laws of the Corporation with respect to
     the Preferred Shares or, in the absence thereof, the formalities prescribed
     in the by-laws of the Corporation for meetings of the holders of voting
     shares shall apply mutatis mutandis.

     3.2   The Common Shares shall entitle the holders thereof to one vote per
     Common Share at all meetings of shareholders, except meetings at which only
     holders of another specified class or series of shares are entitled to
     vote, and shall, subject to the rights, privileges, restrictions and
     conditions attaching to the Preferred Shares, whether as a class or series,
     and to any other class or series of shares of the Corporation which ranks
     prior to the Common Shares, entitle the holders thereof to receive any
     dividend declared by the Corporation and the remaining property of the
     Corporation upon dissolution.

4.   Restrictions if any on share transfers:

     None.

5.   Number (or minimum and maximum number) of directors:

     A minimum of three (3) and a maximum of twenty-one (21).

6.   Restrictions if any on business the Corporation may carry on:

     None.

7.   Other provisions, if any:

     (a)  The directors of the Corporation may, without authorization of the
          shareholders:

          (i)  borrow money upon the credit of the Corporation;

<PAGE>


                                     - 5 -

          (ii) issue, re-issue, sell or pledge any bonds, debentures, debenture
               stock or other debt obligations of the Corporation; and

          (iii) mortgage, hypothecate, pledge or otherwise create a security
               interest in all or any real or personal, movable or immovable
               property of the Corporation, owned or subsequently acquired,
               present or future, to secure any debt of the Corporation.

          The directors may, by resolution or by-law, provide for the delegation
          of such powers by the directors to such officers or directors of the
          Corporation to such extent and in such manner as may be set out in the
          resolution or by-law, as the case may be.

     (b)  Subject to the provisions of the Act, the Corporation may purchase or
          otherwise acquire any shares issued by it.

     (c)  In addition to any other right of the directors under the Act, the
          directors may, pursuant to section 106(8) of the Act, appoint one or
          more directors, who shall hold office for a term expiring not later
          than the close of the next annual meeting of shareholders, but the
          total number of directors so appointed may not exceed one third of the
          number of directors elected at the previous annual meeting of
          shareholders.

8.   The amalgamation has been approved pursuant to that section or subsection
     of the Act which is indicated as follows:

                                        / / 183
                                        /X/ 184(1)
                                        / / 184(2)

9.   Name the amalgamating corporations:

     CAE Inc.
     Corporation No.: 0104001

                                                   /s/ Paul G. Renaud
                                       ----------------------------------------
     Date: March 27, 2001              Title: Executive V.P. C.F.O. & Secretary


     CAE Electronics Ltd./CAE Electronique Ltee
     Corporation No.: 364502-9

                                                   /s/ Paul G. Renaud
                                       ----------------------------------------
     Date: March 27, 2001              Title: Executive V.P. C.F.O. & Secretary


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>4
<FILENAME>ex4_2-072202.txt
<DESCRIPTION>EX 4.2, BY-LAW NO. 73
<TEXT>
                                                                     EXHIBIT 4.2
                                 BY-LAW NO. 73

                       A by-law relating generally to the
                       transaction of the business and
                       affairs of CAE INDUSTRIES LTD.


                                    CONTENTS

                       One      -  Interpretation
                       Two      -  Business of the Corporation
                       Three    -  Borrowing and Securities
                       Four     -  Directors
                       Five     -  Committees
                       Six      -  Officers
                       Seven    -  Protection of Directors, Officers and Others
                       Eight    -  Shares
                       Nine     -  Dividends and Rights
                       Ten      -  Meetings of Shareholders
                       Eleven   -  Divisions and Departments
                       Twelve   -  Notices
                       Thirteen -  Effective Date and Repeal


                       BE IT ENACTED as a by-law of the Corporation
                 as follows:

<PAGE>

                                     - 2 -

                                  SECTION ONE

                                 INTERPRETATION

     1.01 DEFINITIONS - In the by-laws of the Corporation, unless the context
otherwise requires:

          "Act" means the Canada Business Corporations Act, and any statute that
          may be substituted therefor, as from time to time amended;

          "appoint" includes "elect" and vice versa;

          "articles" means the articles attached to the certificate of
          continuance dated August 3, 1977, of the Corporation as from time to
          time amended or restated;

          "board" means the board of directors of the Corporation;

          "by-laws" means this by-law and all other by-laws of the Corporation
          from time to time in force and effect;

          "Corporation" means the corporation continued under the Act and named
          CAE INDUSTRIES LTD.;

          "meeting of shareholders" means an annual meeting of shareholders and
          a special meeting of shareholders;

          "special meeting of shareholders" means a special meeting of all
          shareholders entitled to vote at an annual meeting of shareholders;

          "non-business day" means Saturday, Sunday and any other day that is a
          holiday as defined in the Interpretation Act (Canada);

          "recorded address" means in the case of a shareholder his address as
          recorded in the securities register; and in the case of joint
          shareholders the address appearing in the securities register in
          respect of such joint holding or the first address so appearing if
          there are more than one; and in the case of a director, officer,
          auditor or member of a committee of the board, his latest address as
          recorded in the records of the Corporation;

<PAGE>


                                     - 3 -

          "signing officer" means, in relation to any instrument, any person
          authorized to sign the same on behalf of the Corporation by section
          2.04 or by a resolution passed pursuant thereto;

          "unanimous shareholder agreement" means a written agreement among all
          shareholders of the Corporation, or among all such shareholders and a
          person who is not a shareholder, that restricts, in whole or in part,
          the powers of the directors to manage the business and affairs of the
          Corporation, as from time to time amended;

          save as aforesaid, words and expressions defined in the Act have the
          same meanings when used herein; and

          words importing the singular number include the plural and vice versa;
          words importing gender include the masculine, feminine and neuter
          genders; and words importing persons include individuals, bodies
          corporate, partnerships, trusts and unincorporated organizations.

                                  SECTION TWO

                          BUSINESS OF THE CORPORATION

     2.01 REGISTERED OFFICE - Until changed in accordance with the Act, the
registered office of the Corporation shall be in the Montreal Urban Community,
in the Province of Quebec, and at such location therein as the board may from
time to time determine.

     2.02 CORPORATE SEAL - Until changed by the board, the corporate seal of the
Corporation shall be in the form impressed hereon.

     2.03 FINANCIAL YEAR - Until changed by the board, the financial year of the
Corporation shall end on the last day of March in each year.

     2.04 EXECUTION OF INSTRUMENTS - Deeds, transfers, assignments, contracts,
obligations, certificates and other instruments may be signed on behalf of the
Corporation by two persons, one of whom holds the office of chairman of the
board, president, vice-president or director and the other

<PAGE>


                                     - 4 -

of whom holds one of the said offices or the office of secretary, treasurer,
comptroller, assistant secretary or assistant treasurer or any other office
created by by-law or by resolution of the board. In addition, the board may from
time to time direct the manner in which the person or persons by whom any
particular instrument or class of instruments may or shall be signed. Any
signing officer may affix the corporate seal to any instrument requiring the
same.

     2.05 BANKING ARRANGEMENTS - The banking business of the Corporation
including, without limitation, the borrowing of money and the giving of security
therefor, shall be transacted with such banks, trust companies or other bodies
corporate or organizations as may from time to time be designated by or under
the authority of the board. Such banking business or any part thereof shall be
transacted under such agreements, instructions and delegations of powers as the
board may from time to time prescribe or authorize.

     2.06 VOTING RIGHTS IN OTHER BODIES CORPORATE - The signing officers of the
Corporation may execute and deliver proxies and arrange for the issuance of
voting certificates or other evidence of the right to exercise the voting rights
attaching to any securities held by the Corporation. Such instruments,
certificates or other evidence shall be in favour of such person or persons as
may be determined by the officers executing such proxies or arranging for the
issuance of voting certificates or such other evidence of the right to exercise
such voting rights. In addition, the board may from time to time direct the
manner in which and the person or persons by whom any particular voting rights
or class of voting rights may or shall be exercised.

     2.07 WITHHOLDING INFORMATION FROM SHAREHOLDERS - Subject to the provisions
of the Act, no shareholder shall be entitled to discovery of any information
respecting any details or conduct of the Corporation's business which, in the
opinion of the board, it would be inexpedient in the interests of the
shareholders or the Corporation to communicate to the public. The board may from
time to time determine whether and to what extent and at what time and place and
under what conditions or regulations the accounts, records and documents of the
Corporation or any of them shall be open to the inspection of shareholders and
no shareholder shall have any right of inspecting any account, record or
document of the Corporation except as conferred by the Act or authorized by the
board or by resolution passed at a general meeting of shareholders.

<PAGE>

                                     - 5 -


                                 SECTION THREE

                            BORROWING AND SECURITIES

     3.01 BORROWING POWER - Without limiting the borrowing powers of the
Corporation as set forth in the Act, the board may from time to time:

     (a)  borrow money upon the credit of the Corporation;

     (b)  issue, reissue, sell or pledge bonds, debentures, notes or other
          evidence of indebtedness or guarantee of the Corporation, whether
          secured or unsecured; and

     (c)  mortgage, hypothecate, pledge or otherwise create an interest in or
          charge upon all or any property (including the undertaking and rights)
          of the Corporation, owned or subsequently acquired, by way of
          mortgage, hypothec, pledge or otherwise, to secure payment of any such
          evidence of indebtedness or guarantee of the Corporation.

Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.

     3.02 DELEGATION - The board may from time to time delegate to such one or
more of the directors and officers of the Corporation as may be designated by
the board all or any of the powers conferred on the board by section 3.01 or by
the Act to such extent and in such manner as the board shall determine at the
time of each such delegation.

                                  SECTION FOUR

                                   DIRECTORS

     4.01 NUMBER OF DIRECTORS AND QUORUM - The Board shall consist of 12
directors until the directors adopt a resolution calling for a different number
of directors within the minimum and maximum specified in the articles. Subject
to section 4.08, the quorum for the transaction of business at any meeting of
the board shall consist of a majority of the minimum number of directors
specified in the articles or such greater number of directors as the board may
from time to time determine.

<PAGE>


                                     - 6 -


     4.02 QUALIFICATION - No person shall be qualified for election as a
director if he is less than 18 years of age; if he is of unsound mind and has
been so found by a court in Canada or elsewhere; if he is not an individual; or
if he has the status of a bankrupt. A director need not be a shareholder. A
majority of the directors shall be resident Canadians.

     4.03 ELECTION AND TERM - The election of directors shall take place at the
first meeting of shareholders and at each annual meeting of shareholders and all
the directors then in office shall retire but, if qualified, shall be eligible
for re-election. The number of directors to be elected at any such meeting shall
be the number of directors then in office unless the directors otherwise
determine. The election shall be by resolution. If an election of directors is
not held at the proper time, the incumbent directors shall continue in office
until their successors are elected.


     4.04 REMOVAL OF DIRECTORS - Subject to the provisions of the Act, the
shareholders may by resolution passed at a special meeting remove any director
from office and the vacancy created by such removal may he filled at the same
meeting failing which it may be filled by the directors.

     4.05 VACATION OF OFFICE - A director ceases to hold office when he dies; he
is removed from office by the shareholders; he ceases to be qualified for
election as a director; or his written resignation is sent or delivered to the
Corporation, or if a time is specified in such resignation, at the time so
specified, whichever is later.

     4.06 VACANCIES - Subject to the Act, a quorum of the board may fill a
vacancy in the board, except a vacancy resulting from an increase in the minimum
number of directors or from a failure of the shareholders to elect the minimum
number of directors required by the articles. In the absence of a quorum of the
board, or if the vacancy has arisen from a failure of the shareholders to elect
the minimum number of directors, the directors then in office shall forthwith
call a special meeting of the shareholders to fill the vacancy. If such
directors fail to call such meeting or if there are no directors then in office,
any shareholder may call the meeting.

     4.07 ACTION BY THE BOARD - Subject to any unanimous shareholder agreement,
the board shall manage the business and affairs of the Corporation. Subject to
sections 4.08 and 4.09, the powers of the board may be exercised by resolution
passed at a meeting at which a quorum is present or by

<PAGE>


                                      - 7 -


resolution in writing signed by all the directors entitled to vote on that
resolution at a meeting of the board. Where there is a vacancy in the board, the
remaining directors may exercise all the powers of the board so long as a quorum
remains in office. Where the Corporation has only one director, that director
may constitute the meeting.

     4.08 CANADIAN MAJORITY - The board shall not transact business at a
meeting, other than filling a vacancy in the board, unless a majority of the
directors present are resident Canadians, except where:

     (a)  a resident Canadian director who is unable to be present approves in
          writing or by telephone or other communications facilities the
          business transacted at the meeting; and

     (b)  a majority of resident Canadians would have been present had that
          director been present at the meeting.

     4.09 MEETINGS BY TELEPHONE - If all the directors consent, a director may
participate in a meeting of the board or of a committee of the board by means of
such telephone or other communications facilities as permit all persons
participating in the meeting to hear each other, and a director participating in
such a meeting by such means is deemed to be present at the meeting. Any such
consent shall be effective whether given before or after the meeting to which it
relates and may be given with respect to all meetings of the board and of
committees of the board held while a director holds office.

     4.10 PLACE OF MEETING - Meetings of the board may be held at any place in
or outside Canada.

     4.11 CALLING OF MEETINGS - Meetings of the board shall be held from time to
time and at such place as the board, the chairman of the board, the president or
any two directors may determine.

     4.12 NOTICE OF MEETING - Notice of the time and place of each meeting of
the board shall be given in the manner provided in section 12.01 to each
director not less than 48 hours before the time when the meeting is to be held.
A notice of a meeting of directors need not specify the purpose of or the
business to be transacted at the meeting, except where the Act requires such
purpose or business to be specified, including, without limitation, any proposal
to:

<PAGE>


                                     - 8 -

     (a)  submit to the shareholders any question or matter requiring approval
          of the shareholders;

     (b)  fill a vacancy among the directors or in the office of auditor;

     (c)  issue securities;

     (d)  declare dividends;

     (e)  purchase, redeem or otherwise acquire shares of the Corporation;

     (f)  pay a commission for the sale of shares;

     (g)  approve a management proxy circular;

     (h)  approve a take-over bid circular or directors' circular;

     (i) approve any annual financial statements; or

     (j) adopt, amend or repeal by-laws.

A director may in any manner waive notice of or otherwise consent to a meeting
of the board.

     4.13 FIRST MEETING OF NEW BOARD - Provided a quorum of directors is
present, each newly elected board may without notice hold its first meeting
immediately following the meeting of shareholders at which such board is
elected.

     4.14 ADJOURNED MEETING - Notice of an adjourned meeting of the board is not
required if the time and place of the adjourned meeting is announced at the
original meeting.

     4.15 REGULAR MEETINGS - The board may appoint a day or days in any month or
months for regular meetings of the board at a place and hour to be named. A copy
of any resolution of the board fixing the place and time of such regular
meetings shall be sent to each director forthwith after being passed, but no
other notice shall be required for any such regular meeting except where the Act
requires the purpose thereof or the business to be transacted thereat to be
specified.

<PAGE>

                                     - 9 -


     4.16 CHAIRMAN - The Chairman of any meeting of the board shall be the first
mentioned of such of the following officers as have been appointed and who is a
director and is present at the meeting: chairman of the board, president, or a
vice-president who is a director. If no such officer is present, the directors
present shall choose one of their number to be chairman.

     4.17 VOTES TO GOVERN - At all meetings of the board every question shall be
decided by a majority of the votes cast on the question. In case of an equality
of votes the chairman of the meeting shall be entitled to a second or casting
vote.

     4.18 CONFLICT OF INTEREST - A director or officer who is a party to, or who
is a director or officer of or has a material interest in any person who is a
party to, a material contract or proposed material contract with the Corporation
shall disclose the nature and extent of his interest at the time and in the
manner provided by the Act. Any such contract or proposed contract shall be
referred to the board or shareholders for approval even if such contract is one
that in the ordinary course of the Corporation's business would not require
approval by the board or shareholders, and a director interested in a contract
so referred to the board shall not vote on any resolution to approve the same
except as provided by the Act.

     4.19 REMUNERATION AND EXPENSES - Subject to any unanimous shareholder
agreement, the directors shall be paid such remuneration for their services as
the board may from time to time determine. The directors shall also be entitled
to be reimbursed for travelling and other expenses properly incurred by them in
attending meetings of the board or any committee thereof. Except as provided in
section 4.02, nothing herein contained shall preclude any director from serving
the Corporation in any other capacity and receiving the remuneration therefor.

                                  SECTION FIVE

                                   COMMITTEES

     5.01 EXECUTIVE COMMITTEE - The Board may at their meeting held immediately
after the annual meeting of shareholders and from time to time as vacancies
occur, elect three or more of their body, two of whom shall be the Chairman and
the Committee President, and two or more others as alternates as a committee of
directors (the "Executive Committee") and the following provisions shall apply
thereto:

<PAGE>

                                     - 10 -


     (a) The president shall be ex officio chairman of the Executive Committee
and in his absence the Executive Committee shall choose one of its body to be
chairman. The chairman shall preside at all meetings and shall have a casting
vote in case of a tie.

     (b) A majority of the members of the Executive Committee shall be resident
Canadians.

     (c) The Executive Committee shall meet at the office of the Corporation in
the City of Toronto at such times as they shall by resolution appoint, and shall
also meet at any other time or place at the call of the president on two hours'
notice to be given orally or by telephone or in any of the manners provided in
section 12.01.

     (d) Subject to the provisions of the Act, the number of members of the
Executive Committee may be increased or decreased from time to time and their
remuneration fixed by resolution of the board.

     (e) During the intervals between the meetings of the board, the Executive
Committee shall possess and may exercise (subject to any regulations which the
board may from time to time impose) all the powers of the board in the
management and direction of the operations of the Corporation, save and except
only those acts which, under the Act, a committee of directors has no authority
to exercise. The Executive Committee shall have no authority to:

          (a)  submit to the shareholders any question or matter requiring the
               approval of the shareholders;

          (b)  fill a vacancy among the directors or in the office of auditor;

          (c)  issue securities except in the manner and on the terms authorized
               by the directors;

          (d)  declare dividends;

          (e)  purchase, redeem or otherwise acquire shares issued by the
               Corporation;

          (f)  pay a commission referred to in section 89;

          (g)  approve a management proxy circular referred to in Part XII;

          (h)  approve a take-over bid circular or directors' circular referred
               to in Part XVI;

          (i)  approve any financial statements referred to in section 149;

<PAGE>

                                     - 11 -

          (j)  adopt, amend or repeal by-laws.

The Executive Committee shall exercise its powers as it shall deem best for the
interests of the Corporation in all cases in which specific directions shall not
have been given by the board. All action by the Executive Committee shall be
reported to the board at its meeting next succeeding such action and shall be
subject to revision or alteration by the board; provided that no acts or rights
of third parties shall be affected or invalidated by any such revision or
alteration.

     5.02 TRANSACTION OF BUSINESS - Subject to the provisions of section 4.09,
the powers of the Executive Committee may be exercised by a meeting at which a
quorum is present or by resolution in writing signed by all the members of such
committee who would have been entitled to vote on that resolution at a meeting
of the committee. Meetings of such committee may be held at any place in or
outside Canada.

     5.03 AUDIT COMMITTEE - The board shall elect annually from among its number
an audit committee to be composed of not fewer than 3 directors of whom a
majority shall neither be officers nor employees of the Corporation or its
affiliates. The audit committee shall have the power and duties provided in the
Act.

     5.04 RETIREMENT COMMITTEE - the board may appoint a retirement committee
made up of at least 3 persons, each of whom is a director or an officer and a
majority of whom shall be directors. The retirement committee shall administer
the Corporation's retirement plan, instruct the trustee of such plan in
connection with the nature and extent of the investments to be made, authorize
all disbursements to be made by such trustee, and generally advise the board in
connection with matters of policy as they relate to interpretation and
application of the plan and any insuring and re-insuring of benefits provided by
the plan.

     5.05 ADVISORY COMMITTEES - The board may from time to time appoint such
other committees as it may deem advisable, but the functions of any such other
committees shall be advisory only.

     5.06 PROCEDURE - Unless otherwise determined by the board or the by-laws,
each committee shall have the power to fix its quorum at not less than a
majority of its members, to elect its chairman and to regulate its procedure.

<PAGE>


                                     - 12 -


                                  SECTION SIX

                                    OFFICERS

     6.01 APPOINTMENT - Subject to any unanimous shareholder agreement, the
board may from time to time appoint a president, one or more vice-presidents (to
which title may be added words indicating seniority or function), a secretary, a
treasurer and such other officers as the board may determine, including one or
more assistants to any of the officers so appointed. The board may specify the
duties of and, in accordance with this by-law and subject to the provisions of
the Act, delegate to such officers powers to manage the business and affairs of
the Corporation. Subject to sections 6.02 and 6.03, an officer may but need not
be a director and one person may hold more than one office.

     6.02 CHAIRMAN OF THE BOARD - The board may from time to time also appoint a
chairman of the board who shall be a director. If appointed, the board may
assign to him any of the powers and duties that are by any provisions of this
by-law assigned to the president; and he shall, subject to the provisions of the
Act, have such other powers and duties as the board may specify. During the
absence or disability of the chairman of the board, his duties shall be
performed and his powers exercised by the president.

     6.03 PRESIDENT - If appointed, the president shall be the chief executive
officer and the chief operating officer and, subject to the authority of the
board, shall have general supervision of the business and affairs of the
Corporation; and he shall, subject to the provisions of the Act, have such other
powers and duties as the board may specify.

     6.04 VICE-PRESIDENT - A vice-president shall have such powers and duties as
the board or, subject to the approval of the board, the chief executive officer
may specify.

     6.05 SECRETARY - The secretary shall attend and be the secretary of all
meetings of the board, shareholders and committees of the board and shall enter
or cause to be entered in records kept for that purpose minutes of all
proceedings thereat; he shall give or cause to be given, as and when instructed,
all notices of shareholders, directors, officers, auditors and members of
committees of the board; he shall be the custodian of the stamp or mechanical
device generally used for affixing the corporate seal of the Corporation and of
all books, papers, records, documents and instruments belonging to the
Corporation, except when some other

<PAGE>


                                     - 13 -


officer or agent has been appointed for that purpose; and he shall have such
other powers and duties as the board or the chief executive officer may specify.

     6.06 TREASURER - The treasurer shall keep proper accounting records in
compliance with the Act and shall be responsible for the deposit of money, the
safekeeping of securities and the disbursement of the funds of the Corporation;
he shall render to the board whenever required an account of all his
transactions as treasurer and of the financial position of the Corporation; and
he shall have such other powers and duties as the board or the chief executive
officer may specify.

     6.07 COMPTROLLER - The comptroller shall have charge of the accounts of the
Corporation, shall supervise the bookkeeping and accounting procedures and
advise the Corporation on matters of financial planning and budgeting and have
such other powers and duties as the board may specify. During the absence or
disability of the treasurer, or if no treasurer has been appointed, the
comptroller shall also have the powers and duties of that office.

     6.08 POWERS AND DUTIES OF OTHER OFFICERS - The powers and duties of all
other officers shall be such as the terms of their engagement call for or as the
board or, subject to the approval of the board, the chief executive officer may
specify. Any of the powers and duties of an officer to whom an assistant has
been appointed may be exercised and performed by such assistant, unless the
board or the chief executive officer otherwise directs.

     6.09 VARIATION OF POWERS AND DUTIES - The board may from time to time and
subject to the provisions of the Act, vary, add to or limit the powers and
duties of any officer.

     6.10 TERM OF OFFICE - The board, in its discretion, may remove any officer
of the Corporation, without prejudice to such officer's rights under any
employment contract. Otherwise each officer appointed by the board shall hold
office until his successor is appointed.

     6.11 TERMS OF EMPLOYMENT AND REMUNERATION - The terms of employment and the
remuneration of officers appointed by the board shall be settled by it from time
to time.

     6.12 CONFLICT OF INTEREST - An officer shall disclose his interest in any
material contract or proposed material contract with the Corporation in
accordance with section 4.18.

<PAGE>


                                     - 14 -


6.13 AGENTS AND ATTORNEYS - The board shall have power from time to time to
appoint agents or attorneys for the Corporation in or outside Canada with such
powers of management or otherwise (including the power to sub-delegate) as may
be thought fit.

6.14 FIDELITY BONDS - The board may require such officers, employees and agents
of the Corporation as the board deems advisable to furnish bonds for the
faithful discharge of their powers and duties, in such form and with such surety
as the board may from time to time determine.

                                 SECTION SEVEN

                  PROTECTION OF DIRECTORS, OFFICERS AND OTHERS

     7.01 LIMITATION OF LIABILITY - No director or officer shall be liable for
the acts, receipts, neglects or defaults of any other director or officer or
employee, or for joining in any receipt or other act for conformity, or for any
loss, damage or expense happening to the Corporation through the insufficiency
or deficiency of title to any property acquired for or on behalf of the
Corporation, or for the insufficiency or deficiency of any security in or upon
which any of the moneys of the Corporation shall be invested, or for any loss or
damage arising from the bankruptcy, insolvency or tortious acts of any person
with whom any of the moneys, securities or effects of the Corporation shall be
deposited, or for any loss occasioned by any error of judgment or oversight on
his part, or for any other loss, damage or misfortune whatever which shall
happen in the execution of the duties of his office or in relation thereto,
unless the same are occasioned by his own wilful neglect or default; provided
that nothing herein shall relieve any director or officer from the duty to act
in accordance with the Act and the regulations thereunder or from liability for
any breach thereof.

     7.02 INDEMNITY - Subject to the limitations contained in the Act, the
Corporation shall indemnify a director or officer, a former director or officer,
or a person who acts or acted at the Corporation's request as a director or
officer of a body corporate of which the Corporation is or was a shareholder or
creditor (or a person who undertakes or has undertaken any liability on behalf
of the Corporation or any such body corporate) and his heirs and legal
representatives, against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgement, reasonably incurred by him in
respect of any civil, criminal or administrative action or proceeding to which
he is made a

<PAGE>


                                     - 15 -


party by reason of being or having been a director or officer of the Corporation
or such body corporate, if

          (a)  he acted honestly and in good faith with a view to the best
               interests of the Corporation; and

          (b)  in the case of a criminal or administrative action or proceeding
               that is enforced by a monetary penalty, he had reasonable grounds
               for believing that his conduct was lawful.

     7.03 INSURANCE - Subject to-the limitations contained in the Act, the
Corporation may purchase and maintain such insurance for the benefit of its
directors and officers as such, as the board may from time to time determine.

                                 SECTION EIGHT

                                     SHARES

     8.01 ALLOTMENT - The board may from time to time allot or grant options to
purchase shares of the Corporation at such times and to such persons and for
such consideration as the board shall determine, provided that no share shall be
issued until it is fully paid as prescribed by the Act.

     8.02 COMMISSIONS - The board may from time to time authorize the
Corporation to pay a commission to any person in consideration of his purchasing
or agreeing to purchase shares of the Corporation, whether from the Corporation
or from any other person, or procuring or agreeing to procure purchasers for any
such shares.

     8.03 REGISTRATION OF TRANSFER - Subject to the provisions of the Act, no
transfer of shares shall be registered in a securities register except upon
presentation of the certificate representing such shares with a transfer
endorsed thereon or delivered therewith duly executed by the registered holder
or by his attorney or successor duly appointed, together with such reasonable
assurance or evidence of signature, identification and authority to transfer as
the board may from time to time prescribe, upon payment of all applicable taxes
and any fees prescribed by the board, upon compliance with such restrictions on
transfer as are authorized by the articles and upon satisfaction of any lien
referred to in section 8.05.

     8.04 TRANSFER AGENTS AND REGISTRARS - The board may from time to time
appoint a registrar to maintain the securities

<PAGE>


                                     - 16 -


register and a transfer agent to maintain the register of transfers and may also
appoint one or more branch registrars to maintain branch securities registers
and one or more branch transfer agents to maintain branch registers of
transfers, but one person may be appointed both registrar and transfer agent.
The board may at any time terminate any such appointment.

