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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000912057-01-528363.txt : 20010815
<SEC-HEADER>0000912057-01-528363.hdr.sgml : 20010815
ACCESSION NUMBER:		0000912057-01-528363
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20010630
FILED AS OF DATE:		20010814

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FIRSTSERVICE CORP
		CENTRAL INDEX KEY:			0000913353
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [7381]
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-24762
		FILM NUMBER:		1708792

	BUSINESS ADDRESS:	
		STREET 1:		1140 BAY ST
		STREET 2:		SUITE 4000
		CITY:			TORONTO ONTARIO CANA
		STATE:			A6

	MAIL ADDRESS:	
		STREET 1:		FIRSTSERVICE BUILDING 1140 BAY STREET
		STREET 2:		SUITE 4000
		CITY:			TORONTO ONTARIO CANA
		STATE:			A6
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>a2056788z10-q.txt
<DESCRIPTION>FORM 10Q
<TEXT>
<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q


              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2001

                                       or

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from ______ to ______



                         Commission File Number 0-24762

                            FIRSTSERVICE CORPORATION
             (Exact name of Registrant as specified in its charter)




   ONTARIO, CANADA                                 NOT APPLICABLE
   (State or other                                 (I.R.S. employer
   jurisdiction of incorporation                   identification number,
   or organization)                                if applicable)


                              FIRSTSERVICE BUILDING
                           1140 BAY STREET, SUITE 4000
                            TORONTO, ONTARIO, CANADA
                                     M5S 2B4
                                 (416) 960-9500
    (Address and telephone number of Registrant's principal executive office)




Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] or No [ ]

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock as of the latest practicable date:


           Subordinate Voting Shares - 12,838,393 as of July 31, 2001
              Multiple Voting Shares - 662,847 as of July 31, 2001


<PAGE>
                                      -2-


                            FIRSTSERVICE CORPORATION

                                    FORM 10-Q
                       FOR THE QUARTER ENDED JUNE 30, 2001



                                      INDEX

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>      <C>    <C>                                                         <C>
PART I

Item 1.  Condensed Consolidated Financial Statements

         a)     Statements of Earnings
                For the three months ended June 30, 2001 and 2000            3

         b)     Balance Sheets
                As of June 30, 2001 and March 31, 2001                       4

         c)     Statements of Cash Flows
                For the three months ended June 30, 2001 and 2000            5

         d)     Notes to the financial statements                            6


Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                 9


PART II

Item 6.  Exhibits and Reports on Form 8-K                                   13


SIGNATURE                                                                   14
</TABLE>





<PAGE>
                                      -3-


FIRSTSERVICE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands of U.S. dollars, except per share amounts) - in accordance with
U.S. generally accepted accounting principles.

<TABLE>
<CAPTION>
                                                                               Three month periods
                                                                                  ended June 30
                                                                               2001               2000
- -------------------------------------------------------------------------------------------------------
                                                                           (NOTE 3)
<S>                                                                        <C>                <C>
Revenues                                                                   $136,575           $105,391

Cost of revenues                                                             89,358             69,380
Selling, general and administrative expenses                                 28,457             21,554
Depreciation                                                                  2,752              1,741
Amortization                                                                    204                977
Interest                                                                      2,668              2,234
- -------------------------------------------------------------------------------------------------------
Earnings before income taxes and minority interest                           13,136              9,505

Income taxes                                                                  4,595              3,800
- -------------------------------------------------------------------------------------------------------
Earnings before minority interest                                             8,541              5,705

Minority interest share of earnings                                           1,451              1,026
- -------------------------------------------------------------------------------------------------------
Net earnings before extraordinary item                                       $7,090             $4,679
- -------------------------------------------------------------------------------------------------------
Extraordinary loss on early retirement of debt, net of
     income tax benefit of $578                                                 797                  -
- -------------------------------------------------------------------------------------------------------

Net earnings                                                                 $6,293             $4,679
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE

Net earnings before extraordinary item:                 Basic                 $0.53              $0.36
                                                        Diluted               $0.49              $0.34

Net earnings:                                           Basic                 $0.47              $0.36
                                                        Diluted               $0.44              $0.34

Weighted average shares outstanding:                    Basic                13,395             13,042
     (in thousands)                                     Diluted              14,400             13,648
</TABLE>

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


<PAGE>
                                      -4-

FIRSTSERVICE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars) - in accordance with U.S. generally accepted
accounting principles.

<TABLE>
<CAPTION>
                                                                              June 30           March 31
                                                                                 2001               2001
- -------------------------------------------------------------------------------------------------------------
                                                                          (UNAUDITED)           (Audited)
                                                                             (NOTE 3)
<S>                                                                           <C>                 <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents                                                      $9,254              $5,115
Accounts receivable, net                                                       92,230              79,473
Inventories                                                                     9,656               9,627
Prepaids and other assets                                                      11,403              10,757
Deferred income taxes                                                           1,178               1,136
- -------------------------------------------------------------------------------------------------------------
                                                                              123,721             106,108
- -------------------------------------------------------------------------------------------------------------
Other receivables                                                               5,707               5,092
Fixed assets                                                                   43,593              40,741
Other assets                                                                    2,472               2,550
Deferred income taxes                                                           1,349               1,472
Intangible assets                                                               3,355               2,384
Goodwill                                                                      157,770             155,313
- -------------------------------------------------------------------------------------------------------------
                                                                              214,246             207,552
- -------------------------------------------------------------------------------------------------------------
                                                                             $337,967            $313,660
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable                                                              $23,565             $22,220
Accrued liabilities                                                            32,270              34,001
Income taxes payable                                                            5,214               2,436
Unearned revenue                                                               14,536               9,505
Long-term debt - current (note 4)                                               3,042               3,050
Deferred income taxes                                                             278                 558
- -------------------------------------------------------------------------------------------------------------
                                                                               78,905              71,770
- -------------------------------------------------------------------------------------------------------------

LONG-TERM LIABILITIES
Long-term debt less current portion (note 4)                                  157,676             149,374
Deferred income taxes                                                           4,276               4,236
- -------------------------------------------------------------------------------------------------------------
                                                                              161,952             153,610
- -------------------------------------------------------------------------------------------------------------
Minority interest                                                              10,154               8,824
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock                                                                  56,197              54,863
Receivables pursuant to share purchase plan                                    (3,196)             (3,196)
Retained earnings                                                              34,265              27,972
Cumulative other comprehensive loss                                              (310)               (183)
- -------------------------------------------------------------------------------------------------------------
                                                                               86,956              79,456
- -------------------------------------------------------------------------------------------------------------
                                                                             $337,967            $313,660
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>

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

<PAGE>
                                      -5-


FIRSTSERVICE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of U.S. dollars) - in accordance with U.S. generally accepted
accounting principles.

<TABLE>
<CAPTION>
                                                                                    Three month periods
                                                                                      ended June 30
                                                                                  2001              2000
- ---------------------------------------------------------------------------------------------------------
                                                                              (NOTE 3)
<S>                                                                             <C>               <C>
CASH PROVIDED BY (USED IN)

OPERATING ACTIVITIES
Net earnings                                                                    $6,293            $4,679

Items not affecting cash:
    Depreciation and amortization                                                2,956             2,718
    Deferred income taxes                                                         (159)             (368)
    Minority interest share of earnings                                          1,451             1,026
    Extraordinary loss on early retirement of debt                               1,375                 -
    Other                                                                          110               113
- ---------------------------------------------------------------------------------------------------------
                                                                                12,026             8,168
Changes in operating assets and liabilities:
    Accounts receivable                                                         (9,449)           (6,761)
    Inventories                                                                     87            (1,136)
    Prepaids and other assets                                                     (458)              893
    Accounts payable and other current liabilities                              (1,083)              129
    Unearned revenue                                                             4,731             3,736
- ---------------------------------------------------------------------------------------------------------
Net cash provided by operating activities                                        5,854             5,029
- ---------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired                                 (1,190)           (6,936)
Purchase of minority shareholders' interest                                          -              (648)
Purchases of fixed assets, net                                                  (4,993)           (2,679)
Decrease in intangibles and other assets                                            53                54
Increase in other receivables                                                     (470)           (1,168)
- ---------------------------------------------------------------------------------------------------------
Net cash used for investing                                                     (6,600)          (11,377)
- ---------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Increase in long-term debt, net                                                  6,439             6,538
Financing fees paid                                                             (2,561)                -
Issuance of Subordinate Voting Shares, net of repurchases                        1,334               684
Dividends paid to minority shareholders of subsidiaries                            (70)              (95)
- ---------------------------------------------------------------------------------------------------------
Net cash provided by financing                                                   5,142             7,127
- ---------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash                                           (257)             (587)
- ---------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents during the period                          4,139               192
Cash and cash equivalents, beginning of period                                   5,115             3,297
- ---------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period                                        $9,254            $3,489
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>


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

<PAGE>
                                      -6-


FIRSTSERVICE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
(Unaudited)
(in thousands of U.S. dollars, except per share amounts)


1.       DESCRIPTION OF THE BUSINESS - FirstService Corporation (the "Company")
         is a provider of property and business services to residential,
         corporate and public sector customers in the United States and Canada.
         The Company's operations are conducted through two operating divisions,
         Property Services and Business Services. The Property Services division
         includes Residential Property Management, Integrated Security Services
         and Consumer Services and represented approximately 80% of the
         Company's revenues for the year ended March 31, 2001. The Business
         Services division provides customer support & fulfillment and business
         process outsourcing services to corporations and government agencies.


2.       SUMMARY OF PRESENTATION - The condensed consolidated financial
         statements included herein have been prepared by the Company, without
         audit, pursuant to the rules and regulations of the Securities and
         Exchange Commission for the presentation of interim financial
         information. Certain information and footnote disclosures normally
         included in financial statements prepared in accordance with U.S.
         generally accepted accounting principles have been condensed or omitted
         pursuant to such rules and regulations, although the Company believes
         that the disclosures are adequate to make the information not
         misleading.

         In the opinion of management, the condensed consolidated financial
         statements contain all adjustments necessary to present fairly the
         financial position of the Company as of June 30, 2001 and the results
         of its operations for the three months ended June 30, 2001 and 2000 and
         its cash flows for the three months ended June 30, 2001 and 2000. All
         such adjustments are of a normal recurring nature. The results of
         operations for the three months ended June 30, 2001 are not necessarily
         indicative of the results to be expected for the year ending March 31,
         2002. For further information, refer to the consolidated financial
         statements and footnotes thereto for the year ended March 31, 2001
         contained in the Company's Form 10-K filed on June 29, 2001.


3.       ADOPTION OF NEW ACCOUNTING STANDARDS - Effective April 1, 2001, the
         Company adopted Statement of Financial Accounting Standards ("SFAS")
         No. 142 - Goodwill and Other Intangible Assets. These standards require
         the Company to no longer amortize goodwill. This results in a material
         increase in net earnings and earnings per share.

         The prior period figures have not been restated for the impact of SFAS
         No. 142. The tables below provide a reconciliation of previously
         reported earnings to the earnings adjusted for SFAS No. 142.


<PAGE>
                                      -7-


<TABLE>
<CAPTION>
                                                                                Three months ended June 30
                                                                                   2001                 2000
                                                                         ------------------------------------
<S>                                                                              <C>                  <C>
         Reported net earnings before extraordinary item                         $7,090               $4,679
         Goodwill amortization                                                                           812
         Minority interest                                                                               (74)
                                                                         ---------------      ---------------
         Adjusted net earnings before extraordinary item                         $7,090               $5,417
                                                                         ---------------      ---------------

         Reported net earnings                                                   $6,293               $4,679
         Goodwill amortization                                                                           812
         Minority interest                                                                               (74)
                                                                         ---------------      ---------------
         Adjusted net earnings                                                   $6,293               $5,417
                                                                         ---------------      ---------------
         NET EARNINGS PER SHARE BEFORE EXTRAORDINARY ITEM:
            BASIC
         Reported                                                                 $0.53                $0.36
         Goodwill amortization                                                                          0.06
         Minority interest                                                                                 -
                                                                         ---------------      ---------------
         Adjusted                                                                 $0.53                $0.42
                                                                         ---------------      ---------------
            DILUTED
         Reported                                                                 $0.49                $0.34
         Goodwill amortization                                                                          0.06
         Minority interest                                                                                 -
                                                                         ---------------      ---------------
         Adjusted                                                                 $0.49                $0.40
                                                                         ---------------      ---------------
         NET EARNINGS PER SHARE:
            BASIC
         Reported                                                                 $0.47                $0.36
         Goodwill amortization                                                                          0.06
         Minority interest                                                                                 -
                                                                         ---------------      ---------------
         Adjusted                                                                 $0.47                $0.42
                                                                         ---------------      ---------------
            DILUTED
         Reported                                                                 $0.44                $0.34
         Goodwill amortization                                                                          0.06
         Minority interest                                                                                 -
                                                                         ---------------      ---------------
         Adjusted                                                                 $0.44                $0.40
                                                                         ---------------      ---------------
</TABLE>



4.       LONG-TERM DEBT - On June 29, 2001, the Company amended and restated its
         lending agreement to allow for the issuance of additional debt. The
         amended and restated agreement provides a $140 million committed senior
         revolving credit facility (the "Credit Facility") renewable and
         extendible in 364-day increments, and if not renewed, a two-year final
         maturity. The Credit Facility allows for borrowing in either U.S. or
         Canadian currency and bears interest at 1.50% to 3.00% over floating
         reference rates, depending on certain leverage ratios. At June 30,
         2001, the Company had drawn $50.9 million on the Credit Facility, and
         had $89.1 million of available un-drawn credit.

         Also on June 29, 2001, the Company completed a private placement of
         $100 million of 8.06% fixed-rate Senior Secured Notes (the "Notes").
         The Notes have a final maturity of ten years, with equal annual
         principal repayments beginning at the end of the fourth year, resulting
         in a seven-year average life.

         The Credit Facility and the Notes are pari-passu in terms of security.
         The Company has granted the lenders and Note-holders various security
         including the following: an interest in

<PAGE>
                                      -8-


         all of the assets of the Company including the Company's share of its
         subsidiaries, an assignment of material contracts and an assignment of
         the Company's "call rights" with respect to shares of the subsidiaries
         held by minority interests.

         The covenants and other limitations within the amended lending
         agreement and the Note agreement are substantially the same. The
         covenants require the Company to maintain certain ratios including
         leverage, fixed charge coverage, interest coverage and net worth. Other
         limitations include prohibition from paying dividends, and without
         prior approval, from undertaking certain mergers, acquisitions and
         dispositions.


5.       COMPREHENSIVE INCOME - Total comprehensive income was $6,166 and $4,231
         for the three months ended June 30, 2001 and 2000, respectively. Total
         comprehensive income includes net earnings, foreign currency exchange
         adjustments and current income taxes on realized foreign exchange gains
         for income tax purposes.


6.       SEGMENTED INFORMATION - Within the Property Services division, three
         operating units (Residential Property Management, Integrated Security
         Services and Consumer Services) provide a variety of services to
         residential and commercial customers. The Business Services division
         provides customer support & fulfillment and business process
         outsourcing services to corporate and institutional clients.


OPERATING SEGMENTS

<TABLE>
<CAPTION>
                                  Property         Property
                                Services -       Services -       Property
                               residential       integrated     Services -
                                  property         security       consumer       Business
                                management         services       services       Services       Corporate     Consolidated
                              -------------    -------------    -----------    -----------     -----------    -------------
<S>                                <C>              <C>            <C>            <C>            <C>              <C>
THREE MONTH PERIOD ENDED
JUNE 30, 2001
Revenues                           $56,995          $22,874        $25,613        $31,031             $62         $136,575
                              -------------    -------------    -----------    -----------     -----------    -------------
Operating profit                     5,961            1,595          5,132          4,297          (1,181)          15,804
                              -------------    -------------    -----------    -----------     -----------    -------------
Total assets                        95,311           45,743         61,297        126,303           9,313          337,967
                              -------------    -------------    -----------    -----------     -----------    -------------

THREE MONTH PERIOD ENDED
JUNE 30, 2000
Revenues                           $46,611          $15,231        $24,527        $18,977             $45         $105,391
                              -------------    -------------    -----------    -----------     -----------    -------------
Operating profit                     4,638              609          4,430          3,282         (1,220)           11,739
                              -------------    -------------    -----------    -----------     -----------    -------------
Total assets                        82,472           32,834         53,987         75,085           3,907          248,285
                              -------------    -------------    -----------    -----------     -----------    -------------
</TABLE>



GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
                                       Canada         United States     Consolidated
                                    -------------    ---------------    -------------
<S>                                      <C>                <C>             <C>
THREE MONTH PERIOD ENDED
JUNE 30, 2001
Revenues                                 $47,874            $88,701         $136,575
                                    -------------    ---------------    -------------
Total assets                             112,632            225,335          337,967
                                    -------------    ---------------    -------------

THREE MONTH PERIOD ENDED
JUNE 30, 2000
Revenues                                 $32,194            $73,197         $105,391
                                    -------------    ---------------    -------------
Total assets                              67,710            180,575          248,285
                                    -------------    ---------------    -------------
</TABLE>

<PAGE>
                                      -9-


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(in U.S. dollars)

FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains or incorporates by reference certain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company intends that such forward-looking
statements be subject to the safe harbors created by such legislation. Such
forward-looking statements involve risks and uncertainties and include, but are
not limited to, statements regarding future events and the Company's plans,
goals and objectives. Such statements are generally accompanied by words such as
"intend", "anticipate", "believe", "estimate", "expect" or similar statements.
The Company's actual results may differ materially from such statements. Among
the factors that could result in such differences are the impact of weather
conditions, increased competition, labor shortages, the condition of the United
States and Canadian economies and the ability of the Company to make
acquisitions at reasonable prices. Although the Company believes that the
assumptions underlying its forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in such forward-looking statements will be
realized. The inclusion of such forward-looking statements should not be
regarded as a representation by the Company or any other person that the future
events, plans or expectations contemplated by the Company will be achieved. The
Company notes that past performance in operations and share price are not
necessarily predictive of future performance.

RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2001 AND 2000

Revenues increased $31.2 million, or 30%, to $136.6 million in the first quarter
of fiscal 2002 from $105.4 million in the first quarter of fiscal 2001.
Approximately $22.0 million of the increase is attributable to acquired
companies owned less than one year including Herbert A. Watts Ltd. ("Watts"),
Security Services and Technologies ("SST") and several smaller tuck-under
acquisitions.

Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased 30% to $18.8 million from $14.5 million in the prior year period. The
EBITDA margin for the three months ended June 30, 2001 was 13.7%, unchanged
versus the prior year.

Depreciation for the quarter ended June 30, 2001 was $2.8 million, up 58% from
the prior year quarter due largely to acquisitions. In accordance with Statement
of Financial Accounting Standards ("SFAS") No. 142 - Goodwill and Other
Intangible Assets, effective April 1, 2001, goodwill is no longer being
amortized in the Statement of Earnings.

Interest expense for the quarter increased 19% over prior year levels to $2.7
million as a result of increased borrowings related to acquisitions offset by
lower interest rates. All acquisitions completed during the past year have been
financed through the Company's credit facilities.

The income tax provision for the second quarter was approximately 35% of
earnings before taxes, lower than the 40% recorded in the prior year. Before the
adoption of SFAS No. 142, the fiscal 2002 tax rate was 38%.

<PAGE>
                                      -10-


Minority interest increased to $1.5 million or 17.0% of earnings before minority
interest from $1.1 million or 16.9% in the prior year quarter (adjusted for SFAS
No. 142). The 32% increase in minority interest reflects the 31% increase in
earnings before minority interest.

Net earnings before the extraordinary item were $7.1 million, up 31% over the
prior year period (adjusted for SFAS No. 142), while diluted earnings per share
increased 23% to $0.49 from $0.40. The increase in diluted earnings per share
reflects a 6% increase in the weighted average share count as a result of shares
issued upon the exercise of options and an increase in dilution caused by the
80% increase in the average market price of the Company's shares relative to the
prior year.

On June 29, 2001, the Company recorded an extraordinary loss of $797,000 (after
taxes) on the early retirement of debt. The loss represented the unamortized
portion of financing fees related to the prior credit facility. The prior credit
facility was terminated to allow for the issuance of additional senior debt.

Revenues for the Property Services division were $105.5 million, an increase of
$19.1 million or 22% over the prior year due to internal growth of approximately
8% as well as several acquisitions. Property Services EBITDA grew 24% to $14.5
million or 13.7% of revenue compared to $11.6 million or 13.5% of revenue in the
prior year. The Property Services division is comprised of three service lines -
Residential Property Management, Integrated Security Services and Consumer
Services.

Residential Property Management revenue was $57.0 million for the quarter, up
22% over the prior year. EBITDA grew 26% to $7.1 million, while EBITDA margins
increased to 12.4% from 12.0% last year. Organic revenue growth was 10%, with
the balance coming from acquisitions completed in the past 12 months, most
notably Aquashield Corporation, a building restoration contractor in South
Florida, Arco Management, a residential property manager in New York City, and
Dickinson Management, a full-service residential property manager operating in
Jupiter and Palm Beach County in Florida.