     8.05 NON-RECOGNITION OF TRUSTS - Subject to the provisions of the Act, the
Corporation shall treat as absolute owner of any share the person in whose name
the share is registered in the securities register as if that person had full
legal capacity and authority to exercise all rights of ownership, irrespective
of any indication to the contrary through knowledge or notice or description in
the Corporation's records or on the share certificate.

     8.06 SHARE CERTIFICATE - Every holder of one or more shares of the
Corporation shall be entitled, at his option, to a share certificate, or to a
non-transferable written acknowledgement of his right to obtain a share
certificate, stating the number and class or series of shares held by him as
shown on the securities register. Share certificates and acknowledgements of a
shareholder's right to a share certificate, respectively, shall be in such form
as the board shall from time to time approve. Any share certificate shall be
signed in accordance with section 2.04 and need not be under the corporate seal;
provided that, unless the board otherwise determines, certificates representing
shares in respect of which a transfer agent and/or registrar has been appointed
shall not be valid unless countersigned by or on behalf of such transfer agent
and/or registrar. The signature of one of the signing officers or, in the case
of share certificates which are not valid unless countersigned by or on behalf
of a transfer agent and/or registrar, the signatures of both signing officers,
may be printed or mechanically reproduced in facsimile upon share certificates
and every such facsimile signature shall for all purposes be deemed to be the
signature of the officer whose signature it reproduces and shall be binding upon
the Corporation. A share certificate executed as aforesaid shall be valid
notwithstanding that one or both of the officers whose facsimile signature
appears thereon no longer holds office at the date of issue of the certificate.

     8.07 REPLACEMENT OF SHARE CERTIFICATES - The board or any officer or agent
designated by the board may in its or his discretion direct the issue of a new
share certificate in lieu of and upon cancellation of a share certificate that
has been mutilated or in substitution for a share certificate

<PAGE>


                                     - 17 -


claimed to have been lost, destroyed or wrongfully taken on payment of such
reasonable fee, and on such terms as to indemnity, reimbursement of expenses and
evidence of loss and of title as the board may from time to time prescribe,
whether generally or in any particular case.

     8.08 JOINT SHAREHOLDERS - If two or more persons are registered as joint
holders of any share, the Corporation shall not be bound to issue more than one
certificate in respect thereof, and delivery of such certificate to one of such
persons shall be sufficient delivery to all of them. Any one of such persons may
give effectual receipts for the certificate issued in respect thereof or for any
dividend, bonus, return of capital or other money payable or warrant issuable in
respect of such share.

     8.09 DECEASED SHAREHOLDERS - In the event of the death of a holder, or of
one of the joint holders, of any share, the Corporation shall not be required to
make any entry in the securities register in respect thereof or to make payment
of any dividends thereon except upon production of all such documents as may be
required by law and upon compliance with the reasonable requirements of the
Corporation and its transfer agents.

                                  SECTION NINE

                              DIVIDENDS AND RIGHTS

     9.01 DIVIDENDS - Subject to the provisions of the Act, the board may from
time to time declare dividends payable to the shareholders according to their
respective rights and interests in the Corporation. Dividends may be paid in
money or property or by issuing fully paid shares of the Corporation.

     9.02 DIVIDEND CHEQUES - A dividend payable in cash shall be paid by cheque
drawn on the Corporation's bankers or one of them to the order of each
registered holder of shares of the class or series in respect of which it has
been declared and mailed by prepaid ordinary mail to such registered holder at
his recorded address, unless such holder otherwise directs. In the case of joint
holders the cheque shall, unless such joint holders otherwise direct, be made
payable to the order of all of such joint holders and mailed to them at their
recorded address. The mailing of such cheque as aforesaid, unless the same is
not paid on due presentation, shall satisfy and discharge the liability for the
dividend to the extent of the sum represented thereby plus the amount of any tax
which the Corporation is required to and does withhold.

<PAGE>


                                     - 18 -


     9.03 NON-RECEIPT OF CHEQUES - In the event of non-receipt of any dividend
cheque by the person to whom it is sent as aforesaid, the Corporation shall
issue to such person a replacement cheque for a like amount on such terms as to
indemnity, reimbursement of expenses and evidence of non-receipt and of title as
the board may from time to time, prescribe whether generally or in any
particular case.

     9.04 RECORD DATE FOR DIVIDENDS AND RIGHTS - The board may fix in advance a
date, preceding by not more than 50 days the date for the payment of any
dividend or the date for the issue of any warrant or other evidence of right to
subscribe for securities of the Corporation, as a record date for the
determination of the persons entitled to receive payment of such dividend or to
exercise the right to subscribe for such securities, provided that notice of any
such record date is given, not less than 14 days before such record date, by
newspaper advertisement in the manner provided in the Act. Where no record date
is fixed in advance as aforesaid, the record date for the determination of the
persons entitled to receive payment of any dividend or to exercise the right to
subscribe for securities of the Corporation shall be at the close of business on
the day on which the resolution relating to such dividend or right to subscribe
is passed by the board.

     9.05 UNCLAIMED DIVIDENDS - Any dividend unclaimed after a period of 6 years
from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.

                                  SECTION TEN

                            MEETINGS OF SHAREHOLDERS

     10.01 ANNUAL MEETINGS - The annual meeting of shareholders shall be held at
such time in each year and, subject to section 10.03, at such place as the
board, the chairman of the board, the managing director or the president may
from time to time determine, for the purpose of considering the financial
statements and reports required by the Act to be placed before the annual
meeting, electing directors, appointing auditors and for the transaction of such
other business as may properly be brought before the meeting.

     10.02 SPECIAL MEETINGS - The board, the chairman of the board or the
president shall have power to call a special meeting of shareholders at any
time.

<PAGE>

                                     - 19 -


     10.03 PLACE OF MEETINGS - Meetings of shareholders shall be held at the
registered office of the Corporation or elsewhere in the municipality in which
the registered office is situate or, if the board shall so determine, at some
other place in Canada or, if all the shareholders entitled to vote at the
meeting so agree, at some place outside Canada.

     10.04 NOTICE OF MEETINGS - Notice of the time and place of each meeting of
shareholders shall be given in the manner provided in section 12.01 not less
than 21 nor more than 50 days before the date of the meeting to each director,
to the auditor and to each shareholder whose name appears on the list of
shareholders entitled to receive notice as provided in Section 10.15. Notice of
a meeting of shareholders called for any purpose other than consideration of the
financial statements and auditor's report, election of directors and
reappointment of the incumbent auditor shall state the nature of such business
in sufficient detail to permit the shareholders to form a reasoned judgment
thereon and shall state the text of any special resolution to be submitted to
the meeting. A shareholder may in any manner waive notice of or otherwise
consent to a meeting of shareholders.

     10.05 LIST OF SHAREHOLDERS ENTITLED TO VOTE - For every meeting of
shareholders, the Corporation shall prepare a list of shareholders entitled to
receive notice of the meeting, arranged in alphabetical order and showing the
number of shares entitled to vote at the meeting held by each shareholder. If a
record date for the meeting is fixed pursuant to section 10.06, the shareholders
listed shall be those registered at the close of business on a day not later
than 10 days after such record date. If no record date is fixed, the
shareholders listed shall be those registered at the close of business on the
day immediately preceding the day on which notice of the meeting is given, or
where no such notice is given, the day on which the meeting is held. The list
shall be available for examination by any shareholder during usual business
hours at the registered office of the Corporation or at the place where the
securities register is kept and at the place where the meeting is held.

     10.06 RECORD DATE FOR NOTICE - The board may fix in advance a record date,
preceding the date of any meeting of shareholders by not more than 50 days and
not less than 21 days, for the determination of the shareholders entitled to
notice of the meeting, provided that notice of any such record date is given,
not less than 14 days before such record date, by newspaper advertisement in the
manner provided

<PAGE>


                                     - 20 -


in the Act. If no record date is so fixed, the record date for the determination
of the shareholders entitled to notice of the meeting shall be the close of
business on the day immediately preceding the day on which the notice is given.

     10.07 CHAIRMAN, SECRETARY AND SCRUTINEERS - The chairman of any meeting of
shareholders shall be the first mentioned of such of the following officers as
have been appointed and who is present at the meeting: president, managing
director, chairman of the board, or a vice-president, who is a shareholder. If
no such officer is present within 15 minutes from the time fixed for holding the
meeting, the persons present and entitled to vote shall choose one of their
number to be chairman. If the secretary of the Corporation is absent, the
chairman shall appoint some person, who need not be a shareholder, to act as
secretary of the meeting. If desired, one or more scrutineers, who need not be
shareholders, may be appointed by a resolution or by the chairman with the
consent of the meeting.

     10.08 PERSONS ENTITLED TO BE PRESENT - The only persons entitled to be
present at a meeting of shareholders shall be those entitled to vote thereat,
the directors and auditors of the Corporation and others who, although not
entitled to vote, are entitled or required under any provision of the Act or the
articles or by-laws to be present at the meeting. Any other person may be
admitted only on the invitation of the chairman of the meeting or with the
consent of the meeting.

     10.09 QUORUM - A quorum for the transaction of business at any meeting of
shareholders shall be ten (10) persons present in person, each being a
shareholder entitled to vote thereat or a duly appointed proxyholder for an
absent shareholder so entitled, and each holding or representing by proxy not
less than 1 outstanding share of the Corporation entitled to vote at the
meeting. If a quorum is present at the opening of any meeting of shareholders,
the shareholders present or represented by proxy may proceed with the business
of the meeting notwithstanding that a quorum is not present throughout the
meeting. If a quorum is not present at the opening of any meeting of
shareholders, the shareholders present or represented by proxy may adjourn the
meeting to a fixed time and place but not transact any other business.

     10.10 RIGHT TO VOTE - Subject to the provisions of the Act as to authorized
representatives of any other body corporate, at any meeting of shareholders in
respect of which the Corporation has prepared the list referred to in

<PAGE>


                                     - 21 -


section 10.05, every person who is named in such list shall be entitled to vote
the shares shown thereon opposite his name except, where the Corporation has
fixed a record date in respect of such meeting pursuant to section 10.06, to the
extent that such person has transferred any of his shares after such record date
and the transferee, upon producing properly endorsed certificates evidencing
such shares or otherwise establishing that he owns such shares, demands not
later than 10 days before the meeting that his name be included to vote the
transferred shares at the meeting. In the absence of a list prepared as
aforesaid in respect of a meeting of shareholders, every person shall be
entitled to vote at the meeting who at the time is entered in the securities
register as the holder of one or more shares carrying the right to vote at such
meeting.

     10.11 PROXIES - Every shareholder entitled to vote at a meeting of
shareholders may appoint a proxyholder, or one or more alternate proxyholders,
who need not be shareholders, to attend and act at the meeting in the manner and
to the extent authorized and with the authority conferred by the proxy. A proxy
shall be in writing executed by the shareholder or his attorney and shall
conform with the requirements of the Act.

     10.12 TIME FOR DEPOSIT OF PROXIES - The board may specify in the notice
calling a meeting of shareholders a time, preceding the time of such meeting by
not more than 48 hours exclusive of non-business days, before which time proxies
to be used at such meeting must be deposited. A proxy shall be acted upon only
if, prior to the time so specified, it shall have been deposited with the
Corporation or an agent thereof specified in such notice or, if no such time is
specified in such notice, unless it has been received by the secretary of the
Corporation or by the chairman of the meeting or any adjournment thereof prior
to the time of voting.

     10.13 JOINT SHAREHOLDERS - If two or more persons hold shares jointly, any
one of them present in person or represented by proxy at a meeting of
shareholders may, in the absence of the other or others, vote the shares; but if
two or more of those persons are present in person or represented by proxy and
vote, they shall vote as one on the shares jointly held by them.

     10.14 VOTES TO GOVERN - At any meeting of shareholders every question
shall, unless otherwise required by the articles or by-laws or by law, be
determined by the majority of the votes cast on the question. In case of an
equality

<PAGE>


                                     - 22 -

of votes either upon a show of hands or upon a poll, the chairman of the meeting
shall be entitled to a second or casting vote.

     10.15 SHOW OF HANDS - Subject to the provisions of the Act, any question at
a meeting of shareholders shall be decided by a show of hands unless a ballot
thereon is required or demanded as hereinafter provided. Upon a show of hands
every person who is present and entitled to vote shall have one vote. Whenever a
vote by show of hands shall have been taken upon a question, unless a ballot
thereon is so required or demanded, a declaration by the chairman of the meeting
that the vote upon the question has been carried or carried by a particular
majority or not carried and an entry to that effect in the minutes of the
meeting shall be prima facie evidence of the fact without proof of the number or
proportion of the votes recorded in favour of or against any resolution or other
proceeding in respect of the said question, and the result of the vote so taken
shall be the decision of the shareholders upon the said question.

     10.16 BALLOTS - On any question proposed for consideration at a meeting of
shareholders, and whether or not a show of hands has been taken thereon, any
shareholders or proxyholder entitled to vote at the meeting may require or
demand a ballot. A ballot so required or demanded shall be taken in such manner
as the chairman shall direct. A requirement or demand for a ballot may be
withdrawn at any time prior to the taking of the ballot. If a ballot is taken
each person present shall be entitled, in respect of the shares which he is
entitled to vote at the meeting upon the question, to that number of votes
provided by the Act or the articles, and the result of the ballot so taken shall
be the decision of the shareholders upon the said question.

     10.17 ADJOURNMENT - If a meeting of shareholders is adjourned for less than
30 days, it shall not be necessary to give notice of the adjourned meeting,
other than by announcement at the earliest meeting that is adjourned. If a
meeting of shareholders is adjourned by one or more adjournments for an
aggregate of 30 days or more, notice of the adjourned meeting shall be given as
for an original meeting.

                                 SECTION ELEVEN

                            DIVISIONS AND DEPARTMENTS

     11.01 CREATION AND CONSOLIDATION OF DIVISIONS - The board may cause the
business and operations of the Corporation or any part thereof to be divided or
to be segregated into

<PAGE>


                                     - 23 -


one or more divisions upon such basis, including without limitation, character
or type of operation, geographical territory, product manufactured or service
rendered, as the board may consider appropriate in each case. The board may also
cause the business and operations of any such division to be further divided
into sub-units and the business and operations of any such divisions or
sub-units to be consolidated upon such basis as the board may consider
appropriate in each case.

     11.02 NAME OF DIVISION - Any division or its sub-units may be designated by
such name as the board may from time to time determine and may transact
business, enter into contracts, sign cheques and other documents of any kind and
do all acts and things under such name. Any such contract, cheque or document
shall be binding upon the Corporation as if it had been entered into or signed
in the name of the Corporation.

     11.03 OFFICERS OF DIVISIONS - From time to time the board or, if authorized
by the board, the chief executive officer, may appoint one or more officers for
any division, prescribe their powers and duties and settle their terms of
employment and remuneration. The board or, if authorized by the board, the chief
executive officer, may remove at its or his pleasure any officer so appointed,
without prejudice to such officer's rights under any employment contract.
Officers of divisions or their sub-units shall not, as such, be officers of the
Corporation.

                                 SECTION TWELVE

                                    NOTICES

     12.01 METHOD OF GIVING NOTICES - Any notice (which term includes any
communication or document) to be given (which term includes sent, delivered or
served) pursuant to the Act, the regulations thereunder, the articles, the
by-laws or otherwise to a shareholder, director, officer, auditor or member of a
committee of the board shall be sufficiently given if delivered personally to
the person to whom it is to be given or if delivered to his recorded address or
if mailed to him at his recorded address by prepaid ordinary or air mail or if
sent to him at his recorded address by any means of prepaid transmitted or
recorded communication. A notice so delivered shall be deemed to have been given
when it is delivered personally or to the recorded address as aforesaid; a
notice so mailed shall be deemed to have been given when deposited in a post
office or

<PAGE>


                                     - 24 -

public letter box; and a notice so sent by any means of transmitted or recorded
communication shall be deemed to have been given when dispatched or delivered to
the appropriate communication company or agency or its representative for
dispatch. The secretary may change or cause to be changed the recorded address
of any shareholder, director, officer, auditor or member of a committee of the
board in accordance with any information believed by him to be reliable.

     12.02 NOTICE TO JOINT SHAREHOLDERS - If two or more persons are registered
as joint holders of any share, any notice shall be addressed to all of such
joint holders but notice to one of such persons shall be sufficient notice to
all of them.

     12.03 COMPUTATION OF TIME - In computing the date when notice must be given
under any provision requiring a specified number of days' notice of any meeting
or other event, the date of giving the notice shall be excluded and the date of
the meeting or other event shall be included.

     12.04 UNDELIVERED NOTICES - If any notice given to a shareholder pursuant
to section 12.01 is returned on three consecutive occasions because he cannot be
found, the Corporation shall not be required to give any further notices to such
shareholder until he informs the Corporation in writing of his new address.

     12.05 OMISSIONS AND ERRORS - The accidental omission to give any notice to
any shareholder, director, officer, auditor or member of a committee of the
board or the non-receipt of any notice by any such person or any error in any
notice not affecting the substance thereof shall not invalidate any action taken
at any meeting held pursuant to such notice or otherwise founded thereon.

     12.06 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW - Every person who, by
operation of law, transfer, death of a shareholder or any other means
whatsoever, shall become entitled to any share, shall be bound by every notice
in respect of such share which shall have been duly given to the shareholder
from whom he derives his title to such share prior to his name and address being
entered on the securities register (whether such notice was given before or
after the happening of the event upon which he became so entitled) and prior to
his furnishing to the Corporation the proof of authority or evidence of his
entitlement prescribed by the Act.

<PAGE>


                                     - 25 -


     12.07 WAIVER OF NOTICE - Any shareholder (or his duly appointed
proxyholder), director, officer, auditor or member of a committee of the board
may at any time waive any notice, or waive or abridge the time for any notice,
required to be given to him under any provision of the Act, the regulations
thereunder, the articles, the by-laws or otherwise and such waiver or
abridgement shall cure any default in the giving or in the time of such notice,
as the case may be. Any such waiver or abridgement shall be in writing except a
waiver of notice of a meeting of shareholders or of the board which may be given
in any manner.

                                SECTION THIRTEEN

                           EFFECTIVE DATE AND REPEAL

     13.01 EFFECTIVE DATE - This by-law shall come into force upon the date of
the resolution of the board enacting this by-law.

     13.02 REPEAL - All previous by-laws of the Corporation are repealed as of
the coming into force of this by-law provided that such repeal shall not affect
the previous operation of any by-law so repealed or affect the validity of any
act done or right, privilege, obligation or liability acquired or incurred under
or the validity of any contract or agreement made pursuant to any such by-law
prior to its repeal. All officers and persons acting under any by-law so
repealed shall continue to act as if appointed under the provisions of this
by-law and all resolutions of the shareholders or board with continuing effect
passed under any repealed by-law shall continue good and valid except to the
extent inconsistent with this by-law and until amended or repealed.

     ENACTED and made by the board the 3rd day of August, 1977.

President                            Secretary
/s/ C.D. Reekie                      /s/ R.G. Small
- -------------------------------      -------------------------------

     CONFIRMED by the shareholders in accordance with the Act
the     day of               , 19 .



                                     /s/ R.G. Small
                                     -------------------------------
                                     Secretary

<PAGE>


                              CAE INDUSTRIES LTD.

                                 BY-LAW NO. 74

     Being a by-law to amend Section 4 of By-law No. 73

     WHEREAS the directors have deemed it to be in the best interests of the
Corporation that the By-laws be amended to provide for the mandatory retirement
of directors at the age of 70.

     AND WHEREAS it has been determined that such mandatory retirement
provisions should be introduced gradually over a period of four years and that
Mr. Henry Benson, a director of the Corporation since 1947, should be exempted
from the mandatory retirement provision.

     NOW THEREFORE BE IT ENACTED, as By-law No. 74 of CAE Industries Ltd. (the
"Corporation") that:

1. Paragraph 4.02 of By-law No. 73 be and it is hereby deleted and replaced with
the following:

          "4.02. QUALIFICATIONS - A majority of the directors shall be resident
          Canadians. A director need not be a shareholder of the Corporation. No
          person shall be qualified for election as a director if:

          (a)  he is not an individual;

          (b)  he is of unsound mind and has been so found by a court in Canada
               or elsewhere;


<PAGE>


                                     - 2 -

          (c)  he is a bankrupt;

          (d)  he is less than 18 years of age; or

          (e)  he is 70 years of age or more at the time of such election."

2. Clause 4.02(e) shall not apply:

(a)  in 1980 to a person who is, at the time of his election, under the age of
     73 years;

(b)  in 1981 to a person who is at the time of his election, under the age of 72
     years;

(c)  in 1982 to a person who is, at the time of his election under the age of 71
     years; and

(d)  to Henry Benson.

3. Paragraph 4.05 of By-law No. 73 be and it is hereby deleted and replaced with
the following:

          "4.05. VACATION OF OFFICE - A director ceases to hold office when he
          dies; he is removed from office by the shareholders; he becomes
          bankrupt; he becomes of unsound mind and is so found by a court in
          Canada or elsewhere; or his resignation is sent or delivered to the
          Corporation, or if the time is specified in such resignation, at the
          time so specified, whichever is later."

<PAGE>


                                     - 3 -

4. This by-law shall come into force upon the date of the resolution of board
enacting this by-law.

     ENACTED and made by the board the 5th day of September, 1979.



                                                -------------------------------
                                                          President




                                                -------------------------------
                                                          Secretary


     Confirmed by the shareholders in accordance with the Act the        day
of June, 1980.




                                                -------------------------------
                                                          Secretary

<PAGE>


                              CAE INDUSTRIES LTD.
                                   BY-LAW 77

     BEING A BY-LAW TO AMEND BY-LAW NO. 73 TO PERMIT R. FRASER ELLIOTT TO
CONTINUE AS A DIRECTOR OF THE CORPORATION.

     BE IT ENACTED as By-law No. 77 of CAE Industries Ltd. that:

     Paragraph 4.02 of By-law No. 73, as amended by By-law No. 74, be and it is
hereby amended by adding a new sentence to the end of such paragraph as follows:

     "Clause 4.02(e) shall not apply to R. Fraser Elliott."

     ENACTED and made by the Board the 4th day of September, 1991.




- -------------------------------                 -------------------------------
    D. H. Race, President                         John E. Caldwell, Secretary



     CONFIRMED by the shareholders in accordance with the Act the 11th day of
June, 1992.




                                                -------------------------------
                                                  John E. Caldwell, Secretary

<PAGE>


                               CAE INC. BY-LAW 78


<PAGE>


                                    CAE INC.
                                   BY-LAW 78


     BEING A BY-LAW TO AMEND SECTION FIVE OF BY-LAW NO. 73 AND TO REPEAL BY-LAW
NO. 75 AND BY-LAW NO. 76

     BE IT ENACTED as By-law No. 78 of CAE Inc. that Section Five of By-law No.
73 be and it is hereby deleted and replaced with the following:

"5.01 EXECUTIVE COMMITTEE - The board may at their meeting held immediately
after the annual meeting of shareholders and from time to time as vacancies
occur elect three or more of their body, one of whom shall be the Chairman of
the Board, as a committee of directors (the "Executive Committee") and the
following provisions shall apply thereto:

     (a) The Chairman of the Board shall be chairman of the Executive Committee
and in his absence the Executive Committee shall choose one of its body to be
chairman. The chairman shall preside at all meetings and shall have a casting
vote in case of a tie.

     (b) The Executive Committee shall meet at the office of the Corporation in
the City of Toronto at such times as they shall by resolution appoint, and shall
also meet at any other time or place at the call of the Chairman and President
and Chief Executive Officer on two hours' notice to be given orally or by
telephone or in any of the manners provided in section 12.01.

     (c) Subject to the provisions of the Act, the number of members of the
Executive Committee may be increased or decreased from time to time and their
remuneration fixed by resolution of the board.

<PAGE>


                                                              CAE INC. BY-LAW 78
                                                                          PAGE 2


     (d) During the intervals between the meetings of the board, the Executive
Committee shall possess and may exercise (subject to any regulations which the
board may from time to time impose) all the powers of the board in the
management and direction of the operations of the Corporation, save and except
only those acts which, under the Act, a committee of directors has no authority
to exercise. The Executive Committee shall exercise its powers as it shall deem
best for the interests of the Corporation in all cases in which specific
directions shall not have been given by the board. All action by the Executive
Committee shall be reported to the board at its meeting next succeeding such
action and shall be subject to revision or alteration by the board; provided
that no acts or rights of third parties shall be affected or invalidated by any
such revision.

5.02 AUDIT COMMITTEE - The board shall elect annually from among its number an
audit committee to be composed of not fewer than four directors, and of whom a
majority shall neither be officers nor employees of the Corporation or its
affiliates. The audit committee shall have the power and duties provided in the
Act and such other duties that may be assigned by the Board of Directors.

5.03 COMPENSATION COMMITTEE - The board shall elect annually from among its
number a Compensation Committee to be composed of not fewer than four directors,
one of whom shall be the Chairman of the Board, and of whom a majority shall
neither be officers nor employees of the Corporation or its affiliates, and the
following provisions shall apply thereto:

     (a) The chairman of the Compensation Committee shall be elected annually by
the board and in his absence the Compensation Committee shall choose one of its
body to be chairman. The chairman shall preside at all meetings and shall have a
casting vote in the case of a tie.

<PAGE>


                                                              CAE INC. BY-LAW 78
                                                                          PAGE 3


     (b) The Compensation Committee shall meet at the office of the Corporation
in the City of Toronto at such times as they shall by resolution appoint, and
shall also meet at any time or place at the call of any of the Chairman of the
Board, the President, the chairman or any two members of the Compensation
Committee on two hour's notice to be given orally or by telephone or in any of
the manners provided in section 12.01 of By-law No. 73 of the Corporation.

     (c) The Compensation Committee shall, in addition to any other powers of
the board delegated to the Compensation Committee, administer any stock option
or share purchase plan of the Corporation for employees of the Corporation and
its subsidiaries and shall have full power to (i) construe and interpret such
plans; (ii) establish and amend rules and regulations for their administration;
(iii) grant options to purchase shares of the Corporation to employees of the
Corporation and its subsidiaries under such plans; and (iv) perform all other
acts relating to such plan, including the delegation of administrative
responsibilities thereunder that it believes reasonable and proper.

     (d) All actions of the Compensation Committee shall be reported to the
board at its meeting next succeeding such action.

5.04 COMMITTEES - The board may from time to time appoint such other committees
as it may deem advisable.

5.05 PROCEDURE - Unless otherwise determined by the board or the by-laws, each
committee shall have the power to fix its quorum at not less than a majority of
its members, to elect its chairman and to regulate its procedure."

<PAGE>


                                                              CAE INC. BY-LAW 78
                                                                          PAGE 4


     Each of By-law No. 75 and By-law No. 76 is hereby repealed as of the coming
into force of this By-law No. 78. Such repeal shall not affect the previous
operation of the by-laws so repealed or affect the validity of any act done or
right, privilege, obligation or liability acquired or incurred under, or the
validity of any contract or agreement made pursuant to such by-laws prior to
their repeal.

     ENACTED and made by the board the 2nd day of February, 1994.
                                       ---        --------


/s/ John E. Caldwell                    /s/ Paul G. Renaud
- -------------------------------         -------------------------------
President                               Secretary

     CONFIRMED by the shareholders in accordance with the Act the 7th day of
July, 1994.


                                       /s/ Paul G. Renaud
                                       -------------------------------
                                       Secretary


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>5
<FILENAME>ex4-3_072202.txt
<DESCRIPTION>EX-4.3
<TEXT>
                                                                     EXHIBIT 4.3

                                    CAE INC.

                                       AND

                        MONTREAL TRUST COMPANY OF CANADA

                                 AS RIGHTS AGENT


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

                              AMENDED AND RESTATED
                  SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT

                                  JUNE 14, 2000

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

                                STIKEMAN ELLIOTT

<PAGE>

                                TABLE OF CONTENTS

                                    ARTICLE 1
                                 INTERPRETATION
<TABLE>
<S>         <C>                                                                       <C>
Section 1.1 Certain Definitions .....................................................  1
Section 1.2 Currency ................................................................ 12
Section 1.3 Headings ................................................................ 12
Section 1.4 Number and Gender ....................................................... 12
Section 1.5 Acting Jointly or in Concert ............................................ 12
Section 1.6 Statutory References .................................................... 13

                                   ARTICLE 2
                                   THE RIGHTS

Section 2.1 Legend on Common Share Certificates ..................................... 13
Section 2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights ........ 13
Section 2.3 Adjustments to Exercise Price; Number of Rights ......................... 16
Section 2.4 Date on Which Exercise is Effective ..................................... 21
Section 2.5 Execution, Authentication, Delivery and Dating of Rights Certificates ... 21
Section 2.6 Registration, Registration of Transfer and Exchange ..................... 22
Section 2.7 Mutilated, Destroyed, Lost and Stolen Right Certificates ................ 22
Section 2.8 Persons Deemed Owners ................................................... 23
Section 2.9 Delivery and Cancellation of Rights Certificates ........................ 23
Section 2.10 Agreement of Rights Holders ............................................ 23
Section 2.11 Rights Certificate Holder not Deemed a Shareholder ..................... 24

                                   ARTICLE 3
               ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN
                                  TRANSACTIONS

Section 3.1 Flip-in Event ........................................................... 25

                                   ARTICLE 4
                                THE RIGHTS AGENT

Section 4.1 General ................................................................. 25
Section 4.2 Merger or Amalgamation or Change of Name of Rights Agent ................ 26
Section 4.3 Duties of Rights Agent .................................................. 27
Section 4.4 Change of Rights Agent .................................................. 29

                                   ARTICLE 5
                                 MISCELLANEOUS

Section 5.1 Redemption and Waiver ................................................... 29
Section 5.2 Expiration .............................................................. 31
Section 5.3 Issuance of New Rights Certificates ..................................... 31

                                      (i)
<PAGE>


Section 5.4 Supplements and Amendments .............................................. 31
Section 5.5 Fractional Rights and Fractional Shares ................................. 33
Section 5.6 Rights of Action ........................................................ 33
Section 5.7 Notice of Proposed Actions .............................................. 33
Section 5.8 Notices ................................................................. 34
Section 5.9 Successors .............................................................. 34
Section 5.10 Benefits of this Agreement ............................................. 34
Section 5.11 Governing Law .......................................................... 35
Section 5.12 Severability ........................................................... 35
Section 5.13 Effective Date ......................................................... 35
Section 5.14 Determinations and Actions by the Board of Directors ................... 35
Section 5.15 Rights of Board, Corporation and Offeror ............................... 35
Section 5.16 Regulatory Approvals ................................................... 35
Section 5.17 Declaration as to Non-Canadian Holders.................................. 35
Section 5.18 Time of the Essence .................................................... 36
Section 5.19 Execution in Counterparts .............................................. 36
</Table>

                                    SCHEDULE

SCHEDULE 2.2(3)

                                      (ii)

<PAGE>

                  SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT

     THIS AMENDED AND RESTATED AGREEMENT dated June 14, 2000 between CAE Inc.
(the "CORPORATION"), a corporation incorporated under the laws of Canada, and
Montreal Trust Company of Canada, a trust company incorporated under the laws of
Canada, as Rights Agent (the "RIGHTS AGENT", which term shall include any
successor Rights Agent hereunder).

     WITNESSES THAT:

     WHEREAS the Corporation and the Rights Agent entered into a shareholder
protection rights plan agreement dated as of March 7, 1990, as amended; and

     WHEREAS the shareholders of the Corporation have determined to amend and
restate the shareholder protection rights plan agreement dated as of March 7,
1990, as amended, as set out herein (the amended and restated shareholder
protection rights plan agreement being referred to herein as the "RIGHTS PLAN");

     NOW THEREFORE, in consideration of the foregoing premises and the
respective covenants and agreements set forth herein, the parties hereby agree
as follows:

                                   ARTICLE 1
                                 INTERPRETATION

SECTION 1.1  CERTAIN  DEFINITIONS.

     For purposes of the Agreement, the following terms have the meanings
indicated:

     (a)  "ACQUIRING PERSON" means, any Person who is the Beneficial Owner of
          twenty percent (20%) or more of the outstanding Voting Shares of the
          Corporation; provided, however, that the term "ACQUIRING PERSON" shall
          not include:

          (i)  the Corporation or any Subsidiary of the Corporation;

          (ii) any Person who becomes the Beneficial Owner of twenty percent
               (20%) or more of the outstanding Voting Shares of the Corporation
               as a result of (A) Corporate Acquisitions, (B) Permitted Bid
               Acquisitions, (C) Corporate Distributions, (D) Exempt
               Acquisitions, or (E) Convertible Security Acquisitions; provided,
               however, that if a Person shall become the Beneficial Owner of
               twenty percent (20%) or more of the Voting Shares of the
               Corporation then outstanding by reason of one or more or any
               combination of the operation of a Corporate Acquisition,
               Permitted Bid Acquisition, Corporate Distribution, Exempt
               Acquisition or Convertible Security Acquisition and, after such
               Corporate Acquisition, Permitted Bid Acquisition, Corporate
               Distribution, Exempt Acquisition or Convertible Security
               Acquisition, becomes the Beneficial Owner of an additional one
               percent (1%) or more of the outstanding Voting Shares of the
               Corporation other than pursuant to Corporate Acquisitions,
               Permitted Bid Acquisitions, Corporate Distributions, Exempt
               Acquisitions or Convertible Security Acquisitions, then as of the
               date of such acquisition, such Person shall become an Acquiring
               Person;


<PAGE>
                                      -2-

          (iii)for a period of ten (10) days after the Disqualification Date
               (as hereinafter defined), any Person who becomes the Beneficial
               Owner of twenty percent (20%) or more of the outstanding Voting
               Shares of the Corporation as a result of such Person becoming
               disqualified from relying on Clause 1.1(e)(3) hereof solely
               because such Person makes or proposes to make a Take-over Bid in
               respect of securities of the Corporation alone or by acting
               jointly or in concert with any other Person (the first date of
               public announcement (which, for the purposes of this definition,
               shall include, without limitation, a report filed pursuant to
               section 101 of the SECURITIES ACT (Ontario)) by such Person or
               the Corporation of a current intent to commence such a Take-over
               Bid being herein referred to as the "DISQUALIFICATION DATE"); and

          (iv) an underwriter or member of a banking or selling group that
               acquires Voting Shares of the Corporation from the Corporation in
               connection with a distribution of securities.

     (b)  "AFFILIATE" when used to indicate a relationship with a specified
          Person, means a Person that directly or indirectly through one or more
          intermediaries, controls, or is controlled by, or is under common
          control with, such specified Person.

     (c)  "AGREEMENT" means this agreement as amended, modified or supplemented
          from time to time.

     (d)  "ASSOCIATE" when used to indicate a relationship with a specified
          Person, means any relative of such specified Person who has the same
          home as such specified Person, or any Person to whom such specified
          Person is married or with whom such specified Person is living in a
          conjugal relationship outside marriage, or any relative of such spouse
          or other Person who has the same home as such specified Person.

     (e)  A Person shall be deemed the "BENEFICIAL OWNER", and to have
          "BENEFICIAL OWNERSHIP" of, and to "BENEFICIALLY OWN":

          (i)  any securities of which such Person or any Affiliate or Associate
               of such Person is the owner in law or equity;

          (ii) any securities as to which such Person or any of such Person's
               Affiliates or Associates has the right to acquire (A) upon the
               exercise of any Convertible Securities, or (B) pursuant to any
               agreement, arrangement or understanding, if such right is
               exercisable immediately or within a period of 60 days thereafter
               whether or not on condition or the happening of any contingency
               (other than customary agreements with and between underwriters
               and banking group or selling group members with respect to a
               distribution of securities or pursuant to a pledge of securities
               in the ordinary course of business); and

          (iii) any securities that are Beneficially Owned within the meaning of
               Sections 1.1(e)(i) or (ii) hereof by any other Person with whom
               such Person is acting jointly or in concert;
<PAGE>

                                      -3-

          provided, however, that a Person shall not be deemed the "BENEFICIAL
          OWNER", or to have "BENEFICIAL OWNERSHIP" of, or to "BENEFICIALLY
          OWN", any security as a result of the existence of any one or more of
          the following circumstances:

          (1)  such security has been deposited or tendered, pursuant to a
               Take-over Bid made by such Person or made by any Affiliate or
               Associate of such Person or made by any other Person acting
               jointly or in concert with such Person, unless such deposited or
               tendered security has been taken up or paid for, whichever shall
               first occur;

          (2)  by reason of the holder of such security having agreed to deposit
               or tender such security to a Take-over Bid made by such Person or
               any of such Person's Affiliates or Associates or any other Person
               referred to in Clause (iii) of this definition pursuant to a
               Permitted Lock-Up Agreement;

          (3)  such Person or any Affiliate or Associate of such Person or any
               other Person acting jointly or in concert with such Person, holds
               such security; provided that (i) the ordinary business of any
               such Person (the "FUND MANAGER") includes the management of
               investment funds for others (which others may include or be
               limited to one or more employee benefit plans or pension plans)
               or includes the acquisition or holding of securities for a
               non-discretionary account of of a Client (as defined below) by a
               dealer or broker registered under applicable securities laws to
               the extent required, and such security is held by the Fund
               Manager in the ordinary course of such business in the
               performance of such Fund Manager's duties for the account of any
               other Person (a "CLIENT"), (ii) such Person (the "TRUST COMPANY")
               is licensed to carry on the business of a trust company under
               applicable law and, as such, acts as trustee or administrator or
               in a similar capacity in relation to the estates of deceased or
               incompetent Persons or in relation to other accounts and holds
               such security in the ordinary course of such duties for the
               estate of any such deceased or incompetent Person (each an
               "ESTATE ACCOUNT") or for such other accounts (each an "OTHER
               ACCOUNT"), (iii) the Person (the "STATUTORY BODY") is an
               independent Person established by statute for purposes that
               include, and the ordinary business or activity of such person
               includes, the management of investment funds for employee benefit
               plans, pension plans, insurance plans of various public bodies
               and the Statutory Body holds such security for the purposes of
               its activities as such, (iv) the ordinary business of any such
               Person includes acting as an agent of the Crown in the management
               of public assets (the "CROWN AGENT"), or (v) the Person, any of
               such Person's Affiliates or Associates or any other Person acting
               jointly or in concert with such Person holds such security,
               provided that the Person is the administrator or the trustee of
               one or more pension funds or plans (each a "PENSION FUND")
               registered under the laws of Canada or any province thereof or
               the United States or any state thereof (the "INDEPENDENT
               PERSON"), or is a Pension Fund and holds such securities for the
               purposes of its activities as an Independent Person or as a
               Pension Fund, and further provided that such Person does not

<PAGE>

                                      -4-

               hold more than thirty percent (30%) of the Voting Shares of the
               Corporation;

               provided, however, that in any of the foregoing cases no one of
               the Fund Manager, the Trust Company, the Statutory Body, the
               Crown Agent, the Independent Person or the Pension Fund makes or
               announces a current intention to make a Take-over Bid in respect
               of securities of the Corporation alone or by acting jointly or in
               concert with any other Person (other than pursuant to a
               distribution by the Corporation or by means of ordinary market
               transactions (including prearranged trades entered into the
               ordinary course of business of such Person) executed through the
               facilities of a stock exchange or organized over-the-counter
               market);

          (4)  such Person is a Client of the same Fund Manager as another
               Person on whose account the Fund Manager holds such security, or
               such Person is an Estate Account or an Other Account of the same
               Trust Company as another Person on whose account the Trust
               Company holds such security, or such Person is a Pension Fund
               with the same Independent Person as another Pension Fund;

          (5)  such Person is a Client of a Fund Manager and such security is
               owned at law or in equity by the Fund Manager, or such Person is
               an Estate Account or an Other Account of a Trust Company and such
               security is owned at law or in equity by the Trust Company, or
               such Person is a Pension Fund and such security is owned at law
               or in equity by the Independent Person; or

          (6)  such Person is a registered holder of securities as a result of
               carrying on the business of, or acting as a nominee of, a
               securities depository.

          For purposes of this Agreement, the percentage of Voting Shares
          Beneficially Owned by any Person, shall be and be deemed to be the
          product of one hundred (100) and the number of which the numerator is
          the number of votes for the election of all directors generally
          attaching to the Voting Shares Beneficially Owned by such Person and
          the denominator of which is the number of votes for the election of
          all directors generally attaching to all outstanding Voting Shares.
          Where any Person is deemed to Beneficially Own unissued Voting Shares,
          such Voting Shares shall be deemed to be issued and outstanding for
          the purpose of calculating the percentage of Voting Shares
          Beneficially Owned by such Person.

     (f)  "BOARD OF DIRECTORS" means, at any time, the duly constituted board of
          directors of the Corporation.

     (g)  "BUSINESS DAY" means any day other than a Saturday, Sunday or a day on
          which banking institutions in Toronto are authorized or obligated by
          law to close.

     (h)  "CBCA" means the CANADA BUSINESS CORPORATIONS ACT R.S.C. 1985, c.
          C-44, and the regulations thereunder, and any comparable or successor
          laws or regulations thereto.

<PAGE>

                                      -5-

     (i)  "CLOSE OF BUSINESS" on any given date means the time on such date (or,
          if such date is not a Business Day, the time on the next succeeding
          Business Day) at which the office of the transfer agent for the Common
          Shares in the City of Toronto (or, after the Separation Time, the
          office of the Rights Agent in the City of Toronto) is closed to the
          public.

     (j)  "COMMON SHARES", when used with reference to the Corporation, means
          the common shares in the capital of the Corporation.

     (k)  "COMPETING BID" means a Take-over Bid that: (i) is made while another
          Permitted Bid is in existence, and (ii) satisfies all the components
          of the definition of a Permitted Bid, except that the requirements set
          out in Clause (ii) of the definition of a Permitted Bid shall be
          satisfied if the Take-over Bid shall contain, and the take up and
          payment for securities tendered or deposited thereunder shall be
          subject to, an irrevocable and unqualified condition that no Voting
          Shares shall be taken up or paid for pursuant to the Competing Bid
          prior to the close of business on the date that is no earlier than the
          date which is the later of twenty-one (21) days (or such longer
          minimum period of days that a take-over bid must remain open for
          acceptance under the Securities Act (Ontario)) after the date the
          Competing Bid is made or 60 days after the earliest date on which a
          Permitted Bid or Competing Bid then in existence was made and only if
          at that date, more than fifty percent (50%) of the then outstanding
          Voting Shares held by Independent Shareholders have been deposited to
          the Competing Bid and not withdrawn.

     (l)  "CONTROLLED": a corporation is "CONTROLLED" by another Person if:

          (i)  securities entitled to vote in the election of directors carrying
               more than fifty percent (50%) of the votes for the election of
               directors are held, directly or indirectly, by or for the benefit
               of the other Person; and

          (ii) the votes carried by such securities are entitled, if exercised,
               to elect a majority of the board of directors of such
               corporation;

          and "CONTROLS", "CONTROLLING" and "UNDER COMMON CONTROL WITH" shall be
          interpreted accordingly.

     (m)  "CONVERTIBLE SECURITY" means at any time:

          (i)  any right (regardless of whether such right constitutes a
               security) to acquire Voting Shares from the Corporation; and

          (ii) any securities issued by the Corporation from time to time (other
               than the Rights) carrying any exercise, conversion or exchange
               right;

          which is then exercisable or exercisable within a period of 60 days
          from that time pursuant to which the holder thereof may acquire Voting
          Shares or other securities which are convertible into or exercisable
          or exchangeable for Voting Shares (in each case, whether such right is
          then exercisable or exercisable within

<PAGE>

                                      -6-

          a period of 60 days from that time and whether or not on condition or
          the happening of any contingency).

     (n)  "CONVERTIBLE SECURITY ACQUISITION" means the acquisition of Voting
          Shares upon the exercise of Convertible Securities received by a
          Person pursuant to a Permitted Bid Acquisition, Exempt Acquisition or
          a Corporate Distribution.

     (o)  "CORPORATE ACQUISITION" means an acquisition by the Corporation or the
          redemption by the Corporation of Voting Shares of the Corporation
          which by reducing the number of Voting Shares of the Corporation
          outstanding increases the proportionate number of Voting Shares
          Beneficially Owned by any Person.

     (p)  "CORPORATE DISTRIBUTION" means an acquisition as a result of:

          (i)  a stock dividend or a stock split or other event pursuant to
               which a Person receives or acquires Voting Shares on the same pro
               rata basis as all other holders of Voting Shares of the same
               class; or

          (ii) any other event pursuant to which all holders of Voting Shares of
               the Corporation are entitled to receive Voting Shares or
               Convertible Securities on a pro rata basis, including, without
               limiting the generality of the foregoing, pursuant to the receipt
               or exercise of rights issued by the Corporation and distributed
               to all the holders of a class of Voting Shares to subscribe for
               or purchase Voting Shares or Convertible Securities of the
               Corporation, provided that such rights are acquired directly from
               the Corporation and not from any other Person.

     (q)  "DISQUALIFICATION DATE" has the meaning ascribed thereto in Section
          1.1(a)(iii) hereof.

     (r)  "EFFECTIVE DATE" has the meaning ascribed thereto in Section 5.13
          hereof.

     (s)  "ELECTION TO EXERCISE" has the meaning ascribed thereto in Section
          2.2(4) hereof.

     (t)  "EXEMPT ACQUISITION" means an acquisition:

          (i)  in respect of which the Board of Directors has waived the
               application of Section 3.1 hereof pursuant to the provisions of
               Section 5.1(2), 5.1(3) or 5.1(4) hereof;

          (ii) which was made on or prior to the Record Time;

          (iii) which was made pursuant to a dividend reinvestment plan of the
               Corporation;

          (iv) pursuant to a distribution to the public by the Corporation of
               Voting Shares or Convertible Securities made pursuant to a
               prospectus provided that the Person in question does not thereby
               acquire a greater class percentage of Voting Shares, or
               Convertible Securities representing the right to acquire Voting
               Shares of such class, than the percentage of Voting
<PAGE>

                                      -7-

               Shares of the class Beneficially Owned immediately prior to such
               acquisition; or

          (v)  pursuant to a distribution by the Corporation of Voting Shares or
               Convertible Securities by way of a private placement by the
               Corporation, provided that (x) all necessary stock exchange
               approvals for such private placement have been obtained and such
               private placement complies with the terms and conditions of such
               approvals, and (y) the purchaser does not become the Beneficial
               Owner of more than 25% of the Voting Shares outstanding
               immediately prior to the private placement (and in making this
               determination, the securities to be issued to such purchaser on
               the private placement shall be deemed to be held by such
               purchaser but shall not be included in the aggregate number of
               outstanding Voting Shares immediately prior to the private
               placement).

     (u)  "EXERCISE PRICE" means, as of any date, the price at which a holder
          may purchase the securities issuable upon exercise of one whole Right.
          Until adjustment thereof in accordance with the terms hereof, the
          Exercise Price shall be $100.

     (v)  "EXPIRATION TIME" means the earlier of: (i) the Termination Time, and
          (ii) the close of business on the date immediately following the date
          of the Corporation's annual meeting of shareholders to be held in
          2003.

     (w)  "FLIP-IN EVENT" means a transaction in or pursuant to which any Person
          becomes an Acquiring Person.

     (x)  "INDEPENDENT SHAREHOLDERS" means holders of Voting Shares of the
          Corporation, but shall not include any Acquiring Person or any Offeror
          (other than any Person who pursuant to Clause 1.1(e)(3) is not deemed
          to Beneficially Own the Voting Shares held by such Person), or any
          Affiliate or Associate of such Acquiring Person or such Offeror, or
          any Person acting jointly or in concert with such Acquiring Person or
          such Offeror, or any employee benefit plan, stock purchase plan,
          deferred profit sharing plan or any similar plan or trust for the
          benefit of employees of the Corporation or a Subsidiary of the
          Corporation, unless the beneficiaries of any such plan or trust direct
          the manner in which the Voting Shares are to be voted or direct
          whether the Voting Shares are to be tendered to a Take-over Bid.

     (y)  "MARKET PRICE" per share of any securities on any date of
          determination means the average of the daily closing prices per share
          of such securities (determined as described below) on each of the
          twenty (20) consecutive Trading Days through and including the Trading
          Day immediately preceding such date; provided, however, that if an
          event of a type analogous to any of the events described in Section
          2.3 hereof shall have caused the closing prices used to determine the
          Market Price on any Trading Days not to be fully comparable with the
          closing price on such date of determination or, if the date of
          determination is not a Trading Day, on the immediately preceding
          Trading Day, each such closing price so used shall be appropriately
          adjusted in a manner analogous to the applicable adjustment provided
          for in Section 2.3 hereof in order to make it fully

<PAGE>

                                      -8-

          comparable with the closing price on such date of determination or, if
          the date of determination is not a Trading Day, on the immediately
          preceding Trading Day. The closing price per share of any securities
          on any date shall be (i) the closing board lot sale price or, if such
          price is not available, the average of the closing bid and asked
          prices, for each share as reported by The Toronto Stock Exchange, or
          (ii) if for any reason none of such prices is available on such day or
          the securities are not listed or admitted to trading on The Toronto
          Stock Exchange, the closing board lot sale price or, if such price is
          not available, the average of the closing bid and asked prices, for
          each share as reported in the principal consolidated transaction
          reporting system with respect to securities listed or admitted to
          trading on the securities exchange on which the securities are
          primarily traded, or (iii) if not so listed, the last quoted price, or
          if not so quoted, the average of the high bid and low asked prices for
          each share of such securities in the over-the-counter market, or (iv)
          if on any such date the securities are not quoted by any such
          organization, the average of the closing bid and asked prices as
          furnished by a professional market maker making a market in the
          securities selected in good faith by the Board of Directors; provided,
          however, that if on any such date the securities are not traded in the
          over-the-counter market, the closing price per share of such
          securities on such date shall mean the fair value per share of such
          securities on such date as determined in good faith by a nationally or
          internationally recognized investment dealer or investment banker.

     (z)  "OFFER TO ACQUIRE" shall include:

          (i)  an offer to purchase, a public announcement of an intention to
               make an offer to purchase, or a solicitation of an offer to sell,
               Voting Shares of the Corporation; and

          (ii) an acceptance of an offer to sell Voting Shares of the
               Corporation, whether or not such offer to sell has been
               solicited;

          or any combination thereof, and the Person accepting an offer to sell
          shall be deemed to be making an Offer to Acquire to the Person that
          made the offer to sell.

     (aa) "OFFEROR" means a Person who has announced a current intention to
          make, or who makes and has outstanding, a Take-over Bid.

     (bb) "OFFEROR'S SECURITIES" means Voting Shares of the Corporation
          Beneficially Owned by an Offeror, any Affiliate or Associate of such
          Offeror or any Person acting jointly or in concert with the Offeror.

     (cc) "PERMITTED BID" means a Take-over Bid that is made by means of a
          Take-over Bid circular and which also complies with the following
          additional provisions:

          (i)  the Take-over Bid shall be made to all registered holders of
               Voting Shares (other than the Voting Shares held by the Offeror);

          (ii) the Take-over Bid shall contain, and the take up and payment for
               securities tendered or deposited thereunder shall be subject to,
               an

<PAGE>

                                      -9-

               irrevocable and unqualified condition that no Voting Shares shall
               be taken up or paid for pursuant to the Take-over Bid prior to
               the close of business on the date which is not less than sixty
               (60) days following the date of the Take-over Bid and that no
               Voting Shares shall be taken up or paid for pursuant to the
               Take-over Bid unless, at such date, more than fifty percent (50%)
               of the then outstanding Voting Shares held by Independent
               Shareholders have been deposited to the Take-over Bid and not
               withdrawn;

          (iii) the Take-over Bid shall contain an irrevocable and unqualified
               provision that, unless the Take-over Bid is withdrawn, Voting
               Shares of the Corporation may be deposited pursuant to such
               Take-over Bid at any time during the period of time described in
               Clause (ii) of this Section 1.1(cc) and that any Voting Shares
               deposited pursuant to the Take-over Bid may be withdrawn at any
               time until taken up and paid for; and

          (iv) the Take-over Bid shall contain an irrevocable and unqualified
               provision that should the condition referred to in Clause (ii) of
               this Section 1.1(cc) be met: (A) the Offeror will make a public
               announcement of that fact on the date the Take-over Bid would
               otherwise expire; and (B) the Take-over Bid will be extended for
               a period of not less than ten (10) Business Days from the date it
               would otherwise expire.

     (dd) "PERMITTED BID ACQUISITIONS" means share acquisitions made pursuant to
          a Permitted Bid or a Competing Bid.

     (ee) "PERMITTED LOCK-UP AGREEMENT" means an agreement between a Person and
          one or more holders (each a "LOCKED-UP PERSON") of Voting Shares or
          Convertible Securities (the terms of which are publicly disclosed and
          a copy of which is made available to the public (including the
          Corporation) not later than the date the Lock-up Bid (as defined
          below) is publicly announced or, if the agreement was entered into
          after the date of the Lock-up Bid, not later than the date the
          agreement was entered into), pursuant to which such Locked-up Persons
          agree to deposit or tender Voting Shares or Convertible Securities to
          a Take-over Bid (the "LOCK-UP BID") made by the Person or any of such
          Person's Affiliates or Associates or any other Person referred to in
          Clause (iii) of the definition of Beneficial Owner and where the
          agreement:

          (i)  (A) permits the Locked-up Person to withdraw Voting Shares or
               Convertible Securities in order to tender or deposit Voting
               Shares or Convertible Securities to another Take-over Bid or to
               support another transaction that contains an offering price for
               each Voting Share or Convertible Security that exceeds, or
               provides a value for each Voting Share or Convertible Security
               that is greater than, the offering price or value contained or
               proposed to be contained in the Lock-up Bid, provided that the
               other Take-over Bid is made for at least the same number of
               Voting Shares or Convertible Securities as the Lock-up Bid; or
<PAGE>

                                      -10-

               (B) permits the Locked-up Person to withdraw Voting Shares or
               Convertible Securities in order to tender or deposit the Voting
               Shares or Convertible Securities to another Take-over Bid or to
               support another transaction that contains an offering price for
               each Voting Share or Convertible Security that exceeds, or
               provides a value for each Voting Share or Convertible Security
               that is greater than, the offering price contained in or proposed
               to be contained in, the Lock-up Bid by as much or more than a
               specified amount (the "SPECIFIED AMOUNT") and the Specified
               Amount is not greater than 7% of the offering price that is
               contained in the Lock-up Bid, provided that the other Take-over
               Bid is made for at least the same number of Voting Shares or
               Convertible Securities as the Lock-up Bid; and

          (ii) provides that no "BREAK-UP" fees, "TOP-UP" fees, penalties,
               expenses or other amounts that exceed in the aggregate the
               greater of: (A) the cash equivalent of 2.5% of the price or value
               payable under the Lock-up Bid to the Locked-up Person, and (B)
               50% of the amount by which the price or value payable under
               another Take-over Bid to a Locked-up Person exceeds the price or
               value of the consideration that such Locked-up Person would have
               received under the Lock-up Bid, shall be payable by such
               Locked-up Person pursuant to the agreement in the event that the
               Lock-up Bid is not successfully concluded or if any Locked-up
               Person fails to tender Voting Shares or Convertible Securities
               pursuant thereto;

          and, for greater certainty, the agreement may contain a right of first
          refusal or require a period of delay to give the Offeror an
          opportunity to at least match a higher consideration in another
          Take-over Bid or transaction or contain other similar limitation on a
          Locked-up Person's right to withdraw Voting Shares or Convertible
          Securities from the agreement, so long as any such limitation does not
          preclude the exercise by the Locked-up Person of the right to withdraw
          Voting Shares or Convertible Securities in sufficient time to tender
          to the other Take-over Bid or transaction.

     (ff) "PERSON" means any individual, firm, partnership, association, trust,
          trustee, executor, administrator, legal or personal representative,
          government, governmental body, entity or authority, group, body
          corporate, corporation, unincorporated organization or association,
          syndicate, joint venture or any other entity, whether or not having
          legal personality, and any of the foregoing in any derivative,
          representative or fiduciary capacity and pronouns have a similar
          extended meaning.