Integrated Security Services posted revenue of $22.9 million, up 50% over the
prior year reflecting the impact of the acquisition of SST, which was acquired
in July 2000, together with strong internal growth. EBITDA was $1.9 million,
double the prior year's figure, while EBITDA margins improved from 6.2% last
year to 8.3% in the current quarter. Margin improvement resulted from a shift in
service mix toward higher-margin systems integration, with reduced emphasis on
security officer services.

In Consumer Services, revenue advanced to $25.6 million, an increase of 4% over
last year, while EBITDA increased to $5.5 million, up 8%. The margin was 21.4%
compared to 20.7% in the prior year period. Revenue growth was attributable to
the Creative Closets Boston acquisition completed in October 2000. Internal
revenue growth was flat for two reasons: a planned decline in product sales at
California Closets and production timing at the lawn care operations. California
Closets has historically provided laminated board and other supplies to
franchisees, but has decided to transition away from this practice and instead
facilitate direct relationships between franchisees and product suppliers. This
has the impact of lowering California Closets revenue and inventory but
increasing margins. California Closets system-wide sales were up over the prior
year period. Lawn care operations, located in Canada, experienced a slow start
to the season due to residual snow cover that lasted into mid-April. As a
result, at quarter-end, revenue from lawn care services was two to three weeks
behind where it was last year despite gains in customer count. Lawn care
operations are expected to get back on schedule in the second and third
quarters.

<PAGE>
                                      -11-

Revenues for the Business Services division rose to $31.0 million for the third
quarter, a 64% increase over the prior year primarily from the impact of the
acquisition of Watts. Business Services EBITDA increased to $5.5 million or
17.6% of revenue, compared to $4.0 million and 21.2% of revenue in the prior
year. The margin decline is attributable to the change in service mix resulting
from the Watts acquisition.

Corporate expenses remained flat at $1.2 million versus the prior year period in
the first quarter.

SEASONALITY AND QUARTERLY FLUCTUATIONS

Certain segments of the Company's operations, which in the aggregate comprise
approximately 15% of revenues, are subject to seasonal variations. Specifically,
the demand for residential lawn care, exterior painting, and commercial swimming
pool services in the northern United States and in Canada is highest during late
spring, summer and early fall and very low during winter. As a result, these
operations generate a large percentage of their annual revenues between April
and September. The Company has historically generated lower profits or net
losses during its third and fourth fiscal quarters, from October to March.
Residential Property Management (with the exception of swimming pool services),
Integrated Security Services, and Business Services generate revenues evenly
throughout the fiscal year.

The seasonality of swimming pool services and certain Consumer Services
operations (exterior painting and lawn care) results in variations in quarterly
EBITDA margins. Variations in quarterly EBITDA margins can also be caused by
acquisitions which alter the consolidated service mix. The Company's
non-seasonal businesses typically generate a consistent EBITDA margin over all
four quarters, while the Company's seasonal businesses experience high EBITDA
margins in the first two quarters, offset by negative EBITDA in the last two
quarters. As non-seasonal revenues increase as a percentage of total revenues,
the Company's quarterly EBITDA margin fluctuations should be reduced.

LIQUIDITY AND CAPITAL RESOURCES

On June 29, 2001, the Company amended and restated its lending agreement to
allow for the issuance of additional debt. The amended and restated agreement
provides a $140 million committed revolving credit facility (the "Credit
Facility") renewable and extendible in 364-day increments, and if not renewed, a
two-year final maturity. The Credit Facility allows for borrowing in U.S. and /
or Canadian currency and bears interest at 1.50% to 3.00% over floating
reference rates, depending on certain leverage ratios. Also on June 29, 2001,
the Company completed a private placement of $100 million of 8.06% Senior
Secured Notes (the "Notes"). The Notes have a final maturity of ten years, with
equal annual principal repayments beginning at the end of the fourth year,
resulting in a seven-year average life. Covenants and other limitations within
the amended lending agreement and the Notes are similar to those contained in
the prior lending agreement.

In connection with the Credit Facility and the Notes, the Company incurred
legal, agency and placement fees totaling $2.6 million, which will be amortized
over the life of the associated debt.

The Company believes these new credit arrangements will provide stability and
flexibility to finance acquisitions and working capital requirements for the
foreseeable future. Under the new credit arrangements, un-drawn available credit
under the Credit Facility was $89.1 million at June 30, 2001. The higher
interest rates with the new credit arrangements, relative to the prior lending
agreement, offset by recent declines in LIBOR, will result in a slightly higher
average interest rate in fiscal 2002.


<PAGE>
                                      -12-


During the quarter ended June 30, 2001, capital expenditures were $5.0 million.
Significant items included $1.6 million for service vehicles, $1.2 million for a
building in South Florida for the expansion of Residential Property Management
operations, and $1.0 million in computer equipment and software purchases,
primarily in Business Services.

Business acquisitions for the quarter totaled $1.2 million, comprised of two
Residential Property Management tuck-under acquisitions completed during the
quarter. In connection with certain acquisitions, the Company has agreed to pay
additional consideration based on operating results of the acquired entities.
The payment of any such amounts would be in cash and would result in an increase
in the purchase prices for such acquisitions and, as a result, additional
goodwill.





<PAGE>
                                      -13-


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K



<TABLE>
<S>      <C>      <C>               <C>
1.       a)       Exhibits

                  3.1*              Articles of Incorporation and Amendment

                  3.2*              By-Laws and Amendments

                  10.1*             Credit Facility dated April 1, 1999 among the Company and
                                    syndicate of bank lenders

                  10.2**            FirstService Corporation Amended Stock Option Plan # 2

                  10.3**            FirstService Corporation Amended Share Purchase Plan # 2

                  10.4***           Amended and Restated Credit Agreement Dated
                                    June 21, 2001 among the Company and
                                    syndicate of bank lenders

                  10.5***           Note and Guarantee Agreement - $US100 million 8.06%
                                    Guaranteed Senior Secured Notes due 2011


         b)       Reports on Form 8-K

                  None.
</TABLE>

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

*    Incorporated by reference to the Company's report on Form 10-Q for the
     period ended June 30, 1999.

**   Incorporated by reference to the Company's report on Form 10-K for the year
     ended March 31, 2000.

***  Included herein.


<PAGE>
                                      -14-


SIGNATURE



         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Date:   August 14, 2001

                            FIRSTSERVICE CORPORATION



                            /s/ D. Scott Patterson
                            -------------------------------------------------
                            D. Scott Patterson
                            Senior Vice President and Chief Financial Officer
                            (PRINCIPAL FINANCIAL OFFICER & AUTHORIZED SIGNATORY)







</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>3
<FILENAME>a2056788zex-10_4.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>

<PAGE>


                                                                    Exhibit 10.4


                   THIRD AMENDED AND RESTATED CREDIT AGREEMENT

                            DATED AS OF JUNE 21, 2001

                            FIRSTSERVICE CORPORATION

                              AS CANADIAN BORROWER

                                       AND

                          FIRSTSERVICE (USA), INC. AND

                            FIRSTSERVICE DELAWARE, LP

                                AS U.S. BORROWERS

                                       AND

                          THE WHOLLY-OWNED SUBSIDIARIES

                       NAMED ON THE EXECUTION PAGES HEREOF

                             AS UNLIMITED GUARANTORS

                                       AND

                  THE BANKS NAMED ON THE EXECUTION PAGES HEREOF

                                   AS LENDERS

                                  BANK ONE, NA

                              AS SYNDICATION AGENT

                                       AND

                            THE TORONTO-DOMINION BANK


                               AS COLLATERAL AGENT

                                       AND


                            THE TORONTO-DOMINION BANK

                        AS CANADIAN ADMINISTRATION AGENT

                                       AND

                          TORONTO DOMINION (TEXAS) INC.



<PAGE>



                          AS U.S. ADMINISTRATION AGENT

MEIGHEN DEMERS LLP                                         FOGLER  RUBINOFF LLP

LENDERS'  COUNSEL                                   BORROWERS' CANADIAN COUNSEL



<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>      <C>                                                                         <C>
ARTICLE I
DEFINITIONS............................................................................2
         1.1      Definitions..........................................................2
         1.2      References..........................................................19
         1.3      Interpretation......................................................20
         1.4      Headings and Table of Contents......................................20
         1.5      Accounting Terms....................................................20
         1.6      Recitals............................................................21
         1.7      Precedence..........................................................21
ARTICLE II
FACILITIES        ....................................................................21
         2.1      The Credit Facilities...............................................21
         2.2      Notice and Revolving Nature of Borrowings...........................21
         2.3      Conversion..........................................................25
         2.4      Making Borrowings...................................................25
         2.5      Participation of Each Lender........................................26
         2.6      Bankers' Acceptances................................................26
         2.7      Acceptance Date Procedure...........................................28
         2.8      Purchase of Bankers' Acceptances....................................29
         2.9      Payment of Bankers' Acceptances.....................................29
         2.10     Set-Off and Netting.................................................30
         2.11     Letters of Credit...................................................30
ARTICLE III
REPAYMENT AND ACCOUNTS................................................................32
         3.1      Repayment...........................................................32
         3.2      Accounts kept by the Canadian Agent.................................32
         3.3      Accounts kept by the Canadian Swingline Lender......................32
         3.4      Accounts kept by the U.S. Swingline Lender..........................33
         3.5      Accounts kept by the U.S. Agent.....................................33
         3.6      Accounts kept by each Canadian Lender...............................33
         3.7      Accounts kept by U.S. Lenders.......................................34
         3.8      Promissory Notes....................................................34
         3.9      Excess Resulting from Exchange Rate Change..........................34
         3.10     Currency............................................................35
         3.11     Extension of Final Maturity Date....................................35
ARTICLE IV
INTEREST, ACCEPTANCE FEE, LETTER OF CREDIT FEE AND COMMITMENT FEES....................36
         4.1      Interest on Libor Loans.............................................36
         4.2      Interest on U.S. Base Rate Loans....................................37
         4.3      Interest on Prime Rate Loans........................................38
         4.4      Interest on U.S. Prime Rate Loans...................................38
</TABLE>


                                      -i-

<PAGE>
<TABLE>
<CAPTION>

<S>      <C>                                                                         <C>
         4.5      Libor Interest Periods..............................................39
         4.6      Interest on Overdue Amounts.........................................39
         4.7      Acceptance Fee......................................................40
         4.8      Commitment Fees.....................................................40
         4.9      Letter of Credit Fronting Fee.......................................40
         4.10     Effective Date for Changes in Applicable Margins....................41
ARTICLE V
CONDITIONS PRECEDENT..................................................................41
         5.1      Conditions Precedent................................................41
         5.2      Conditions Precedent to Borrowings to make Acquisitions.............43
         5.3      Waiver..............................................................44
         5.4      Hostile Takeover....................................................44
ARTICLE VI
PREPAYMENT, CANCELLATION, MANDATORY APPLICATION OF CASH PROCEEDS......................44
         6.1      Prepayment and Cancellation.........................................44
         6.2      Notice..............................................................45
         6.3      Status of Lender....................................................45
         6.4      Fees................................................................46
         6.5      Mandatory Application of Cash Proceeds..............................46
ARTICLE VII
SPECIAL LIBOR AND INCREASED COST PROVISIONS...........................................46
         7.1      Substitute Rate of Borrowing........................................46
         7.2      Increased Cost......................................................47
         7.3      Illegality..........................................................48
         7.4      Indemnity...........................................................48
         7.5      Other Increased Costs or Reductions in Return.......................48
         7.6      Additional Cost in Respect of Tax...................................51
         7.7      Claims under Section 7.6............................................51
         7.8      Tax Receipts........................................................51
         7.9      Internal Revenue Service Forms......................................52
ARTICLE VIII
REPRESENTATIONS, WARRANTIES & COVENANTS...............................................53
         8.1      Representations and Warranties......................................53
         8.2      Covenants...........................................................56
ARTICLE IX
EVENTS OF DEFAULT.....................................................................66
         9.1      Events of Default...................................................66
         9.2      Security............................................................69
         9.3      Remedies Not Exclusive..............................................69
         9.4      Set-Off.............................................................69
ARTICLE X
PAYMENTS..............................................................................70
</TABLE>


                                      -ii-


<PAGE>
<TABLE>
<CAPTION>


<S>      <C>                                                                         <C>
         10.1     Payments to Agents/Swingline Lenders................................70
         10.2     Payments by Lenders to Agents.......................................71
         10.3     Payments by Agents to Borrowers.....................................71
         10.4     Distribution to Lenders and Application of Payments.................71
         10.5     No Set-Off or Counterclaim..........................................71
         10.6     Non-Receipt By Agents...............................................72
         10.7     When Due Date Not Specified.........................................72
         10.8     Agents' Authority to Debit..........................................72
ARTICLE XI
EXPENSES..............................................................................72
         11.1     Payment of Expenses.................................................72
         11.2     Survival............................................................73
         11.3     Environmental Indemnity.............................................73
ARTICLE XII
FEES..................................................................................75
         12.1     Agency Fee..........................................................75
         12.2     Miscellaneous.......................................................75
ARTICLE XIII
THE AGENTS............................................................................75
         13.1     Agents..............................................................75
         13.2     Agents' Responsibility..............................................76
         13.3     Agents' Duties......................................................77
         13.4     Protection of Agents................................................77
         13.5     Indemnification of Agents...........................................78
         13.6     Termination or Resignation of Agent.................................79
         13.7     Rights of an Agent as Lender........................................79
         13.8     Authorized Waivers, Variations and Omissions........................79
         13.9     Financial Information Concerning the Borrowers or Guarantors........80
         13.10    Knowledge of Financial Situation of Borrowers.......................80
         13.11    Legal Proceedings...................................................80
         13.12    Capacity as Agent...................................................80
         13.13    Deposits or Loans Respecting the Borrowers..........................81
ARTICLE XIV
ASSIGNMENTS AND TRANSFERS.............................................................81
         14.1     Benefit of Agreement................................................81
         14.2     Assignments and Transfers by a Borrower or an Unlimited Guarantor...81
         14.3     Assignments and Transfers by a Lender...............................81
         14.4     Transfer Certificate................................................82
         14.5     Notice..............................................................83
         14.6     Sub-Participations..................................................83
         14.7     Disclosure..........................................................84
         14.8     Assignment to Federal Reserve Bank..................................84
ARTICLE XV
GOVERNING LAW, COURTS AND JUDGMENT CURRENCY...........................................84
</TABLE>


                                     -iii-


<PAGE>
<TABLE>
<CAPTION>

<S>      <C>                                                                         <C>
         15.1     Governing Law.......................................................84
         15.2     Courts..............................................................84
         15.3     Judgment Currency...................................................85
ARTICLE XVI
GUARANTORS' OBLIGATIONS...............................................................85
         16.1     Guarantee...........................................................85
ARTICLE XVII
MISCELLANEOUS.........................................................................87
         17.1     Equal Ranking of Lenders............................................87
         17.2     Sharing of Information..............................................87
         17.3     Severability........................................................88
         17.4     Remedies and Waivers................................................88
         17.5     Direct Obligation...................................................88
         17.6     Notices.............................................................88
         17.7     Counterparts........................................................89
         17.8     Limit on Rate of Interest...........................................89
         17.9     No Merger or Novation...............................................90
</TABLE>


                                      -iv-


<PAGE>



                                    SCHEDULES

         "A"      Call Price Formulae

         "B"      Net Proceeds of Bankers' Acceptances

         "C"      Security

         "D"      Shareholders' Agreements

         "E"      Form of Transfer Certificate

         "F"      Form of Undertaking

         "G"      Form of Conversion Notice

         "H"      Form of Drawdown Notice

         "I"      Details of Issue

         "J"      Form of Compliance Certificate

         "K"      Intentionally Deleted

         "L"      Commitments

         "M"      Intentionally Deleted

         "N"      Form of Officer's Certificate Re: Acquisition Facility

         "O"      Intentionally Deleted

         "P"      Permitted Encumbrances

         "Q"      Form of Promissory Note



<PAGE>




                   THIRD AMENDED AND RESTATED CREDIT AGREEMENT
                            DATED AS OF JUNE 21, 2001

AMONG:

                  FIRSTSERVICE  CORPORATION,  a corporation duly organized and
                  existing under the laws of Ontario,

AND:

                  FIRSTSERVICE  (USA),  INC., a corporation  duly  organized and
                  existing   under  the  laws  of  the  State  of  Delaware  and
                  FIRSTSERVICE   DELAWARE,   LP,  a  limited   partnership  duly
                  organized  and  existing  under  the  laws  of  the  State  of
                  Delaware,

AND:

                  THE WHOLLY-OWNED SUBSIDIARIES NAMED ON THE EXECUTION PAGES
                  HEREOF

AND:

                  THE BANKS NAMED ON THE EXECUTION PAGES HEREOF, as lenders

AND:

                  BANK ONE, NA, as syndication agent

AND:

                  THE TORONTO-DOMINION BANK, as collateral agent,

AND:

                  THE TORONTO-DOMINION BANK, as Canadian administration agent


AND:

                  TORONTO DOMINION (TEXAS) INC. as U.S. administration agent

         WHEREAS, the Canadian Borrower, the Unlimited Guarantors, Dresdner Bank
Canada,  The  Toronto-Dominion  Bank, First Chicago NBD Bank Canada and Dresdner
Bank Canada as Agent  entered into a Credit  Agreement  dated as of December 16,
1996 (the "Original Credit Agreement");


<PAGE>


                                      -2-


         AND WHEREAS,  the Original Credit Agreement was amended as of August 7,
1997, September 30, 1997, January 8, 1998, January 12, 1998 and May 13, 1998;

         AND WHEREAS the  Original  Credit  Agreement so amended was amended and
restated by way of an amended and restated credit  agreement dated as of June 1,
1998 (the "First Amended and Restated Credit Agreement");

         AND WHEREAS the First Amended and Restated Credit Agreement was amended
and restated by way of a second amended and restated  credit  agreement dated as
of April 1, 1999 (the "Second Amended and Restated Credit Agreement");

         AND WHEREAS,  the parties  hereto desire to amend and restate the terms
of the Second Amended and Restated Credit Agreement;

         AND WHEREAS the Borrowers have requested that:

         (a)      the Canadian  Lenders make available to the Canadian  Borrower
                  the  Canadian  Revolving  Facility  to  finance  acquisitions,
                  working capital needs,  capital  expenditures  and for general
                  corporate   purposes  of  the   Canadian   Borrower   and  its
                  Subsidiaries; and

         (b)      the U.S. Lenders make available to the U.S. Borrowers the U.S.
                  Revolving  Facility to finance  acquisitions,  working capital
                  needs, capital expenditures and for general corporate purposes
                  of Subsidiaries of the Canadian Borrower located in the United
                  States.


         AND WHEREAS,  the Canadian  Borrower  has requested  that the Canadian
Swingline Lender make the Canadian Swingline Facility available to the Canadian
Borrower and the U.S. Borrowers  have requested that the  U.S. Swingline Lender
make the U.S. Swingline Facility available to the U.S. Borrowers;

         AND WHEREAS the Lenders are willing to grant the  Facilities  upon and
subject to the following  terms and conditions;

         NOW  THEREFORE  in  consideration  of the  respective  covenants of the
parties contained herein and other good and valuable  consideration (the receipt
and sufficiency of which is hereby  acknowledged)  the parties amend and restate
with effect as and from the Effective  Date the terms of the Second  Amended and
Restated Credit Agreement and the parties agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

1.1      DEFINITIONS


<PAGE>


                                      -3-


         In this Agreement,  unless the context  otherwise  requires,  the terms
defined in the  introduction  of the parties  and the  recitals  shall have,  as
herein used, the same meanings and:

"ACCEPTANCE DATE" means any Business Day on which a Bankers' Acceptance is or is
requested to be issued hereunder.

"ACCEPTANCE FEE" means in respect of any Bankers' Acceptance  outstanding at any
time on or  after  the  Effective  Date the  Acceptance  Fees  described  in the
definition of Applicable Margin.

"ACCOMMODATION" has the meaning attributed thereto in Section 7.5 (a).

"ACCOUNTS" means the accounts kept by the Canadian Agent, the Canadian Swingline
Lender,  the  U.S.  Agent  or the  U.S.  Swingline  Lender,  as the case may be,
pursuant to Section 3.2, 3.3, 3.4 and 3.5 to record the  Borrowers'  liabilities
to the Agents and each Lender under this Agreement.

"ACQUISITION  ENTITY"  means  an  Eligible  Business  acquired  by the  Canadian
Borrower or a Subsidiary thereof as permitted under this Agreement.

"ADDITIONAL COMPENSATION" has the meaning attributed thereto in Section 7.2.

"ADDITIONAL OTHER COMPENSATION"  has the  meaning  attributed thereto in Section
7.5.

"ADVANCE" means an advance of money under the Facilities.

"AFFECTED SUBSIDIARY" means any Subsidiary other than the Wholly-Owned
Subsidiaries.

"AFFILIATE"  means,  in respect of any Person (the "first  Person"),  any Person
which,  directly or indirectly,  controls or is controlled by or is under common
control with the first Person; and for the purpose of this definition, "control"
(including,  with  correlative  meanings,  the terms  "controlled by" and "under
common  control with") means the power to direct,  or cause to be directed,  the
management  and  policies of a Person  whether  through the  ownership of voting
shares or by contract or otherwise.

"AGENTS" means  collectively  the Canadian Agent,  the Collateral  Agent and the
U.S. Agent and "Agent" means any one of the Canadian Agent, the Collateral Agent
or the U.S. Agent.

"AGREEMENT"  means this Third Amended and Restated Credit  Agreement dated as of
June 21, 2001 and any future amendments or supplements to it.

"AMOUNT" has the meaning attributed thereto in Section 9.1(n)(ii)(B).


<PAGE>


                                      -4-


"APPLICABLE MARGIN" means the following fees, rates and margins per annum:

<TABLE>
<CAPTION>

                                      Total Debt/Consolidated      Total Debt/Consolidated      Total Debt/Consolidated
                                              EBITDA                       EBITDA                        EBITDA
                                         Ratio of < 2.5:1       Ratio of > =2.5:1 but < 3.0:1       Ratio of > =3.0:1
<S>                                            <C>                          <C>                          <C>
Acceptance Fee                                 1.50%                        2.25%                        3.00%
U.S. Base Rate Margin                          0.50%                        1.25%                        2.00%
Letter of Credit Fee                           1.50%                        2.25%                        3.00%
Libor Margin                                   1.50%                        2.25%                        3.00%
Prime Rate Margin                              .50%                         1.25%                        2.00%
Commitment Fee                                 .375%                        .50%                          .75%
</TABLE>

Changes in the  Applicable Margins  become effective in accordance with  Section
4.10.

"AUTHORIZED  SIGNATORY"  in relation to a Borrower and any  communication  to be
made or document to be executed or  certified  by it, means at any time a Person
who is at  such  time  duly  appointed  as such by  such  Borrower  in a  manner
acceptable to the Canadian Agent or the U.S.  Agent,  as the case may be, acting
reasonably.

"AVAILABLE PROCEEDS" has the meaning ascribed to it in Section 2.7 (b) (iv).

"B/A  MATURITY  DATE",  in respect of a Bankers'  Acceptance,  means the date on
which such Bankers' Acceptance matures.

"BA DISCOUNT RATE" means,  in relation to any Bankers'  Acceptance,  the average
rate (calculated on the basis of 365 days and rounded upwards to the nearest one
hundredth  of one  percent  (0.01%),  if such  average  is not a  multiple)  for
Canadian  Dollar bankers'  acceptances  having a comparable term that appears on
the Reuters  Screen CDOR Page (or such other page as is a  replacement  page for
such bankers'  acceptances) at 10:00 a.m.  (Toronto,  Ontario time) for bankers'
acceptances to be accepted by Schedule I Canadian Banks (the "CDOR Rate") and in
the case of Bankers  Acceptances  to be accepted by Canadian  Lenders  which are
Schedule II Canadian  Banks the lesser of (a) the bid rate quoted by such Lender
for its own  bankers'  acceptances  of a like term with effect as at or about 10
a.m. on the applicable  Drawdown Date or Conversion  Date; and (b) the CDOR Rate
plus 10 basis points.  If the CDOR Rate is not available at such time,  the rate
otherwise determined by the Canadian Agent at or about 10:00 a.m. on the date of
acceptance of such Bankers'  Acceptance as the discount rate (rounded upwards to
the nearest one-one hundredth of one percent (0.01%) based on a year of 365 days
applicable  to bankers'  acceptances  with terms  equivalent to the term of such
Bankers' Acceptances;


<PAGE>

                                      -5-


"BANKERS'  ACCEPTANCE"  means a bill of  exchange  or a  depository  note,  duly
completed  and  accepted  by a  Canadian  Lender  under the  Canadian  Revolving
Facility pursuant to this Agreement.

"BORROWERS"  means the Canadian  Borrower and the U.S.  Borrowers and "Borrower"
means either the Canadian Borrower or either of the U.S. Borrowers.

"BORROWERS'  CANADIAN  COUNSEL"  means  Fogler,  Rubinoff  or any other  firm of
solicitors  selected by the  Borrowers  and  acceptable  to the Canadian  Agent,
acting reasonably.

"BORROWERS' U.S.  COUNSEL" means Shearman & Sterling or Ferrante & Associates or
any one or more firms of attorneys  selected by the Borrowers and  acceptable to
the U.S. Agent, acting reasonably.

"BORROWING"  means a utilization of a Facility by way of Loans,  by the issue of
Bankers' Acceptances or by the issue of Letters of Credit.

"BUSINESS DAY" means

(a)      in respect of Borrowings  available to a Borrower by way of Libor Loans
         and payments in  connection  therewith,  a day (other than  Saturday or
         Sunday) which is a day for trading by and between banks in U.S.  Dollar
         deposits in the London  interbank  market  which is also a day on which
         banks are generally open for business in New York City and Toronto;

(b)      in respect of  Borrowings  available to a Borrower by way of U.S.  Base
         Rate Loans or Letters of Credit denominated in U.S.$, a day (other than
         Saturday or Sunday) on which banks are  generally  open for business in
         New York City and Toronto; and

(c)      for all other purposes of this Agreement, a day (other than Saturday or
         Sunday) on which banks are generally open for business in Toronto.

"CALL OPTION TRIGGERING EVENT" means, in respect of any Affected Subsidiary:

(a)      the 61st day following the  commencement  of any actions or proceedings
         against such  Subsidiary or against any of the property  thereof before
         any court,  governmental  agency or  arbitrator  which,  if  determined
         adversely,  may  have  a  material  adverse  effect  on  the  financial
         condition or operations of such Subsidiary unless the Canadian Borrower
         shall have satisfied the Majority  Lenders that such  Subsidiary  shall
         not be materially  and adversely  affected by such action or proceeding
         or the consequences arising therefrom; or

(b)      the 31st day following the receipt by such  Subsidiary of any Violation
         Notice which, if same were enforced, may have a material adverse effect
         on the financial condition or operations of such Subsidiary, unless the
         Canadian  Borrower shall have satisfied


<PAGE>


                                      -6-


         the Majority  Lenders  that such  Subsidiary  shall not be  materially
         and  adversely  affected  by such Violation Notice or the consequences
         arising therefrom; or

(c)      the EBITDA of such Subsidiary for any period of 4 consecutive  Quarters
         ended (the "Relevant 4 Quarter  Period") is at least 50% less than such
         Subsidiary's  EBITDA for the period of 4  consecutive  Quarters  ending
         immediately  prior to the commencement of the Relevant 4 Quarter Period
         (an "Earnings Call Option Triggering Event").

"CALL OPTION  TRIGGERING  EVENT NOTICE" means a written notice from the Canadian
Agent,  if the  Canadian  Agent is so directed by the Majority  Lenders,  to the
Canadian  Borrower   requiring  the  Canadian  Borrower  to  cause  an  Affected
Subsidiary  in  respect  of which a Call  Option  Triggering  Event  shall  have
occurred to become a Direct Guarantor; provided that, Majority Lenders shall not
be entitled to direct the Canadian Agent to issue a Call Option Triggering Event
Notice  following the  occurrence of an Earnings  Call Option  Triggering  Event
unless the Canadian Borrower has a Total Debt to Consolidated EBITDA Ratio equal
to or greater than 3.25 to 1.

"CALL PRICE FORMULAE" means the call price formulae described on Schedule "A".

"CANADIAN AGENT" means The Toronto-Dominion  Bank and its successors and assigns
duly appointed in accordance with Section 13.6.

"CANADIAN ASSIGNEE" has the meaning ascribed to it in Section 14.3(a).

"CANADIAN BORROWER" means FirstService Corporation.

"CANADIAN  DOLLARS"  means  the  lawful  money  of  Canada  and  "CDN  $"  has a
corresponding meaning.

"CANADIAN FACILITIES"  means the  Canadian  Revolving Facility  and the Canadian
Swingline.

"CANADIAN  LENDERS"  means the Lenders  identified  as  Canadian  Lenders on the
execution pages hereof having a Commitment to lend or when such Commitment shall
have terminated,  having  Borrowings  outstanding to the Canadian Borrower under
the Canadian Facilities.

"CANADIAN  REVOLVING  FACILITY" means the Commitments of the Canadian Lenders to
make  Advances to the Canadian  Borrower in accordance  with Section  2.2(a) and
such Advances so made.

"CANADIAN  REVOLVING FACILITY  COMMITMENT" means the Commitments of the Canadian
Lenders to make  Advances to the  Canadian  Borrower up to the Cdn.$  Equivalent
Amount of  US$36,000,000;  provided  that the aggregate  outstanding  Borrowings
under the Canadian Facilities shall not exceed the Total Canadian Commitments at
any time.

"CANADIAN  SWINGLINE  FACILITY"  means the Commitment of the Canadian  Swingline
Lender to make  Advances to the  Canadian  Borrower in  accordance  with Section
2.2(b) and such Advances so made.


<PAGE>


                                      -7-


"CANADIAN  SWINGLINE  COMMITMENT" means the Commitment of the Canadian Swingline
Lender to make  Advances to the Canadian  Borrower of up to the Cdn$  Equivalent
Amount of US$4,000,000 which Commitment constitutes a subcommitment of the Total
Canadian Commitments of The  Toronto-Dominion  Bank; provided that the aggregate
outstanding  Borrowings under the Canadian Facilities shall not exceed the Total
Canadian Commitments at any time.

"CANADIAN SWINGLINE LENDER"  means The Toronto-Dominion Bank and  its successors
and assigns.

"CAPITAL  EXPENDITURES" means capital  expenditures of the Canadian Borrower and
its  Subsidiaries   (other  than  in  respect  of  acquisitions  of  Acquisition
Entities), determined in accordance with GAAP on a consolidated basis.

"CASH AMOUNT" means,  for the purposes of Schedule "O" referred to in Subsection
5.2(i)(D) hereof,  that portion of the consideration  payable in cash in respect
of any  purchase  of shares by the  Canadian  Borrower  or a  Subsidiary  in the
capital  stock of any  Subsidiary  pursuant  to the  exercise of any call option
right in favour of the  Canadian  Borrower  or  Subsidiary,  as the case may be,
under the terms of any Shareholders Agreement in respect of such Subsidiary.

"CODE"  means  the  Internal  Revenue Code  (U.S.) of  1986,  as amended  or any
successor statute.

"COLLATERAL  AGENT"  means  The  Toronto-Dominion  Bank and its  successors  and
assigns  acting in the capacity of  collateral  agent for the Lenders  hereunder
with respect to the Security.

"COMMITMENT" means, except as otherwise provided herein, the amount set opposite
each  Lender's  name on  Schedule  "L" hereof as its  Commitment  to each of the
Facilities.

"CONSOLIDATED  DEPRECIATION  AND  AMORTIZATION  EXPENSE"  means,  for any period
depreciation,  amortization and depletion charged to the income statement of the
Canadian Borrower and its Subsidiaries for such period, determined in accordance
with GAAP on a consolidated basis.

"CONSOLIDATED  EARNINGS"  means, for any period,  Consolidated  Net Income,  but
excluding in each case for such period:  (i) any gain or loss recorded in income
arising from the sale of capital assets,  as determined in accordance with GAAP;
(ii) any gain or loss recorded in income arising from any write-up or write-down
of  assets,  as  determined  in  accordance  with  GAAP;  (iii) any gain or loss
recorded  in  income  arising  from the  acquisition  of any  securities  of the
Canadian Borrower or any of its  Subsidiaries,  as determined in accordance with
GAAP;  (iv) any  non-cash  gain or loss  recorded  in income  from  discontinued
operations from and after the date of sale or discontinuance of such operations,
as determined in  accordance  with GAAP; or (v) any other  non-cash gain or loss
arising  from  items  that  do  or  do  not  have  all  the  characteristics  of
extraordinary  items but which result from  transactions  or events that


<PAGE>


                                      -8-


are not expected to occur  frequently over several years or do not typify normal
business activities of the Canadian Borrower and its Subsidiaries, as determined
in  accordance  with  GAAP,  to the  extent  that any such gain or loss has been
recorded in income and has been disclosed separately in the income statement for
the Canadian Borrower and its Subsidiaries or the notes thereto.

"CONSOLIDATED EBITDA" means for any period, Consolidated Earnings,  increased by
the sum of: (i) Consolidated  Interest  Charges;  (ii)  Consolidated  Income Tax
Expense; (iii) Consolidated  Depreciation and Amortization Expense and (iii) the
minority  interest  share of  Earnings as stated on the  consolidated  financial
statements of the Canadian Borrower, in each case for such period.

"CONSOLIDATED  INCOME TAX EXPENSE" means,  for any period,  the aggregate of all
Taxes  (including  deferred Taxes) based on the income of the Canadian  Borrower
and its  Subsidiaries  for such period,  determined in accordance with GAAP on a
consolidated basis.

"CONSOLIDATED  INTEREST  CHARGES" means, for any period,  the total of all items
properly  classified  as interest  expense  for the  Canadian  Borrower  and its
Subsidiaries  for  such  period,   determined  in  accordance  with  GAAP  on  a
consolidated basis.

"CONSOLIDATED  NET INCOME"  means,  for any period,  the Net Income (loss) after
taxes of the Canadian Borrower and its Subsidiaries for such period,  determined
in accordance with GAAP on a consolidated basis.

"CONSOLIDATED  TOTAL  ASSETS"  means,  for any period,  the Total  Assets of the
Canadian Borrower and its Subsidiaries for such period, determined in accordance
with GAAP.

"CONVERSION"  means the  conversion  of a Borrowing  or any  portion  thereof in
accordance with Section 2.3.

"CONVERSION  DATE" means the date a Borrower has notified the Canadian  Agent or
the U.S.  Agent,  as the case may be, to be the date on which it has  elected to
convert a Borrowing or a portion thereof pursuant to Section 2.3.

"DEFAULT"  means an event with which notice or lapse of time or both will become
an Event of Default.

"DEPRECIATION  AND AMORTIZATION  EXPENSE" means,  for any period,  depreciation,
amortization and depletion  charged to the income statement of a Person for such
Person, determined in accordance with GAAP.

"DIRECT GUARANTOR" means each Subsidiary of the Canadian Borrower,  of which the
Canadian  Borrower shall at any time directly or indirectly own and control 100%
of the issued and outstanding shares,  equity or other ownership interests which
shall have executed and delivered to the Collateral Agent the Direct Security.


<PAGE>


                                      -9-


"DIRECT SECURITY" means the Security designated as Direct Security in Schedule
"C".

"DISPOSITION" has the meaning attributed to it in Section 8.2(c)(ii).

"DRAWDOWN" means a drawdown of a Borrowing by a Borrower.

"DRAWDOWN  DATE" means any  Business  Day when a Borrower  makes a Drawdown or a
Conversion Date with respect to any Borrowing or portion thereof.

"EARNINGS" means, for any Person for any period, Net Income for such Person, but
excluding  in each case for such  Person for such  period:  (i) any gain or loss
recorded in income  arising from the sale of capital  assets,  as  determined in
accordance  with GAAP; (ii) any gain or loss recorded in income arising from any
write-up or write-down of assets,  as determined in accordance with GAAP;  (iii)
any  gain or  loss  recorded  in  income  arising  for  the  acquisition  of any
securities of such Person,  as  determined in accordance  with GAAP; or (iv) any
non-cash gain or loss recorded in income from  discontinued  operations from and
after the date of sale or  discontinuance  of such operations,  as determined in
accordance  with GAAP; or (v) any other non-cash gain or loss arising from items
that do or do not have all the  characteristics of extraordinary items but which
results from  transactions  or events that are not expected to occur  frequently
over several years or do not typify normal  business  activities of such Person,
as determined in accordance  with GAAP, to the extent that any such gain or loss
has been  recorded  in income and has been  disclosed  separately  in the income
statement for such Person or the notes thereto.

"EARNINGS  CALL  OPTION  TRIGGERING  EVENT" has the  meaning  ascribed  to it in
paragraph (c) in the definition of "Call Option Triggering Event".

"EBITDA"  means,  for  any  Person  for any  period,  Earnings  of such  Person,
increased by the sum of: (i)  Interest  Charges;  (ii) Income Tax  Expense;  and
(iii)  Depreciation  and Amortization  Expenses and, (iv) the minority  interest
share of Earnings as stated on any consolidated financial statements of any such
Person, in each case for such Person for such period.

"EFFECTIVE DATE" means June 29, 2001.

"ELIGIBLE  BUSINESS"  means,  in respect of any  business  to be acquired by the
Canadian Borrower or its Subsidiaries, a business which:

(a)      is substantially  similar to the "core" businesses  currently conducted
         by the Canadian Borrower and its Subsidiaries, taken as a whole, in the
         reasonable opinion of the Canadian Borrower; which "core" businesses of
         the Canadian Borrower and its Subsidiaries are as follows:

         (i)      the security business,

         (ii)     the property management business,


<PAGE>


                                      -10-


         (iii)    the property maintenance business,

         (iv)     the service franchise business,

         (v)      landscape, lawn-care and lawn maintenance business,

         (vi)     the interior or exterior pest control businesses,

         (vii)    business out-sourcing,

         (viii)   residential and commercial cleaning and/or maintenance
                  business; and

         (ix)     customer support and fulfillment.

(b)      does not include (i) manufacturing, fabrication or similar processes or
         (ii) retail business;

(c)      does not include any business  that  carries on a material  part of its
         business outside of Canada or the United States of America; and

(d)      as the result of completion of the  acquisition  of such  business,  no
         Default  or  Event  of  Default  will  occur;   including  for  greater
         certainty,  the  Canadian  Borrower  will  not  be in  default  of  its
         covenants contained in Section 8.2(o).

"ENVIRONMENTAL  LAWS"  means  all laws,  statutes,  codes,  ordinances,  orders,
decrees, rules, regulations,  guidelines, standards, judgements, or instruments,
in each case  having  the force of law,  of any  authority  having  jurisdiction
relating in whole or in part to the environment or its protection.

"EQUIVALENT  AMOUNT"  means on any date,  as the case may be, the amount of Cdn.
Dollars  into which an amount of U.S.  Dollars may be converted or the amount of
U.S.  Dollars  into  which an amount of Cdn.  Dollars  may be  converted  at the
Canadian Agent's spot buying rate in Toronto as at approximately  12:00 noon, on
such date.

"ERISA" has the meaning ascribed to it in Section 8.1(n).

"EVENT" has the meaning attributed thereto in Section 7.5(b).

"EVENT OF DEFAULT" has the meaning ascribed to it in Section 9.1.

"EXTENSION DATE" has the meaning ascribed to it in Section 3.11(a).

"EXTENSION REQUEST" has the meaning ascribed to it in Section 3.11(a).

"FACILITIES"  means,  collectively, the Revolving  Facilities and  the Swingline
Facilities.

"FEDERAL  FUNDS RATE" means,  for any period,  a  fluctuating  interest rate per
annum equal for each day during such period to (a) the  weighted  average of the
rates on  overnight  federal


<PAGE>


                                      -11-


funds  transactions  with  members of the  Federal  Reserve  System  arranged by
federal  funds  brokers,  as  published  for such day (or,  if such day is not a
Business Day, for the next preceding  Business Day) by the Federal  Reserve Bank
of New  York,  or (b) if such  rate is not so  published  for any day which is a
Business Day, the average of the  quotations  for such day on such  transactions
received by the  applicable  U.S.  Base Rate  Reference  Bank from three federal
funds brokers of recognized standing selected by it.

"FINAL MATURITY DATE" means June 25, 2004 unless extended in accordance with the
terms hereof.

"FINANCIAL  CONTRACT  OBLIGATIONS"  means all  obligations,  present and future,
direct  or  indirect,   contingent  or  absolute,   of  a  Borrower  and/or  its
Subsidiaries  in  respect  of, in each case  determined  on a "marked to market"
basis on the date of determining the amount of such obligations,:

(a)      a currency or interest rate swap agreement;

(b)      a swap, future, forward or other foreign exchange agreement;

(c)      a forward rate agreement;

(d)      any  derivative,  combination  or option in  respect  of, or  agreement
         similar to, an agreement or contract  referred to in paragraphs  (a) to
         (c);

(e)      any master agreement in respect of any agreement or contract referred
         to in paragraphs (a) to (c); or

(f)      a guarantee of the liabilities under an agreement or contract referred
         to in paragraphs (a) to (c).

"FIRST AMENDED AND RESTATED CREDIT AGREEMENT" has the meaning attributed thereto
in the recitals.

"FISCAL YEAR" means a fiscal year of the Canadian Borrower; currently the Fiscal
Year ends on March 31.

"FIXED  CHARGE  COVERAGE  RATIO" means,  in respect of any period,  the quotient
obtained by dividing:

(a)      Consolidated  EBITDA less  Capital  Expenditures and  less income taxes
         paid in cash for such period; by

(b)      the sum (as denominator) of (i) Consolidated  Interest Charges for such
         period, (ii) scheduled principal repayments and capital lease principal
         payments  for  such  period,   and  (iii)  payments  of  any  dividends
         determined in accordance with GAAP on a consolidated basis.


<PAGE>


                                      -12-


"FS (USA)" means FirstService (USA), Inc.

"FSLLC" means FirstService Delaware, LLC.