     (gg) "RECORD TIME" means the close of business on March 7, 1990.

     (hh) "REDEMPTION PRICE" has the meaning ascribed thereto in Section 5.1(1)
          hereof.

     (ii) "REGULAR PERIODIC CASH DIVIDENDS" means cash dividends paid at regular
          intervals in any fiscal year of the Corporation to the extent that
          such cash dividends do not exceed, in the aggregate, the greatest of:

<PAGE>

                                      -11-

          (i)  two hundred percent (200%) of the aggregate amount of cash
               dividends declared payable by the Corporation on its Common
               Shares in its immediately preceding fiscal year; and

          (ii) one hundred percent (100%) of the aggregate consolidated net
               income of the Corporation, before extraordinary items, for its
               immediately preceding fiscal year.

     (jj) "RIGHT" means a right issued pursuant to this Agreement.

     (kk) "RIGHTS CERTIFICATE" has the meaning ascribed thereto in Section
          2.2(3) hereof.

     (ll) "RIGHTS REGISTER" has the meaning ascribed thereto in Section 2.6(1)
          hereof.

     (mm) "SECURITIES ACT (ONTARIO)" means the SECURITIES ACT, R.S.O. 1990, c.
          S.5, and the regulations, rules, policies, and notices thereunder, and
          any comparable or successor laws, regulations, rules, policies or
          notices thereto.

     (nn) "SEPARATION TIME" means the close of business on the tenth (10th)
          Trading Day after the earlier of (i) the Stock Acquisition Date, (ii)
          the date of the commencement of, or first public announcement of the
          intent of any person (other than the Corporation or any Subsidiary of
          the Corporation) to commence, a Take-over Bid (other than a Permitted
          Bid or Competing Bid) or such later date as may be determined by the
          Board of Directors and (iii) the date on which a Permitted Bid or
          Competing Bid ceases to qualify as such or such later date as may be
          determined by the Board of Directors provided that, if any Take-over
          Bid referred to in Clause (ii) of this Section 1.1(nn) or any
          Permitted Bid or Competing Bid referred to in Clause (iii) of this
          Section 1.1(nn) expires, is cancelled, terminated or otherwise
          withdrawn prior to the Separation Time, such Take-over Bid, Permitted
          Bid or Competing Bid, as the case may be, shall be deemed, for the
          purposes of this Section 1.1(nn), never to have been made and provided
          further that if the Board of Directors determines pursuant to Sections
          5.1(2), (3) or (4) hereof to waive the application of Section 3.1
          hereof to a Flip-in Event, the Separation Time in respect of such
          Flip-in Event shall be deemed never to have occurred.

     (oo) "STOCK ACQUISITION DATE" means the first date of public announcement
          (which, for purposes of this definition, shall include, without
          limitation, a report filed pursuant to section 101 of the SECURITIES
          ACT (Ontario)) by the Corporation or an Offeror or Acquiring Person of
          facts indicating that a Person has become an Acquiring Person.

     (pp) "SUBSIDIARY": a corporation shall be deemed to be a Subsidiary of
          another corporation if:

          (i)  it is controlled by:

               (A)  that other;

<PAGE>

                                      -12-

               (B)  that other and one or more corporations each of which is
                    controlled by that other, or

               (C)  two or more corporations each of which is controlled by that
                    other; and

          (ii) it is a Subsidiary of a corporation that is that other's
               Subsidiary.

     (qq) "TAKE-OVER BID" means an Offer to Acquire Voting Shares of the
          Corporation or securities convertible into or exchangeable for or
          carrying a right to purchase Voting Shares of the Corporation where
          the Voting Shares of the Corporation subject to the Offer to Acquire,
          together with the Voting Shares of the Corporation into which the
          securities subject to the Offer to Acquire are convertible,
          exchangeable or exercisable, and the Offeror's Securities, constitute
          in the aggregate twenty percent (20%) or more of the outstanding
          Voting Shares of the Corporation at the date of the Offer to Acquire.

     (rr) "TERMINATION TIME" means the time at which the right to exercise
          Rights shall terminate pursuant to Sections 5.1(1) or (5) hereof.

     (ss) "TRADING DAY", when used with respect to any securities, means a day
          on which the principal Canadian stock exchange or American stock
          exchange or market on which such securities are listed or admitted to
          trading is open for the transaction of business or, if the securities
          are not listed or admitted to trading on any Canadian stock exchange
          or American stock exchange or market, a Business Day.

     (tt) "VOTING SHARES" means the Common Shares and any other shares of
          capital stock or voting interests of the Corporation entitled to vote
          generally in the election of all directors.

SECTION 1.2  CURRENCY.

     All sums of money which are referred to in this Agreement are expressed in
lawful money of Canada, unless otherwise specified.

SECTION 1.3  HEADINGS.

     The division of this Agreement into Articles, Sections and Clauses and the
insertion of headings, subheadings and a table of contents are for convenience
of reference only and shall not affect the construction or interpretation of
this Agreement.

SECTION 1.4  NUMBER AND GENDER.

     Wherever the context so requires, terms used herein importing the singular
number only shall include the plural and vice-versa and words importing only one
gender shall include all others.

SECTION 1.5  ACTING JOINTLY OR IN CONCERT.

     For the purposes of this Agreement, a Person is acting jointly or in
concert with every Person who is a party to an agreement, commitment or
understanding, whether formal or informal, with the first Person or any
Associate or Affiliate of the second Person to acquire or to make an Offer to
Acquire Voting Shares of the Corporation (other than customary agreements

<PAGE>

                                      -13-

with and between underwriters or banking group members or selling
group members with respect to a distribution of securities or to a pledge of
securities in the ordinary course of business).

SECTION 1.6  STATUTORY REFERENCES.

     Unless the context otherwise requires or except as expressly provided
herein, any reference herein to a specific part, section, clause or Rule of any
statute or regulation shall be deemed to refer to the same as it may be amended,
re-enacted or replaced or, if repealed and there shall be no replacement
therefor, to the same as it is in effect on the date of this Agreement.

                                   ARTICLE 2
                                   THE RIGHTS

SECTION 2.1  LEGEND ON COMMON SHARE CERTIFICATES.

(1)  Certificates issued for Common Shares after the Record Time but prior to
     the close of business on the earlier of the Separation Time and the
     Expiration Time shall evidence one Right for each Common Share represented
     thereby and, commencing as soon as reasonably practicable after the
     effective date of this Agreement, shall have impressed on, printed on,
     written on or otherwise affixed to them, a legend in substantially the
     following form:

          Until the Separation Time (defined in the Rights Agreement referred to
          below), this certificate also evidences rights of the holder described
          in a Shareholder Protection Rights Plan Agreement, dated March 7,
          1990, as amended (the "RIGHTS AGREEMENT"), between the Corporation and
          Montreal Trust Company of Canada, a copy of which is on file at the
          principal executive offices of the Corporation. Under certain
          circumstances set out in the Rights Agreement, the rights may be
          redeemed, may expire, may become null and void or may be evidenced by
          separate certificates and no longer evidenced by this certificate.

(2)  Until the earlier of the Separation Time and the Expiration Time,
     certificates representing Common Shares that are issued and outstanding at
     the Record Time shall evidence one Right for each Common Share evidenced
     thereby notwithstanding the absence of the foregoing legend. Following the
     Separation Time, Rights will be evidenced by Rights certificates issued
     pursuant to Section 2.2 hereof.

SECTION 2.2  INITIAL EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS.

(1)  RIGHT TO ENTITLE HOLDER TO PURCHASE ONE COMMON SHARE PRIOR TO ADJUSTMENT.
     Subject to adjustment as herein set forth and subject to Section 3.1(1)
     hereof, each Right will entitle the holder thereof, from and after the
     Separation Time and prior to the Expiration Time, to purchase, for the
     Exercise Price as at the Business Day immediately preceding the date of
     exercise of the Right, one Common Share (which price and number of Common
     Shares are subject to adjustment as set forth below and are subject to
     Section 3.1(1) hereof). Notwithstanding any other provision of this
     Agreement, any Rights held by the Corporation and any of its Subsidiaries
     shall be void.

<PAGE>

                                      -14-

(2)  RIGHTS NOT EXERCISABLE UNTIL SEPARATION TIME. Until the Separation Time,
     (i) the Rights shall not be exercisable and no Right may be exercised, and
     (ii) for administrative purposes each Right will be evidenced by the
     certificates for the associated Common Shares registered in the names of
     the holders thereof (which certificates shall also be deemed to be Rights
     Certificates) and will be transferable only together with, and will be
     transferred by a transfer of, such associated Common Shares.

(3)  DELIVERY OF RIGHTS CERTIFICATE AND DISCLOSURE STATEMENT. From and after the
     Separation Time and prior to the Expiration Time, (i) the Rights shall be
     exercisable, and (ii) the registration and transfer of the Rights shall be
     separate from, and independent of, Common Shares. Promptly following the
     Separation Time, the Corporation will prepare and the Rights Agent will
     mail to each holder of record of Rights as of the Separation Time (other
     than an Acquiring Person and, in respect of any Rights Beneficially Owned
     by such Acquiring Person which are not held of record by such Acquiring
     Person, the holder of record of such Rights (a "NOMINEE")) at such holder's
     address as shown by the records of the Corporation (the Corporation hereby
     agreeing to furnish copies of such records to the Rights Agent for this
     purpose), (A) a certificate (a "RIGHTS CERTIFICATE") in substantially the
     form of Schedule 2.2(3) hereto appropriately completed, representing the
     number of Rights held by such holder at the Separation Time, and having
     such marks of identification or designation and such legends, summaries or
     endorsements printed thereon as the Corporation may deem appropriate and as
     are not inconsistent with the provisions of this Agreement, or as may be
     required to comply with any law, rule, regulation or judicial or
     administrative order or with any rule or regulation made pursuant thereto
     or with any rule or regulation of any self-regulatory organization, stock
     exchange or quotation system on which the Rights may from time to time be
     listed or traded, or to conform to usage, and (B) a disclosure statement
     describing the Rights, provided that a Nominee shall be sent the materials
     provided for in (A) and (B) in respect of all Common Shares held of record
     by it which are not Beneficially Owned by an Acquiring Person. In order for
     the Corporation to determine whether any Person is holding Common Shares
     which are Beneficially Owned by another Person, the Corporation may require
     such first mentioned Person to furnish it with such information and
     documentation as the Corporation considers advisable.

(4)  EXERCISE OF RIGHTS. Rights may be exercised in whole or in part on any
     Business Day after the Separation Time and prior to the Expiration Time by
     submitting to the Rights Agent (at the office of the Rights Agent in the
     City of Toronto or any other office of the Rights Agent in the cities
     designated from time to time for that purpose by the Corporation) the
     Rights Certificate evidencing such Rights together with an election to
     exercise such Rights (an "ELECTION TO EXERCISE") substantially in the form
     attached to the Rights Certificate duly completed, accompanied by payment
     by certified cheque, banker's draft or money order payable to the order of
     the Corporation, of a sum equal to the Exercise Price multiplied by the
     number of Rights being exercised and a sum sufficient to cover any transfer
     tax or charge which may be payable in respect of any transfer involved in
     the transfer or delivery of Rights Certificates or the issuance or delivery
     of certificates for Common Shares in a name other than that of the holder
     of the Rights being exercised, all of the above to be received before the
     Expiration Time by the Rights Agent at its principal office in any of the
     cities listed on the Rights Certificate.

<PAGE>

                                      -15-

(5)  DUTIES OF RIGHTS AGENT UPON RECEIPT OF ELECTION TO EXERCISE. Upon receipt
     of a Rights Certificate, which is accompanied by (i) a completed and duly
     executed Election to Exercise, and (ii) payment as set forth in Section
     2.2(4) above, the Rights Agent (unless otherwise instructed by the
     Corporation) will thereupon promptly:

     (A)  requisition from the transfer agent for the Common Shares certificates
          representing the number of Common Shares to be purchased (the
          Corporation hereby irrevocably authorizing its transfer agent to
          comply with all such requisitions);

     (B)  when appropriate, requisition from the Corporation the amount of cash
          to be paid in lieu of issuing fractional Common Shares;

     (C)  after receipt of such certificates, deliver the same to or upon the
          order of the registered holder of such Rights Certificate, registered
          in such name or names as may be designated by such registered holder;

     (D)  when appropriate, after receipt, deliver such cash (less any amounts
          required to be withheld) to or to the order of the registered holder
          of the Rights Certificate; and

     (E)  tender to the Corporation all payments received on exercise of the
          Rights.

(6)  PARTIAL EXERCISE OF RIGHTS. In case the holder of any Rights shall exercise
     less than all of the Rights evidenced by such holder's Rights Certificate,
     a new Rights Certificate evidencing the Rights remaining unexercised will
     be issued by the Rights Agent to such holder or to such holder's duly
     authorized assigns.

(7)  DUTIES OF THE CORPORATION. The Corporation covenants and agrees that it
     will:

     (a)  take all such action as may be necessary and within its power to
          ensure that all Common Shares or other securities delivered upon
          exercise of Rights shall, at the time of delivery of the certificates
          for such shares (subject to payment of the Exercise Price), be duly
          and validly authorized, executed, issued and delivered and fully paid
          and non-assessable;

     (b)  take all such action as may be necessary and within its power to
          ensure compliance with the provisions of Section 3.1 hereof including,
          without limitation, all such action to comply with any applicable
          requirements of the CBCA, the SECURITIES ACT (Ontario) and any
          applicable comparable securities legislation of each of the provinces
          of Canada and any other applicable law, rule or regulation, in
          connection with the issuance and delivery of the Rights Certificates
          and the issuance of any Common Shares or other securities upon
          exercise of Rights;

     (c)  use reasonable efforts to cause, from and after such time as the
          Rights become exercisable, all Common Shares issued upon exercise of
          Rights to be listed upon issuance on the principal stock exchange on
          which the Common Shares were traded prior to the Stock Acquisition
          Date;

<PAGE>

                                      -16-

     (d)  cause to be reserved and kept available out of its authorized and
          unissued Common Shares, the number of Common Shares that, as provided
          in this Agreement, will from time to time be sufficient to permit the
          exercise in full of all outstanding Rights;

     (e)  pay when due and payable any and all Canadian federal and provincial
          transfer taxes and charges (not including any income or capital taxes
          of the holder or exercising holder or any liability of the Corporation
          to withhold tax) which may be payable in respect of the original
          issuance or delivery of the Rights Certificates, provided that the
          Corporation shall not be required to pay any transfer tax or charge
          which may be payable in respect of any transfer involved in the
          transfer or delivery of Rights Certificates or the issuance or
          delivery of certificates for shares or other securities in a name
          other than that of the registered holder of the Rights being
          transferred or exercised; and

     (f)  after the Separation Time, except as permitted by Sections 5.1 or 5.4
          hereof, not take (or permit any Subsidiary to take) any action if at
          the time such action is taken it is reasonably foreseeable that such
          action will diminish substantially or otherwise eliminate the benefits
          intended to be afforded by the Rights.

SECTION 2.3  ADJUSTMENTS TO EXERCISE PRICE, NUMBER OF RIGHTS.

     The Exercise Price, the number and kind of Common Shares or other
securities subject to purchase upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 2.3:

     (a)  ADJUSTMENT TO EXERCISE PRICE UPON CHANGES TO SHARE CAPITAL. In the
          event the Corporation shall at any time after the Record Time:

          (i)  declare or pay a dividend on the Common Shares payable in Common
               Shares (or other securities exchangeable for or convertible into
               or giving a right to acquire Common Shares or other securities)
               other than the issue of Common Shares or such exchangeable or
               convertible securities to holders of Common Shares in lieu of but
               not in an amount which exceeds the value of regular periodic cash
               dividends;

          (ii) subdivide or change the outstanding Common Shares into a greater
               number of Common Shares;

          (iii) combine or change the outstanding Common Shares into a smaller
               number of Common Shares; or

          (iv) issue any Common Shares (or other securities exchangeable for or
               convertible into or giving a right to acquire Common Shares or
               other securities) in respect of, in lieu of or in exchange for
               existing Common Shares, except as otherwise provided in this
               Section 2.3;

          the Exercise Price in effect at the time of the record date for such
          dividend or of the effective date of such subdivision, combination or
          reclassification, and the number and kind of Common Shares, or other
          securities, as the case may be, issuable on such date, shall be
          proportionately adjusted so that the holder of any

<PAGE>

                                      -17-

          Right exercised after such time shall be entitled to receive, upon
          payment of the Exercise Price then in effect, the aggregate number and
          kind of Common Shares or other securities, as the case may be, which,
          if such Right had been exercised immediately prior to such date and at
          a time when the Common Share transfer books of the Corporation were
          open, such holder would have owned upon such exercise and been
          entitled to receive by virtue of such dividend, subdivision,
          combination or reclassification. If an event occurs which would
          require an adjustment under both this Section 2.3 and Section 3.1
          hereof, the adjustment provided for in this Section 2.3 shall be in
          addition to and, shall be made prior to, any adjustment required
          pursuant to Section 3.1 hereof.

     (b)  ADJUSTMENT TO EXERCISE PRICE UPON ISSUE OF RIGHTS, OPTIONS AND
          WARRANTS. In case the Corporation shall at any time after the Record
          Time fix a record date for the issuance of rights, options or warrants
          to all holders of Common Shares entitling them (for a period expiring
          within forty-five (45) calendar days after such record date) to
          subscribe for or purchase Common Shares (or shares having the same
          rights, privileges and preferences as Common Shares ("EQUIVALENT
          COMMON SHARES")) or securities convertible into or exchangeable for or
          carrying a right to purchase Common Shares or equivalent common shares
          at a price per Common Share or per equivalent common share (or having
          a conversion price or exchange price or exercise price per share, if a
          security convertible into or exchangeable for or carrying a right to
          purchase Common Shares or equivalent common shares) less than ninety
          percent (90%) of the Market Price per Common Share on such record
          date, the Exercise Price to be in effect after such record date shall
          be determined by multiplying the Exercise Price in effect immediately
          prior to such record date by a fraction, the numerator of which shall
          be the number of Common Shares outstanding on Such record date, plus
          the number of Common Shares that the aggregate offering price of the
          total number of Common Shares and/or equivalent common shares so to be
          offered (and/or the aggregate initial conversion, exchange or exercise
          price of the convertible or exchangeable securities or rights so to be
          offered, including the price required to be paid to purchase such
          convertible or exchangeable securities or rights so to be offered)
          would purchase at such Market Price per Common Share, and the
          denominator of which shall be the number of Common Shares outstanding
          on such record date, plus the number of additional Common Shares
          and/or equivalent common shares to be offered for subscription or
          purchase (or into which the convertible or exchangeable securities are
          initially convertible, exchangeable or exercisable). In case such
          subscription price may be paid by delivery of consideration, part or
          all of which may be in a form other than cash, the value of such
          consideration shall be as determined in good faith by the Board of
          Directors, whose determination shall be described in a certificate
          filed with the Rights Agent and shall be binding on the Rights Agent
          and the holders of the Rights. Such adjustment shall be made
          successively whenever such a record date is fixed and, in the event
          that such rights or warrants are not so issued, the Exercise Price
          shall be adjusted to be the Exercise Price which would then be in
          effect if such record date had not been fixed.

          For purposes of this Agreement, the granting of the right to purchase
          Common Shares (or equivalent common shares) (whether from treasury
          shares or

<PAGE>

                                      -18-

          otherwise) pursuant to any dividend or interest reinvestment plan
          and/or any Common Share purchase plan providing for the reinvestment
          of dividends or interest payable on securities of the Corporation
          and/or the investment of periodic optional payments and/or employee
          benefit, stock option or similar plans (so long as such right to
          purchase is in no case evidenced by the delivery of rights or
          warrants) shall not be deemed to constitute an issue of rights,
          options or warrants by the Corporation; provided, however, that, in
          the case of any dividend or interest reinvestment plan, the right to
          purchase Common Shares (or equivalent common shares) is at a price per
          share of not less than ninety percent (90%) of the current market
          price per share (determined as provided in such plans) of the Common
          Shares.

     (c)  ADJUSTMENT TO EXERCISE PRICE UPON CORPORATE DISTRIBUTIONS. In case the
          Corporation shall at anytime after the Record Time fix a record date
          for a distribution to all holders of Common Shares (including any such
          distribution made in connection with a merger, amalgamation,
          arrangement, plan, compromise or reorganization in which the
          Corporation is the continuing or successor corporation) of evidences
          of indebtedness, cash (other than a regular periodic cash dividend or
          a regular periodic cash dividend paid in Common Shares, but including
          any dividend payable in securities other than Common Shares), assets
          or subscription rights, options or warrants (excluding those referred
          to in Section 2.3(b) above), the Exercise Price to be in effect after
          such record date shall be determined by multiplying the Exercise Price
          in effect immediately prior to such record date by a fraction, the
          numerator of which shall be the Market Price per Common Share on such
          record date, less the fair market value (as determined in good faith
          by the Board of Directors, whose determination shall be described in a
          statement filed with the Rights Agent) of the portion of the cash,
          assets or evidences of indebtedness so to be distributed or of such
          subscription rights, options or warrants applicable to a Common Share
          and the denominator of which shall be such Market Price per Common
          Share. Such adjustments shall be made successively whenever such a
          record date is fixed, and in the event that such distribution is not
          so made, the Exercise Price shall be adjusted to be the Exercise Price
          which would have been in effect if such record date had not been
          fixed.

     (d)  DE MINIMIS THRESHOLD FOR ADJUSTMENT TO EXERCISE PRICE. Notwithstanding
          anything herein to the contrary, no adjustment in the Exercise Price
          shall be required unless such adjustment would require an increase or
          decrease of at least one percent (1%) in the Exercise Price; provided,
          however, that any adjustments which by reason of this Section 2.3(d)
          are not required to be made shall be carried forward and taken into
          account in any subsequent adjustment. All calculations under this
          Section 2.3 shall be made to the nearest cent or to the nearest
          one-hundredth of a Common Share or other share, as the case may be.
          Notwithstanding the first sentence of this Section 2.3(d), any
          adjustment required by this Section 2.3 shall be made no later than
          the earlier of (i) three (3) years from the date of the transaction
          which mandates such adjustment or (ii) the Expiration Time.

<PAGE>

                                      -19-

     (e)  CORPORATION MAY PROVIDE FOR ALTERNATE MEANS OF ADJUSTMENT. Subject to
          the prior consent of the holders of Voting Shares or Rights obtained
          as set forth in Section 5.4(2) or (3) hereof, as applicable, in the
          event the Corporation shall at any time after the Record Time issue
          any shares of capital stock (other than Common Shares), or rights or
          warrants to subscribe for or purchase any such capital stock, or
          securities convertible into or exchangeable for any such capital
          stock, in a transaction referred to in Sections 2.3(a)(i) or (iv) or
          2.3(b) or (c) above, if the Board of Directors acting in good faith
          determines that the adjustments contemplated by Sections 2.3(a), (b)
          and (c) above in connection with such transaction will not
          appropriately protect the interests of the holders of Rights, the
          Corporation shall be entitled to determine what other adjustments to
          the Exercise Price, number of Rights and/or securities purchasable
          upon exercise of Rights would be appropriate and, notwithstanding
          Sections 2.3(a), (b) and (c) above, such adjustments, rather than the
          adjustments contemplated by Sections 2.3(a), (b) and (c) above, shall
          be made. The Corporation and the Rights Agent shall amend this
          Agreement as appropriate to provide for such adjustments.

     (f)  ADJUSTMENT TO RIGHTS EXERCISABLE INTO SHARES OTHER THAN COMMON SHARES.
          If as a result of an adjustment made pursuant to Section 3.1 hereof,
          the holder of any Right thereafter exercised shall become entitled to
          receive any shares other than Common Shares, thereafter the number of
          such other shares so receivable upon exercise of any Right and the
          Exercise Price thereof shall be subject to adjustment from time to
          time in a manner and on terms as nearly equivalent as practicable to
          the provisions with respect to the Common Shares contained in Sections
          2.3(a), (b), (c), (d), (e), (g), (h), (i), (j), (k) and (l) above and
          below, as the case may be, and the provisions of this Agreement with
          respect to the Common Shares shall apply on like terms to any such
          other shares.

     (g)  RIGHTS TO EVIDENCE RIGHT TO PURCHASE COMMON SHARES AT ADJUSTED
          EXERCISE PRICE. Each Right originally issued by the Corporation
          subsequent to any adjustment made to the Exercise Price hereunder
          shall evidence the right to purchase, at the adjusted Exercise Price,
          the number of Common Shares purchasable from time to time hereunder
          upon exercise of such Right, all subject to further adjustment as
          provided herein.

     (h)  ADJUSTMENT TO NUMBER OF COMMON SHARES PURCHASABLE UPON ADJUSTMENT TO
          EXERCISE PRICE. Unless the Corporation shall have exercised its
          election as provided in Section 2.3(i) below, upon each adjustment of
          the Exercise Price as a result of the calculations made in Sections
          2.3(b) and (c) above, each Right outstanding immediately prior to the
          making of such adjustment shall thereafter evidence the right to
          purchase, at the adjusted Exercise Price, that number of Common Shares
          (calculated to the nearest one ten-thousandth) obtained by (A)
          multiplying (x) the number of shares purchasable upon exercise of a
          Right immediately prior to this adjustment by (y) the Exercise Price
          in effect immediately prior to such adjustment of the Exercise Price,
          and (B) dividing the product so obtained by the Exercise Price in
          effect immediately after such adjustment of the Exercise Price.

<PAGE>

                                      -20-

     (i)  ELECTION TO ADJUST NUMBER OF RIGHTS UPON ADJUSTMENT TO EXERCISE PRICE.
          The Corporation shall be entitled to elect on or after the date of any
          adjustment of the Exercise Price to adjust the number of Rights, in
          lieu of any adjustment in the number of Common Shares purchasable upon
          the exercise of a Right. Each of the Rights outstanding after the
          adjustment in the number of Rights shall be exercisable for the number
          of Common Shares for which a Right was exercisable immediately prior
          to such adjustment. Each Right held of record prior to such adjustment
          of the number of Rights shall become that number of Rights (calculated
          to the nearest one ten-thousandth) obtained by dividing the Exercise
          Price in effect immediately prior to adjustment of the Exercise Price
          by the Exercise Price in effect immediately after adjustment of the
          Exercise Price. The Corporation shall make a public announcement of
          its election to adjust the number of Rights, indicating the record
          date for the adjustment and, if known at the time, the amount of the
          adjustment to be made. This record date may be the date on which the
          Exercise Price is adjusted or any day thereafter but, if Rights
          Certificates have been issued, shall be at least ten (10) days later
          than the date of the public announcement. If Rights Certificates have
          been issued, upon each adjustment, of the number of Rights pursuant to
          this Section 2.3(i), the Corporation shall, as promptly as
          practicable, cause to be distributed to holders of record of Rights
          Certificates on such record date Rights Certificates evidencing,
          subject to Section 5.5 hereof, the additional Rights to which such
          holders shall be entitled as a result of such adjustment, or, at the
          option of the Corporation, shall cause to be distributed to such
          holders of record in substitution and replacement for the Rights
          Certificates held by such holders prior to the date of adjustment, and
          upon surrender thereof, new Rights Certificates evidencing all the
          Rights to which such holders shall be entitled after such adjustment.
          Rights Certificates so to be distributed shall be issued, executed and
          countersigned in the manner provided for herein and may bear, at the
          option of the Corporation, the adjusted Exercise Price and shall be
          registered in the names of the holders of record of Rights
          Certificates on the record date for the adjustment specified in the
          public announcement.

     (j)  RIGHTS CERTIFICATES MAY CONTAIN EXERCISE PRICE BEFORE ADJUSTMENT.
          Irrespective of any adjustment or change in the Exercise Price or the
          number of Common Shares issuable upon the exercise of the Rights, the
          Rights Certificates theretofore and thereafter issued may continue to
          express the Exercise Price per share and the number of shares which
          were expressed in the initial Rights Certificates issued hereunder.