"FSLP" means FirstService Delaware, LP.

"GAAP"  means generally  accepted accounting  principles  applied  in the United
States.

"GUARANTOR"  means any Person,  including  an Unlimited  Guarantor  and a Direct
Guarantor,  which shall have  provided a guarantee of a  Borrower's  obligations
hereunder in favour of the Collateral Agent and/or the Lenders.

"GUARANTEED  OBLIGATIONS" means the Canadian Borrower's Guaranteed  Obligations,
(as such term is defined in Section  16.1(a))  and/or the Unlimited  Guarantor's
Guaranteed Obligations (as such term is defined in Section 16.1(b)).

"HAZARDOUS  MATERIAL"  means any substance,  waste,  solid,  liquid,  or gaseous
matter,  petroleum  or  petroleum  derived  substance,  micro-organism,   sound,
vibration,  ray,  heat,  odour,  radiation,  energy vector,  plasma,  organic or
inorganic matter, whether animate or inanimate,  transient reaction intermediate
or any combination of the foregoing deemed  hazardous,  hazardous  waste,  solid
waste,  or  pollutant,  a  deleterious  substance,  or a  contaminant  under any
Environmental Law.

"INCOME  TAX  EXPENSE"  means,  for  any  period,  the  aggregate  of all  Taxes
(including  deferred  Taxes)  based on the income of a Person  for such  period,
determined in accordance with GAAP.

"INITIAL ADVANCE" means, in respect of a Facility, the Borrowing,  or where more
than one Borrowing may be made thereunder, the first Borrowing,  contemplated to
be made thereunder pursuant to this Agreement.

"INTERCREDITOR  AGREEMENT" means an  intercreditor  agreement among the Lenders,
the Collateral Agent, the lenders under the Private Placement and the collateral
agent  to the  lenders  under  the  Private  Placement,  in form  and  substance
satisfactory to the Lenders and Lenders' Counsel

"INTEREST  CHARGES"  means  for any  period,  the  total of all  items  properly
classified  as interest  expense  for a Person for such  period,  determined  in
accordance with GAAP.

"INTEREST COVERAGE RATIO" means, in respect of any period, the quotient obtained
by dividing (a) the amount (as numerator)  obtained by  subtracting  (i) capital
expenditures  (other than  acquisition  expenditures)  for such period from (ii)
Consolidated  EBITDA  for such  period by (b) the sum of  Consolidated  Interest
Charges for such period.

"INTEREST  PAYMENT DATE" means (a) in respect of a Prime Loan, a U.S. Prime Rate
Loan or an U.S.  Base Rate Loan and Article  XII,  the 1st  Business Day of each
Quarter and (b) in respect of a Libor Loan, the last day of the applicable Libor
Interest Period and, where any


<PAGE>


                                      -13-


Libor Interest  Period is longer than 90 days, the 90th day or the last Business
Day of such Libor Interest Period.

"ISSUING BANK" means, in the case of Letters of Credit issued under the Canadian
Revolving  Facility,  a Canadian Lender which issues Letters of Credit hereunder
and, in the case of Letters of Credit issued under the U.S. Revolving  Facility,
a U.S.  Lender which issues  Letters of Credit  hereunder.  As of the  Effective
Date, the Issuing Bank for Letters of Credit issued under the Canadian Revolving
Facility is The Toronto-Dominion Bank and the Issuing Bank for Letters of Credit
issued  under the U.S.  Revolving  Facility is Bank One, NA or Toronto  Dominion
(Texas) Inc.

"LENDERS" means the Canadian  Lenders and the U.S. Lenders and their  respective
successors  and assigns.  "Lender"  means any Canadian Lender or U.S. Lender, as
the case may be.

"LENDERS'  COUNSEL"  means  Meighen  Demers LLP or any other firm of  solicitors
selected by the Majority Lenders.

"LETTER OF CREDIT" means a Standby  Letter of Credit or a Trade Letter of Credit
issued by an  Issuing  Bank at the  request  of a  Borrower  in an amount not to
exceed the unused portion of the applicable Revolving Facility.

"LETTER OF CREDIT  FEE" means a monthly fee based on the  Applicable  Margin for
Letter  of  Credit  Fees and  equivalent  to  annual  returns  on each  Lender's
Participation  in the  average  daily  balance of the face  amount of Letters of
Credit  outstanding  on or after  the  Effective  Date  and as set  forth in the
definition of Applicable Margin.

"LIBOR" means, with respect to any Libor Interest Period,  the interest rate per
annum  appearing on Telerate  Page 3750,  or if such  Telerate Page shall not be
available,  any successor or similar services as may be selected by the Canadian
Agent) for a period equal to the number of days in the applicable Libor Interest
Period for  deposits  in U.S.  Dollars of amounts  comparable  to the  principal
amount of such Libor Loan to be outstanding  during such Libor Interest  Period,
at or about  11:00  a.m.  (London,  England  time) on the date  which is two (2)
Business Days prior to the first day of the proposed Libor Interest  Period.  If
neither the Telerate  Page nor any  successor or similar  service is  available,
"Libor"  shall  mean,  with  respect  to any  Libor  Interest  Period,  the rate
determined by the Canadian  Agent or the U.S.  Agent as  applicable,  based on a
360-day year,  rounded upwards,  if necessary,  to the nearest whole multiple of
one-sixteenth  of one  percent  (0.0625%),  at  which  the  Canadian  Agent,  in
accordance with its normal practice, would be prepared to offer to leading banks
in the London  inter-bank market for delivery by the Canadian Agent on the first
day of the applicable  Libor Interest Period for a period equal to the number of
days in  such  Libor  Interest  Period,  deposits  in U.S.  Dollars  of  amounts
comparable to the principal amount of such Libor Loans to be outstanding  during
such Libor Interest Period, at or about 11:00 a.m. (London, England time) on the
date which is two (2) Business Days prior to the first day of the proposed Libor
Interest Period for such Libor Loan.


<PAGE>


                                      -14-


"LIBOR  DETERMINATION  DATE" means any date on which the  Canadian  Agent or the
U.S. Agent, as the case may be, determines LIBOR for a Libor Interest Period.

"LIBOR  INTEREST  PERIOD"  means with respect to any Borrowing by way of a Libor
Loan, the period of 30, 60, 90 or 180 days (as selected by the Canadian Borrower
and notified to the Canadian  Agent or selected by a U.S.  Borrower and notified
to the U.S.  Agent,  as the case may be,  pursuant to Section 4.5 and subject to
availability) commencing with the applicable Drawdown Date.

"LIBOR LOAN" means a Loan made available by the U.S. Lenders to a U.S.  Borrower
or by the  Canadian  Lenders  to the  Canadian  Borrower,  as the  case  may be,
outstanding  from  time to time and  denominated  in U.S.  Dollars  and on which
interest is to be paid in accordance with Section 4.1.

"LIBOR MARGIN" means in respect of a Libor Loan or portion  thereof  outstanding
on or after the Effective  Date, the Libor Margin as set forth in the definition
of Applicable Margin.

"LIEN" means with  respect to the property or assets of any Person,  a mortgage,
pledge,  hypothecation,  encumbrance, lien (statutory or other), charge or other
security  interest  of any kind in or with  respect to such  property  or assets
(including,  without  limitation,  any conditional sale or other title retention
agreement,  and any  financing  lease under  which such Person is lessee  having
substantially the same economic effect as any of the foregoing).

"LOANS" means collectively,  that portion of any Borrowing outstanding from time
to time by way of Libor Loans, Bankers' Acceptances, Prime Rate Loans, U.S. Base
Rate Loans,  U.S.  Prime Rate Loans or, as the context  may  require,  all Loans
outstanding at any time.  "Loan" means, at any time, any Libor Loan, Prime Loan,
U.S. Base Rate Loan or U.S. Prime Rate Loan, as the case may be.

"MAJORITY   LENDERS"  means  Lenders  having  at  least  66-2/3%  of  the  Total
Commitments  or,  if  the  Commitments  have  terminated,  of  total  Borrowings
outstanding at such time.

"MATERIAL  CONTINGENT  OBLIGATION" means, in respect of the Canadian Borrower or
its Subsidiaries, a contingent obligation or liability of U.S.$5,000,000 (or the
Equivalent Amount thereof in Cdn.$) or more or which is otherwise required to be
disclosed to securities regulators or exchanges or the public.

"NET INCOME" means,  for any Person for any period,  the Net Income (loss) after
tax of such Person for such period, determined in accordance with GAAP.

"NET PROCEEDS", in respect of any Bankers' Acceptance, means the amount obtained
by  applying  the BA  Discount  Rate to the  Principal  Amount of such  Bankers'
Acceptance in accordance with the formula set out in Schedule "B".

"NON-CONSENTING LENDER" has the meaning ascribed to it in Section 3.11(e).


<PAGE>


                                      -15-


"NON-EXTENDING  LENDERS  CONVERSION  DATE"  has  the meaning  ascribed to it  in
Section 3.11(e).

"NON-EXTENSION  CONVERSION  DATE"  has the  meaning ascribed  to it  in  Section
3.11(d).

"NORMALIZING  ADJUSTMENTS" has the meaning attributed to it in the definition of
"Total Debt Consolidated EBITDA Ratio".

"NOTE PURCHASE  AGREEMENT"  means the Note and Guarantee  Agreement  dated as of
June 21, 2001 of the Canadian  Borrower and FSLP with respect to  US$100,000,000
of 8.06% Guaranteed Senior Secured Notes due 2011.

"NSULC" means FirstService Nova Scotia Corp.

"ORIGINAL CREDIT AGREEMENT" has the meaning attributed thereto in the recitals.

"PARTICIPATION"  of  a  Lender  means  that  Lender's  pro  rata  share  of  the
Commitments as indicated on Schedule "L".

"PERMITTED ENCUMBRANCES" has the meaning ascribed to it in Section 8.2(m).

"PERMITTED LOANS" has the meaning ascribed to it in Section 8.2(j)(ii).

"PERMITTED VTBS" has the meaning ascribed to it in Section 8.2(m).

"PERSON"  means  any  individual,  firm,  company,  corporation,  entity,  joint
venture, joint-stock company, trust, unincorporated organization,  government or
state entity or any association or a partnership (whether or not having separate
legal personality) of two or more of the foregoing.

"PREPAID BANKERS'  ACCEPTANCES"  has the meaning  attributed thereto in  Section
7.5 (c).

"PRIME RATE" means,  at any time, the greater of (a) the floating annual rate of
interest  calculated  from time to time by the Canadian  Agent as the base rate,
calculated on the basis of a year of 365 days,  which the Canadian Agent uses to
determine  rates of interest on Canadian Dollar loans to customers in Canada and
designates as its prime rate and (b) the rate expressed as an annual  percentage
equal to the sum of (x) 1% per annum and (y) the BA Discount Rate.

"PRIME RATE LOANS" means the Loans,  or portion of them,  made  available by the
Canadian  Lenders to the Canadian  Borrower  outstanding from time to time which
are drawn down in Canadian  Dollars and in respect of which  interest is payable
in accordance with Section 4.3.

"PRIME  RATE  MARGIN"  means in respect of a Prime Rate Loan or portion  thereof
outstanding  on or after the Effective  Date, the Prime Rate Margin set forth in
the definition of Applicable Margin.


<PAGE>


                                      -16-


"PRINCIPAL  AMOUNT"  means (a) for a Bankers'  Acceptance or a Letter of Credit,
the face amount thereof and (b) for a Loan, the principal amount thereof.

"PRIVATE  PLACEMENT"  means the private  placement of  U.S.$100,000,000  of debt
described  in the Note  Purchase  Agreement  and to be on terms  and  conditions
acceptable to the Lenders.

"QUARTER" means a fiscal quarter of any Fiscal Year.

"REPAYMENT  DATE" means a day,  other than the Final  Maturity  Date, on which a
Borrower repays all or part of a Loan pursuant to Section 2.2.

"REVOLVING FACILITIES" means, collectively,  the Canadian Revolving Facility and
the U.S. Revolving Facility.

"SECURED  HEDGING  AGREEMENTS"  means one or more interest rate and/or  currency
hedge  agreements  entered  into  between the  Canadian  Borrower and a Canadian
Lender  from  time  to  time  to  a  maximum   aggregate   notional   amount  of
U.S.$40,000,000  for all Canadian Lenders and between a U.S. Borrower and a U.S.
Lender  from  time  to  time  to  a  maximum   aggregate   notional   amount  of
U.S.$100,000,000 for all U.S. Lenders.

"SECOND  AMENDED AND  RESTATED  CREDIT  AGREEMENT"  has the  meaning  attributed
thereto in the recitals.

"SECURITY" means the security described in Schedule "C".

"SHAREHOLDERS'  AGREEMENTS"  means the  shareholders'  agreements  described  in
Schedule "D".

"SHAREHOLDERS' EQUITY" has the meaning attributed thereto under GAAP.

"STANDBY  LETTER  OF  CREDIT"  means a standby  letter  of credit  issued by any
Issuing  Bank  pursuant to Section  2.11 or a letter of  guarantee  issued by an
Issuing Bank which is a Canadian Lender.

"SUBSIDIARY"  of any  Person  means  any  corporation  or other  entity of which
securities or other ownership  interests having ordinary voting power to elect a
majority of the board of directors or of others performing similar functions are
directly or indirectly owned or controlled by such Person.

"SWINGLINE FACILITIES" means, collectively, the Canadian Swingline Facility and
the U.S. Swingline.

"TAX"  includes  all present and future  taxes,  levies,  imposts,  stamp taxes,
duties,  withholdings  and all  penalty,  interest  and other  payments on or in
respect thereof.


<PAGE>


                                      -17-


"TOTAL CANADIAN  COMMITMENTS" means the Cdn.$ Equivalent Amount of US$40,000,000
and  includes  the  Canadian  Revolving  Facility  Commitment  and the  Canadian
Swingline Commitment.

"TOTAL  COMMITMENTS" means the aggregate for all Facilities from time to time of
the  Lenders'  Commitments  from time to time to a maximum  aggregate  amount of
U.S.$140,000,000.

"TOTAL U.S.  COMMITMENTS"  means  US$100,000,000 and includes the U.S. Revolving
Facility Commitment and the U.S. Swingline Commitment.

"TOTAL DEBT" shall include the obligations under this Agreement,  obligations in
respect of the Private  Placement,  Financial Contract  Obligations,  guaranteed
obligations,  capital leases, vendor-take-back financing,  subordinated debt and
any  other  interest  bearing  obligations  of the  Canadian  Borrower  and  its
Subsidiaries  on a consolidated  basis  determined in accordance with GAAP after
deduction of cash-on-hand plus the aggregate of all Cash Amounts.

"TOTAL DEBT/CONSOLIDATED EBITDA RATIO" means, at any time, the quotient obtained
by  dividing  (a) Total  Debt (as  numerator)  by (b)  Consolidated  EBITDA  (as
denominator),  for the  purpose of this  ratio,  calculated  on the basis of the
immediately  preceding  four  consecutive  Quarters so as to include all Persons
that have become  Subsidiaries during the relevant periods in a manner permitted
by the terms of this  Agreement,  with  EBITDA from  Acquisition  Entities to be
included  in the  calculations  by using the  trailing  12 month  EBITDA for the
Acquisition  Entity or  entities  and so as to  exclude  the  EBITDA of a former
Subsidiary that ceased being a Subsidiary during the previous four Quarters;  In
addition,  the Consolidated EBITDA may be adjusted to include a full year impact
of the cost savings in respect of any such Acquisition  Entity which are readily
identifiable and can be immediately implemented, such as elimination of salaries
for redundant  employees and  elimination  of various  administrative  functions
which  will,  in  the  reasonable  opinion  of  the  Canadian  Borrower,  become
unnecessary  or otherwise  performed  more cost  effectively  (such cost savings
being collectively  "Normalizing  Adjustments");  provided that such adjustments
shall only be made if (i) the  Canadian  Borrower  has  provided to the Canadian
Agent details of such  Normalizing  Adjustments  following the completion of the
acquisition  of such  Acquisition  Entity,  and (ii) the Canadian  Agent has not
provided written notice to the Canadian  Borrower within 15 Business Days of the
receipt by the Canadian  Agent of such details that the Majority  Lenders do not
so consent to the Normalizing Adjustments.

"TRADE  LETTER OF CREDIT"  means a trade letter of credit or letter of guarantee
acceptable to the Majority Lenders, acting reasonably, issued by an Issuing Bank
pursuant to Section 2.11.

"TRANSFER CERTIFICATE" means a certificate  substantially in the form set out in
Schedule "E" signed by a Lender and a Transferee.

"TRANSFEREE" means a Canadian Assignee,  a U.S. Assignee or any other transferee
to which a Lender  seeks to  assign  or  transfer  all or part of such  Lender's
rights and obligations hereunder in accordance with Article XIV.


<PAGE>


                                      -18-


"TYPE"  means,  with respect to any Loan, a Prime Rate Loan,  an U.S.  Base Rate
Loan, a U.S. Prime Rate Loan or a LIBOR Loan and otherwise , with respect to any
Borrowing or portion thereof, Bankers' Acceptances or Letters of Credit.

"U.S.  AGENT"  means  Toronto-Dominion  (Texas),  Inc. and  its  successors  and
assigns duly appointed in accordance with Section 13.6.

"U.S. ASSIGNEE" has the meaning ascribed to it in Section 14.3(a).

"U.S. BASE RATE" means for any day and with respect to all U.S. Base Rate Loans,
a fluctuating interest rate per annum equal to the greater of the base rate most
recently  announced by the Canadian Agent as its base rate for U.S. Dollar loans
in Canada.

"U.S. BASE RATE LOANS" mean Loans, or any portion thereof, made available by the
Canadian  Lenders to the Canadian  Borrower  outstanding from time to time which
are  drawdown  in U.S.  Dollars  and in respect of which  interest is payable in
accordance with Section 4.2.

"U.S.  BASE RATE MARGIN" means, in respect of an U.S. Base Rate Loan, or portion
thereof  outstanding  on or after the Effective  Date, the U.S. Base Rate Margin
described in the definition of Applicable Margin.

"U.S.  BORROWERS" means,  collectively,  FS (USA) and FSLP and each of such U.S.
Borrowers being a "U.S. Borrower".

"U.S.  DOLLARS" means the lawful money of the United States of America and "U.S.
$" has a corresponding meaning.

"U.S.  FACILITIES"  means the U.S.  Revolving  Facility  and the U.S.  Swingline
Facility.

"U.S.  LENDERS"  means the Lenders  identified as U.S.  Lenders on the execution
pages hereof  having a  Commitment  to lend or when such  Commitment  shall have
terminated,  having  Borrowings  outstanding to the U.S. Borrower under the U.S.
Facilities.

"U.S.  PRIME  RATE"  means the  floating  rate of  interest  per annum  publicly
announced  from time to time by the U.S.  Agent as its prime lending rate.  This
rate of interest is determined from time to time by the U.S. Agent as a means of
pricing U.S. Dollar loans to customers in the U.S.

"U.S.  PRIME RATE LOAN" means Loans, or any portion  thereof,  made available by
the U.S. Lenders to the U.S.  Borrowers  outstanding from time to time which are
drawndown  in U.S.  Dollars  and in  respect  of which  interest  is  payable in
accordance with Section 4.4.

"U.S.  PRIME RATE MARGIN" means in respect of a U.S. Prime Rate Loan, or portion
thereof  outstanding on or after the effective  date, the U.S. Prime Rate Margin
described in the definition of Applicable Margin.


<PAGE>


                                      -19-


"U.S. REVOLVING FACILITY" means Commitments of the U.S. Lenders to make Advances
to the U.S.  Borrowers in  accordance  with Section  2.2(c) and such Advances so
made.

"U.S.  REVOLVING  FACILITY  COMMITMENT" means Commitments of the U.S. Lenders to
make  Advances to the U.S.  Borrowers  up to  US$96,000,000;  provided  that the
aggregate outstanding  Borrowings under the U.S. Facilities shall not exceed the
Total U.S. Commitments at any time.

"U.S. SWINGLINE COMMITMENT" means the Commitment of the U.S. Swingline Lender to
make  Advances  to  the  U.S.  Borrowers  up to  US$4,000,000  which  Commitment
constitutes  a  subcommitment  of the Total U.S.  Commitments  of Bank One,  NA;
provided that the aggregate  outstanding  Borrowings  under the U.S.  Facilities
shall not exceed the Total U.S. Commitments at any time.

"U.S. SWINGLINE FACILITY" means Commitments of the U.S. Swingline Lender to make
Advances  to the U.S.  Borrowers  in  accordance  with  Section  2.2(d) and such
Advances so made.

"U.S. SWINGLINE LENDER" means Bank One, NA and its successors and assigns.
"UNDERTAKING  TO SECURE" means the Undertaking to be provided by Subsidiaries of
the  Canadian   Borrower,   other  than   Subsidiaries   that  are  Wholly-Owned
Subsidiaries as of the date of this Agreement, substantially in the form set out
in Schedule "F".

"UNLIMITED  GUARANTOR"  means  each  Wholly-Owned  Subsidiary  which is  legally
entitled to give an unlimited guarantee of the obligations of the Borrowers.

"VIOLATION  NOTICE"  means  any  notice  received  by a  Borrower  or any of its
Subsidiaries  from any  governmental  or  regulatory  body or  agency  under any
Environmental  Law  that  such  Borrower  or  any  of  its  Subsidiaries  is  in
non-compliance with the requirements of any Environmental Law.

"WHOLLY-OWNED SUBSIDIARY" means any corporation or other entity of which 100% of
the securities or other ownership  interests are owned directly or indirectly by
a Borrower.

1.2      REFERENCES

         Any reference made in this Agreement to:

(a)      Any of the "Canadian Agent", the "U.S. Agent", the "Collateral  Agent",
         the "Lenders" or a "Lender"  shall so be construed as to include its or
         their respective successors and permitted assigns.

(b)      A time of day is, unless otherwise stated, a reference to Toronto time.

(c)      Sections,  Articles or Schedules is,  unless  otherwise  indicated,  to
         Sections  and  Articles  of this  Agreement  and to  Schedules  to this
         Agreement,  as the case may be. The


<PAGE>


                                      -20-


         provisions of each Schedule  shall constitute  provisions of this
         Agreement as though  repeated at length herein.

(d)      A "month" is a reference to a period  starting on one day in a calendar
         month to but excluding the  numerically  corresponding  day in the next
         calendar month except that,  where any such period would  otherwise end
         on a day other than a Business  Day, it shall end on the next  Business
         Day,  unless that day falls in the calendar  month  succeeding  that in
         which it would  otherwise have ended, in which case it shall end on the
         next  preceding  Business  Day in a  calendar  month  or if there is no
         numerically  corresponding  day in the month in which that period ends,
         that period shall end on the last Business Day in that later month (and
         references  to  "months"  (other  than  "calendar   months")  shall  be
         construed accordingly).

1.3      INTERPRETATION

         In this Agreement:

(a)      the singular includes the plural and vice-versa;

(b)      "in  writing"  or  "written"  includes  printing,  typewriting,  or any
         electronic means of communication  capable of being visibly  reproduced
         at the point of reception, including telex, telecopy and telegraph and,
         as between an Agent and the  Lenders  (but only when so  directed by an
         Agent), Reuters screen or equivalent means of communication;

(c)      a document, notice, note, bill of exchange or other instrument shall be
         considered  to have been  validly  signed or  executed,  if it has been
         signed by either an  original  signature  or a facsimile  signature  or
         stamp affixed by an Authorized Signatory, provided that this Agreement,
         all collateral  documents  contemplated  hereby,  any promissory  notes
         required by a Lender and the bills of exchange or  depository  notes to
         be deposited  pursuant to Section 2.6 shall be considered to be validly
         signed  or  executed  only if  signed by an  original  signature  of an
         Authorized Signatory; and

(d)      all calculations of interest under this Agreement are to be made on the
         basis of the  stated  rates set out  herein and not on the basis of the
         effective  yearly rates  determined  on any basis which gives effect to
         the principle of deemed reinvestment.

1.4      HEADINGS AND TABLE OF CONTENTS

         The headings,  the table of contents, the Articles and the Sections are
inserted  for  convenience  only  and  are  to be  ignored  in  construing  this
Agreement.

1.5      ACCOUNTING TERMS

         All accounting terms not defined in this Agreement shall be interpreted
in accordance with GAAP unless otherwise expressly  indicated.  Unless otherwise
indicated,  references to


<PAGE>


                                      -21-


accounting terms,  ratios or financial tests applicable to the Canadian Borrower
hereunder  shall be references to such terms,  ratios or tests,  calculated  and
determined on a consolidated basis.

1.6      RECITALS

         The recitals to this Agreement form part hereof.

1.7      PRECEDENCE

         In the event that any  provisions  of the  Security  contradict  or are
otherwise  incapable of being  construed in  conjunction  with the provisions of
this  Agreement,  the provisions of this Agreement  shall take  precedence  over
those contained in the Security and, in particular,  if any act of a Borrower or
a Guarantor is expressly  permitted under this Agreement but is prohibited under
the Security,  any such act shall be permitted under this Agreement and shall be
deemed to be permitted under the Security.

                                   ARTICLE II
                                   FACILITIES

2.1      THE CREDIT FACILITIES

(a)      Subject to the terms of this Agreement,  (i) the Canadian Lenders shall
         extend credit to the Canadian Borrower by way of the Canadian Revolving
         Facility; (ii) the Canadian Swingline Lender shall extend credit to the
         Canadian  Borrower  by way of the  Canadian  Swingline,  (iii) the U.S.
         Lenders  shall extend  credit to the U.S.  Borrowers by way of the U.S.
         Revolving  Facility;  and (iv) the U.S.  Swingline  Lender shall extend
         credit to the U.S. Borrower by way of the U.S. Swingline.

(b)      The  proceeds  of  Borrowings  shall be used by the  Borrowers  for the
         purposes  set out in the  recitals  to this  Agreement,  subject to the
         terms and conditions of this Agreement.

2.2      NOTICE AND REVOLVING NATURE OF BORROWINGS

(a)      The Canadian Borrower may, subject to the terms of this Agreement, upon
         giving the Canadian Agent prior written notice:

         (i)      by not later than 10:00 a.m. on the 3rd  Business Day prior to
                  the  Drawdown  Date for each Advance  which is a Libor Loan;

         (ii)     by not later than 10:00 a.m. on the 2nd  Business Day prior to
                  the Drawdown Date or Repayment Date or Acceptance Date, as the
                  case  may be,  for  any  Borrowing  or  Conversion  under  the
                  Canadian Revolving Facility (other than a Libor Loan);


<PAGE>


                                      -22-


borrow,  repay and/or  reborrow or convert in accordance  with Section 2.3 under
the Canadian Revolving  Facility,  (A) in respect of Prime Rate Loans in minimum
tranches of Cdn. $300,000,  and thereafter in multiples of Cdn. $100,000 and (B)
in respect  of U.S.  Base Rate Loans in minimum  tranches  of  U.S.$300,000  and
thereafter in multiples of U.S.$100,000,  (C) in respect of Bankers' Acceptances
in minimum  amounts of Cdn.  $1,000,000  and  thereafter  in  multiples  of Cdn.
$100,000,  (D) in respect of Libor Loans in minimum  amounts of U.S.  $1,000,000
and thereafter in multiples of U.S.  $100,000;  provided that repayment of Libor
Loans shall be made on the last day of the applicable  Libor Interest Period and
the Canadian  Borrower  will not be entitled to have more than an aggregate of 8
Loans outstanding by way of Bankers' Acceptances and Libor Loans at any time.

         Notwithstanding  the  provisions of this Section  2.2(a),  the Canadian
Agent  shall use its best  efforts to make  Advances  by way of Prime Rate Loans
under the Canadian  Revolving Facility available to the Canadian Borrower on the
Business Day  following the receipt by the Canadian  Agent of a Drawdown  Notice
for a Prime Loan.

(b)

         (i)      In order to facilitate the Canadian Borrower's cash management
                  requirements, the Canadian Swingline Lender in its capacity as
                  a Lender agrees to make available to the Canadian Borrower the
                  Canadian  Swingline.  The Canadian Swingline Facility shall be
                  used by the  Canadian  Borrower  to fund  amounts  which would
                  otherwise  be drawn down by the  Canadian  Borrower  by way of
                  Prime Rate Loans or U.S.  Base Rate Loans  under the  Canadian
                  Revolving  Facility  pursuant  to Section  2.2(a) but for such
                  amounts  not  being,  in the case of Prime  Rate  Loans,  in a
                  minimum  principal  amount of  Cdn.$300,000  and  multiples of
                  Cdn.$100,000  thereafter  and in the  case of U.S.  Base  Rate
                  Loans  in a  minimum  principal  amount  of  U.S.$300,000  and
                  multiples  of  U.S.$100,000  thereafter.  Notwithstanding  any
                  other provision hereof, drawdowns under the Canadian Swingline
                  Facility are not subject to any minimum amount. Any Borrowings
                  under the Canadian Swingline Facility may be drawn down by the
                  Canadian  Borrower  without  notice to the Canadian  Swingline
                  Lender by way of presentment to the Canadian  Swingline Lender
                  of cheques and other bills of exchange  issued by the Canadian
                  Borrower.

         (ii)     At any  time  and  from  time to time in its  discretion,  the
                  Canadian  Swingline  Lender  may notify  each of the  Canadian
                  Lenders to provide its Participation in the Canadian Revolving
                  Facility for Advances made under the Canadian  Swingline,  and
                  each Canadian Lender shall  thereupon  provide to the Canadian
                  Agent, for the account of the Canadian Swingline Lender,  such
                  Canadian Lender's  Participation  under the Canadian Revolving
                  Facility;  PROVIDED HOWEVER no such Participation  shall cause
                  any such  Canadian  Lender to exceed  its  Commitment  for the
                  Total  Canadian  Commitments.  The  amounts so provided by the
                  Canadian Lenders in respect of the Canadian Swingline Facility
                  shall be deemed to be Prime Rate Loans or U.S. Base Rate Loans


<PAGE>


                                      -23-


                  denominated  in Cdn$ or U.S.$,  as the case may be,  under the
                  Canadian  Revolving Facility in accordance with the provisions
                  of this Agreement (and for such purposes any notice provisions
                  or minimum amounts of such Loans otherwise required under this
                  Agreement shall be disregarded  except for the proviso of this
                  Section  2.2(ii)).  The  aggregate  of the amounts paid by the
                  Canadian  Lenders  to the  Canadian  Agent in  respect  of the
                  Canadian  Swingline  Facility shall be applied by the Canadian
                  Swingline  Lender to reduce the then  outstanding  Loans under
                  the Canadian Swingline.

         (iii)    Notwithstanding  the  foregoing  (A)  the  Canadian  Swingline
                  Lender may, at its sole option,  put all outstanding  Advances
                  under  the  Canadian   Swingline   Facility  to  the  Canadian
                  Revolving  Facility  Lenders,  (B) in such case,  the Canadian
                  Swingline  Lender  will not make  further  Advances  under the
                  Canadian   Swingline   Facility  and  the  Canadian  Swingline
                  Commitment  shall be  transferred  to the  Canadian  Revolving
                  Facility  Commitment,  and (C) the Canadian  Agent will adjust
                  amounts  outstanding under the Canadian Revolving Facility pro
                  rata to the Total Canadian Commitments.

         (iv)

                  (A)      The Canadian  Borrower shall pay interest  payable on
                           Advances made under the Canadian  Swingline  Facility
                           directly to the Canadian Swingline Lender; and

                  (B)      The Canadian  Swingline  Lender shall  determine  the
                           Prime Rate or the U.S. Base Rate, as the case may be,
                           for Advances made under the Canadian Swingline.

(c)      The U.S.  Borrowers may,  subject to the terms of this Agreement,  upon
         giving the U.S. Agent prior written notice:

         (i)      by not later than 10:00 a.m. on the 3rd  Business Day prior to
                  the Drawdown Date for each Advance which is a Libor Loan;

         (ii)     by not later than 10:00 a.m. on the 2nd  Business Day prior to
                  the Drawdown  Date or Repayment  Date, as the case may be, for
                  any Borrowing or Conversion under the U.S.  Revolving Facility
                  (other than a Libor Loan);

borrow,  repay and/or  reborrow or convert in accordance with Section 2.3, under
the U.S. Revolving Facility,  (A) in respect of U.S. Prime Rate Loans in minimum
tranches of U.S.  $300,000 and thereafter in multiples of U.S.  $100,000 and (B)
in respect of Libor Loans in minimum tranches of U.S.  $1,000,000 and thereafter
in multiples of U.S.  $100,000;  provided that repayment of Libor Loans shall be
made on the  last  day of the  applicable  Libor  Interest  Period  and the U.S.
Borrowers  shall not be entitled to have more than an aggregate of 8 Libor Loans
outstanding at any time.


<PAGE>


                                      -24-


(d)

         (i)      In order to facilitate  each U.S.  Borrower's  cash management
                  requirements,  the U.S.  Swingline Lender in its capacity as a
                  U.S. Lender agrees to make available to the U.S. Borrowers the
                  U.S.  Swingline.  The U.S. Swingline Facility shall be used by
                  the U.S.  Borrowers to fund amounts  which would  otherwise be
                  drawn  down by the U.S.  Borrowers  under  the U.S.  Revolving
                  Facility  pursuant to Section  2.2(c) but for such amounts not
                  being,  in a  minimum  principal  amount of  U.S.$300,000  and
                  multiples of U.S.  $100,000  thereafter.  Notwithstanding  any
                  other provision  hereof,  Drawdowns  under the U.S.  Swingline
                  Facility are not subject to any minimum amount. Any Borrowings
                  under the U.S.  Swingline Facility may be drawn down by way of
                  U.S.  Prime  Rate  Loans by the U.S.  Borrowers  by  providing
                  notice to the U.S.  Swingline  Lender  before 3:00 p.m. on the
                  date of the request for drawdown.

         (ii)     At any time and from time to time in its discretion,  the U.S.
                  Swingline  Lender  may  notify  the U.S.  Agent  that the U.S.
                  Swingline  Lender  wishes each of the U.S.  Lenders to provide
                  its Participation in the U.S.  Revolving Facility for Advances
                  made under the U.S.  Swingline,  in which case the U.S.  Agent
                  shall  forthwith  notify  each  of the  U.S.  Lenders  of such
                  Participation  and each U.S. Lender shall thereupon provide to
                  the U.S. Agent, for the account of the U.S.  Swingline Lender,
                  such U.S.  Lender's  Participation  under  the U.S.  Revolving
                  Facility;  PROVIDED HOWEVER, no such Participation shall cause
                  any such U.S. Lender to exceed its Total U.S. Commitment.  The
                  amounts so provided by the U.S. Lenders in respect of the U.S.
                  Swingline  shall  be  deemed  to  be  U.S.  Prime  Rate  Loans
                  denominated  in U.S.$  under the U.S.  Revolving  Facility  in
                  accordance with the provisions of this Agreement (and for such
                  purposes  any notice  provisions  or  minimum  amounts of such
                  Loans  otherwise   required  under  this  Agreement  shall  be
                  disregarded   except   for  the   proviso   to  this   Section
                  2.2(d)(ii)).  The  aggregate  of the amounts  paid by the U.S.
                  Lenders to the U.S.  Agent in  respect  of the U.S.  Swingline
                  Facility shall be paid by the U.S. Agent to the U.S. Swingline
                  Lender and applied by the U.S.  Swingline Lender to reduce the
                  then outstanding Loans under the U.S. Swingline.

         (iii)    Notwithstanding  the foregoing (A) the U.S.  Swingline  Lender
                  may, at its sole option,  put all  outstanding  Advances under
                  the U.S.  Swingline  Facility to the U.S.  Revolving  Facility
                  Lenders,  (B) in such case, the U.S. Swingline Lender will not
                  make further  Advances under the U.S.  Swingline  Facility and
                  the U.S. Swingline Commitment shall be transferred to the U.S.
                  Revolving  Facility  Commitment,  and (C) the U.S.  Agent will
                  adjust amounts  outstanding under the U.S.  Revolving Facility
                  pro rata to the Total U.S. Commitment.

         (iv)     The U.S.  Borrowers  shall pay interest on Advances made under
                  the U.S.  Swingline  Facility  directly to the U.S.  Swingline
                  Lender;  provided,  however,  that  to  the  extent  any  such
                  interest is due to U.S. Prime Rate Loans of U.S.


<PAGE>


                                      -25-


                  Lenders made in  accordance  with clause (ii)  preceding,  the
                  U.S.  Swingline  Lender shall  immediately  upon receipt remit
                  such funds to the U.S.  Agent  which shall  promptly  pay such
                  interest  to such U.S.  Lenders in  accordance  with the terms
                  hereof for payments on U.S. Prime Rate Loans herein.; and

         (v)      The U.S.  Swingline Lender shall determine the U.S. Prime Rate
                  for Advances made under the U.S. Swingline.

2.3      CONVERSION

         A Borrower may, upon giving prior written  notice to the Canadian Agent
and/or the U.S.  Agent, as the case may be, in accordance with Section 2.2(a) or
(c), as the case may be,  containing  the  information  set out in Schedule  "G"
effective  on  any   Business   Day  during  the  term  of  this   Agreement  (a
"Conversion"), convert on the Conversion Date Advances outstanding from one Type
to another Type to the extent such Type is available hereunder, provided that:

(a)      a Libor Loan may be  converted  to another Type only on the last day of
         the Libor Interest Period applicable to that Libor Loan;

(b)      Borrowings or any portion thereof comprising  Bankers'  Acceptances may
         be converted to another Type only on the  applicable B/A Maturity Date;
         and

(c)      the conditions precedent set out in Section 5.1 have been fulfilled.

The Conversion of any Advances shall not reduce any amount  available  under the
Total Commitments.

2.4      MAKING BORROWINGS

(a)      If the Canadian  Borrower gives prior written  notice,  in the form set
         out in Schedule  "H", to the  Canadian  Agent of its  intention to draw
         down a  Borrowing  under the  Canadian  Revolving  Facility,  including
         Bankers' Acceptances, a Prime Rate Loan, a U.S. Base Rate Loan or Libor
         Loan or a Conversion  in  accordance  with  Section  2.2(a) or 2.3, the
         Canadian Agent shall on the same day it receives the notice notify each
         Canadian  Lender by  telephone or in writing of the amount of the Prime
         Loan, U.S. Base Rate Loan,  Libor Loan or Bankers'  Acceptance and such
         Canadian Lender's portion thereof, and

         (i)      each Canadian Lender shall,  not later than 12:00 noon. on the
                  Drawdown Date, make, or procure to be made, its  Participation
                  in such Bankers'  Acceptances,  Prime Loan, Libor Loan or U.S.
                  Base Rate Loan, as the case may be,  available to the Canadian
                  Agent in accordance with Article X; and


<PAGE>


                                      -26-


         (ii)     the  Canadian  Agent  shall on the  Drawdown  Date,  make such
                  Bankers' Acceptances, Prime Loan, Libor Loan or U.S. Base Rate
                  Loan, as the case may be, available to the Canadian  Borrower,
                  in accordance with Article X.

(b)      If a U.S.  Borrower gives prior written notice,  in the form set out in
         Schedule  "H",  to the  U.S.  Agent  of its  intention  to draw  down a
         Borrowing  under the U.S.  Revolving  Facility,  including a U.S. Prime
         Rate Loan or a Libor Loan, or a  Conversion  of a U.S.  Prime Rate Loan
         or a Libor Loan in  accordance  with  Section  2.2(b) or 2.3,  the U.S.
         Agent  shall on the same day it  receives  the notice  notify each U.S.
         Lender by  telephone  or in writing of the amount of the Libor Loan and
         such U.S. Lender's portion thereof, and

         (i)      each U.S.  Lender  shall,  not later than 12:00  noon.  on the
                  Drawdown Date, make, or procure to be made, its  Participation
                  in the U.S. Prime Rate Loan or Libor Loan, as the case may be,
                  available to the U.S. Agent in accordance with Article X; and

         (ii)     the U.S.  Agent shall,  on the Drawdown  Date,  make such U.S.
                  Prime Rate Loan or Libor Loan,  as the case may be,  available
                  to the U.S. Borrower, in accordance with Article X.

2.5      PARTICIPATION OF EACH LENDER

(a)      The Canadian  Agent is  authorized  by the  Canadian  Borrower and each
         Canadian Lender to allocate  amongst the Canadian  Lenders the Bankers'
         Acceptances  to be issued and  purchased  in such manner and amounts as
         the Canadian Agent may, in its sole and unfettered  discretion consider
         necessary and  equitable,  rounding up or down, so as to ensure that no
         Canadian   Lender  is  required  to  accept  and  purchase  a  Bankers'
         Acceptance  for a  fraction  of Cdn.  $100,000;  provided  however  the
         Canadian Agent shall seek to allocate such Bankers' Acceptances in such
         amounts  and  for  such   terms,   over  time,   as  to  maintain   the
         Participations  of all  such  Canadian  Lenders  in  substantially  the
         relative  amounts  and  percentages  set out on  Schedule  "L".  To the
         extent,  if any,  necessary to maintain each such  Participation as the
         result of the foregoing,  the Canadian Agent shall allocate a lesser or
         greater amount of other Advances to each Canadian Lender.

(b)      At the time of making any Loan, the Canadian  Agent or the U.S.  Agent,
         as the case may be, shall,  if  appropriate,  re-allocate  amounts made
         available to the Borrowers under any of the Loans to give effect to the
         Participation  of each  Lender,  determined  immediately  prior  to the
         making of a Loan.

2.6      BANKERS' ACCEPTANCES

(a)      Each  Banker's   Acceptance  tendered  by  the  Canadian  Borrower  for
         acceptance by a Canadian Lender under the Canadian  Revolving  Facility
         shall be denominated in Canadian Dollars and be payable in Canada.  The
         Canadian  Borrower  acknowledges


<PAGE>


                                      -27-


         that the Canadian  Lenders may require the delivery of drafts which are
         in conformity  with the rules and  procedures  of a clearing  house (as
         that term in defined in the  DEPOSITORY  BILLS AND NOTES ACT  (Canada))
         used by the Canadian Lenders for the delivery,  transfer and collection
         of bankers' acceptances and depository bills.