     (k)  CORPORATION MAY IN CERTAIN CASES DEFER ISSUES OF SECURITIES. In any
          case in which this Section 2.3 shall require that an adjustment in the
          Exercise Price be made effective as of a record date for a specified
          event, the Corporation may elect to defer until the the occurrence of
          such event the issuance to the holder of any Right exercised after
          such record date the number of Common Shares and other securities of
          the Corporation, if any, issuable upon such exercise over and above
          the number of Common Shares and other securities of the Corporation,
          if any, issuable upon such exercise on the basis of the Exercise Price
          in effect prior to such adjustment; provided, however, that the
          Corporation shall deliver to such holder an appropriate instrument
          evidencing such holder's right to receive such

<PAGE>

                                      -21-

          additional shares (fractional or otherwise) or securities upon the
          occurrence of the event requiring such adjustment.

     (l)  CORPORATION HAS DISCRETION TO REDUCE EXERCISE PRICE FOR TAX REASONS.
          Notwithstanding anything in this Section 2.3 to the contrary, the
          Corporation shall be entitled to make such reductions in the Exercise
          Price, in addition to those adjustments expressly required by this
          Section 2.3, as and to the extent that in their good faith judgment,
          the Board of Directors shall determine to be advisable in order that
          any (A) consolidation or subdivision of the Common Shares, (B)
          issuance of any Common Shares at less than the Market Price, (C)
          issuance of securities convertible into or exchangeable for Common
          Shares, (D) stock dividends or (E) issuance of rights, options or
          warrants, referred to in this Section 2.3 hereafter made by the
          Corporation to holders of its Common Shares, shall not be taxable to
          such shareholders.

SECTION 2.4  DATE ON WHICH EXERCISE IS EFFECTIVE.

     Each person in whose name any certificate for Common Shares is issued upon
the exercise of Rights, shall for all purposes be deemed to have become the
holder of record of the Common Shares represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered (together with a duly completed
Election to Exercise) and payment of the Exercise Price for such Rights (and any
applicable transfer taxes and other governmental charges payable by the
exercising holder hereunder) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Common Share transfer books
of the Corporation are closed, such person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Common Share transfer books of the
Corporation are open.

SECTION 2.5  EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS
CERTIFICATES.

(1)  The Rights Certificates shall be executed on behalf of the Corporation by
     its Chairman, President or any of its Vice-Presidents under its corporate
     seal reproduced thereon attested by its Secretary or one of its Assistant
     Secretaries. The signature of any of these officers on the Rights
     Certificates may be manual or facsimile. Rights Certificates bearing the
     manual or facsimile signatures of individuals who were at any time the
     proper officers of the Corporation shall bind the Corporation,
     notwithstanding that such individuals or any of them have ceased to hold
     such offices prior to the countersignature and delivery of such Rights
     Certificates.

(2)  Promptly after the Corporation learns of the Separation Time, the
     Corporation will notify the Rights Agent of such Separation Time and will
     deliver Rights Certificates executed by the Corporation to the Rights Agent
     for countersignature and a disclosure statement as described in Section
     2.2(3), and the Rights Agent shall manually or by facsimile signature
     countersign and mail such Rights Certificates and disclosure statement to
     the holders of the Rights pursuant to Section 2.2(3) hereof. No Rights
     Certificate shall be valid for any purpose until countersigned by the
     Rights Agent as aforesaid.

(3)  Each Rights Certificate shall be dated the date of countersignature
     thereof.

<PAGE>

                                      -22-

SECTION 2.6  REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.

(1)  The Corporation will cause to be kept a register (the "RIGHTS REGISTER") in
     which, subject to such reasonable regulations as it may prescribe, the
     Corporation will provide for the registration and transfer of Rights. The
     Rights Agent is hereby appointed "RIGHTS REGISTRAR" for the purpose of
     maintaining the Rights Register for the Corporation and registering Rights
     and transfers of Rights as herein provided, in the event that the Rights
     Agent shall cease to be the Rights Registrar, the Rights Agent will have
     the right to examine the Rights Register at all reasonable times.

     After the Separation Time and prior to the Expiration Time, upon surrender
     for registration of transfer or exchange of any Rights Certificate and
     subject to the provisions of Section 2.6(3) below and the other provisions
     of this Agreement, the Corporation will execute and the Rights Agent will
     countersign, register and deliver, in the name of the holder or the
     designated transferee or transferees as required pursuant to the holder's
     instructions, one or more new Rights Certificates evidencing the same
     aggregate number of Rights as did the Rights Certificates so surrendered.

(2)  All Rights issued upon any registration of transfer or exchange of Rights
     Certificates shall be the valid obligations of the Corporation, and such
     Rights shall be entitled to the same benefits under this Agreement as the
     Rights surrendered upon such registration of transfer or exchange.

(3)  Every Rights Certificate surrendered for registration of transfer or
     exchange shall be duly endorsed, or be accompanied by a written instrument
     of transfer in form satisfactory to the Corporation or the Rights Agent, as
     the case may be, duly executed by the registered holder thereof or such
     holder's attorney duly authorized in writing. As a condition to the
     issuance of any new Rights Certificate under this Section 2.6, the
     Corporation or the Rights Agent may require the payment of a sum sufficient
     to cover any tax or other governmental charge that may be imposed in
     relation thereto and the Corporation may require payment of a sum
     sufficient to cover any other expenses (including the fees and expenses of
     the Rights Agent) in connection therewith.

SECTION 2.7  MUTILATED, DESTROYED, LOST AND STOLEN RIGHT CERTIFICATES.

(1)  If any mutilated Rights Certificate is surrendered to the Rights Agent
     prior to the Expiration Time, the Corporation shall execute and the Rights
     Agent shall manually countersign and deliver in exchange therefor a new
     Rights Certificate evidencing the same number of Rights as did the Rights
     Certificate so surrendered.

(2)  If there shall be delivered to the Corporation and the Rights Agent prior
     to the Expiration Time (i) evidence to their reasonable satisfaction of the
     destruction, loss or theft of any Rights Certificate, and (ii) such
     indemnity or other security as may be required by them to save each of them
     and any of their agents harmless then, in the absence of notice to the
     Corporation or the Rights Agent that such Rights Certificate has been
     acquired by a bona fide purchaser, the Corporation shall execute and upon
     its request the Rights Agent shall countersign and deliver, in lieu of any
     such destroyed, lost or stolen Rights Certificate, a new Rights Certificate
     evidencing the same number of Rights as did the Rights Certificate so
     destroyed, lost or stolen.

<PAGE>

                                      -23-

(3)  As a condition to the issuance of any new Rights Certificate under this
     Section 2.7, the Corporation or the Rights Agent may require the payment of
     a sum sufficient to cover any tax or other governmental charge that may be
     imposed in relation thereto and the Corporation may require payment of a
     sum sufficient to cover any other expenses (including the fees and expenses
     of the Rights Agent) in connection therewith.

(4)  Every new Rights Certificate issued pursuant to this Section 2.7 in lieu of
     any destroyed, lost or stolen Rights Certificate shall evidence an original
     additional contractual obligation of the Corporation, whether or not the
     destroyed lost or stolen Rights Certificate shall be at any time
     enforceable by anyone, and the holder thereof shall be entitled to all the
     benefits of this Agreement equally and proportionately with any and all
     other holders of Rights duly issued by the Corporation.

SECTION 2.8  PERSONS DEEMED OWNERS.

     Prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) for registration of
transfer, the Corporation, the Rights Agent and any agent of the Corporation or
the Rights Agent shall be entitled to deem and treat the person in whose name a
Rights Certificate (or, prior to the Separation Time, the associated Common
Share certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement, unless
the context otherwise requires, the term "HOLDER" of any Rights shall mean the
registered holder of such Rights (or, prior to the Separation Time, the
associated Common Shares).

SECTION 2.9  DELIVERY AND CANCELLATION OF RIGHTS CERTIFICATES.

     All Rights Certificates surrendered upon exercise or for redemption,
registration of transfer or exchange shall, if surrendered to any person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly cancelled by the Rights Agent. The Corporation may at any time
deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired in
any manner whatsoever, and all Rights Certificates so delivered shall be
promptly cancelled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates cancelled as
provided in this Section 2.9 except as expressly permitted by this Agreement.
The Rights Agent shall, subject to applicable laws, destroy all cancelled Rights
Certificates and deliver a certificate of destruction to the Corporation.

SECTION 2.10  AGREEMENT OF RIGHTS HOLDERS.

     Every holder of Rights, by accepting the same, consents and agrees with the
Corporation and the Rights Agent and with every other holder of Rights:

     (a)  to be bound by and subject to the provisions of this Agreement, as
          amended or supplemented from time to time in accordance with the terms
          hereof, in respect of all Rights held;

     (b)  that prior to the Separation Time each Right will be transferable only
          together with, and will be transferred by a transfer of, the Common
          Share certificate representing such Right;

<PAGE>

                                      -24-

     (c)  that after the Separation Time, the Rights Certificates will be
          transferable only on the Rights Register as provided herein;

     (d)  that prior to due presentment of a Rights Certificate (or, prior to
          the Separation Time, the associated Common Share certificate) for
          registration of transfer, the Corporation, the Rights Agent and any
          agent of the Corporation or the Rights Agent shall be entitled to deem
          and treat the person in whose name the Rights Certificate (or prior to
          the Separation Time, the associated Common Share certificate) is
          registered as the absolute owner thereof and of the Rights evidenced
          thereby (notwithstanding any notations of ownership or writing on such
          Rights Certificate or the associated Common Share certificate made by
          anyone other than the Corporation or the Rights Agent) for all
          purposes whatsoever, and neither the Corporation nor the Rights Agent
          shall be affected by any notice to the contrary;

     (e)  that such holder of Rights has waived his right to receive any
          fractional Rights or any fractional shares upon exercise of Right;

     (f)  that without the approval of any holder of Rights and upon the sole
          authority of the Board of Directors acting in good faith this
          Agreement may be supplemented or amended from time to time pursuant to
          and as provided herein; and

     (g)  that notwithstanding anything in this Agreement to the contrary,
          neither the Corporation nor the Rights Agent shall have any liability
          to any holder of a Right or any other Person as a result of its
          inability to perform any of its obligations under this Agreement by
          reason of any preliminary or permanent injunction or other order,
          decree or ruling issued by a court of competent jurisdiction or by a
          governmental, regulatory or administrative agency or commission, or
          any statute, rule, regulation, or executive order promulgated or
          enacted by any governmental authority, prohibiting or otherwise
          restraining performance of such obligation.

SECTION 2.11  RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER.

     No holder, as such, of any Rights or Rights Certificate shall be entitled
to vote, receive dividends or be deemed for any purpose whatsoever the holder of
any Common Share or any other share or security of the Corporation which may at
any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed or
deemed to confer upon the holder of any Right or Rights Certificate, as such,
any of the rights, titles, benefits or privileges of a holder of Common Shares
or any other shares or securities of the Corporation or any right to vote at any
meeting of shareholders of the Corporation whether for the election of directors
or otherwise or upon any matter submitted to holders of shares of the
Corporation at any meeting thereof, or to give or withhold consent to any action
of the Corporation, or to receive notice of any meeting or other action
affecting any holder of Common Shares or any other shares or securities of the
Corporation except as expressly provided herein, or to receive dividends,
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by Rights Certificates shall have been duly exercised in accordance
with the terms and provisions hereof.

<PAGE>

                                      -25-

                                   ARTICLE 3
         ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS

SECTION 3.1  FLIP-IN EVENT.

(1)  Subject to Section 3.1(2) below, and Sections 5.1(2), (3) and (4) hereof,
     in the event that prior to the Expiration Time a Flip-in Event shall occur,
     the Corporation shall take such action as may be necessary to ensure and
     provide within eight (8) Business Days of such occurrence, or such longer
     period as may be required to satisfy all applicable requirements of the
     SECURITIES ACT (Ontario), and the securities legislation of each other
     province of Canada that, except as provided below, each Right shall
     thereafter constitute the right to purchase from the Corporation upon
     exercise thereof in accordance with the terms hereof that number of Common
     Shares of the Corporation having an aggregate Market Price on the date of
     the occurrence of such Flip-in Event equal to twice the Exercise Price for
     an amount in cash equal to the Exercise Price (such Right to be
     appropriately adjusted in a manner analogous to the applicable adjustment
     provided for in Section 2.3 hereof in the event that after such date of
     occurrence an event of a type analogous to any of the events described in
     Section 2.3 hereof shall have occurred with respect to such Common Shares).

(2)  Notwithstanding anything in this Agreement to the contrary, upon the
     occurrence of any Flip-in Event, any Rights that are Beneficially Owned by
     (i) an Acquiring Person, or any Affiliate or Associate of an Acquiring
     Person, or any Person acting jointly or in concert with an Acquiring Person
     or any Affiliate or Associate of such Acquiring Person, or any Affiliate or
     Associate of such Person so acting jointly or in concert, or (ii) a
     transferee or other successor in title of Rights, directly or indirectly,
     of an Acquiring Person (or of any Affiliate or Associate of an Acquiring
     Person) or of any Person acting jointly or in concert with an Acquiring
     Person or any Associate or Affiliate of an Acquiring Person (or of any
     Affiliate or Associate of such Person so acting jointly or in concert) who
     becomes a transferee or successor in title concurrently with or subsequent
     to the Acquiring Person becoming such, shall become null and void without
     any further action, and any holder of such Rights (including transferees or
     successors in title) shall not have any rights whatsoever to exercise such
     Rights under any provision of this Agreement and shall not have thereafter
     any other rights whatsoever with respect to such Rights, whether under any
     provision of this Agreement or otherwise.

                                   ARTICLE 4
                                THE RIGHTS AGENT

SECTION 4.1  GENERAL.

(1)  The Corporation hereby appoints the Rights Agent to act as agent for the
     Corporation in accordance with the terms and conditions hereof, and the
     Rights Agent hereby accepts such appointment. The Corporation may from time
     to time appoint such co-Rights Agents as it may deem necessary or
     desirable, subject to the prior approval of the Rights Agent. In the event
     the Corporation appoints one or more co-Rights Agents, the respective
     duties of the Rights Agents and co-Rights Agents shall be as the
     Corporation may determine, with the approval of the Rights Agent. The
     Corporation agrees to pay to the Rights Agent reasonable compensation for
     all services rendered by it hereunder and, from time to time, on demand of
     the Rights Agent, its reasonable expenses and

<PAGE>

                                      -26-

     other disbursements incurred in the administration and execution of this
     Agreement (including the reasonable fees and disbursements of counsel for
     the Rights Agent) and the exercise and performance of its duties hereunder.
     The Corporation also agrees to indemnify the Rights Agent, its officers,
     directors and employees for, and to hold such persons harmless against, any
     loss, liability, cost, claim, action, suit, damage, or expense incurred
     (that is not the result of negligence, bad faith or wilful misconduct on
     the part of any one or all of the Rights Agent, its officers, directors or
     employees) for anything done or omitted by the Rights Agent in connection
     with the acceptance and administration of this Agreement, including the
     costs and expenses of defending against any claim of liability, which right
     to indemnification will survive the termination of this Agreement or the
     resignation or removal of the Rights Agent.

(2)  The Rights Agent shall be protected from and shall incur no liability for
     or in respect of any action taken, suffered or omitted by it in connection
     with its administration of this Agreement in reliance upon any certificate
     for Common Shares or any Rights Certificate or certificate for other
     securities of the Corporation, instrument of assignment or transfer, power
     of attorney, endorsement, affidavit, letter, notice, direction, consent,
     certificate, statement, or other paper or document believed by it to be
     genuine and to be signed, executed and, where necessary, verified or
     acknowledged, by the proper Person or Persons.

(3)  The Corporation shall inform the Rights Agent in a reasonably timely manner
     of events which may materially affect the administration of this Agreement
     by the Rights Agent and at any time, upon request, shall provide to the
     Rights Agent an incumbency certificate certifying the then current officers
     of the Corporation.

SECTION 4.2  MERGER OR AMALGAMATION OR CHANGE OF NAME OF RIGHTS AGENT.

(1)  Any corporation into which the Rights Agent or any successor Rights Agent
     may be merged or amalgamated or with which it may be consolidated, or any
     corporation resulting from any merger, amalgamation, statutory arrangement
     or consolidation to which the Rights Agent or any successor Rights Agent is
     a party, or any corporation succeeding to the shareholder or stockholder
     services business of the Rights Agent or any successor Rights Agent, will
     be the successor to the Rights Agent under this Agreement without the
     execution or filing of any paper or any further act on the part of any of
     the parties hereto, provided that such corporation would be eligible for
     appointment as a successor Rights Agent under the provisions of Section 4.4
     hereof. In case at the time such successor Rights Agent succeeds to the
     agency created by this Agreement any of the Rights Certificates have been
     countersigned but not delivered, any such successor Rights Agent may adopt
     the countersignature of the predecessor Rights Agent and deliver such
     Rights Certificates so countersigned; and in case at that time any of the
     Rights Certificates have not been countersigned, any successor Rights Agent
     may countersign such Rights Certificates either in the name of the
     predecessor Rights Agent or in the name of the successor Rights Agent; and
     in all such cases such Rights Certificates will have the full force
     provided in the Rights Certificates and in this Agreement.

(2)  In case at any time the name of the Rights Agent is changed and at such
     time any of the Rights Certificates shall have been countersigned but not
     delivered, the Rights Agent may adopt the countersignature under its prior
     name and deliver Rights Certificates so

<PAGE>

                                      -27-

     countersigned; and in case at that time any of the Rights Certificates
     shall not have been countersigned, the Rights Agent may countersign such
     Rights Certificates either in its prior name or in its changed name; and in
     all such cases such Rights Certificates shall have the full force provided
     in the Rights Certificates and in this Agreement.

SECTION 4.3  DUTIES OF RIGHTS AGENT.

     The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, to all of which the
Corporation and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:

(a)  The Rights Agent may retain and consult with legal counsel (who may be
     legal counsel for the Corporation) and the opinion of such counsel will be
     full and complete authorization and protection to the Rights Agent as to
     any action taken or omitted to be taken by it in good faith and in
     accordance with such opinion. Subject to the prior written consent of the
     Corporation, which consent shall not be unreasonably withheld, the Rights
     Agent may also consult with such other experts as the Rights Agent shall
     consider necessary or appropriate to properly carry out the duties and
     obligations imposed under this Agreement (at the expense of the
     Corporation) and the Rights Agent shall be entitled to act and rely in good
     faith on the advice of any such expert.

(b)  Whenever in the performance of its duties under this Agreement the Rights
     Agent deems it necessary or desirable that any fact or matter be proved or
     established by the Corporation prior to taking or suffering any action
     hereunder, such fact or matter (unless other evidence in respect thereof be
     herein specifically prescribed) may be deemed to be conclusively proven and
     established by a certificate signed by a person believed by the Rights
     Agent to be the Chairman of the Board, the President or any Vice-President,
     Treasurer or the Controller of the Corporation and delivered to the Rights
     Agent; and such certificate will be full authorization to the Rights Agent
     for any action taken or suffered in good faith by it under the provisions
     of this Agreement in reliance upon such certificate.

(c)  The Rights Agent will be liable hereunder only for events which are the
     result of its own negligence, bad faith or wilful misconduct and that of
     its officers, directors and employees.

(d)  The Rights Agent will not be liable for or by reason of any of the
     statements of fact or recitals contained in this Agreement or in the
     certificates for Common Shares or the Rights Certificates (except its
     countersignature thereof) or be required to verify the same, but all such
     statements and recitals are and will be deemed to have been made by the
     Corporation only.

(e)  The Rights Agent will not be under any responsibility in respect of the
     validity of this Agreement or the execution and delivery hereof (except the
     due authorization, execution and delivery hereof by the Rights Agent) or in
     respect of the validity or execution of any Common Share certificate or
     Rights Certificate (except its countersignature thereof); nor will it be
     responsible for any breach by the Corporation of any covenant or condition
     contained in this Agreement or in any Rights Certificate; nor will it be
     responsible for any change in the

<PAGE>

                                      -28-

     exercisability of the Rights (including the Rights becoming void pursuant
     to Section 3.1(2) hereof) or any adjustment required under the provisions
     of Section 2.3 hereof or responsible for the manner, method or amount of
     any such adjustment or the ascertaining of the existence of facts that
     would require any such adjustment (except with respect to the exercise of
     Rights after receipt of the certificate contemplated by Section 2.3 hereof
     describing any such adjustment); nor will it by any act hereunder be deemed
     to make any representation or warranty as to the authorization of any
     Common Shares to be issued pursuant to this Agreement or any Rights or as
     to whether any Common Shares will, when issued, be duly and validly
     authorized, executed, issued and delivered or fully paid and
     non-assessable.

(f)  The Corporation agrees that it will perform, execute, acknowledge and
     deliver or cause to be performed, executed, acknowledged, and delivered all
     such further and other acts, instruments and assurances as may reasonably
     be required by the Rights Agent for the carrying out or performing by the
     Rights Agent of the provisions of this Agreement.

(g)  The Rights Agent is hereby authorized and directed to accept instructions
     with respect to the performance of its duties hereunder from any person
     believed by the Rights Agent to be the Chairman of the Board, President,
     any Vice-President or the Treasurer or Controller of the Corporation and to
     apply to such persons for advice or instructions in connection with its
     duties, and it shall not be liable for any action taken or suffered by it
     in good faith in accordance with instructions of any such person. It is
     understood that instructions to the Rights Agent shall, except where
     circumstances make it impracticable or the Rights Agent otherwise agrees,
     be given in writing and, where not in writing, such instructions shall be
     confirmed in writing as soon as reasonably possible after the giving of
     such instructions.

(h)  The Rights Agent and any shareholder or stockholder, director, officer or
     employee of the Rights Agent may buy, sell or deal in Common Shares, Rights
     or other securities of the Corporation or become pecuniarily interested in
     any transaction in which the Corporation may be interested or contract with
     or lend money to the Corporation or otherwise act as fully and freely as
     though it were not Rights Agent under this Agreement. Nothing herein shall
     preclude the Rights Agent from acting in any other capacity for the
     Corporation or for any other legal entity.

(i)  The Rights Agent may execute and exercise any of the rights or powers
     hereby vested in it or perform any duty hereunder either itself or, with
     the prior written consent of the Corporation, by or through its attorneys
     or agents. The Rights Agent will not be answerable or accountable for any
     act, omission, default, neglect or misconduct of any such attorneys or
     agents or for any loss to the Corporation resulting from any such act,
     omission, default, neglect or misconduct, provided the prior written
     consent of the Corporation was obtained and reasonable care was exercised
     in the selection and continued employment thereof.

<PAGE>

                                      -29-

SECTION 4.4  CHANGE OF RIGHTS AGENT.

     The Rights Agent may resign and be discharged from its duties under this
Agreement upon sixty (60) days' notice (or such lesser notice as is acceptable
to the Corporation) in writing mailed to the Corporation and to each transfer
agent of Voting Shares of the Corporation by registered or certified mail, and
to the holders of the Rights in accordance with Section 5.8 hereof (all of which
shall be at the expense of the Corporation). The Corporation may remove the
Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent and to each transfer agent of the Voting Shares of the Corporation by
registered or certified mail and to the holders of the Rights in accordance with
Section 5.8 hereof. If the Rights Agent should resign or be removed or otherwise
become incapable of acting, the Corporation will appoint a successor to the
Rights Agent. If the Corporation fails to make such appointment within a period
of sixty (60) days after such removal or after it has been notified in writing
of such resignation or incapacity by the resigning or incapacitated Rights Agent
or by the holder of any Rights (which holder shall, with such notice, submit
such holder's Rights Certificate for inspection by the Corporation), then the
Rights Agent or the holder of any Rights may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent at the Corporation's
expense. Any successor Rights Agent, whether appointed by the Corporation or by
such a court, shall be a corporation incorporated under the laws of Canada or a
province thereof authorized to carry on the business of a trust company in
Canada. After appointment, the successor Rights Agent will be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent, upon receiving from the Corporation payment in full of all amounts
outstanding under this Agreement, shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the
Corporation will file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Voting Shares of the Corporation, and mail
a notice thereof in writing to the holders of the Rights. The cost of giving any
notice required under this Section 4.4 shall be borne solely by the Corporation.
Failure to give any notice provided for in this Section 4.4 however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.

                                   ARTICLE 5
                                 MISCELLANEOUS

SECTION 5.1  REDEMPTION AND WAIVER.

(1)  Subject to the prior consent of the holders of Voting Shares or Rights
     obtained as set forth in Section 5.4(2) or Section 5.4(3) hereof, as
     applicable, the Board of Directors acting in good faith may, at any time
     prior to the occurrence of a Flip-in Event, elect to redeem all but not
     less than all of the then outstanding Rights at a redemption price of
     $0.00001 per Right appropriately adjusted in a manner analogous to the
     applicable adjustment provided for in Section 2.3 hereof in the event that
     an event of the type described in Section 2.3 hereof shall have occurred
     (such redemption price being herein referred to as the "REDEMPTION PRICE").

(2)  Subject to the prior consent of the holders of Voting Shares obtained as
     set forth in Section 5.4(2) hereof, the Board of Directors may, at any time
     prior to the occurrence of a

<PAGE>

                                      -30-

     Flip-in Event as to which the application of Section 3.1 hereof has not
     been waived pursuant to this Section 5.1, if such Flip-in Event would occur
     by reason of an acquisition of Voting Shares otherwise than pursuant to a
     Take-over Bid made by means of a Take-over Bid circular to all registered
     holders of Voting Shares and otherwise than in the circumstances set forth
     in Section 5.1(4) hereof, waive the application of Section 3.1 hereof to
     such Flip-in Event. In such event, the Board of Directors shall extend the
     Separation Time to a date at least ten (10) Business Days subsequent to the
     meeting of shareholders called to approve such waiver.

(3)  The Board of Directors acting in good faith, may, prior to the occurrence
     of a Flip-in Event, and upon prior written notice delivered to the Rights
     Agent, determine to waive the application of Section 3.1 hereof to a
     Flip-in Event that may occur by reason of a Take-over Bid made by means of
     a Take-over Bid circular to all registered holders of Voting Shares;
     provided that if the Board of Directors waives the application of Section
     3.1 hereof to a particular Flip-in Event pursuant to this Section 5.1(3),
     the Board of Directors shall be deemed to have waived the application of
     Section 3.1 hereof to any other Flip-in Event occurring by reason of any
     Take-over Bid made by means of a Take-over Bid circular to all registered
     holders of Voting Shares prior to the expiry of any Take-over Bid in
     respect of which a waiver is, or is deemed to have been granted, pursuant
     to this Section 5.1(3).

(4)  The Board of Directors may, prior to the close of business on the tenth
     (10th) day following the Stock Acquisition Date, determine, upon prior
     written notice delivered to the Rights Agent, to waive or to agree to waive
     the application of Section 3.1 hereof to a Flip-in Event, provided that
     both of the following conditions are satisfied:

     (a)  the Board of Directors has determined that a Person became an
          Acquiring Person by inadvertence and without any intention to become,
          or knowledge that Person would become, an Acquiring Person; and

     (b)  such Acquiring Person has reduced its Beneficial Ownership of Voting
          Shares (or has entered into a contractual arrangement with the
          Corporation, acceptable to the Board of Directors, to do so within
          thirty (30) days of the date on which such contractual arrangement is
          entered into) such that at the time the waiver becomes effective
          pursuant to this Section 5.1(4) it is no longer an Acquiring Person;

     and in the event of such a waiver, for the purposes of this Agreement, the
     Flip-in Event shall be deemed never to have occurred.

(5)  Where a Person acquires pursuant to a Permitted Bid, a Competing Bid or an
     Exempt Acquisition under Section 5.1(3) above, outstanding Voting Shares,
     then the Corporation shall immediately upon the consummation of such
     acquisition redeem the Rights at the Redemption Price.