(b)      The Borrower  shall provide for each accepted  draft at its maturity to
         the  Canadian  Agent  either by  payment of the full  principal  amount
         thereof or through  utilization of the Canadian  Revolving  Facility in
         accordance  with this Agreement or through a combination  thereof.  The
         Canadian  Borrower  may  not at any  time  request  that  any  Bankers'
         Acceptance  be issued if the face  amount  of such  requested  Bankers'
         Acceptance  together with the aggregate of the other  outstanding Loans
         under  the  Canadian  Revolving  Facility,   would  exceed  the  amount
         available to be drawdown under the Canadian  Revolving Facility at such
         time.  Any  amount  owing by the  Canadian  Borrower  in respect of any
         Bankers'  Acceptance  which is not paid or provided  for in  accordance
         with the foregoing shall be deemed to be a Prime Rate Loan owing by the
         Canadian  Borrower to the Canadian  Lenders and shall be subject to all
         of the provisions of this Agreement  applicable to a  Prime Rate  Loan.
         The Canadian  Borrower hereby  authorizes the Canadian Lenders to debit
         its account by the amount  required  to pay any such  drafts made by it
         and accepted as a Bankers' Acceptance hereunder  which is not otherwise
         paid.

(c)      If an Event of Default shall have occurred and shall then be continuing
         unremedied  not waived by the Lenders  (whether or not demand is made),
         the Canadian  Borrower  shall  forthwith  pay to the Canadian  Agent an
         amount equal to the Canadian Lender's maximum potential liability under
         all such outstanding Bankers' Acceptances. Such amount shall be held by
         the  Canadian  Agent as general  and  continuing  cash  collateral  for
         payment of the indebtedness  and liability of the Canadian  Borrower to
         the Canadian  Lenders in respect of such Bankers'  Acceptances  and any
         other obligations to the Canadian Lenders.

(d)      To facilitate the  acceptance of Bankers'  Acceptances  hereunder,  the
         Canadian   Borrower   hereby   authorizes  the  Canadian   Lenders  and
         irrevocably appoints the Canadian Lenders as its attorney:

         (i)      to complete and sign on the Canadian Borrower's behalf, either
                  manually or by facsimile or mechanical  signature,  the drafts
                  to create the  Bankers'  Acceptances  (with,  in the  Canadian
                  Lender's  discretion,  the  inscription  "This is a depository
                  bill subject to the DEPOSITORY BILLS AND NOTES ACT (Canada));

         (ii)     after  the  acceptance  thereof  by  the  applicable  Canadian
                  Lender, to endorse on the Canadian  Borrower's behalf,  either
                  manually  or  by  facsimile  or  mechanical  signature,   such
                  Bankers'  Acceptances in favour of the applicable purchaser or
                  endorsee   thereof   including,   in  the  Canadian   Lender's
                  discretion,  the  Canadian  Lender  or a  clearing  house  (as
                  defined by the DEPOSITORY BILLS AND NOTES ACT (Canada));


<PAGE>


                                      -28-


         (iii)    to deliver such Bankers'  Acceptances  to such purchaser or to
                  deposit such Bankers'  Acceptances  with such clearing  house;
                  and

         (iv)     to comply with the  procedures  and  requirements  established
                  from time to time by the  Canadian  Lenders  or such  clearing
                  house in respect of the delivery,  transfer and  collection of
                  bankers' acceptances and depository bills.

All Bankers' Acceptances so completed,  signed, endorsed, delivered or deposited
by a Canadian  Lender on behalf of the Canadian  Borrower  shall be binding upon
the Canadian Borrower as if completed,  signed, endorsed, delivered or deposited
by it. The records of the Canadian Lenders and such clearing house shall, in the
absence of manifest error, be conclusively binding on the Canadian Borrower. The
Lenders  shall not be  liable  for any  claim  arising  by reason of any loss or
improper use of such drafts or Bankers'  Acceptances except for damages suffered
by  the  Canadian  Borrower  caused  by  the  intentional  misconduct  or  gross
negligence of a Canadian Lender.

(e)      The  Borrowers  shall not claim  any days of grace for the  payment  at
         maturity of any drafts  presented and accepted as Bankers'  Acceptances
         hereunder.

(f)      When  the  Canadian  Borrower  wishes  to  make a  Borrowing  by way of
         Bankers'  Acceptances  it shall  give the  Canadian  Agent  the  notice
         required pursuant to Section 2.2. Bankers' Acceptances shall have terms
         of at least 1 month and not more than 6 months  excluding days of grace
         (and which shall,  in no event,  end on a date after the Final Maturity
         Date).

(g)      On the same day it  receives  such  notice,  the  Canadian  Agent shall
         notify by  telephone  or in  writing  all the  Canadian  Lenders of the
         details of the proposed issue, specifying, for each Canadian Lender:

         (i)      the  Principal  Amount  of  the  Bankers'  Acceptances  to  be
                  accepted and purchased by such Canadian Lender; and

         (ii)     the term of such Bankers' Acceptances.

2.7      ACCEPTANCE DATE PROCEDURE

         On the Acceptance Date, the following provisions shall apply:

(a)      At or about 10:00 a.m.  on the  Acceptance  Date,  the  Canadian  Agent
         shall  promptly  determine  the BA Discount Rate.

(b)      Forthwith  that same day,  the Canadian  Agent shall  advise each
         Canadian Lender of:

         (i)      the BA Discount Rate;

         (ii)     the amount of the  Acceptance Fee applicable to those Bankers'
                  Acceptances  to be  accepted by such  Canadian  Lender on such
                  Acceptance  Date, such


<PAGE>


                                      -29-


                  Canadian Lender being  authorized by the Canadian  Borrower to
                  collect such  Acceptance  Fee out of the Net Proceeds of those
                  Bankers' Acceptances mentioned in subsection (iii);

         (iii)    the Net Proceeds of those Bankers'  Acceptances to be accepted
                  and purchased by such Canadian Lender on such Acceptance Date;
                  and

         (iv)     the amount obtained (the "Available  Proceeds") by subtracting
                  the Acceptance  Fee mentioned in subsection  (ii) from the Net
                  Proceeds mentioned in subsection (iii).

(c)      Not later than 12:00 noon that same day,  each  Canadian  Lender  shall
         make available to the Canadian Agent its Available Proceeds.

(d)      That same day, the  Canadian  Agent shall  transfer all such  Available
         Proceeds so made available to it to the Canadian Borrower in accordance
         with Section  10.3 and shall  notify the Canadian  Borrower on such day
         either by telex or telephone (to be confirmed  subsequently  by letter)
         of the  details  of the  issue,  substantially  in the  form set out in
         Schedule "I".

2.8      PURCHASE OF BANKERS' ACCEPTANCES

         Before  giving value to the  Canadian  Borrower,  the Canadian  Lenders
shall, on the Acceptance Date, accept the Bankers' Acceptances, by inserting the
appropriate  Principal  Amount,  Acceptance  Date and  maturity  date thereof in
accordance with the Canadian  Borrower's  notice  relating  thereto and affixing
their acceptance  stamps thereto,  and shall purchase same. The Principal Amount
so accepted  and  purchased  by any such  Canadian  Lender shall not exceed such
Canadian Lender's unutilized Commitment.

2.9      PAYMENT OF BANKERS' ACCEPTANCES

         The  Bankers'  Acceptances  shall be  payable  in  accordance  with the
following provisions:

(a)      The Canadian  Borrower  shall pay to the Canadian Agent for the account
         of the Canadian  Lenders an amount equal to the Principal Amount of the
         Bankers' Acceptances on their respective B/A Maturity Dates.

(b)     In the event the Canadian  Borrower fails to notify the Canadian  Agent,
        in writing,  not later than 10:00 a.m.  (such notice,  if verbal,  to be
        confirmed to the Canadian  Agent in writing  later the same day, but not
        necessarily  by 10:00 a.m.),  2 Business  Days prior to any B/A Maturity
        Dates of a Bankers'  Acceptance,  that the Canadian  Borrower intends to
        pay with its own funds the Principal Amount of the Bankers'  Acceptances
        due on such B/A Maturity Dates,  the Canadian  Borrower shall be deemed,
        for all purposes, to have given the Canadian Agent notice to convert the
        Principal  Amount  of


<PAGE>


                                      -30-


        such Bankers' Acceptances into a Prime Loan denominated in Cdn.$ and the
        provisions of Section 2.3 shall apply mutatis mutandis save that:

         (i)      such B/A Maturity Date shall be considered to be the Drawdown
                  Date of such Prime Loan;

         (ii)     the  proceeds  of such  Prime  Loan  shall  be used to pay the
                  Principal  Amount of the Bankers'  Acceptances due on such B/A
                  Maturity Date; and

         (iii)    on such B/A Maturity Date,  each Canadian  Lender,  instead of
                  making its  Participation  in such Prime Loan available to the
                  Canadian Agent,  shall first directly apply its  Participation
                  in such  Prime Loan in  payment  of its  Participation  in the
                  Principal  Amount  of  the  Bankers'   Acceptances   accepted,
                  purchased and issued by such  Canadian  Lender and due on such
                  B/A Maturity Date.

2.10     SET-OFF AND NETTING

         On any Acceptance  Date,  Drawdown Date or Repayment Date, the Canadian
Agent or the U.S.  Agent,  as the case may be,  shall be entitled to set-off and
net amounts payable on such date by the Canadian Agent or the U.S. Agent, as the
case may be, to a Lender for the account of any Borrower against amounts payable
on such date by such Lender to the Canadian Agent or the U.S. Agent, as the case
may  be,  in  connection  with  transactions  conducted  in the  same  basis  of
borrowing, for the account of such Borrower.  Similarly, on any Acceptance Date,
Drawdown Date or Repayment Date, each Lender shall be entitled to set-off and to
net amounts payable on such date by such Lender to a Borrower (by payment to the
Canadian Agent or the U.S. Agent,  as the case may be),  against amounts payable
on such date by such Borrower to such Lender,  in  accordance  with the Canadian
Agent's or the U.S. Agent's, as the case may be, calculations.

2.11     LETTERS OF CREDIT

(a)     Subject to the notice  provisions  of Sections  2.2 and 2.3 and upon the
        terms and subject to the conditions  hereof, the applicable Issuing Bank
        shall,  at  the  request  of a  Borrower,  issue  under  the  applicable
        Revolving  Facility  one or more  irrevocable  Letters of Credit in such
        Issuing Bank's usual form (or such other form as may be required by such
        Borrower  and is  acceptable  to the Issuing  Bank  acting  reasonably),
        expiring no later than,  in the case of Standby  Letters of Credit,  365
        days from the date of  issuance  and,  in the case of Trade  Letters  of
        Credit,  270 days from the date of issuance  and in no case later than 3
        Business Days before the Final Maturity Date,  provided that the maximum
        amount  payable  under all  Letters of Credit  shall not, at the time of
        issue of each Letter of Credit, exceed U.S.$10,000,000 or the Equivalent
        Amount thereof in Canadian Dollars.

(b)     In the event that an Issuing  Bank is called  upon by a  beneficiary  to
        honour a Letter of Credit issued by such Issuing Bank, such Issuing Bank
        shall forthwith give notice


<PAGE>


                                      -31-

        thereof to the applicable Borrower.  Unless such Borrower has made other
        arrangements  with the  Issuing  Bank with  respect  to  payment  to the
        Issuing  Bank of an amount  sufficient  to permit  the  Issuing  Bank to
        discharge  its  obligations  under the Letter of Credit plus that amount
        equal to any and all charges and expenses which the Issuing Bank may pay
        or incur relative to such Letter of Credit,  any such payment so payable
        in Canadian  Dollars  with respect to the  Canadian  Revolving  Facility
        shall be deemed to be a Drawdown of a Prime Rate Loan under the Canadian
        Revolving  Facility  and any  amount so  payable  in U.S.  Dollars  with
        respect to a Letter of Credit issued on behalf of the Canadian  Borrower
        shall be deemed to be a Drawdown by way of an U.S.  Base Rate Loan under
        the  Canadian  Revolving  Facility,  and any such amount so payable with
        respect to a Letter of Credit issued on behalf of a U.S.  Borrower shall
        be deemed to be a Drawdown  by way of an U.S.  Prime Rate Loan under the
        U.S.  Revolving  Facility  provided  that the  provisions of Section 2.2
        regarding notices shall not apply to such Loans.

(c)     Any Issuing Bank shall notify the Canadian Agent or the U.S.  Agent,  as
        the case may be, of each  issuance or  amendment of any Letter of Credit
        on the day upon which such issuance or amendment  occurs and the Issuing
        Bank shall provide the Canadian Agent or the U.S. Agent, as the case may
        be,  with  monthly  reports  setting  out the face  amount of Letters of
        Credit  outstanding  on each  day of the  preceding  month.  Each of the
        Lenders,  other than an Issuing Bank,  shall be deemed to have purchased
        from such  Issuing  Bank its  Participation  of the face  amount of each
        Letter  of Credit  issued by such  Issuing  Bank.  Each of the  Canadian
        Lenders  agrees to indemnify the Issuing Bank issuing  Letters of Credit
        under the Canadian  Facilities  and each of the U.S.  Lenders  agrees to
        indemnify  the Issuing  Bank  issuing  Letters of Credit  under the U.S.
        Facilities, in each case as to such Lender's Participation of any amount
        paid by the  Issuing  Bank under any Letter of Credit  plus that  amount
        equal to any and all payments, losses, costs, charges and expenses which
        such  Issuing  Bank may pay or incur  relative to such Letter of Credit,
        except to the extent due to the gross negligence or wilful misconduct of
        such  Issuing  Bank in the  issuance  or  performance  of such Letter of
        Credit.

(d)      The  Borrowers  shall  indemnify  the Issuing Banks against any and all
         actions, proceedings, costs, damages, expenses, taxes (other than taxes
         on overall net income, assets or capital), claims and demands which the
         Issuing  Banks may incur or  sustain by reason of or arising in any way
         whatsoever in connection  with the opening,  establishing  or paying of
         the amounts  payable under Letters of Credit issued at the request of a
         Borrower  or  arising in  connection  with any  amounts  payable by any
         Issuing Bank or any Lender thereunder.

(e)      Each  Borrower  for  which a Letter of  Credit  has been  issued on its
         behalf shall pay to the Canadian Agent or U.S.  Agent,  as the case may
         be, for the account of the Canadian Lenders or the U.S. Lenders, as the
         case may be, each month that Letters of Credit issued on behalf of such
         Borrower are outstanding,  the applicable  Letter of


<PAGE>


                                      -32-


        Credit Fee and the applicable Agent shall promptly pay such fees to such
        Lenders in accordance with the terms hereof.

(f)      Each  Borrower  for  which a Letter of  Credit  has been  issued on its
         behalf shall pay to the  applicable  Issuing Bank,  sundry  charges and
         out-of-pocket  expenses  payable in respect of Letters of Credit  which
         the Issuing Bank issues pursuant to a request of such Borrower.

                                  ARTICLE III
                             REPAYMENT AND ACCOUNTS

3.1      REPAYMENT

         The Principal  Amount of all  Borrowings  outstanding  under all of the
Facilities  shall be repaid in full by the Borrowers on the Final  Maturity Date
and the Commitments in respect of such Facilities shall terminate on such date.

3.2      ACCOUNTS KEPT BY THE CANADIAN AGENT

         The Canadian  Agent shall keep in its books Accounts for the Letters of
Credit,  the Prime Rate Loans,  U.S.  Base Rate  Loans,  Libor  Loans,  Bankers'
Acceptances  and  other  amounts  payable  by the  Canadian  Borrower  under the
Canadian  Revolving Facility  (including for greater  certainty,  any Loans made
under the  Canadian  Swingline  Facility  which  become Loans under the Canadian
Revolving Facility).  The Canadian Agent shall make appropriate entries showing,
as debits, the amount of the indebtedness of the Canadian Borrower in respect of
the Letters of Credit,  the Prime Rate Loans, U.S. Base Rate Loans, Libor Loans,
and  Bankers'  Acceptances,  as the  case  may be,  the  amount  of all  accrued
interest,  and any  other  amount  due to the  Canadian  Lenders  or the  Agents
pursuant hereto, according to the respective Participation of each Lender in the
Canadian Revolving Facility,  and showing, as credits, each payment or repayment
of principal and interest made in respect of such  indebtedness,  as well as any
other  amount  paid to the  Canadian  Lenders  or the  Agents  pursuant  hereto,
according  to  the  respective   Participation  of  each.  Such  Accounts  shall
constitute  (in the absence of  manifest  error)  prima facie  evidence of their
content  against the Canadian  Borrower and the Canadian  Lenders.  The Canadian
Agent shall supply any Canadian Lender and the Canadian Borrower,  upon request,
with statements of such Accounts.

3.3      ACCOUNTS KEPT BY THE CANADIAN SWINGLINE LENDER

         The Canadian  Swingline Lender shall keep in its books Accounts for the
Prime  Rate  Loans and U.S.  Base Rate  Loans and other  amounts  payable by the
Canadian Borrower under the Canadian  Swingline.  The Canadian  Swingline Lender
shall make appropriate entries, showing as debits, the amount of indebtedness of
the  Canadian  Borrower  in respect  of the Prime Rate Loans and U.S.  Base Rate
Loans,  as the case may be, the  amount of all  accrued  interest  and any other
amount due to the Canadian Swingline Lender and showing as


<PAGE>


                                      -33-


credits,  each payment or repayment of principal and interest made in respect of
such  indebtedness.  Such Accounts shall  constitute (in the absence of manifest
error) prima facie evidence of their content against the Canadian Borrower.  The
Canadian  Swingline  Lender  shall  supply any  Canadian  Lender or the Canadian
Borrower, upon request, with statements of such Accounts.

3.4      ACCOUNTS KEPT BY THE U.S. SWINGLINE LENDER

         The U.S.  Swingline  Lender  shall keep in its books  Accounts for U.S.
Prime Rate Loans and other amounts  payable by the U.S.  Borrower under the U.S.
Swingline.  The U.S. Swingline Lender shall make appropriate entries, showing as
debits,  the amount of indebtedness of the U.S.  Borrower in respect of the U.S.
Prime Rate Loans, the amount of all accrued interest and any other amount due to
the U.S.  Swingline Lender and showing as credits,  each payment or repayment of
principal and interest made in respect of such indebtedness. Such Accounts shall
constitute  (in the absence of  manifest  error)  prima facie  evidence of their
content against the U.S.  Borrower.  The U.S.  Swingline Lender shall supply any
U.S. Lender or U.S. Borrower, upon request, with statements of such Accounts.

3.5      ACCOUNTS KEPT BY THE U.S. AGENT

         The U.S.  Agent  shall keep in its books  Accounts  for the  Letters of
Credit,  the U.S. Prime Rate Loans and Libor Loans and other amounts  payable by
the U.S.  Borrowers  under the U.S.  Revolving  Facility  (including for greater
certainty,  any Loans made under the U.S.  Swingline  Facility which have become
Loans under the U.S. Revolving Facility).  The U.S. Agent shall make appropriate
entries showing, as debits, the amount of the indebtedness of the U.S. Borrowers
in respect of the U.S. Prime Rate Loans and Libor Loans, as the case may be, the
amount of all accrued interest,  and any other amount due to the U.S. Lenders or
the Agents pursuant  hereto,  according to the respective  Participation of each
Lender,  and showing,  as credits,  each  payment or repayment of principal  and
interest made in respect of such indebtedness,  as well as any other amount paid
to the U.S. Lenders or the Agents pursuant  hereto,  according to the respective
Participation  of each.  Such  Accounts  shall  constitute  (in the  absence  of
manifest error) prima facie evidence of their content against the U.S. Borrowers
and the U.S.  Lenders.  The U.S.  Agent shall supply any U.S.  Lender and either
U.S. Borrower, upon request, with statements of such Accounts.

3.6      ACCOUNTS KEPT BY EACH CANADIAN LENDER

         Each  Canadian  Lender  shall  keep in its  books,  in  respect  of its
Participation,  accounts for the Letters of Credit,  the Prime Rate Loans,  U.S.
Base Rate Loans, Libor Loans,  Bankers' Acceptances and other amounts payable by
the Canadian  Borrower  under this  Agreement.  Each Canadian  Lender shall make
appropriate  entries showing,  as debits,  the amount of the indebtedness of the
Canadian Borrower towards it in respect of the Letters of Credit, the Prime Rate
Loans, U.S. Base Rate Loans, Libor Loans, and Bankers' Acceptances,  as the case
may be,  the amount of all  accrued  interest  and any other  amount due to such
Lender pursuant  hereto and, as credits,  each payment or repayment of principal
and interest  made in respect of such  indebtedness  as well as any other amount
paid to such Lender  pursuant


<PAGE>


                                      -34-


hereto.  These accounts shall constitute (in the absence of manifest error or of
contradictory  entries in the  Accounts),  prima facie evidence of their content
against the Canadian Borrower.