(6)  If the Corporation is obligated under Section 5.1(5) above to redeem the
     Rights, or if the Board of Directors elects under Section 5.1(1) above or
     Section 5.1(8) below to redeem the Rights, the right to exercise the Rights
     will thereupon, without further action and without notice, terminate and
     each Right will after redemption be null and void and the only right
     thereafter of the holders of Rights shall be to receive the Redemption
     Price.

<PAGE>

                                      -31-

(7)  Within ten (10) days after the Corporation is obligated under Section
     5.1(5) above to redeem the Rights, or the Board of Directors elects under
     Section 5.1(1) above or Section 5.1(8) below to redeem the Rights, the
     Corporation shall give notice of redemption to the holders of the then
     outstanding Rights by mailing such notice to all such holders at their last
     address as they appear upon the Rights Register or, prior to the Separation
     Time, on the registry books of the Transfer Agent for the Common Shares.
     Any notice which is mailed in the manner herein provided shall be deemed
     given, whether or not the holder receives the notice. Each such notice of
     redemption will state the method by which the payment of the Redemption
     Price will be made. The Corporation may not redeem, acquire or purchase for
     value any Rights at any time in any manner other than that specifically set
     forth in this Section 5.1 and other than in connection with the purchase of
     Common Shares prior to the Separation Time.

(8)  Where a Take-over Bid that is not a Permitted Bid Acquisition is withdrawn
     or otherwise terminated after the Separation Time has occurred and prior to
     the occurrence of a Flip-in Event, the Board of Directors may elect to
     redeem all the outstanding Rights at the Redemption Price.

(9)  Upon the Rights being redeemed pursuant to Section 5.1(8) above, all the
     provisions of this Agreement shall continue to apply as if the Separation
     Time had not occurred and Rights Certificates representing the number of
     Rights held by each holder of record of Common Shares as of the Separation
     Time had not been mailed to each such holder and for all purposes of this
     Agreement the Separation Time shall be deemed not to have occurred.

SECTION 5.2  EXPIRATION.

     No person shall have any rights whatsoever pursuant to or arising out of
this Agreement or in respect of any Right after the Expiration Time, except the
Rights Agent as specified in Section 4.1(1) hereof.

SECTION 5.3  ISSUANCE OF NEW RIGHTS CERTIFICATES.

     Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Corporation may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the number or kind or class of shares
purchasable upon exercise of Rights made in accordance with the provisions of
this Agreement.

SECTION 5.4  SUPPLEMENTS AND AMENDMENTS.

(1)  The Corporation may, prior to any shareholders' meeting called to approve
     this Agreement, supplement or amend this Agreement without the approval of
     any holder of Rights or Voting Shares. Thereafter, the Corporation may from
     time to time supplement or amend this Agreement without the approval of any
     holders of Rights or Voting Shares to correct any clerical or typographical
     error or to maintain the validity of the Agreement as a result of a change
     in any applicable legislation or regulations or rules thereunder.

     Notwithstanding anything in this Section 5.4 to the contrary, no supplement
     or amendment shall be made to the provisions of Article 4 hereof except
     with the written concurrence of the Rights Agent to such supplement or
     amendment.

<PAGE>

                                      -32-

(2)  Subject to Section 5.4(1) above, the Corporation may, with the prior
     consent of the holders of the Voting Shares obtained as set forth below, at
     any time prior to the Separation Time amend, vary or rescind any of the
     provisions of this Agreement and the Rights (whether or not such action
     would materially adversely affect the interests of the holders of Rights
     generally). Such consent shall be deemed to have been given if provided by
     the holders of Voting Shares at a meeting of the holders of Voting Shares,
     which meeting shall be called and held in compliance with applicable laws
     and regulatory requirements and the requirements in the articles and
     by-laws of the Corporation. Subject to compliance with any requirements
     imposed by the foregoing, consent shall be deemed to have been given if the
     proposed amendment, variation or revision is approved by the affirmative
     vote of a majority of the votes cast by all holders of Voting Shares (other
     than any holder of Voting Shares who is an Offeror pursuant to a Take-over
     Bid that is not a Permitted Bid or Competing Bid with respect to all Voting
     Shares Beneficially Owned by such Person), represented in person or by
     proxy at the meeting.

(3)  The Corporation may, with the prior consent of the holders of Rights, at
     any time after the Separation Time and before the Expiration Time, amend,
     vary or rescind any of the provisions of this Agreement and the Rights
     (whether or not such action would materially adversely affect the interests
     of the holders of Rights generally).

(4)  Any approval of the holders of Rights shall be deemed to have been given if
     the action requiring such approval is authorized by the affirmative votes
     of the holders of Rights present or represented at and entitled to be voted
     at a meeting of the holders of Rights and representing a majority of the
     votes cast in respect thereof. For the purposes hereof, each outstanding
     Right (other than Rights which are void pursuant to the provisions hereof)
     shall be entitled to one vote, and the procedures for the calling, holding
     and conduct of the meeting shall be those, as nearly as may be, which are
     provided in the Corporation's by-laws and the CBCA with respect to a
     meeting of shareholders of the Corporation.

(5)  The Corporation shall be required to provide the Rights Agent with notice
     in writing of any such amendment, variation or deletion to this Agreement
     as referred to in this Section 5.4 within 5 days of effecting such
     amendment, variation or deletion.

(6)  Any supplements or amendments made by the Corporation to this Agreement
     pursuant to Section 5.4(1) above which are required to maintain the
     validity of this Agreement as a result of any change in any applicable
     legislation or regulations or rules thereunder shall:

     (a)  if made before the Separation Time, be submitted to the shareholders
          of the Corporation at the next meeting of shareholders and the
          shareholders may, by the majority referred to in Section 5.4(2) above
          confirm or reject such amendment; and

     (b)  if made after the Separation Time, be submitted to the holders of
          Rights at a meeting to be called for on a date not later than
          immediately following the next meeting of shareholders of the
          Corporation and the holders of Right may, by

<PAGE>

                                      -33-

          resolution passed by the majority referred to in Section 5.4(4) above,
          confirm or reject such amendment.

     A supplement or amendment of the nature referred to in this Section 5.4(6)
     shall be effective from the date of the resolution of the Board of
     Directors adopting such supplement or amendment until it is confirmed or
     rejected or until it ceases to be effective (as described in the next
     sentence) and, where such supplement or amendment is confirmed, it
     continues in effect in the form so confirmed. If such supplement or
     amendment is rejected by the shareholders or the holders of Rights or is
     not submitted to the shareholders or holders of Rights as required, then
     such supplement or amendment shall cease to be effective from and after the
     termination of the meeting at which it was rejected or to which it should
     have been but was not submitted or from and after the date of the meeting
     of holders of Rights that should have been but was not held, and no
     subsequent resolution of the Board of Directors to amend, vary or delete
     any provision of this Agreement to substantially the same effect shall be
     effective until confirmed by the shareholders or holders of Rights, as the
     case may be.

SECTION 5.5  FRACTIONAL RIGHTS AND FRACTIONAL SHARES.

(1)  The Corporation shall not be required to issue fractions of Rights or to
     distribute Rights Certificates which evidence fractional Rights. Any such
     fractional Right shall be null and void and the Corporation will not have
     any obligation or liability in respect thereof.

(2)  The Corporation shall not be required to issue fractions of Common Shares
     or other securities upon exercise of the Rights or to distribute
     certificates which evidence fractional Common Shares or other securities.
     In lieu of issuing fractional Common Shares or other securities, the
     Corporation shall pay to the registered holders of Rights Certificates at
     the time such Rights are exercised as herein provided, an amount in cash
     equal to the same fraction of the Market Price of one Common Share. The
     Rights Agent shall have no obligation to make any payments in lieu of
     fractional Common Shares unless the Corporation shall have provided the
     Rights Agent with the necessary funds to pay in full all amounts payable in
     accordance with Section 2.2(5).

SECTION 5.6  RIGHTS OF ACTION.

     Subject to the terms of this Agreement, all rights of action in respect of
this Agreement, other than rights of action vested solely in the Rights Agent,
are vested in the respective registered holders of the Rights; and any
registered holder of any Rights, without the consent of the Rights Agent or of
the registered holder of any other Rights, may, on such holder's own behalf and
for such holder's own benefit and the benefit of other holders of Rights
enforce, and may institute and maintain any suit, action or proceeding against
the Corporation to enforce such holder's right to exercise such holder's Rights
in the manner provided in such holder's Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.

SECTION 5.7  NOTICE OF PROPOSED ACTIONS.

     In case the Corporation shall propose after the Separation Time and prior
to the Expiration Time to effect the liquidation, dissolution or winding-up of
the Corporation or the

<PAGE>

                                      -34-

sale of all or substantially all of the Corporation's assets, then, in each such
case, the Corporation shall give to each holder of a Right, in accordance with
Section 5.8 hereof, a notice of such proposed action, which shall specify the
date on which such liquidation, dissolution, winding up, or sale is to take
place, and such notice shall be so given at least twenty (20) Business Days
prior to the date of taking of such proposed action.

SECTION 5.8  NOTICES.

(1)  Notices or demands authorized or required by this Agreement to be given or
     made by the Rights Agent or by the holder of any Rights to or on the
     Corporation shall be sufficiently given or made if delivered or sent by
     first-class mail, postage prepaid, addressed (until another address is
     filed in writing with the Rights Agent) as follows:

                    CAE Inc.
                    P.O. Box 30, Suite 3060
                    Royal Bank Plaza
                    Toronto, Ontario
                    M5J 2J1

                    Attention: President and Chief Executive Officer
                    Facsimile No.: (416) 865-0337

(2)  Any notice or demand authorized or required by this Agreement to be given
     or made by the Corporation or by the holder of any Rights to or on the
     Rights Agent shall be sufficiently given or made if delivered or sent by
     first-class mail, postage prepaid, addressed (until another address is
     filed in writing with the Corporation) as follows:

                    Montreal Trust Company of Canada
                    151 Front Street West, 8th Floor
                    Toronto, Ontario, M5J 2N1

                    Attention: Senior Manager, Client Services
                    Facsimile No.: (416) 981-9800

(3)  Notices or demands authorized or required by this Agreement to be given or
     made by the Corporation or the Rights Agent to or on the holder of any
     Rights shall be sufficiently given or made if delivered or sent by
     first-class mail, postage paid, addressed to such holder at the address of
     such holder as it appears upon the Rights Register or, prior to the
     Separation Time, on the registry books of the transfer agent for the Common
     Shares. Any notice which is mailed in the manner herein provided shall be
     deemed given, whether or not the holder receives the notice.

SECTION 5.9  SUCCESSORS.

     All the covenants and provisions of this Agreement by or for the benefit of
the Corporation or the Rights Agent shall bind and enure to the benefit of their
respective successors and assigns hereunder.

SECTION 5.10  BENEFITS OF THIS AGREEMENT.

     Nothing in this Agreement shall be construed to give to any Person other
than the Corporation, the Rights Agent and the holders of the Rights any legal
or equitable right, remedy

<PAGE>

                                      -35-

or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Corporation, the Rights Agent and the holders of the
Rights.

SECTION 5.11  GOVERNING LAW.

     This Agreement and each Right issued hereunder shall be deemed to be a
contract made under the laws of the Province of Ontario and for all purposes
shall be governed by and construed in accordance with the laws of such province.

SECTION 5.12  SEVERABILITY.

     If any Section, Clause, term or provision hereof or the application thereof
to any circumstances or any right hereunder shall, in any jurisdiction and to
any extent, be invalid or unenforceable, such Section, Clause, term or provision
or such right shall be ineffective only in such jurisdiction and to the extent
of such invalidity or unenforceability in such jurisdiction without invalidating
or rendering unenforceable or ineffective the remaining Sections, Clauses, terms
and provisions hereof or rights hereunder in such jurisdiction or the
application of such Section, Clause, term or provision or rights hereunder in
any other jurisdiction or to circumstances other than those as to which it is
specifically held invalid or unenforceable.

SECTION 5.13  EFFECTIVE DATE.

     This Agreement is effective and in full force and effect in accordance with
its terms and conditions as of and from March 7, 1990 (the "EFFECTIVE DATE").

SECTION 5.14  DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS.

     All actions, calculations and determinations (including all omissions with
respect to the foregoing) which are done or made by the Board of Directors, in
good faith, in relation to or in connection with this Agreement, shall not
subject the Board of Directors or any director of the Corporation to any
liability to the holders of the Rights.

SECTION 5.15  RIGHTS OF BOARD, CORPORATION AND OFFEROR.

     Without limiting the generality of the foregoing, nothing contained herein
shall be construed to suggest or imply that the Board of Directors shall not be
entitled to recommend that holders of Voting Shares reject or accept any
Take-over Bid or take any other action (including, without limitation, the
commencement, prosecution, defence or settlement of any litigation and the
submission of additional or alternative Take-over Bids or other proposals to the
Shareholders of the Corporation) with respect to any Take-over Bid or otherwise
that the Board of Directors believes is necessary or appropriate in the exercise
of its fiduciary duties.

SECTION 5.16  REGULATORY APPROVALS.

     Any obligation of the Corporation or action or event contemplated by this
Agreement shall be subject in any jurisdiction to the prior receipt of any
required approval or consent from any governmental or regulatory authority in
such jurisdiction including, without limiting the generality of the foregoing,
any necessary approval of any securities regulatory authority or stock exchange.

SECTION 5.17  DECLARATION AS TO NON-CANADIAN HOLDERS.

     If in the opinion of the Board of Directors (who may rely upon the advice
of counsel) any action or event contemplated by this Agreement would require
compliance with the securities laws or comparable legislation of a jurisdiction
outside Canada, the Board of Directors

<PAGE>

                                      -36-

acting in good faith may take such actions as it may deem appropriate to ensure
such compliance. In no event shall the Corporation or the Rights Agent be
required to issue or deliver Rights or securities issuable on exercise of Rights
to Persons who are citizens, residents or nationals of any jurisdiction other
than Canada or the United States in which such issue or delivery would be
unlawful without registration of the relevant Persons or securities for such
purposes.

SECTION 5.18  TIME OF THE ESSENCE.

     Time shall be of the essence in this Agreement.

SECTION 5.19  EXECUTION IN COUNTERPARTS.

     This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties have executed this Agreement.

                                   CAE INC

                                   By: /s/ Paul G. Renaud
                                       __________________________
                                       Authorized Signing Officer

                                   MONTREAL TRUST COMPANY OF CANADA

                                   By: /s/ Pierre Tellis
                                       __________________________
                                       Authorized Signing Officer
                                       Pierre Tellis
                                       Senior Account Manager
                                       Montreal Trust Company of Canada

                                   By: /s/ J.P. Gagnon
                                       __________________________
                                       Authorized Signing Officer

<PAGE>

                                SCHEDULE 2.2(3)

                           FORM OF RIGHTS CERTIFICATE

CERTIFICATE NO. ___________                                   ___________ RIGHTS

THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE CORPORATION, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED
IN SECTION 3.1(2) OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON, ANY PERSON ACTING JOINTLY OR IN CONCERT WITH AN ACQUIRING
PERSON OR THEIR RESPECTIVE ASSOCIATES AND AFFILIATES (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) AND THEIR RESPECTIVE TRANSFEREES SHALL BECOME VOID
WITHOUT ANY FURTHER ACTION.

                               RIGHTS CERTIFICATE

     This certifies that ______________________ or registered assigns, is the
registered holder of the number of Rights set forth above each of which entitles
the registered holder thereof, subject to the terms, provisions and conditions
of the Amended and Restated Shareholder Protection Rights Plan Agreement dated
June 14, 2000, as amended and restated from time to time (the "RIGHTS
AGREEMENT"), between CAE Inc., a corporation incorporated under the laws of
Canada (the "CORPORATION"), and Montreal Trust Company of Canada, a trust
company incorporated under the laws of Canada, as rights agent (the "RIGHTS
AGENT", which term shall include any successor Rights Agent under the Rights
Agreement) to purchase from the Corporation at any time after the Separation
Time (as such term is defined the Rights Agreement) and prior to the Expiration
Time (as such term is defined in the Rights Agreement) (or such earlier
expiration time as is provided in the Rights Agreement) one fully paid and
non-assessable Common Share of the Corporation (a "COMMON SHARE") at the
Exercise Price referred to below, upon presentation and surrender of this Rights
Certificate together with the Form of Election to Exercise duly executed and
submitted to the Rights Agent at its principal offices in any of the City of
Toronto. The Exercise Price shall initially be $100 (Canadian) per Right and
shall be subject to adjustment in certain events as provided in the Rights
Agreement.

     In certain circumstances described in the Rights Agreement, each Right
evidenced hereby may entitle the registered holder thereof to purchase or
receive assets, debt securities or other equity securities of the Corporation
(or a combination thereof) all as provided in the Rights Agreement.

     This Rights Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the Corporation and the holders of the Rights. Copies of the
Rights Agreement are on file at the registered head office of the Corporation
and are available upon written request.

     This Rights Certificate, with or without other Rights Certificates, upon
surrender at any of the offices of the Rights Agent designated for such purpose,
may be exchanged for another

<PAGE>

                                      -2-

Rights Certificate or Rights Certificates of like tenor and date evidencing an
aggregate number of Rights entitling the holder to purchase a like aggregate
number of Common Shares as the Rights evidenced by the Rights Certificate or
Rights Certificates surrendered. If this Rights Certificate shall be exercised
in part, the registered holder shall be entitled to receive, upon surrender
hereof, another Rights Certificate or Rights Certificates for the number of
whole Rights not exercised.

     Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Rights Certificate may be, and under certain circumstances are required to
be, redeemed by the Corporation at a redemption price of $0.00001 per Right.

     No fractional Common Shares will be issued upon the exercise of any Right
or Rights evidenced hereby.

     No holder of this Rights Certificate, as such, shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of Common Shares or of
any other securities of the Corporation which may at any time be issuable upon
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof any of the rights of a
shareholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to shareholders of the Corporation at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders of the
Corporation (except as expressly provided in the Rights Agreement), or to
receive dividends, distributions or subscription rights, or otherwise until the
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.

     This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been manually countersigned by the Rights Agent.

     WITNESS the facsimile signature of the proper officers of the Corporation.

Dated --


                                   CAE INC.

                                   By:__________________________
                                   Authorized Signing Officer


                                   By:__________________________
                                   Authorized Signing Officer

<PAGE>

                                      -3-

                                   MONTREAL TRUST COMPANY OF CANADA


                                   By:__________________________
                                   Authorized Signing Officer


                                   By:__________________________
                                   Authorized Signing Officer

<PAGE>

                                     NOTICE

     In the event the certification set forth in the Form of Election to
Exercise is not completed, the Corporation will deem the Beneficial Owner of the
Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and
accordingly such Rights shall be null and void.

<PAGE>

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
               holder desires to transfer the Rights Certificate)

FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ________________________________
               ____________________________________________
              (Please print name and address of transferee)

the Rights represented by this Rights Certificate, together with all right,
title and interest therein and does hereby irrevocably constitute and appoint

___________________________________________________________
as attorney to transfer the within Rights on the books of the Corporation,
with full power of substitution.

Dated ___________________

Signature Guaranteed ________________________________________________________
                     Signature

                     (Signature must correspond to name as written upon the face
                     of this Rights Certificate in every particular, without
                     alteration or enlargement or any change whatsoever)

     Signature must be guaranteed by a Canadian chartered bank, or Medallion
guaranteed by a Canadian trust company or a member of a recognized stock
exchange or a member of the Transfer Association Medallion (Stamp) Program.

                             TO BE COMPLETED IF TRUE

     The undersigned hereby represents, for the benefit of all holders of Rights
and Common Shares, that the Rights evidenced by this Rights Certificate are not
and, to the knowledge of the undersigned, have never been, Beneficially Owned by
an Acquiring Person or an Affiliate or Associate thereof or any Person acting
jointly or in consent with any of the foregoing (as defined in the Rights
Agreement).

                     ________________________________________________________
                     Signature

<PAGE>

                                      -2-

                                     NOTICE

     In the event the certification set forth in the Form of Assignment is not
completed, the Corporation will deem the Beneficial Owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and accordingly such
Rights shall be null and void.

<PAGE>

                   (To be attached to each Rights Certificate)

                          FORM OF ELECTION TO EXERCISE

TO: CAE INC.

     The undersigned hereby irrevocably elects to exercise ________ whole Rights
represented by the attached Rights Certificate to purchase the Common Shares
issuable upon the exercise of such Rights and requests that certificates for
such Shares be issued to:

                          ____________________________
                                     (NAME)

                          ____________________________
                                   (ADDRESS)

                          ____________________________
                          (CITY AND STATE OR PROVINCE)

     If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:

                          ____________________________
                                     (NAME)

                          ____________________________
                                   (ADDRESS)

                          ____________________________
                          (CITY AND STATE OR PROVINCE)

           __________________________________________________________
           SOCIAL INSURANCE, SOCIAL SECURITY OR OTHER TAXPAYER NUMBER


Dated ___________________

Signature Guaranteed ________________________________________________
                     Signature

                     (Signature must correspond to name as written upon the face
                     of this Rights Certificate in every particular, without
                     alteration or enlargement or any change whatsoever)

     Signature must be guaranteed by a Canadian chartered bank, a Canadian trust
company or a member of a recognized stock exchange or a member of the Securities
Transfer Association Medallion Program (Stamp).

<PAGE>

                                      -2-

                            TO BE COMPLETED IF TRUE

     The undersigned hereby represents, for the benefit of all holders of Rights
and Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, Beneficially Owned by
an Acquiring Person or an Affiliate or Associate thereof or any Person acting
jointly or in consent with any of the foregoing or any Affiliate or Associate of
such Person (as defined in the Rights Agreement).

                     __________________________________
                     Signature

<PAGE>

                        ASSIGNMENT OF AGENCIES AGREEMENT

THIS AGREEMENT made as of the 15th day of January, 2001

BETWEEN:                CAE INC.,
                        a company incorporated under the laws of C.B.C.A

                        (hereinafter called the "Company")

                            PARTY OF THE FIRST PART


AND:                    MONTREAL TRUST COMPANY,
                        a trust company existing under the laws of Canada

                            PARTY OF THE SECOND PART

AND:                    MONTREAL TRUST COMPANY OF CANADA,
                        a trust company existing under the laws of Canada

                        (Montreal Trust Company and Montreal Trust Company of
                        Canada being hereinafter referred to, either
                        individually or collectively as the context may require,
                        as "Montreal Trust")

                             PARTY OF THE THIRD PART

AND:                    COMPUTERSHARE TRUST COMPANY OF CANADA, a trust company
                        existing under the laws of Canada with an office in the
                        City of Toronto, in the Province of Ontario

                        (hereinafter called "Computershare")

                            PARTY OF THE FOURTH PART

WHEREAS Montreal Trust is currently under contract to act as the Company's duly
appointed Transfer Agent and Registrar, and provides various ancillary services
to the Company in connection therewith;

<PAGE>

AND WHEREAS Montreal Trust may currently be under contract to provide certain
additional agency and administrative services to the Company, under agreements
or arrangements entered into through its former Stock Transfer operations;

AND WHEREAS the aforementioned agencies and services (hereinafter called "the
Agencies") are provided principally under the agreement(s) set forth on Schedule
"A" hereto (the "Contracts");

AND WHEREAS Computershare and Montreal Trust represent that Computershare
acquired the Stock Transfer business of Montreal Trust pursuant to an Asset
Purchase Agreement dated as of June 30, 2000;

AND WHEREAS both the Company and Montreal Trust are desirous of having the
rights, powers, duties and obligations of the Agencies transferred and assigned
to, and assumed by, Computershare, and Computershare is desirous of accepting
same, all with effect from the close of business on March 16, 2001,
(hereinafter, the "Transfer Date");

AND WHEREAS to give effect to the foregoing, Montreal Trust desires to transfer
and assign, and to formally resign from, the Agencies; and the Company is
prepared to accept such resignations and to appoint Computershare as the
successor to the Agencies under the terms of the applicable Contracts, all with
effect upon the Transfer Date;

NOW, THEREFORE, THIS AGREEMENT WITNESSES THAT IN CONSIDERATION OF THE PREMISES
AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH
ARE HEREBY ACKNOWLEDGED BY THE PARTIES HERETO, THE PARTIES COVENANT AND AGREE AS
FOLLOWS:

1. Montreal Trust hereby transfers and assigns to Computershare all of its
rights, powers, duties and obligations under the Agencies and the Contracts, and
immediately thereafter resigns therefrom, all with effect upon the Transfer
Date.

2. The Company hereby consents to such transfers and assignments from Montreal
Trust to Computershare, accepts such resignations, waiving any periods of notice
that may be set forth in the Contracts, and appoints Computershare as its
Transfer Agent and Registrar and as its agent and/or administrator under the
other Agencies, if any, all with effect upon the Transfer Date. The Company
further releases Montreal Trust from any duties and liabilities that may arise
pursuant to Computershare's administration of the Agencies, from and after the
Transfer Date.

3. Computershare hereby accepts such appointments, transfers and assignments,
effective upon the Transfer Date and upon such terms as are set forth in the
Contracts, and agrees to perform all of the obligations of Montreal Trust under
the Agencies and the Contracts which are required to be performed from and after
the Transfer Date.

4. Montreal Trust shall transfer and deliver to Computershare, and Computershare
shall accept, any and all records, documents, property, monies and other
holdings as may be held by Montreal Trust in connection with the Agencies. Such
transfers, deliveries and acceptances shall be made as soon as practicable upon,
after, or in anticipation of, the Transfer Date as may be agreed between such
parties.

5. Each party hereto agrees to execute and deliver all such documents and
instruments and to do such other acts as may be necessary or advisable to give
effect to the assignments, transfers, and deliveries referred to herein.

<PAGE>

6. For greater certainty, the parties acknowledge and agree that any Agencies
currently performed by Montreal Trust, or in its name by Computershare, which
are ancillary to and/or related to those set forth in the Contracts but which
may not be expressly provided for in the Contracts, are intended to be
transferred to Computershare along with the Agencies expressly created by the
Contracts, and they shall transfer to Computershare upon the Transfer Date.

7. Notwithstanding any other provision hereof, to the extent that any of the
Contracts expressly require the consent of any third party or parties, the
parties hereto agree that the transfer and assignments of such Contract(s) shall
not be effective until such consent(s) are provided.

8. The parties hereto acknowledge that Computershare, having been continued as a
federal trust company on January 9, 2001, expects to obtain all registrations,
licenses and approvals required for it to carry on its business in all
jurisdictions in Canada (the "required approvals") on or before the Transfer
Date. If, however, the receipt of the required approvals has not occurred by the
Transfer Date, then notwithstanding any other provision of this Agreement,
Computershare may elect by written notice to the other parties hereto that all
resignations, releases, appointments, transfers and assignments contemplated
hereunder shall not occur on the Transfer Date but shall occur on such later
date as Computershare shall determine and communicate to the other parties,
provided that if Computershare's determination and communication of such later
date have not occurred by December 31, 2001, this Agreement shall be null and
void in its entirety. This Agreement shall ensure to the benefit of and be
binding upon the parties hereto and their successors and permitted assigns.

9. This Agreement shall be governed by the laws of the Province of Ontario and
the laws of Canada applicable therein.

IN WITNESS WHEREOF THIS AGREEMENT HAS BEEN DULY EXECUTED BY THE PARTIES HERETO
AS OF THE DATE FIRST ABOVE WRITTEN.

                                   CAE INC.

                                   Per: /s/ Robert Hedges
                                        ________________________

                                   Per: /s/ Paul G. Renaud
                                        ________________________

<PAGE>

                                   MONTREAL TRUST COMPANY

                                   Per: /s/ Shirley Yuen
                                        ________________________

                                   Per: /s/ Christine Lawton
                                        ________________________


                                   MONTREAL TRUST COMPANY OF CANADA

                                   Per: /s/ Shirley Yuen
                                        ________________________

                                   Per: /s/ Christine Lawton
                                        ________________________


                                   COMPUTERSHARE TRUST COMPANY OF CANADA

                                   Per: /s/ Sandra Palma
                                        ________________________

                                   Per: /s/ Rita De Sousa-Lopes
                                        ________________________

<PAGE>

                                  SCHEDULE "A"
             TO ASSIGNMENT OF AGENCIES AGREEMENT BETWEEN CAE INC.,
          MONTREAL TRUST COMPANY, MONTREAL TRUST COMPANY OF CANADA AND
                     COMPUTERSHARE TRUST COMPANY OF CANADA


TITLE AND DATE OF AGREEMENT            ADDITIONAL IDENTIFIERS
                                       (e.g.. Capacity. Type of Agreement etc.,
                                       as may be required to identify Agreement)

Transfer Agent, Registrar & Dividend 1996
Disbursing Agent


Shareholder Protection      14-Jun-00
Rights Plan Agreement       (Amended and Restated)

Sedar Solutions Agreement   01-Apr-97

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.4
<SEQUENCE>6
<FILENAME>ex4_4-071802.txt
<DESCRIPTION>EMPLOYMENT STOCK PURCHASE PLAN
<TEXT>
                                    CAE INC.


                          EMPLOYEE STOCK PURCHASE PLAN


                         Effective as of April 1, 2000

<PAGE>

                                    CAE INC.
                          EMPLOYEE STOCK PURCHASE PLAN


1.   PURPOSE

     The purpose of the Plan is to provide Employees with an opportunity to
     participate in the ownership of the Company on an ongoing basis through
     purchases of Shares. The Plan is established effective April 1, 2000 and
     shall operate as an employees profit sharing plan as defined in section 144
     of the Income Tax Act (Canada) or any successor provision.


2.   DEFINITIONS

     As used in the Plan:

     "Affiliate" means an affiliated body corporate of the Company within the
     meaning of subsection 2(2) of the Canada Business Corporations Act.
     Notwithstanding any other provision of the Plan, the Committee may
     determine whether and as of what date employees of any particular Affiliate
     may participate herein.

     "Board" means the Board of Directors of the Company.

     "Business Day" means any day of the year, other than a Saturday, Sunday or
     any day on which banks are required or authorized to close in Toronto,
     Ontario.

     "Company" means CAE Inc. or a successor.

     "Committee" means the Compensation Committee of the Board or such other
     committee as may be designated by the Board.

     "Effective Date" means April 1, 2000.

     "Employee" means a permanent full-time or permanent part-time employee of
     the Company or of an Affiliate. For purposes of the Plan, a transfer from
     the Company to an Affiliate, from an Affiliate to the Company, or between
     Affiliates shall be deemed not to constitute a resignation or termination
     of employment.

     "Employer Contributions" means contributions made to the Plan by the
     Company or an Affiliate pursuant to section 6.

     "Enrollment/Modification Form" means the Enrollment/Modification Form in
     the form determined by the Committee.

     "Group RRSP" means any group registered retirement savings plan
     administered by the Trustee or an affiliate thereof for the benefit of
     Employees that is designated by the Committee for purposes of the Plan.

<PAGE>
                                      -3-

     "Initial Participant Contribution" means a one-time contribution made by a
     Participant in the amount of Cdn.$500, the election for which contribution
     must be indicated on an Enrollment/Modification Form filed within two (2)
     months after the later of the Effective Date and the first enrollment date
     after the Participant qualifies as an Employee.

     "Ordinary Participant Contributions" means periodic contributions made by a
     Participant computed as a percentage of Salary.

     "Participant" means an Employee who has enrolled in the Plan.

     "Participant Contributions" means Initial Participant Contributions and/or
     Ordinary Participant Contributions, as the context requires.

     "Pay Period" means the Participant's pay period.

     "Plan" means this Employee Stock Purchase Plan, as it may be amended from
     time to time, and which is intended to constitute an employees profit
     sharing plan as defined in section 144 of the Income Tax Act (Canada) or
     any successor provision.

     "Plan Year" means any calendar year during which the Plan is in force.

     "Profits" means current profits, retained earnings, and any other amount of
     or in respect of the Company or an Affiliate considered by the Canada
     Customs and Revenue Agency to constitute profits for purposes of subsection
     144(10) of the Income Tax Act (Canada) or any successor provision.

     "Retirement" means a cessation of employment entitling the Participant to
     receive an immediate pension benefit under a Company or Affiliate pension
     plan, except in the case of a termination for cause (other than mental or
     physical incapacity).

     "Salary" means the base salary of the Employee for the relevant period,
     excluding overtime, bonuses, and other special or one-time payments
     received in that period.

     "Shares" means common shares in the capital stock of the Company.

     "Trust Fund" means the assets of the Plan held by the Trustee, consisting
     of the Participant Contributions, the Employer Contributions, the Shares
     purchased therewith and the income derived therefrom, the whole as more
     fully set out at paragraph 7.1.

     "Trustee" means such trustee as may from time to time be appointed by the
     Company.

     "Unvested Shares" means Shares in a Participant's account purchased with
     the Employer Contributions in the current and two previous Plan Years.

     "Vested Shares" means Shares in a Participant's account which are not
     Unvested Shares.

     "Withdrawal/Termination Form" means the Withdrawal/Termination Form in the
     form determined by the Committee.

<PAGE>

                                       -4-

     Unless the context otherwise requires, references to the masculine shall be
     deemed to include references to the feminine, and vice versa, and
     references to the singular shall be deemed to include references to the
     plural, and vice versa.


3.   REGULATORY APPROVAL

     This Plan is subject to all necessary regulatory approvals.


4.   ELIGIBILITY

4.1  Eligible Employees - Each Employee shall be eligible to participate in the
     Plan.

4.2  No Effect on Employment - The terms of employment of an Employee by the
     Company or an Affiliate shall not be affected by his participation in the
     Plan. Nothing contained in the Plan or in any documentation pertaining
     thereto shall confer upon any Participant any right with respect to
     continuance of employment by the Company or any Affiliate or interfere in
     any way with the right of the Company or any Affiliate to terminate the
     employment of any Participant. Under no circumstances shall any person who
     is or has at any time been a Participant be able to claim from the Company
     or an Affiliate or any related person any sum or other benefit to
     compensate him for loss of any rights or benefits under or in connection
     with this Plan or by reason of his participation herein.

4.3  Enrollment Modification Form - Each Employee may elect to participate in
     the Plan as of the Effective Date or any subsequent July 1, October 1,
     January 1, or April 1, by completing and delivering to the Company the
     Enrollment/Modification Form. Delivery of a duly completed and executed
     Enrollment/Modification Form shall constitute acceptance by the Employee of
     all the terms and conditions of the Plan and of any regulations adopted or
     to be adopted pursuant to paragraph 13.1.


5.   PARTICIPANT CONTRIBUTIONS

5.1  Amount of Contributions - The Employee shall indicate in the
     Enrollment/Modification Form whether he wishes to make an Initial
     Participant Contribution and/or the amount of any Ordinary Participant
     Contributions he wishes to make. Such amount of Ordinary Participant
     Contributions must be equal to any whole percentage of the Participant's
     Salary from 1 percent to 10 percent. In the event that the Salary of a
     Participant varies at any time in the course of a Plan Year, the Ordinary
     Participant Contributions of such Participant shall be automatically
     adjusted accordingly in order to remain equal to the selected percentage of
     the Participant's Salary.

5.2  Manner of Payment - Each Participant shall make Participant Contributions
     to the Plan by regular scheduled payroll deductions at the end of each Pay
     Period. Each payroll deduction in respect of Ordinary Participant
     Contributions shall be in an amount equal to the percentage of such
     Participant's Salary for such Pay Period selected by the Participant on his
     Enrollment/Modification Form. Each payroll deduction in respect of the
     Initial

<PAGE>

                                      -5-

     Participant Contribution shall be in the same percentage, provided,
     however, that such Participant may instead make such Initial Participant
     Contribution by way of cheque payable to the Trustee no later than two
     months after the later of the Effective Date and the first enrollment date
     after he qualifies as an Employee. The Participant Contributions in any
     given Plan Year shall be made on the basis of the year of receipt of the
     Salary from which such Participant Contributions are deducted. Participant
     Contributions shall commence as soon as practicable but in no event later
     than the first Pay Period following the Pay Period in which the
     Enrollment/Modification form is received.

5.3  Modification of Contributions - A Participant may modify the amount of his
     Ordinary Participant Contributions to the Plan up to twice in any Plan
     Year, by completing and delivering to the Company an
     Enrollment/Modification Form. Such modification shall take effect as soon
     as practicable but in no event later than the first Pay Period following
     the Pay Period in which the Enrollment/Modification Form is received, at
     which time the Ordinary Participant Contributions shall be adjusted
     accordingly, provided such adjustment conforms with paragraph 5.1.

5.4  No Retroactive Contributions - A Participant may not make retroactive
     Participant Contributions to the Plan, unless the Committee determines
     otherwise.

5.5  No Lump Sum Contributions - Subject to paragraph 5.2, a Participant may not
     make lump sum Participant Contributions to the Plan, unless the Committee
     determines otherwise.

5.6  Paid Leave of Absence - A Participant on authorized Company-paid or
     Affiliate-paid leave of absence shall continue to make Participant
     Contributions through payroll deduction, as provided for in paragraph 5.2,
     unless such Participant has completed and delivered to the Company an
     Enrollment/Modification form stating that he wishes that his Participant
     Contributions be suspended during the period of such absence, in which
     event paragraph 5.8 shall become applicable with such modifications as the
     context requires.

5.7  Maternity Leave - A Participant on maternity leave shall continue to make
     Participant Contributions by way of post-dated cheques, unless such
     Participant has completed and delivered to the Trustee an
     Enrollment/Modification Form stating that she wishes that her Participant
     Contributions be suspended during the period of such absence, in which
     event paragraph 5.8 shall become applicable with such modifications as the
     context requires.

5.8  Lay-off, Unpaid Leave of Absence - In the case of lay-off or authorized
     unpaid leave of absence, and subject to paragraph 5.10, the Participant
     Contributions of the Participant shall be automatically suspended. Such
     suspension shall apply until the Participant returns to work, in which case
     the Participant may resume his Participant Contributions by completing and
     delivering to the Company an Enrollment/Modification Form. Participant
     Contributions shall resume as soon as practicable but in no event later
     than the first Pay Period following the Pay Period in which the
     Enrollment/Modification Form is received.

<PAGE>

                                      -6-

     During any suspension of Participant Contributions by a Participant on
     lay-off or unpaid leave of absence, the Participant shall remain eligible
     for Company Contributions earned prior to such suspension, subject to
     section 6.

5.9  Long-Term Disability - In the event that a Participant becomes disabled and
     entitled to benefits under a recognized long-term disability program, and
     subject to paragraph 5.10, the Participant Contributions of the Participant
     shall be automatically suspended. Such suspension shall apply until the
     Participant returns to work, in which case the Participant may resume his
     Participant Contributions by completing and delivering to the Company an
     Enrollment/Modification Form. Participant Contributions shall resume as
     soon as practicable but in no event later than the first Pay Period
     following the Pay Period in which the Enrollment/Modification Form is
     received.

     During any suspension of Participant Contributions by a Participant on
     long-term disability, the Participant shall remain eligible for Employer
     Contributions earned prior to such suspension, subject to section 6.

5.10 Continuing Contributions - A Participant to whom paragraph 5.8 or 5.9
     applies may continue to contribute to the Plan by way of post-dated cheques
     until the earlier of his return to work or the end of the Plan Year in
     which the event described in such applicable paragraph occurs.

5.11 Voluntary Suspension of Contributions - A Participant may at any time, by
     completing and delivering to the Company an Enrollment/Modification Form,
     request that his Ordinary Participant Contributions be suspended. The
     Participant will have the option of resuming his Ordinary Participant
     Contributions at any time by completing and delivering to the Company a new
     Enrollment/Modification Form. Ordinary Participant Contributions shall
     resume as soon as practicable but in no event later than the first Pay
     Period following the Pay Period in which the new Enrollment/Modification
     Form is received. However, in the event of a second such suspension in the
     same Plan Year, the Participant shall not be allowed to resume making
     Participant Contributions until the next enrollment date.

     During any suspension of Participant Contributions, the Participant shall
     remain eligible for Employer Contributions earned prior to such suspension,
     subject to section 6, and shall be considered a Participant in the Plan for
     all purposes other than the making of Participant Contributions.

5.12 Remittance of Contributions - Participant Contributions withheld through
     payroll deduction by the Company and each Affiliate in each Pay Period
     shall be remitted by the Company and each Affiliate to the Trustee as soon
     as practicable but not later than the fifth Business Day following the date
     such withholding is effected. Participant Contributions described in
     paragraph 5.7 or 5.10 shall be remitted by the Participant directly to the
     Trustee by way of post-dated cheque.

<PAGE>

                                      -7-

6.   EMPLOYER CONTRIBUTIONS

     Simultaneous with the relevant Participant Contribution or as soon as
     practicable thereafter, the Company or the relevant Affiliate, as the case
     may be, shall remit to the Trustee for the benefit of each Participant an
     Employer Contribution out of Profits. Such Employer Contribution shall be
     equal to: (a) 100 percent of the amount of the Participant's Initial
     Participant Contribution, if any, and (b) 33.3 percent of the amount of the
     relevant Ordinary Participant Contributions up to (i) 6 percent of Salary
     less (ii) any amount described in (a); provided, however, that if there are
     insufficient Profits to make an Employer Contribution computed according to
     the preceding formula in a particular Plan Year, the Employer Contribution
     for that Plan Year shall be reduced to Cdn.$100 per Participant. For the
     avoidance of doubt, the Employer Contribution described in (b) for the
     benefit of any Participant in respect of a Plan Year shall not exceed 2
     percent of his Salary in that Plan Year.


7.   TRUST FUND; ALLOCATIONS TO PARTICIPANTS

7.1  Assets of the Trust Fund - The Trustee shall receive from the Company and
     the Affiliates the Participant Contributions of all the Participants made
     in accordance with section 5 and the Employer Contributions made to the
     Plan in accordance with section 6. Such contributions, the Shares acquired
     therewith and the income thereon from the date of receipt by the Trustee
     shall constitute the Trust Fund of the Plan and shall be held, invested,
     managed, administered and dealt with by the Trustee pursuant to the terms
     of the Plan. The Trustee shall, as soon as reasonably practicable, convert
     into Canadian dollars any Participant Contributions and Employer
     Contributions paid in another currency.

7.2  Allocations to Participants - The Trustee shall maintain a separate account
     for each Participant. The Trustee shall credit to the account of a
     Participant all Employer Contributions made for the benefit of the said
     Participant, all Participant Contributions made by such Participant, and
     all Shares acquired therewith. The Trustee shall allocate either absolutely
     or contingently to each Participant all income received, capital gains
     realized, and capital losses sustained by the Trust Fund on his account at
     such time or times as the Trustee may determine but in any event, at least
     annually. The Trustee shall credit to the Plan reserve all Unvested Shares
     forfeited by Participants in accordance with paragraph 8.4.


8.   SALE, WITHDRAWAL, TRANSFER, OR FORFEITURE OF SHARES

8.1  Right to Sell, Withdraw or Transfer - Upon completion and delivery to the
     Company of a Withdrawal/Termination Form, a Participant may direct the
     Trustee to sell, withdraw, or transfer some or all of the Vested Shares in
     his account. In the first case, the Trustee shall pay to the Participant an
     amount equal to the net proceeds of sale of those Shares which have been
     sold at the Participant's direction. In the second case, the Trustee shall
     transfer title and deliver to the Participant those Shares which have been

<PAGE>

                                      -8-

     withdrawn at the Participant's direction. In the third case, the Trustee
     shall proceed in accordance with paragraph 8.3.

8.2  Exception for Unvested Shares - A Participant may not direct the Trustee to
     sell or withdraw any Unvested Shares in his account. For purposes of this
     paragraph 8.2, the Trustee shall track each Participant's Unvested Shares
     separately from his Vested Shares.

8.3  Group RRSP Transfer - Beginning on such date as the Committee determines, a
     Participant may direct the Trustee to transfer some or all of the Vested
     Shares in his account into the Group RRSP. A Participant may not request
     Share transfers to the Group RRSP more than once in any Plan Year. It is
     the responsibility of the Participant to ensure that the aggregate of such
     Group RRSP contributions and any contributions he makes to other registered
     retirement savings plans does not exceed the allowable limit under the
     Income Tax Act (Canada).

8.4  Termination for Cause; Resignation - In the event that the employment of a
     Participant is terminated for cause or the Participant resigns, the
     Participant's participation in the Plan shall be terminated. The Trustee
     shall either transfer and deliver to the Participant or sell all of the
     Vested Shares in the Participant's account, at the option of the
     Participant. The transfer and delivery of the Shares or payment of the net
     proceeds of sale, as the case may be, shall be effected as soon as
     practicable but in no event later than five (5) days from the date the
     Trustee receives notification of such termination.

     The Participant shall not be entitled to acquire title to or receive
     proceeds from the sale of his Unvested Shares. Such Shares shall be
     forfeited and credited to the Plan reserve and may be utilized to satisfy
     future Employer Contribution obligations.

8.5  Termination in Other Circumstances - In the event of the death, Retirement,
     or involuntary termination without cause of a Participant, the Trustee
     shall transfer and deliver or sell all of the Vested Shares and Unvested
     Shares in the Participant's account to the Participant or the legal
     representatives of the deceased Participant's estate, as the case may be.
     The transfer and delivery or payment of the net proceeds of sale, as the
     case may be, shall be effected as soon as practicable but in no event later
     than five (5) days from the date the Trustee receives notification of such
     termination.


9.   INVESTMENTS

9.1  Contributions to Be Invested Solely in Shares - All Participant
     Contributions and all Employer Contributions, as well as all income
     thereon, shall be invested solely in the acquisition of Shares.
     Notwithstanding the foregoing, all Participant Contributions and Employer
     Contributions remitted to the Trustee shall, prior to the acquisition of
     Shares therewith pursuant to paragraph 9.2, earn interest for the account
     of the Participants.

9.2  Acquisition of Shares by Trustee - In the case of Participant
     Contributions, Shares shall be purchased by the Trustee as soon as
     reasonably practicable following receipt of the Participant Contributions
     by the Trustee, as determined by the Trustee. In the case of Employer
     Contributions, Shares shall be purchased by the Trustee as soon as
     reasonably

<PAGE>

                                      -9-

     practicable following receipt of such Contributions from the Company or any
     such longer period required by securities legislation, stock exchange
     rules, or other relevant rules.

9.3  Source of Shares - The Trustee shall use the Participant Contributions and
     the Employer Contributions to purchase Shares only on the open market,
     through the facilities of The Toronto Stock Exchange or such other stock
     exchange on which the Shares are listed as the Board shall from time to
     time prescribe.

9.4  Registration of Shares - All the Shares purchased by the Trustee on behalf
     of a Participant pursuant to the provisions hereof shall be registered in
     the name of the Trustee, on behalf of such Participant. As long as such
     Shares have not been forfeited pursuant to paragraph 8.4 and are governed
     by the provisions of the Plan, they shall be held by the Trustee on behalf
     of the Participant. However, all rights and privileges with respect to the
     Shares, including voting rights, shall be exercised by the Participant
     through the Trustee, and any dividends shall be credited to the
     Participant's account.

9.5  Dividends - All dividends paid on Shares held by the Trustee on a
     Participant's behalf shall be reinvested by the Trustee in the acquisition
     of additional Shares as soon as practicable but in no event later than ten
     (10) days following payment of the dividends, which Shares shall be
     credited to the account of the Participant.

9.6  Shareholder Information; Right to Vote - The Trustee shall forward to each
     Participant all the shareholder information, documentation and reports sent
     by the Company to its shareholders. Prior to all meetings of the Company's
     shareholders, the Trustee shall provide to the Participant a voting
     instruction card so that the Participant may indicate thereon his
     directions to the Trustee as to how he wishes the Trustee to vote on his
     behalf and the Participant shall return such voting instruction card to the
     Trustee. Should the Participant fail to provide the Trustee with the voting
     instruction card, the Trustee shall refrain from voting the Shares credited
     to the account of the Participant.

9.7  Discretion of Trustee - Notwithstanding paragraph 9.2, the Trustee, in its
     discretion, may limit the daily volume of its purchases and sales of Shares
     or make such purchases and sales over several trading days to the extent
     that such action is deemed by it to be in the best interests of the
     Participants. Should the purchase or sale of Shares by the Trustee in any
     given month pursuant hereto be at various prices, the Trustee shall
     establish an average purchase or sale price, as the case may be, applicable
     for each Share in the relevant month.

9.8  Fractions of Shares - A Participant shall not be allowed in any
     circumstances to withdraw or transfer a fraction of a Share pursuant to any
     provision of the Plan. The value of any such fraction will be paid in cash.

9.9  No Share Value Guarantee - Neither the Company nor any Affiliate makes any
     representation or warranty as to the future market value of any Shares
     acquired in accordance with the provisions of the Plan.

<PAGE>

                                      -10-

10.  STATEMENTS OF ACCOUNT

10.1 Quarterly Statements - The Trustee will provide, on a quarterly basis, a
     statement of account to each Participant setting out the activity relating
     to the Participant's account for those periods ending at the end of March,
     June, September and December of each Plan Year.

10.2 Up-to-Date Statements - Should a Participant request an up-to-date
     statement of account, such statement may be made available at such other
     time as may be agreed upon between the Company and the Trustee.


11.  THE TRUSTEE

11.1 Change of Trustee - The Company as agent for each Participant may at any
     time or times after providing ninety (90) days' written notice remove the
     Trustee and appoint a successor or successors to fill any vacancy arising
     for any reason whatever.

11.2 Delegation by Trustee - The Trustee may delegate to the Company or to any
     corporation authorized to carry on the business of a trust company in
     Canada the duty to maintain records and to furnish statements in connection
     with all aspects of the Plan.

11.3 Indemnification - The Trustee shall be indemnified and held harmless by the
     Company against and from any and all loss, cost, liability or expense
     resulting from any claim, action, suit or proceeding to which it may be a
     party or in which it may be involved by reason of any action taken or
     failure to act under the Plan and against and from any and all amounts paid
     by it in settlement thereof (with the Company's written approval) or paid
     by it in satisfaction of a judgment in any such action, suit or proceeding,
     except a judgment in favor of the Company based upon a finding of the
     Trustee's wilful misconduct, negligence, or bad faith; subject, however, to
     the condition that, upon the assertion or institution of any such claim,
     action, suit or proceeding against it, the Trustee shall in writing give
     the Company a reasonable opportunity, at the latter's expense, to handle
     and defend the same within a time frame to be specified by the Trustee,
     before the Trustee undertakes to handle and defend such claim, action, suit
     or proceeding on its own behalf. The Company and the Participants shall be
     indemnified and held harmless by the Trustee against and from any and all
     loss, cost, liability or expense resulting from the wilful misconduct,
     negligence or bad faith of the Trustee or of any person (other than the
     Company) to which the Trustee has delegated any of its duties hereunder.

11.4 Certificates, Reports, Opinions - The Trustee shall be entitled to rely on
     all certificates, reports, opinions and other documents furnished by any
     broker, accountant, auditor or counsel to the Company and shall be fully
     protected and indemnified by the Company in respect of any acts done in
     good faith and in reliance on such certificates, reports, opinions or
     documents.

11.5 Resignation of Trustee - The Trustee may resign its trust and be discharged
     from all further duties and liabilities hereunder upon ninety (90) days'
     written notice to the Company and each Participant or such shorter notice
     as may be agreed upon.

<PAGE>

                                      -11-

12.  PARTICIPANT'S RIGHTS NOT TRANSFERABLE

     Except as provided herein, the rights of a Participant pursuant to the
     provisions of the Plan are non-assignable and non-transferable, in whole or
     in part. No attempted assignment or transfer thereof, otherwise than in
     accordance with the provisions hereof, shall be effective.


13.  INTERPRETATION, REGULATIONS, AMENDMENT AND TERMINATION

13.1 Regulation and Delegation - The Committee may make, amend and repeal at any
     time and from time to time such regulations not inconsistent herewith, as
     it may deem necessary or advisable generally for the proper administration
     and operation of the Plan. In particular, the Committee may delegate to any
     person, group of persons or corporation such administrative duties and
     powers as it sees fit, and the Committee may take such actions as are
     necessary not to penalize a Participant moving to or from Canada at the
     Company's request.

13.2 Interpretation - The Committee shall have the power to interpret the
     provisions of the Plan from time to time. All decisions and interpretations
     of the Committee respecting the Plan and all rules and regulations made
     from time to time pursuant hereto shall be binding and conclusive on the
     Company, the Affiliates, and all Participants and their respective legal
     representatives and on all Employees eligible under the Plan to participate
     herein.

13.3 Amendment - The Committee may amend at any time the provisions of the Plan
     at its sole and complete discretion, except that no such amendment shall
     operate so as to deprive a Participant of any rights acquired prior to the
     date thereof or to relieve the Company of the obligation to make such
     unremitted Employer Contributions as it would have been obliged to make in
     respect of that Participant pursuant to section 6. Notwithstanding the
     foregoing, if any provision of the Plan contravenes any applicable laws or
     regulations or any rules, regulations, by-laws or policies of any
     regulatory authority or stock exchange having jurisdiction or authority
     over the Company, an Affiliate or the Plan, then the Committee may amend
     such provision to the extent required to bring such provision into
     compliance therewith.

13.4 Termination - The Company hopes and expects to maintain the Plan
     indefinitely. However, the Committee reserves the right to terminate the
     Plan at any time, in which event the Participants' rights will be governed
     by paragraph 8.5 as if the Participants' Retirements had all occurred on
     the date of the termination of the Plan.


14.  COSTS

     Except as otherwise provided for in this section 14, the Company shall pay
     all costs of administering the Plan, including without limitation all the
     fees and expenses of the Trustee. All brokerage fees relating to the
     acquisition of Shares shall be borne by the Company. All brokerage and
     other fees relating to the sale, transfer to the Group RRSP

<PAGE>

                                      -12-

     or withdrawal of Shares shall be paid by the relevant Participants, except
     that the Company shall pay the said fees in respect of one (1) such
     transaction per Participant in each Plan Year.


15.  APPLICABLE LAW

     The laws of the Province of Ontario and the laws of Canada applicable
     therein shall apply to the Plan, any amendments thereto, and the
     administration thereof, and all rights and obligations thereunder shall be
     governed, construed and determined in accordance with such laws.


16.  NON-CANADIAN EMPLOYEES

     The Plan shall apply to Employees outside Canada as of the times and to the
     extent determined by the Committee. The terms and conditions offered to
     non-Canadian Employees may vary and be more limited than those set forth
     above, depending on local regulations and restrictions. For greater
     certainty, the application to non-Canadian Employees of the foregoing Plan
     provisions shall be determined: (a) in accordance with any schedules added
     to the Plan at the Committee's discretion; and (b) as the context requires.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.5
<SEQUENCE>7
<FILENAME>ex4_5-071802.txt
<DESCRIPTION>EMPLOYMENT STOCK OPTION PLAN
<TEXT>
                                    CAE INC.

                           EMPLOYEE STOCK OPTION PLAN
                    (Amended and Restated as of May 9, 2001)

     CAE Inc., a corporation incorporated under the laws of Canada, hereby
adopts an Employee Stock Option Plan, as amended, for key employees of CAE Inc.
and its subsidiaries, as follows:

                                   ARTICLE I
                                    PURPOSE

1.01 Purpose. The purpose of the CAE Inc. Employee Stock Option Plan, as
amended, is to provide key employees of CAE Inc. and its subsidiaries with an
opportunity to purchase common shares of CAE Inc. and to benefit from the
appreciation thereof, thus providing an increased incentive for these employees
to contribute to the future success and prosperity of CAE Inc., enhancing the
value of the common shares for the benefit of the shareholders and increasing
the ability of CAE Inc. and its subsidiaries to attract and retain individuals
of exceptional skill.

                                   ARTICLE II
                                 INTERPRETATION

2.01 Definitions. In this Plan, unless the context otherwise requires, the
following words and expressions shall have the respective meanings ascribed to
them below:

     "Approval Date" means the later of the date of approval of the Plan by the
shareholders of the Corporation and by the applicable regulatory authorities and
stock exchanges, each as contemplated by Article XII hereof.