3.7      ACCOUNTS KEPT BY U.S. LENDERS

         Each  U.S.   Lender  shall  keep  in  its  books,  in  respect  of  its
Participation,  accounts for the Letters of Credit, U.S. Prime Rate Loans, Libor
Loans,  and other amounts  payable by the U.S.  Borrowers  under this Agreement.
Each U.S. Lender shall make appropriate  entries showing,  as debits, the amount
of the indebtedness of the U.S. Borrower towards it in respect of the Letters of
Credit,  U.S. Prime Rate Loans,  Libor Loans,  as the case may be, the amount of
all accrued  interest  and any other amount due to such Lender  pursuant  hereto
and, as credits,  each payment or repayment  of principal  and interest  made in
respect of such  indebtedness  as well as any other  amount  paid to such Lender
pursuant  hereto.  These accounts  shall  constitute (in the absence of manifest
error or of  contradictory  entries in the  Accounts),  prima facie  evidence of
their content against the U.S. Borrowers.

3.8      PROMISSORY NOTES

         At the  request  of any  Lender,  each  Borrower  under the  Facilities
applicable  to such Lender shall execute and deliver to such Lender a promissory
note substantially in the form attached hereto as Schedule "Q".

3.9      EXCESS RESULTING FROM EXCHANGE RATE CHANGE

         Any time that,  following one or more fluctuations in the exchange rate
of the Cdn. Dollar against the U.S. Dollar, the sum of:

(a)      the Borrowings in Cdn. Dollars under the Canadian Facilities; and

(b)      the  Equivalent  Amount  in  Canadian  Dollars  of the  Borrowings  in
         U.S.  Dollars  under  the  Canadian Facilities;

         exceeds the Total  Commitments  under the Canadian  Facilities  then in
         effect, the Canadian Borrower shall, within 10 days thereafter, either:

(c)      make the  necessary  payments or  repayments  to the Canadian  Agent or
         Canadian Swingline Lender, as the case may be, to reduce such sum to an
         amount equal to or less than the Total  Commitments  under the Canadian
         Facilities in effect on the date of such payment or repayment; or

(d)     maintain or cause to be maintained  with the Canadian  Agent deposits of
        U.S.  Dollars in an amount  equal to or greater than the amount by which
        such sum exceeds the Total Commitments under the Canadian  Facilities in
        effect on the date such  deposits are  provided to the  Canadian  Agent,
        such  deposits to be  maintained in such form and upon such terms as are
        acceptable to the Canadian  Agent.  Until such time as such


<PAGE>


                                      -35-

        sum shall no longer  exceed  the Total  Commitments  under the  Canadian
        Facilities, the Canadian Agent shall invest the deposits, in such manner
        and form of investment  as shall be mutually  acceptable to the Canadian
        Borrower and the Canadian  Agent,  and income  earned  thereon  shall be
        received by the Canadian Agent for the Canadian  Borrower's  account and
        paid to the Canadian Borrower. Without in any way limiting the foregoing
        provisions,  the Canadian Agent shall, on each Acceptance Date, Drawdown
        Date,  Interest  Payment Date and B/A Maturity  Date make the  necessary
        exchange rate  calculations to determine  whether any such excess exists
        on such date and, if there is an excess, it shall so notify the Canadian
        Borrower.

3.10     CURRENCY

         Borrowings and payments in respect  thereof are payable in the currency
in which they are denominated.

3.11     EXTENSION OF FINAL MATURITY DATE

(a)      June 28, 2002 or, if the Facility is extended as a 364 day facility for
         a further 364 days such subsequent  extension date,  shall in each case
         be an "Extension  Date".  Subject to the terms of this  Agreement,  not
         earlier  than 90 days  but not  later  than 60 days  prior  to the next
         pending  Extension  Date, the Borrowers  collectively  may request,  in
         writing to the Canadian Agent and the U.S.  Agent,  an extension of the
         Final  Maturity Date for all but not less than all Facilities to a date
         which is one year  after the  Final  Maturity  Date then in effect  (an
         "Extension Request").

(b)      Upon receipt of an Extension  Request,  the Canadian Agent shall advise
         the Canadian  Lenders and the U.S. Agent shall advise the U.S.  Lenders
         of such Extension Request and each Lender shall advise their respective
         Agent within 30 days of receipt thereof whether such Lender consents to
         the Extension Request.

(c)      Unless the Majority  Lenders agree to any Extension  Request  extending
         the facility as a 364 day revolving  facility,  the Final Maturity Date
         shall not be extended by any Lender.

(d)      In the event that  either the  Majority  Lenders  have not agreed to an
         Extension  Request or the  Borrowers do not provide the Canadian  Agent
         and the U.S.  Agent with an  Extension  Request as  provided in Section
         3.11(a),  the next pending Extension Date shall become a "Non-Extension
         Conversion Date" and the Lenders' Commitments under the Facilities will
         convert to  two-year  reducing  non-revolving  term  facilities  in the
         principal  amounts of the  Advances  outstanding  on the  Non-Extension
         Conversion Date and the Facilities  shall be reduced and/or repaid,  as
         follows:

         (i)      on or  before  the  first  anniversary  of  the  Non-Extension
                  Conversion  Date in an amount  at least  equal to 10% of Total
                  Commitments on the Non-Extension Conversion Date; and


<PAGE>


                                      -36-


         (ii)     on or  before  the  second  anniversary  of the  Non-Extension
                  Conversion  Date,  the amount  necessary  to fully and finally
                  repay all amounts  outstanding to the Lenders and the Lenders'
                  Commitments with respect to the Facilities shall be cancelled.

(e)     If the Majority  Lenders have consented to an Extension  Request but one
        or more Lenders (each a  "Non-Consenting  Lender") do not consent to the
        Extension  Request,  the  Canadian  Agent  shall so advise the  Canadian
        Borrower  with  respect to a  Non-Consenting  Lender which is a Canadian
        Lender,  or the U.S.  Borrowers with respect to a Non-Consenting  Lender
        which is a U.S. Lender,  as the case may be, and the Lenders  consenting
        to the  Extension  Request  may (i)  elect  to have  one or more of such
        consenting Lenders assume all or a ratable portion of the Commitments of
        such  Non-Consenting  Lender,  or (ii) prepay the portion of  Facilities
        outstanding to Non-Consenting Lenders and accordingly the Commitments of
        such  Non-Consenting  Lenders  shall be cancelled or (iii) the Extension
        Date shall become a  "Non-Extending  Lenders  Conversion  Date", and the
        Non-Extending Lenders' Commitments under the Facilities shall convert to
        two-year reducing  non-revolving term facilities in the principal amount
        of  the  Advances  outstanding  to  the  Non-Extending  Lenders  on  the
        Non-Extending  Lenders  Conversion Date and the  Non-Extending  Lenders'
        Commitments shall be reduced and/or repaid as follows:

         (i)      on or  before  the  first  anniversary  of  the  Non-Extending
                  Lenders  Conversion  Date,  the amount  necessary  to repay at
                  least 10% of the Non-Extending  Lender's pro rata share of the
                  principal amount outstanding on the Extension Date; and

         (ii)     on or  before  the  second  anniversary  of the  Non-Extending
                  Lenders  Conversion  Date, the amount necessary to fully repay
                  all amounts  outstanding to the Non-Extending  Lenders and the
                  Non-Extending   Lenders   Commitments   with  respect  to  the
                  Facilities shall be cancelled.

                                   ARTICLE IV
                            INTEREST, ACCEPTANCE FEE,
                    LETTER OF CREDIT FEE AND COMMITMENT FEES

4.1      INTEREST ON LIBOR LOANS

(a)     The U.S. Borrowers shall pay, on each applicable  Interest Payment Date,
        to the U.S. Agent for the account of the U.S.  Lenders  interest on each
        Libor Loan in U.S.  Dollars  drawn down by the U.S.  Borrowers  for each
        Libor  Interest  Period at that rate per  annum  determined  by the U.S.
        Agent to be equal to the sum of the applicable  Libor Margin plus LIBOR.
        Each determination by the U.S. Agent of the rate of interest  applicable
        to a Libor Interest  Period shall,  in the absence of manifest error, be
        final,  conclusive  and  binding  upon the U.S.  Borrowers  and the U.S.
        Lenders.  Upon  determination of the rate of interest  applicable on the
        Libor Determination Date, the


<PAGE>


                                      -37-

        U.S. Agent shall notify the U.S.  Borrowers and the U.S. Lenders of such
        rate. Such interest shall be calculated daily on the basis of the actual
        number of days elapsed divided by 360.

(b)     The Canadian  Borrowers shall pay, on each applicable  Interest  Payment
        Date,  to the  Canadian  Agent for the account of the  Canadian  Lenders
        interest on each Libor Loan in U.S.  Dollars  drawn down by the Canadian
        Borrowers  for  each  Libor  Interest  Period  at that  rate  per  annum
        determined  by  the  Canadian  Agent  to be  equal  to  the  sum  of the
        applicable Libor Margin plus LIBOR.  Each  determination by the Canadian
        Agent of the rate of  interest  applicable  to a Libor  Interest  Period
        shall,  in the  absence of  manifest  error,  be final,  conclusive  and
        binding  upon the Canadian  Borrowers  and the  Canadian  Lenders.  Upon
        determination   of  the  rate  of  interest   applicable  on  the  Libor
        Determination  Date,  the  Canadian  Agent  shall  notify  the  Canadian
        Borrowers and the Canadian  Lenders of such rate. Such interest shall be
        calculated  daily on the  basis of the  actual  number  of days  elapsed
        divided by 360.

(c)      The yearly rate of interest to which the rate  determined in accordance
         with the foregoing provisions of this Section 4.1 is equivalent, is the
         rate so determined multiplied by the actual number of days in that year
         and divided by 360.

4.2      INTEREST ON U.S. BASE RATE LOANS

(a)      The Canadian  Borrower  shall pay to the Canadian Agent for the account
         of the Canadian  Lenders in U.S.  Dollars,  interest on each U.S.  Base
         Rate Loan made under the  Canadian  Revolving  Facility as evidenced by
         the Accounts of the Canadian Agent at a rate per annum equal to the sum
         of:

         (i)      the U.S. Base Rate Margin; and

         (ii)     the U.S. Base Rate.

(b)      The Canadian  Borrower  shall pay to the Canadian  Swingline  Lender in
         U.S.  Dollars,  interest  on each U.S.  Base  Rate Loan made  under the
         Canadian  Swingline  Facility  as  evidenced  by  the  Accounts  of the
         Canadian Swingline Lender at a rate per annum equal to the sum of:

         (i)      the U.S. Base Rate Margin; and

         (ii)     the U.S. Base Rate.

(c)      Each change in the  fluctuating  rate for U.S. Base Rate Loan will take
         place simultaneously with a corresponding change in the U.S. Base Rate.

(d)      The yearly rate of interest to which the rate  determined in accordance
         with the foregoing provisions of this Section 4.2 is equivalent, is the
         rate so determined multiplied by the actual number of days in that year
         and divided by 360.


<PAGE>


                                      -38-


(e)      This interest is payable  quarterly in arrears on each Interest Payment
         Date for the period up to and  including  the last day of the  previous
         Quarter  and shall be  calculated  daily on the basis of the  number of
         days elapsed divided by 360.

4.3      INTEREST ON PRIME RATE LOANS

(a)      The Canadian  Borrower  shall pay the Canadian Agent for the account of
         the Canadian  Lenders in Canadian  Dollars  interest on each Prime Loan
         made under the Canadian Revolving Facility as evidenced by the Accounts
         at a rate per annum equal to the sum of:

         (i)      the Prime Rate Margin; and

         (ii)     the Prime Rate.

(b)      The Canadian  Borrower  shall pay to the Canadian  Swingline  Lender in
         Canadian  Dollars,  interest on each Prime Loan made under the Canadian
         Swingline  Facility  as  evidenced  by the  Accounts  of  the  Canadian
         Swingline Lender at a rate per annum equal to the sum of:

         (i)      the Prime Rate Margin; and

         (ii)     the Prime Rate.

(c)      Each change in the fluctuating interest rate for a Prime Rate Loan will
         take place  simultaneously  with the corresponding  change in the Prime
         Rate.

(d)      This interest is payable  quarterly in arrears on each Interest Payment
         Date for the period up to and  including  the last day of the  previous
         Quarter and shall be calculated daily on the basis of the actual number
         of days elapsed in a year of 365 or 366 days, as the case may be.

4.4      INTEREST ON U.S. PRIME RATE LOANS

(a)      The U.S.  Borrowers  shall pay to the U.S. Agent for the account of the
         U.S. Lenders in U.S. Dollars,  interest on each U.S. Prime Rate Loan as
         evidenced by the Accounts at a rate per annum equal to the sum of:

         (i)      the U.S. Prime Rate Margin; and

         (ii)     the U.S. Prime Rate.

(b)      The U.S.  Borrowers  shall  pay to the U.S.  Swingline  Lender  in U.S.
         Dollars  interest  on each U.S.  Prime  Rate Loan as  evidenced  by the
         Accounts of the U.S.  Swingline Lender at a rate per annum equal to the
         sum of:

         (i)      the U.S. Prime Rate Margin; and


<PAGE>


                                      -39-


         (ii)     the U.S. Prime Rate.

(c)      Each  change in the  fluctuating  rate for a U.S.  Prime Rate Loan will
         take place simultaneously with a corresponding change in the U.S. Prime
         Rate.

(d)      The yearly rate of interest to which the rate  determined in accordance
         with the foregoing provisions of this Section 4.4 is equivalent, is the
         rate so determined multiplied by the actual number of days in that year
         and divided by 360.

(e)      This interest is payable  quarterly in arrears on each Interest Payment
         Date for the period up to and  including  the last day of the  previous
         Quarter  and shall be  calculated  daily on the basis of the  number of
         days elapsed divided by 360.

4.5      LIBOR INTEREST PERIODS

         If a U.S.  Borrower or the  Canadian  Borrower is borrowing by way of a
Libor Loan or if a U.S. Borrower or the Canadian Borrower elects to convert into
a Libor Loan pursuant to Section 2.3, the applicable  Borrower  shall,  prior to
the  expiration or beginning of each Libor  Interest  Period , select and notify
the  Canadian  Agent  and/or  the U.S.  Agent,  as the  case may be,  at least 3
Business Days prior to:

(a)      the last day of the current Libor Interest Period for such Libor Loan;

(b)      the  Conversion  Date,  as the case may be, of the next or new,  as the
         case may be, Libor Interest Period applicable to such Libor Loan, which
         new Libor Interest Period, as applicable, shall commence on and include
         the day following the expiration of the prior Libor Interest Period. If
         a Borrower fails to select and to notify the Canadian Agent or the U.S.
         Agent, as the case may be, of the Libor Interest Period applicable to a
         Libor  Loan,  such  Borrower  shall be deemed to have  selected a Libor
         Interest Period, of one month or 30 days, as the case may be.

In any event,  no Libor  Interest  Period shall end on a date falling  after the
Final Maturity Date. The Borrowers shall ensure, when selecting a Libor Interest
Period,  that no Libor  Loan  shall be  required  to be prepaid in order for the
Borrowers to perform their obligations under Section 3.1.

4.6      INTEREST ON OVERDUE AMOUNTS

         The Canadian  Borrower  shall pay to the Canadian Agent for the account
of the Canadian  Lenders and the U.S.  Borrowers shall pay to the U.S. Agent for
the account of the U.S. Lenders, on demand,  interest on all overdue payments in
connection  with this  Agreement,  at a rate per annum  which is equal to 2% per
annum in excess of (a) the  applicable  rates of  interest  (inclusive  of Libor
Margin)  payable  under  Section  4.1 in the case of payments  of  principal  or
interest on Libor Loans or (b) the  applicable  rates of interest  (inclusive of
Prime Rate Margin,  U.S.  Base Rate Margin or U.S.  Prime Rate  Margin)  payable


<PAGE>


                                      -40-


under  Sections  4.2,  4.3 or 4.4 in the case of any other  payments in Cdn.$ or
U.S.$, as applicable.

4.7      ACCEPTANCE FEE

         An Acceptance Fee shall be:

(a)      payable by the Canadian Borrower to the Canadian Agent for distribution
         to the  Canadian  Lenders  on the  Acceptance  Date for  each  Bankers'
         Acceptance issued; and

(b)      calculated on the Principal Amount of each Bankers'  Acceptance for the
         number of days in the term of such Bankers'  Acceptance  and based on a
         year of 365 days.

4.8      COMMITMENT FEES

(a)      From and including the date hereof to and including the Final Maturity
         Date,

         (i)      the Canadian Borrower shall pay to the Canadian Agent, for the
                  account of the Canadian Lenders to be allocated among and paid
                  to such  Lenders  pro rata in  accordance  with such  Lenders'
                  respective  Commitments,  the commitment fees described in the
                  definition   of   Applicable   Margin  on  the  daily  average
                  unutilized  portion  of  the  Commitments  in  respect  of the
                  Canadian Revolving Facility for each Quarter;

         (ii)     the  U.S.  Borrowers  shall  pay to the  U.S.  Agent,  for the
                  account of the U.S.  Lenders to be allocated among and paid to
                  such  Lenders  pro  rata  in  accordance  with  such  Lenders'
                  respective  Commitments,  the commitment fees described in the
                  definition   of   Applicable   Margin  on  the  daily  average
                  unutilized  portion of the  Commitments in respect of the U.S.
                  Revolving Facility for each Quarter;

         (iii)    the  Canadian  Borrower  shall pay to the  Canadian  Swingline
                  Lender,  the  commitment  fees  described in the definition of
                  Applicable  Margin on the daily average  unused portion of the
                  Commitments in respect of the Canadian  Swingline Facility for
                  each Quarter; and

         (iv)     the U.S. Borrowers shall pay to the U.S. Swingline Lender, the
                  commitment  fees  described in the  definition  of  Applicable
                  Margin  or  the  daily  average   unutilized  portion  of  the
                  commitments in respect of the U.S. Swingline Facility for each
                  Quarter.

4.9      LETTER OF CREDIT FRONTING FEE

         The Canadian Borrower or a U.S. Borrower,  as the case may be shall pay
to the Issuing Bank for its own account  issuing a Letter of Credit on behalf of
such Borrower,  a letter of credit fronting fee of .125% of the Principal Amount
of such Letter of Credit.


<PAGE>


                                      -41-


4.10     EFFECTIVE DATE FOR CHANGES IN APPLICABLE MARGINS

(a)      Applicable  Margins  will be adjusted  effective as of the first day of
         the month following the date that the Canadian  Borrower is required to
         deliver financial statements in accordance with Section 8.2(i).

(b)      In  the  event  that  the  Borrower  fails  to  deliver  its  financial
         statements when required in accordance with Section 8.2(i),  Applicable
         Margins shall be adjusted to highest margins applicable until the first
         day of the month following the delivery of financial  statements of the
         Canadian  Borrower   providing  the  information   confirming  that  an
         adjustment  to the  Applicable  Margins has come into effect or that no
         adjustment to the Applicable  Margins has come into effect, as the case
         may be.

(c)      Notwithstanding  any other  provision of this  Agreement,  in the event
         that the Borrowers  are entitled to a downward  adjustment to the rates
         applicable   to  any   Borrowings   outstanding   by  way  of  Bankers'
         Acceptances, Letters of Credit, and/or LIBOR Loans such rates shall not
         be adjusted downward prior to:

         (i)      in the case of Bankers' Acceptances, the applicable B/A
                  Maturity Date;

         (ii)     in the case of Letters of Credit, the applicable expiry date;
                  and

         (iii)    in the case of  Libor  Loans,  the end of the  applicable
                  Libor  Interest Period.