     "Base Price" means, with respect to a Share subject to Option, the latest
closing price of the Shares on The Toronto Stock Exchange (or such other stock
exchange on which the Shares are listed as the Board shall from time to time
prescribe) on the trading day immediately preceding the day on which the Option
is granted. If no Shares have been traded on such exchange on such day, the Base
Price shall be established on the same basis on the last previous day for which
a trade was reported by such exchange.

     "Board" means the board of directors of the Corporation.

     "Code" means the United States Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.

     "Committee" means the Compensation Committee of the Board.

     "Corporation" means CAE Inc.

<PAGE>

                                       2

     "Incentive Stock Option" means an Option (i) which is intended to meet the
requirements of Section 422A of the Code, including, without limitation, the
requirement under the Code that such Option be issued at an Option Price which
is not less than the fair market value of a Share on the date of grant and (ii),
in connection with the exercise of which, an Optionee will not recognize income
for United States federal income tax purposes if the Shares acquired upon
exercise of such Option are held for two years from the date of the grant of the
Option and one year from the date of exercise thereof.

     "Non-qualified Stock Option" means an Option which is not intended to meet
the requirements of Section 422A of the Code, and which does not entitle the
Optionee to receive the United States federal income tax treatment described in
paragraph (ii) of the definition of Incentive Stock Option contained herein.

     "Options" means options granted under the terms of the Plan and includes
both Incentive Stock Options and Non-qualified Stock Options.

     "Option Price" means the purchase price of a Share under an Option.

     "Optionee" shall mean an employee of the Corporation or its subsidiaries to
whom an Option has been granted under the terms of the Plan.

     "Plan" means the CAE Inc. Employee Stock Option Plan, as amended and as the
same may from time to time be amended.

     "Shares" means the common shares in the capital of the Corporation or, in
the event of any reclassification of such common shares, the shares in the
capital of the Corporation resulting from such reclassification.

     "Subsidiary" has the meaning ascribed thereto in the Securities Act
(Ontario) on the date on which the Plan is adopted by the Board.

     "Termination Date" means, with respect to any Option, such date as is fixed
by the Committee at the time of the grant of the Option but is not later than
the day preceding the tenth anniversary of the date on which the Option is
granted.

     "United States" means the United States of America, its territories and
possessions, any State of the United States and the District of Columbia.

     "U.S. Securities Act" means the United States Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.

2.02 Gender, etc. The masculine gender shall include the feminine and neuter
genders and vice versa and the singular shall include the plural and vice versa.

<PAGE>

                                       3

                                  ARTICLE III
                                 ADMINISTRATION

3.01 Administration. Except as otherwise provided in the Plan, the Committee
shall administer the Plan and shall have full power to grant Options, construe
and interpret the Plan, establish, amend and rescind rules and regulations for
its administration and perform all other acts relating to the Plan, including
the delegation of administrative responsibilities, that it believes reasonable
and proper.

3.02 Granting of Options. Subject to the terms and conditions of the Plan, the
Committee shall, in its discretion, determine which employees of the Corporation
or its subsidiaries shall be granted Options, the number of Shares subject to
option under any such Options, the dates after which Options may be exercised
(which shall not be earlier than the Approval Date nor later than the
Termination Date) in whole or in part, the Option Price, any restrictions
imposed on Shares received upon the exercise of Options, the terms and
conditions of the Options and, in respect of Options granted to United States
persons, whether the Options shall be Incentive Stock Options.

3.03 Determinations Final and Conclusive. Any decision or determination made or
action taken by the Committee or the Board arising out of or in connection with
the interpretation and administration of the Plan including, without limitation,
the granting of Options, shall be final and conclusive.

                                   ARTICLE IV
                             SHARES SUBJECT TO PLAN

4.01 Number of Shares. The total number of Shares available for grants of
Options under the Plan shall be 10,000,000 subject to adjustment in accordance
with Article VIII of the Plan. The Shares which may be issued and sold upon the
exercise of Options granted pursuant to the Plan will be authorized but unissued
Shares. The aggregate number of Shares so reserved for issuance to any one
person shall not exceed 5% of the issued and outstanding Shares (on an
non-diluted basis) from time to time.

4.02 Lapsed Options. If Options or any part thereof are surrendered, terminate
or expire without having been exercised in full, new Options may be granted
covering the Shares not purchased under such lapsed Options, but Options once
issued cannot be rescinded by mutual consent or agreement for the purpose of
making optioned Shares available for reallocation pursuant to a new Option in
favour of the same Optionee at a lower Option Price under the Plan.

                                   ARTICLE V
                                  ELIGIBILITY

5.01 Eligibility. Options may be granted to selected key employees of the
Corporation or its subsidiaries, provided that Incentive Stock Options shall
only be granted to employees of a subsidiary of the Corporation if such
subsidiary constitutes a "subsidiary" of the Corporation within the meaning
ascribed to such term in the Code.

<PAGE>

                                       4

                                   ARTICLE VI
                                TERMS OF OPTIONS

6.01 Option Agreement. All Options shall be evidenced by written agreements
executed by the Corporation and the Optionee. Such Options shall be subject to
the applicable provisions of the Plan, and shall contain such provisions as are
required by the Plan and such other terms and conditions as may be prescribed by
the Committee (which terms and conditions need not be the same in each case and
may be changed from time to time). All agreements evidencing Options shall
specify the total number of Shares subject to each grant, the Option Price and
the Termination Date. Each agreement evidencing an Option granted to a United
States person shall specify whether the Option evidenced thereby is an Incentive
Stock Option or a Non-qualified Stock Option.

6.02 Option Price. The Option Price per Share shall not be less than the Base
Price calculated in accordance with the Plan on the date of the grant or less
than that permitted by applicable laws or regulations or the rules, regulations,
by-laws or policies of regulatory authorities having jurisdiction or the stock
exchanges on which any securities of the Corporation are listed.

6.03 Period of Exercise.
     (1) Subject to the provisions of the Plan, the Committee shall determine
the date after which Options may be exercised in whole or in part.

     (2) Except as set forth in Section 6.05, no Option may be exercised unless
the Optionee is at the time of such exercise an employee of the Corporation or
one of its subsidiaries and shall have served continuously in such capacity
since the date of the grant of his Option. Absence on leave, having approval of
the Corporation or one of its subsidiaries, shall not be considered an
interruption of service for any purpose of the Plan.

6.04 Nontransferability of Options. Each Option shall, during the Optionee's
lifetime, be exercisable only by the Optionee, and neither it nor any right
hereunder shall be transferable otherwise than by will or the laws of descent
and distribution or be subject to attachment, execution or other similar
process. In the event of any attempt by the Optionee to alienate, assign,
pledge, hypothecate, grant a security interest in or otherwise dispose of an
Option or of any right hereunder, except as provided for herein, or in the event
of any levy or any attachment, execution or similar process upon the rights or
interest hereby conferred, the Corporation may terminate the Option by notice to
the Optionee and the Option shall thereupon become null and void.

6.05 Effect of Death, etc.
     (1) If an Optionee shall die while an employee of the Corporation or one of
its subsidiaries, any Option held by him may be exercised, to the extent that
the Optionee was entitled to do so at the time of his death, by the person to
whom the Optionee's rights under the Option shall pass by the Optionee's will or
the applicable laws of descent and distribution. Any person to whom an
Optionee's rights under an Option have passed by will or by applicable laws of
descent or distribution (i) shall be entitled to exercise the Option only during
the period expiring on the day that is earlier of (x) six months following the
date of death; and (y) the

<PAGE>

                                       5

Termination Date of the Option; and (ii) shall be subject to all terms and
conditions of the Plan and the Option applicable to the Optionee.

     (2) If an Optionee ceases to serve the Corporation as an employee of the
Corporation or one of its subsidiaries otherwise than by reason of death, each
Option held by the Optionee together with all rights hereunder or thereunder,
shall terminate on the date on which such Optionee ceases to serve the
Corporation in such capacity.

     (3) The Committee may, with respect to any Option, in its discretion,
waive, amend or vary the requirements of Section 6.03(2) or this Section 6.05.

6.06 Manner of Exercise and Payments.
     (1) An Option, or part thereof, shall be exercised by delivery of a written
notice of exercise to the Corporation and payment, in cash or by cheque, bank
draft or money order payable to the order of the Corporation, of the full
purchase price of the Shares then being purchased pursuant to the Option. An
Optionee may exercise an Option with respect to less than the full number of
Shares for which the Option may then be exercised, but an Optionee must exercise
the Option in full Shares.

     (2) An Optionee shall be entitled to the rights appertaining to share
ownership only with respect to Shares that have been fully paid for and issued
to him.

6.07 Withholding Taxes. The Corporation may, in its discretion, require an
Optionee to pay to the Corporation or its subsidiaries the amount, or make such
other arrangements (including the withholding of Shares which would otherwise be
delivered upon exercise), at the time of the exercise in whole or in part of any
Option or thereafter, that the Corporation deems necessary to satisfy any
obligation of the Corporation or its subsidiaries to withhold federal,
provincial, state or local income or other taxes incurred by reason of the
exercise.

6.08 Effect of Takeover Bid. If an offer (the "Offer") is made to the Optionee
or to shareholders generally or to a class of shareholders which includes the
Optionee (or would include the Optionee in the event that the Shares that are
subject to the Optionee's Option had previously been purchased and retained by
him) for Shares, which Offer, if accepted in whole or in part, would result in
the offeror exercising control over the Corporation within the meaning of
subsection 1(3) of the Securities Act (Ontario) (as amended from time to time),
then the Board shall determine by resolution, within ten days of the receipt of
notice of the Offer by the Corporation, if such Offer is bona fide. In the event
that the Board so determines that the Offer is bona fide, the Corporation shall,
immediately upon such determination by the Board notify each Optionee currently
holding an Option of the Offer, with full particulars thereof, and of such
determination by the Board, whereupon, subject to Section 7.02 with respect to
Options granted to United States residents, such Option shall become immediately
exercisable by the Optionee and, subject to the terms and provisions of the
Plan, may be exercised by the Optionee in whole or in part at any time or from
time to time prior to its Termination Date.

<PAGE>

                                       6

6.09 Amendments.
     (1) The Committee may at any time and from time to time after the grant of
an Option, with the consent of the Optionee, amend the terms and conditions of
the Option or the agreement evidencing the Option.

     (2) Without limiting the generality of Section 6.09(1), the Committee may
at any time and from time to time amend an Option to accelerate the date after
which the Option may be exercised in whole or in part including, without
limitation, in the event that the Corporation shall sell, lease or otherwise
dispose of all or substantially all of its assets and undertaking, shall enter
into an arrangement with, be merged or amalgamated with or absorbed by or into
any other company under any circumstances which involve or may involve or
require the liquidation of the Corporation, a distribution of its assets among
its shareholders or the termination of its corporate existence or in the event
that any person or combination of persons successfully solicits proxies for the
election of a slate of directors of the Corporation (other than the slate
proposed by the management of the Corporation in its management proxy circular)
which in the opinion of the Board may well result in such slate being elected as
directors of the Corporation.

     (3) No amendment to any Option or agreement evidencing an Option shall be
made unless the Option or agreement, as amended, will comply with the provisions
of the Plan and with applicable laws and regulations and the rules, regulations,
by-laws or policies of regulatory authorities having jurisdiction and the stock
exchanges on which any securities of the Corporation are listed.

                                  ARTICLE VII
            OPTIONS GRANTED TO PERSONS RESIDENT IN THE UNITED STATES

7.01 Special Rules Applicable to Options Granted to Persons Resident in the
United States. The provisions of this Article VII shall apply to Option grants
made to each employee of the Corporation or its subsidiaries who is resident in
the United States unless the Committee, in its discretion, determines otherwise.

7.02 Restriction on Exercise.
     (1) Anything in this Plan to the contrary notwithstanding, an Option shall
not be exercisable, no transfer of Shares shall be made to any Optionee, and any
attempt to exercise an Option or to transfer any such Shares shall be void and
of no effect, unless and until;

(i) a registration statement under the U.S. Securities Act has been duly filed
and declared effective pertaining to the Shares subject to such Option and the
Shares subject to such Option have been duly qualified under applicable United
States federal or state securities or blue sky laws; or

(ii) the Committee, in its sole discretion, determines, or the Optionee, upon
the request of the Committee, provides an opinion of counsel satisfactory to the
Committee, that such registration or qualification is not required as a result
of the availability of an exemption from registration or qualification under
such laws.

     (2) Without limiting the generality of Sections 7.02(1) or 10.01, if at any
time the Committee shall determine, in its sole discretion, that the listing,
registration or qualification of

<PAGE>

                                       7

the Shares under any United States federal or state law or on any stock exchange
or the consent and approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, delivery or purchase of such
Shares pursuant to the exercise of an Option, such Option shall not be exercised
in whole or in part unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.

     (3) Each certificate for Shares acquired upon the exercise of an Option by
an employee who is resident in the United States shall bear the legend set out
in Attachment 1 which legend may be removed in connection with a sale of such
Shares that meets the requirements of Section 7.03; provided, however, that such
legend shall be placed on any certificates for Shares returned to the Optionee
as a result of the failure to complete any such sale.

7.03 Restrictions on Resale. Unless the Committee determines otherwise, in its
sole discretion, employees of the Corporation or its subsidiaries who are
resident in the United States shall covenant and agree that resales of the
Shares acquired upon the exercise of an Option shall be subject to the following
restrictions:

(i) the Shares shall at no time be offered by the Optionee to any person in the
United States;

(ii) the sale of the Shares may be made by the Optionee or a person acting on
his behalf only (A) through the trading facilities of The Toronto Stock Exchange
or the Montreal Exchange, provided that neither the Optionee nor any person
acting on his behalf knows that a sale or other transaction involving the Shares
has been pre-arranged with a buyer in the United States or (B) to a buyer who,
at the time the buy order is originated, is either outside the United States or
whom the Optionee and any person acting on his behalf reasonably believes to be
outside the United States; and

(iii) at the time of any sale described in Section 7.03(ii) above, no "directed
selling efforts", within the meaning of Rule 902(b) of Regulation S under the
U.S. Securities Act, have been made or are being made by the Optionee, any
affiliate, or any person acting on their behalf.

7.04 Restrictions Binding on Other Persons. The covenants and restrictions set
forth in this Article VII shall be binding on any person who (i) in accordance
with the provisions of Section 6.05 acquires any rights of the Optionee with
respect to the Option or (ii) as a result of the death of the Optionee or by
gift acquires any of the Shares acquired upon exercise of the Option.

                                  ARTICLE VIII
                                  ADJUSTMENTS

8.01 Subdivisions. In the event of any subdivision of the Shares, at any time
prior to termination of the Plan, into a greater number of Shares, the total
number of Shares available for the grant of Options under the Plan after such
subdivision shall be increased to such greater number of Shares as equals the
number of Shares that would have been received on such subdivision, were all of
the Shares allotted to the Plan and available for the grant of Options
immediately prior to such subdivision issued as fully-paid and non-assessable
Shares before such subdivision.

<PAGE>

                                       8

8.02 Consolidations. In the event of any consolidation of the Shares, at any
time prior to termination of the Plan, the total number of Shares available for
the grant of Options under the Plan after such consolidation shall be decreased
to such lesser number of Shares as equals the number of Shares that would have
been received on such consolidation, were all of the Shares allotted to the Plan
and available for the grant of Options immediately prior to such consolidation
issued and outstanding as fully-paid and non-assessable Shares before such
consolidation.

8.03 Reclassifications. In the event of any reclassification of the Shares, at
any time prior to termination of the Plan, the number of shares of each class of
shares in the capital of the Corporation available for the grant of Options
under the Plan after such reclassification shall be amended to the number of
shares of each such class as equals the number of shares of each class that
would have been received on such reclassification, were all of the Shares
allotted to the Plan and available for the grant of Options immediately prior to
such reclassification issued and outstanding as fully-paid and non-assessable
Shares prior to such reclassification.

8.04 Adjustment to Outstanding Options.
     (1) (If the Corporation shall declare a dividend payable in or shall
subdivide, consolidate or reclassify the Shares, or any other event shall occur
which in the judgment of the Committee necessitates action by way of adjusting
the terms of the outstanding Options, the Committee may take any such action as
in its judgment shall be necessary to preserve the Optionee's rights
substantially proportionate to the rights existing prior to such event
(including adjusting the number of Shares subject to Options or the Option Price
thereof). Any adjustment to the number of Shares that are subject to outstanding
Options pursuant to this Section 8.04 in consequence of a subdivision,
consolidation or reclassification of the Shares shall not affect the number of
Shares that remain available for the grant of Options under Article IV at the
time of such adjustment.

     (2) If at any time the Corporation issues rights to its shareholders to
subscribe for Shares, each Optionee may, if the Committee so decides in its
discretion, be granted a further option, exercisable during the time within
which such rights may be exercised, to purchase, at the same price as the Shares
subject to such rights, a number of Shares equal to those for which rights would
have been issued to the Optionee on the Shares that are subject to his Option if
such Shares bad previously been purchased by the Optionee and retained by him.

     (3) The judgment of the Committee with respect to any matters referred to
in this Section 8.04 shall be conclusive and binding upon each Optionee. Any
exercise by the Committee of its authority under this Section 8.04 is subject to
the approval of the Board if required by applicable laws and regulations or the
rules, regulations, by-laws or policies of any regulatory authority or stock
exchange having jurisdiction.

                                   ARTICLE IX
                                   AMENDMENTS

9.01 Required Amendments. If any provision of the Plan or any Option contravenes
any applicable laws or regulations or any rules, regulations, by-laws or
policies of any regulatory authority or stock exchange having jurisdiction or
authority over the Corporation or the Plan,

<PAGE>

                                       9

then the Board may amend such provision to the extent required to bring such
provision into compliance therewith.

9.02 Other Amendments.
     (1) The Board may, at any time or from time to time, suspend or terminate
the Plan in whole or in part or amend it in such respects as the Board may deem
appropriate. No amendment of the Plan shall be made without the approval of the
shareholders which would:

     (i)    materially increase the benefits under the Plan;

     (ii)   materially modify the requirements as to eligibility for
            participation in the Plan;

     (iii)  increase the total number of Shares which may be issued pursuant to
            Options, except as is provided for in accordance with Article VIII;
            or

     (iv)   extend the period of granting Incentive Stock Options.

     (2) Subject to Section 9.01, no amendment, suspension or termination of the
Plan shall, without the Optionee's consent, impair any of the rights or
obligations under any Option theretofore granted to an Optionee under the Plan

9.03 Approvals. No amendment shall be effective until all applicable approvals,
if any, of regulatory authorities and stock exchanges have been obtained.

                                   ARTICLE X
                              GOVERNMENT APPROVALS

10.01 Necessary Approvals. The obligation of the Corporation to issue, transfer
and deliver Shares on the exercise of Options under the Plan is subject to the
approval of any regulatory authorities or stock exchanges on which the Shares
are listed for trading which may be required in connection with the
authorization, issuance, transfer or delivery of such Shares by the Corporation.
If any Shares cannot be issued to any Optionee for any reason including, without
limitation, the failure to obtain such approval, then the obligation of the
Corporation to issue such Shares shall terminate and any Option Price paid to
the Corporation shall be returned to the Optionee.

                                   ARTICLE XI
                            MISCELLANEOUS PROVISIONS

11.01 No Rights to Employment. Nothing contained in the Plan or in any agreement
evidencing Options granted under the Plan shall confer upon any Optionee any
right with respect to continuance of employment by Corporation or any subsidiary
thereof or interfere in any way with the right of the Corporation or any
subsidiary to terminate the employment of any Optionee.

11.02 No Representations or Warranty. The Corporation makes no representation or
warranty as to the future market value of any Shares issued in accordance with
the provisions of the Plan.

<PAGE>

                                       10

11.03 Use of Proceeds. Payments received from Optionees upon the exercise of
Options shall be used for the general corporate purposes of the Corporation.

11.04 Plan Expenses. Any expenses of administering the Plan shall be borne by
the Corporation.

11.05 Interpretation. The Plan will be governed by and construed in accordance
with the laws of the Province of Ontario and the laws of Canada applicable
therein.

                                  ARTICLE XII
                                 EFFECTIVE DATE

12.01 Effective Date.
      (1) The Plan shall become effective when it is adopted by the Board.
However, if (a) the Plan is not approved by the shareholders of the Corporation,
by a majority of the votes cast on the question, at the next annual meeting of
shareholders of the Corporation or any adjournment thereof or (b) the necessary
regulatory and stock exchange approvals are not obtained prior to March 7, 1991
(being one year after the date on which the CAE Inc. Employee Stock Option was
adopted by the Board), the Plan and all Options shall terminate.

      (2) No Incentive Stock Option may be granted after the tenth anniversary
of the earlier of (a) the date the Plan is adopted (or the date any amendment is
adopted to increase the aggregate number of Shares issuable under the Plan or to
change the employees eligible to receive Options, which amendment is described
and considered a new plan under Proposed Treas. Reg. ss. 1.422A-2(b)(3)(iv) of
the U.S. Department of Treasury) by the Board, or (b) the date such Plan (or
such amendment) is approved by the shareholders.

      ORIGINALLY adopted by the Board of Directors of CAE Inc. on the 9th day of
May, 1990 and as amended February 4, 1994, June 17, 1998 and May 9, 2001.

<PAGE>

                                  ATTACHMENT 1

                                       TO

                                    CAE INC.

                           EMPLOYEE STOCK OPTION PLAN

                                     LEGEND


Each certificate for Shares acquired upon the exercise of an Option by a United
States resident shall bear the following legend:

The Securities evidenced by this certificate have not been registered under the
United States Securities Act of 1933, as amended (the "Act"). These securities
may not be sold to a United States person (within the meaning of Regulation S
under the Act), except in compliance with the registration requirements of the
Act or an exemption therefrom. These Securities are subject to manner of sale
restrictions which are set forth in the Issuer's Employee Stock Option Plan, the
relevant provisions of which are available for inspection during business hours
at the Issuer's principal business office.

The securities represented by this certificate are listed on The Toronto Stock
Exchange and the Montreal Exchange; however the said securities cannot be traded
through the facilities of such Exchanges since they are not freely transferable,
and consequently any certificate representing such securities is not "good
delivery" in settlement of transactions on such Exchanges.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-5
<SEQUENCE>8
<FILENAME>ex5_1-072502.txt
<DESCRIPTION>EX-5.1,  REGISTRATION STATEMENT ON FORM S-8
<TEXT>
                                STIKEMAN ELLIOTT

                            Barristers & Solicitors

       5300 Commerce Court West, 199 Bay Street, Toronto, Canada M5L 1B9
            Tel: (416) 869-5500 Fax: (416) 947-0866 www.stikeman.com






July 26, 2002

CAE Inc.
Royal Bank Plaza, South Tower
Suite 3060
Toronto, Ontario
M5J 2J1  Canada

Re:      CAE Inc. Registration Statement on Form S-8

Ladies and Gentlemen:

We have acted as Canadian counsel for CAE Inc. (the "Company") in connection
with the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of an aggregate of 814,750 Common Shares, no par value, in
the capital of the Company (the "Shares") proposed to be issued pursuant to a
Form S-8 (the "Registration Statement") to be filed today with the Securities
and Exchange Commission under the Securities Act relating to the CAE Inc.
Employee Stock Option Plan (as amended and restated as of May 9, 2001) (the
"Plan").

We have examined and are familiar with the Registration Statement. We have also
examined and relied on such corporate records and documents of the Company and
such matters of law as we have considered necessary or appropriate to enable us
to give this opinion, including, without limitation to the foregoing, the
minutes of the meeting of the board of directors of the Company held on May 6,
1998 and the annual and special meeting of shareholders of the Company held on
June 17, 1998. In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents, certificates and instruments
submitted to us as originals and the conformity with originals of all documents
submitted to us as copies.

The opinion expressed below is limited to the laws of the Province of Ontario
and the federal laws of Canada applicable therein as the same are in force at
the date hereof, and we do not express any opinion herein concerning the laws of
any other jurisdiction.

Based upon the foregoing, it is our opinion that, upon the allotment of the
Shares by the board of directors of the Company and due registration of the

<PAGE>

issue of such Shares in the register of shareholders of the Company and subject
to receipt by the Company in full of the exercise price therefor, the Shares
issuable upon exercise of stock options in accordance with the terms of the Plan
(i) have been duly authorised by the Company and (ii) when issued in accordance
with the terms of the Plan, will be validly issued, fully paid and
non-assessable.

We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act.

Yours faithfully,

/s/ Stikeman Elliott



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>9
<FILENAME>ex23-1_072202.txt
<DESCRIPTION>CONSENT OF INDEPENDENT ACCOUNTANTS
<TEXT>
                    [PricewaterhouseCoopers LLP Letterhead]


                       CONSENT OF INDEPENDENT ACCOUNTANTS


We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our following reports and comments, all of which appear
in CAE Inc.'s Registration Statement on Form 40-F dated July 25, 2002:

o    Our Auditors' Report addressed to the Board of Directors dated May 8, 2002
     except for Note 21 D which is as at July 3, 2002 and our Comments by
     Auditors for U.S. Readers on Canada-U.S. Reporting Difference dated May 8,
     2002 except for Note 21 D which is as at July 3, 2002 relating to the
     consolidated financial statements of CAE Inc.;

o    our Auditors' Report addressed to the Shareholders dated May 8, 2002
     relating to the consolidated financial statements of CAE Inc.; and

o    our Auditors' Report addressed to the Shareholders dated Apri1 30, 2001
     relating to the consolidated financial statements of CAE Inc.


/s/ PricewaterhouseCoopers LLP

Chartered Accountants

Montreal, Quebec
July 25, 2002

PricewaterhouseCoopers refers to the Canadian firm of PricewaterhouseCoopers LLP
and other members of the worldwide PricewaterhouseCoopers organization.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>10
<FILENAME>ex24_1-071802.txt
<DESCRIPTION>EXHIBIT 24.1
<TEXT>
                                                                   EXHIBIT 24.1

                               POWERS OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of D.H. Burney and Paul G. Renaud his true
and lawful attorney-in-fact and agent, each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign and to file a Registration Statement on Form S-8
(or such other Form as may be appropriate) in connection with the registration
of Common Shares of the Registrant and any and all amendments (including
post-effective amendments) to any such Registration Statement on Form S-8 with
the Securities and Exchange Commission, granting to said attorney-in-fact and
agent full power and authority to perform any other act on behalf of the
undersigned required to be done in the premises. This power of attorney may be
executed in counterparts.



Signature                            Title                         Date
- ---------                            -----                         ----

/s/ D.H. Burney
- --------------------------------     President and Chief        7/26/02
D.H. Burney                          Executive Officer
                                     and Director (Principal
                                     Executive Officer)
/s/ John A. Craig
- --------------------------------     Director                   7/26/02
John A. (Ian) Craig

/s/ Richard J. Currie
- --------------------------------     Director                   7/26/02
Richard (Dick) J. Currie, C.M.

/s/ R. Fraser Elliott
- --------------------------------     Director                   7/26/02
R. Fraser Elliott, C.M., Q.C

/s/ H. Garfield Emerson
- --------------------------------     Director                   7/26/02
H. Garfield Emerson, Q.C.

/s/ Anthony S. Fell
- --------------------------------     Director                   7/26/02
Anthony S. Fell

/s/ James A. Grant
- --------------------------------     Director                   7/26/02
The Honourable James A. Grant,
P.C., Q.C.


- --------------------------------     Director
James F. Hankinson


/s/ E. Randolph Jayne II
- --------------------------------     Director                   7/26/02
E. Randolph (Randy) Jayne II

/s/ James W. McCutcheon
- --------------------------------     Director                   7/26/02
James W. McCutcheon, Q.C.


<PAGE>


- --------------------------------     Director
George K. Petty

/s/ Paul G. Renaud                                              7/26/02
- --------------------------------     Executive Vice President, Chief
Paul G. Renaud                       Financial Officer and Secretary
                                     (Principal Financial Officer and
                                     Principal Accounting Officer)


- --------------------------------     Director
Lawrence N. Stevenson

/s/ Lynton R. Wilson                                            7/26/02
- --------------------------------     Chairman of the Board of Directors
Lynton R. Wilson



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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