                                   ARTICLE V
                              CONDITIONS PRECEDENT

5.1      CONDITIONS PRECEDENT

         The Lenders'  and Issuing  Banks'  obligations  to make  available  any
Borrowings  under the Facilities on any Drawdown Date or Acceptance  Date (other
than in respect of a Conversion  pursuant to Section 2.3) or date of issuance of
a Letter of Credit is subject to and conditional  upon the  satisfaction of each
of the following conditions:

(a)      On each Drawdown  Date,  Acceptance  Date or date of issuance of a
         Letter of Credit:

         (i)      the  Canadian  Agent and the U.S.  Agent,  as the case may be,
                  shall have  received a notice of the  requested  Borrowing  or
                  Conversion  in   accordance   with  Section  2.2  or  2.3,  as
                  applicable, and with respect to Letters of Credit, the Issuing
                  Bank shall have received an application therefor and any other
                  documents   it  may  require,   all  in  form  and   substance
                  satisfactory to such Issuing Bank;

         (ii)     there shall exist no Event of Default and no condition,  event
                  or act which,  with the giving of notice or lapse of time,  or
                  both, would constitute an Event of Default; and


<PAGE>


                                      -42-


         (iii)    the  representations  and  warranties  set out in Section  8.1
                  would,  if made on such  date,  be true  and  accurate  in all
                  material  respects on each such  Drawdown  Date or  Acceptance
                  Date or date of issuance of a Letter of Credit;

(b)      on or before the  Initial  Drawdown  Date,  Acceptance  Date or date of
         issuance of a Letter of Credit,  the Canadian  Agent has  received,  in
         sufficient  quantities  to provide 1 copy to each  Lender,  in form and
         substance satisfactory to the Collateral Agent and Lenders' Counsel and
         in the case of clause (iv) of this paragraph (b), in form and substance
         satisfactory to the U.S. Lender referred to therein:

         (i)      this Agreement  duly executed by the Borrowers,  the Unlimited
                  Guarantors,  the Lenders,  the Canadian Agent,  the U.S. Agent
                  and the Collateral Agent;

         (ii)     certified   copies  of  the   articles  and   certificate   of
                  incorporation  of each  of the  Borrowers  and  the  Unlimited
                  Guarantors,  their respective  borrowing by-laws,  if any, and
                  resolutions   of  their   respective   boards   of   directors
                  authorizing  the execution,  delivery and  performance of this
                  Agreement and the Security by them respectively;

         (iii)    the certificate (without personal liability) of the president,
                  the  chief  financial  officer  or  treasurer  of  each of the
                  Borrowers  and  the  Unlimited  Guarantor  confirming,  in all
                  material  respects,  the veracity of the  representations  and
                  warranties set out in Section 8.1, substantially as set out in
                  Schedule "J" supplemented by all such certificates as Lenders'
                  Counsel may require;

         (iv)     promissory note(s) requested by a U.S. Lender;

         (v)      incumbency  certificates  setting  forth  the  signatures  and
                  titles of Authorized Signatories for each Borrower, certifying
                  their  authority  to sign  this  Agreement  and any  documents
                  contemplated hereby or provided in connection herewith;

         (vi)     the  Canadian  Agent shall have  received the opinions in form
                  and substance  satisfactory to the Canadian Agent, the Lenders
                  and  the  Lenders'  Counsel  of each  of  Borrowers'  Canadian
                  Counsel,  Borrowers'  U.S.  Counsel,  each  addressed  to  the
                  Canadian Agent,  the U.S.  Agent,  the Collateral  Agent,  the
                  Lenders and Lenders' Counsel;

         (vii)    the Canadian  Agent shall have  received  opinions of Lenders'
                  Counsel  addressed to the Canadian Agent,  the U.S. Agent, the
                  Collateral   Agent   and   Lenders   in  form  and   substance
                  satisfactory to the Collateral Agent, the Lenders and Lenders'
                  Counsel;

         (viii)   all  registrations and filings and amendments to registrations
                  and filings in respect of the Security shall have been made to
                  the satisfaction of Lenders'


<PAGE>


                                      -43-


                  Counsel  in  such  jurisdictions  as  Lenders'  Counsel  shall
                  determine to be necessary or appropriate;

         (ix)     there shall not have  occurred  any event,  act or thing which
                  would  have  a  material   adverse  effect  on  the  business,
                  operations  or properties of the Borrowers or any Guarantor or
                  the rights and  Security  of the  Lenders or on the ability of
                  any Borrower or any  Guarantor to perform all its  obligations
                  under this Agreement or any Security;

         (x)      the Canadian  Agent shall have received and be satisfied  with
                  the insurance policies of the Borrowers and the Guarantors and
                  the terms and extent of coverage  thereunder (such policies to
                  include, without limitation, the standard mortgagee clause);

         (xi)     the Lenders shall have  received and be satisfied  with a list
                  disclosing  all of the  Canadian  Borrowers'  Subsidiaries  in
                  existence on the initial  Acceptance  Date or Drawdown Date or
                  date of  issuance  of a  Letter  of  Credit,  and  shall  have
                  completed  and be  satisfied  with the  results  of their  due
                  diligence  review of the  Borrowers,  Guarantors and the other
                  Subsidiaries,   including  review  of  audited  and  unaudited
                  intercompany debt arrangements,  the Shareholders' Agreements,
                  call options,  non-competition  agreements with key management
                  personnel,  compliance with environmental regulations,  leases
                  and outstanding material litigation;

         (xii)    the Collateral Agent, the Lenders, the Borrowers,  the lenders
                  under the Private  Placement and the  collateral  agent to the
                  lenders under the Private  Placement shall have entered in the
                  Intercreditor Agreement;

         (xiii)   the  Agents,  the  Lenders  and  Lenders'  Counsel  will  have
                  reviewed  and  shall be  satisfied  with the terms of the Note
                  Purchase  Agreement and all other material  agreements related
                  to the Private Placement;

         (xiv)    the Collateral  Agent, the Canadian Agent, the U.S. Agent, the
                  Lenders and Lenders'  Counsel shall have  received  payment of
                  all fees or other  amounts  then  due and  payable  to them in
                  connection with this Agreement; and

         (xv)     the Canadian Agent shall have received a list  disclosing,  in
                  sufficient detail, all Material Contingent  Obligations of the
                  Borrowers and any of their Subsidiaries.

5.2      CONDITIONS PRECEDENT TO BORROWINGS TO MAKE ACQUISITIONS

         The  Lenders'   obligations   to  make  available  any  Borrowings  for
acquisitions  on any  Drawdown  Date  or  Acceptance  Date  are  subject  to and
conditional  upon  the  satisfaction  of each of the  following  conditions  (in
addition to the conditions set out in Section 5.1):


<PAGE>


                                      -44-


(a)      at least 5 Business Days prior to such Drawdown Date or Acceptance Date
         the Canadian  Agent or the U.S.  Agent,  as the case may be, shall have
         received:

         (i)      a certificate from the Canadian  Borrower's  president,  chief
                  financial  officer or treasurer,  substantially as in Schedule
                  "N", to the following effect:

                  (A)      the  proposed  Borrowing  shall  be used to  assist a
                           Borrower in financing the  acquisition of an Eligible
                           Business;

                  (B)      in the opinion of the Canadian Borrower or, where the
                           Canadian  Borrower has  identified  the  existence of
                           potentially   Hazardous  Materials,   a  third  party
                           environmental  consultant  engaged  by  the  Canadian
                           Borrower  of  experience  and  reputation  reasonably
                           satisfactory  to  such  Agent  certifying  that  such
                           Eligible  Business  has been and can  continue  to be
                           conducted   in   compliance   with   any   applicable
                           Environmental  Laws  and  that  no  material  adverse
                           change in the earnings of the applicable  Acquisition
                           Entity  or  the   Canadian   Borrower   shall  result
                           therefrom; and

                  (C)      that no Event of Default or event  which with  notice
                           or the  passage of time or both will  become an Event
                           of  Default or will  occur as a  consequence  of such
                           acquisition.

5.3      WAIVER

         The terms and  conditions  of Sections 5.1 and 5.2 are inserted for the
sole benefit of the Lenders.  The terms and  conditions of Section 5.1 or 5.2 in
whole or in part may be  waived  only with the prior  written  agreement  of all
Lenders and with or without  terms or  conditions  in respect of any  Borrowing,
without  prejudicing  the Lenders'  rights to assert them in whole or in part in
respect of any other Borrowing.

5.4      HOSTILE TAKEOVER

         Notwithstanding  any other provision of this Agreement,  if any portion
of the  Facilities  are to be used to fund a hostile  takeover,  any  Lender may
refuse to fund its  Participation  with respect to such hostile  takeover if the
Lender reasonably  determines,  by providing such funding, that it may be placed
in a conflict of interest.

                                   ARTICLE VI
                       PREPAYMENT, CANCELLATION, MANDATORY
                          APPLICATION OF CASH PROCEEDS

6.1      PREPAYMENT AND CANCELLATION

(a)     The  Borrowers may at any time prepay,  in whole or in part,  Borrowings
        outstanding  under the Facilities  and thereby reduce or cancel,  as the
        case may be, corresponding


<PAGE>


                                      -45-


        Commitments  by the amount of such  prepayment  upon giving the Canadian
        Agent  and/or  the U.S.  Agent,  as the case may be, at least 3 Business
        Days' prior written notice, in the case of the Canadian  Facilities,  in
        minimum  amounts of  Cdn.$10,000,000  and  multiples of Cdn.  $1,000,000
        thereafter (or the  Equivalent  Amount thereof in U.S.$) and in the case
        of the U.S.  Facilities,  in  minimum  amounts of U.S.  $10,000,000  and
        multiples  of  U.S.  $1,000,000  thereafter.   Any  such  prepayment  of
        Borrowings  outstanding  under the Facilities  shall be applied  against
        reductions of Commitments and related repayment  instalments required to
        be made under Section 3.11 in inverse order of maturity

For greater certainty  repayments made under a Revolving Facility or a Swingline
Facility  pursuant  to  Section  2.2 do not  constitute  prepayments  under this
Section 6.1.

(b)      The Borrowers may, at any time,  reduce or cancel any unused portion of
         the  Commitments,  provided that to the extent any such reduction shall
         cause any Borrowings  outstanding to exceed the  Commitments so reduced
         or cancelled such Borrowers  shall prepay any such excess in accordance
         with paragraph (a) above.

(c)      Any  prepayment  and  reduction  or  cancellation  relating to Bankers'
         Acceptances,  or Libor  Loans shall be made  subject to the  Borrowers'
         obligations under Section 7.4.

(d)      Any such  prepayment and reduction  shall reduce the Commitments of the
         Lenders pro rata according to their respective Participations.

6.2      NOTICE

         Each notice of prepayment and reduction or cancellation  given pursuant
to this Article shall be irrevocable, and shall specify the date upon which such
prepayment  and  reduction  or  cancellation  is to be made.  A Borrower may not
thereafter  give a notice of prepayment  and reduction or  cancellation  of such
part of the  Facilities  for a date  other  than  the date so  specified  in any
previous such notice.

6.3      STATUS OF LENDER

         If, at any time:

(a)      the Commitment of any Lender is, in accordance  with the terms of this
         Agreement,  permanently  reduced to zero;

(b)      all indebtedness  owed to such Lender by the Borrowers  hereunder or in
         connection  herewith  has been  finally and  indefeasibly  satisfied in
         full; and

(c)      such Lender is under no further actual or contingent obligation
         hereunder;

then such Lender  shall cease to be a party hereto and a Lender for the purposes
hereof;  provided  however that all indemnities and provisions of this Agreement
for the benefit of such Lender shall survive termination for the benefit of such
Lender.


<PAGE>


                                      -46-


6.4      FEES

         Upon cancellation of the Facilities in accordance with this Article VI,
all accrued and unpaid fees for the Facilities as provided shall be paid in full
on and to such cancellation date.

6.5      MANDATORY APPLICATION OF CASH PROCEEDS

         Each  Borrower  shall  apply  100% of the net cash  proceeds  which are
derived from the sale or disposition of assets by it or any of its Subsidiaries,
other  than  in the  ordinary  course  of  business,  towards  repayment  of the
Principal  Amount  of  Borrowings  outstanding  from  time  to  time  under  the
Facilities,  except to the extent that such net proceeds are reinvested within 6
months of receipt  thereof  (unless such time period is extended  with the prior
written consent of the Majority Lenders), in the businesses of the Borrowers and
their Subsidiaries and except to the extent that such net proceeds are less than
Cdn.$5,000,000  in the  aggregate.  Any such  prepayment  shall not constitute a
reduction of availability under the Facilities until such time as the Facilities
have been converted to non-revolving  term facilities in accordance with Section
3.11 in which case any prepayments shall constitute a permanent reduction of the
Facilities.

                                  ARTICLE VII
                   SPECIAL LIBOR AND INCREASED COST PROVISIONS

7.1      SUBSTITUTE RATE OF BORROWING

         If, on any Libor  Determination Date during the term of this Agreement,
any Lender reasonably  determines (which determination is final,  conclusive and
binding upon the  Borrowers  and the Lenders) and advises the Canadian  Agent or
the U.S. Agent, as the case may be, that:

(a)      adequate and fair means do not exist for ascertaining the rate of
         interest on a Libor Loan,

(b)      the making or the continuing of a loan bearing  interest  substantially
         similar to a Libor Loan by such  Lender  has  become  impracticable  by
         reason of circumstances  which materially and adversely  affect, in the
         case of a Libor Loan, the London interbank market, or

(c)      deposits in U.S. Dollars are not available to such Lender,  in the case
         of a Libor Loan, in the London interbank market, in sufficient  amounts
         in the ordinary  course of business for the  applicable  Libor Interest
         Period to make, fund or maintain a loan bearing interest  substantially
         similar to a Libor Loan during such Libor Interest Period,

then, the Canadian Agent or the U.S.  Agent,  as the case may be, shall promptly
notify  the  applicable  Borrower  in  writing  and such  Borrower  shall (if so
notified), promptly and, in any


<PAGE>


                                      -47-


event,  no  later  than  by  close  of  business  on the  day it  receives  such
notification,  advise such Agent of the Type into which the  Borrower  wishes to
convert  such Libor  Loan.  Should a Borrower  fail to advise  such  Agent,  the
Borrower shall be deemed to have given such Agent notice to convert (a) any such
Libor Loan to the Canadian Borrower denominated in U.S.$, into an U.S. Base Rate
Loan,  and any such Libor  Loan will be deemed to be an U.S.  Base Rate Loan for
all  purposes  under  this  Agreement,  and (b) any  such  Libor  Loan to a U.S.
Borrower,  into an U.S.  Prime Rate Loan, and any such Libor Loan will be deemed
to be an U.S. Prime Rate Loan for all purposes under this Agreement.

         With a view to returning to the normal operation of the Facilities, the
Canadian  Agent or the U.S.  Agent,  as the case  may be,  shall,  after  having
consulted with the applicable  Borrowers and the Lenders,  examine the situation
at least weekly to determine if the circumstances  described in Section 7.1 (a),
(b) or (c) still prevail.

7.2      INCREASED COST

         If the introduction of, or any change in,  applicable law,  regulation,
treaty or official  directive  or  regulatory  requirement  now or  hereafter in
effect  (whether  or not  having the force of law) or in the  interpretation  or
application  thereof by any court or by any judicial or  governmental  authority
charged with the interpretation or administration thereof, or if compliance by a
Lender with any request from any central bank or other fiscal, monetary or other
regulatory  authority  (other  than a change in the  relative  credit  rating or
borrowing ability of a Lender) (whether or not having the force of law):

(a)      subjects  any Lender to any Tax,  or changes  the basis of  taxation of
         payments due to such Lender or increases  any existing Tax, on payments
         of principal,  interest or other amounts  payable by a Borrower to such
         Lender under this Agreement (in each case,  except for Taxes on the net
         income or capital of such Lender),

(b)      imposes,  modifies or deems  applicable any reserve,  special  deposit,
         regulatory,  capital or similar  requirement  against assets held by or
         deposits in or for the account of, or loans bearing  interest at a rate
         fixed on the  basis of the  London  interbank  market  rates by, or any
         other  acquisition of funds for loans bearing  interest at a rate fixed
         on the basis of the London interbank market rates or any commitments or
         authorizations  in  respect  thereof  by any Lender or an office of any
         Lender, or

(c)      imposes  on any  Lender  any  other  condition  with  respect  to  this
         Agreement  (except  for  Taxes on the net  income  or  capital  of such
         Lender),

and the result of Sections  7.2 (a),  (b) or (c) is to increase  the cost to any
Lender or to reduce the income  receivable  by such Lender in respect of a Libor
Loan by any amount,  the applicable  Borrower shall pay to the Canadian Agent or
the U.S.  Agent,  as the case may be, for the account of any such  Lender,  that
amount which  compensates  such Lender for such  additional cost or reduction in
income  ("Additional  Compensation")  arising and  calculated as and from a date
which shall not be earlier than the 30th day preceding  the date the  applicable
Borrower  receives the notice  referred to in the following  sentence.  Upon any
Lender  having


<PAGE>


                                      -48-


determined  that it is entitled to Additional  Compensation,  it shall  promptly
notify the Canadian Agent or the U.S.  Agent, as the case may be, and such Agent
shall promptly notify the applicable  Borrower.  A certificate by any manager of
such Lender  setting  forth the amount of the  Additional  Compensation  and the
basis for it shall be  submitted  by such Lender to such Agent and  forwarded by
such Agent, to the applicable  Borrower and,  absent  manifest  error,  shall be
prima  facie  evidence  of the  amount of the  Additional  Compensation  and the
applicable  Agent shall debit,  from the  applicable  Borrower's  accounts,  the
amount  stipulated as Additional  Compensation in such certificate in accordance
with Section 10.8.

         If an Agent  notifies a Borrower  pursuant to this  Section  7.2,  such
Borrower shall have the right,  upon written  irrevocable  notice to that effect
delivered to such Agent at least 10 Business Days prior to the end of such Libor
Interest  Period,  to repay or convert such Lender's  Participation  in any such
Libor Loan in full, together with payment of accrued interest and the Additional
Compensation to the date of payment, to U.S. Base Rate Loans which do not suffer
the same defect or U.S.  Prime Rate Loans,  as the case may be,  denominated  in
U.S.$.

7.3      ILLEGALITY

         If the introduction of, or any change in,  applicable law,  regulation,
treaty or official directive,  or regulatory  requirement (whether or not having
the force of law) or in the  interpretation or application  thereof by any court
or by any governmental authority charged with the administration  thereof, makes
it unlawful,  or prohibited for any Lender to make, to fund or to maintain Libor
Loans,  such  Lender may, by written  notice to the  Canadian  Agent or the U.S.
Agent,  which  notice  shall  be  promptly  communicated  by such  Agent  to the
applicable  Borrower  terminate its  obligations to make, to fund or to maintain
Libor Loans and the  applicable  Borrower  shall prepay or convert such Lender's
Participation  in the Libor  Loans  forthwith  (or at the end of any  applicable
Libor  Interest  Period as such Lender in its discretion  agrees)  together with
payment of all  additional  amounts as may be applicable to the date of payment,
to U.S.  Base Rate Loans which do not suffer the same defect or U.S.  Prime Rate
Loans, as the case may be, denominated in U.S.$.

7.4      INDEMNITY

         If a Borrower  prepays or  converts,  whether  pursuant to Section 6.1,
7.2, 7.3 or 7.5 or otherwise  repays  pursuant to Section 6.5, a Libor Loan on a
day other than the last day of an Libor  Interest  Period,  such Borrower  shall
indemnify the Lenders for any loss,  cost or expense (except that in the case of
prepayment  or conversion  pursuant to Section 7.3,  such loss,  cost or expense
shall be  restricted  to actual  costs  incurred  by the  Lenders)  incurred  in
maintaining or redeploying  deposits  obtained by the Lenders to fund such Libor
Loan.  The  provisions of Section  11.1(d)  shall apply to such  indemnification
mutatis mutandis.

7.5      OTHER INCREASED COSTS OR REDUCTIONS IN RETURN

(a)     If, with respect to any  accommodation of any kind or nature provided by
        the Lenders under this Agreement, whether by way of Bankers' Acceptances
        or otherwise (each


<PAGE>


                                      -49-

        accommodation   being   in  this   Section   7.5   referred   to  as  an
        "Accommodation") and as a result of the introduction of or any change in
        any  law,  regulation,  rule  or  order  or  in  its  interpretation  or
        administration  or by  reason  of any  compliance  with  any  guideline,
        request or  requirement  from any fiscal,  monetary  or other  authority
        (other than a change in the relative credit rating or borrowing  ability
        of a Lender with respect to such  Accommodation)  (whether or not having
        the  force of law)  which it is  customary  for a bank or other  lending
        institutions to comply with in respect of all its loans or facilities of
        similar  type in Canada or the U.S.  as the case may be, in  relation to
        Facilities made available to the Borrowers:

         (i)      any Lender  incurs a cost (which it would not  otherwise  have
                  incurred) or becomes liable to make a payment (calculated with
                  reference   to   the   Borrowings    outstanding    under   an
                  Accommodation)  with  respect  to  continuing  to  provide  or
                  maintain an Accommodation (other than Taxes imposed on the net
                  income or capital of such Lender);

         (ii)     any reserve, special deposit or similar requirement is imposed
                  or increased with respect to an  Accommodation  increasing the
                  cost thereof to any Lender; or

         (iii)    any Lender suffers a reduction in its effective  return on the
                  date  hereof,  on the  transactions  contemplated  under  this
                  Agreement  (as  determined  by such Lender  after  taking into
                  account any  reduction  in the rate of return  (before Tax) on
                  its overall  capital  arising as a  consequence  of compliance
                  with any such guideline, request or requirement as aforesaid);

                  then the Borrowers shall,  subject to the terms and conditions
                  hereof,  pay to such Lender such amount (the "Additional Other
                  Compensation")  as will  compensate  the  Lender  for and will
                  indemnify  the  Lender  against  such  increase  in  costs  or
                  reduction  of rate of return  with  respect to the  Facilities
                  (arising and  calculated as and from a date which shall not be
                  earlier  than  the  30th day  preceding  the  date a  Borrower
                  receives notice  from the Canadian Agent or the U.S. Agent, as
                  the case may be, pursuant to Section 7.5 (b) below).

(b)     The  Lender  shall,  forthwith,  after  incurring  a cost  as set out in
        Section 7.5 (a)(i),  suffering an increase in cost as set out in Section
        7.5 (a) (ii) or suffering a reduction in its effective return as set out
        in Section 7.5 (a) (iii) (each being in this  Section  referred to as an
        "Event")  entitling  the  Lender  to the  payment  of  Additional  Other
        Compensation  and the Lender  determining to claim such Additional Other
        Compensation, shall give notice to the Canadian Agent or the U.S. Agent,
        as the case may be, of the Additional  Other  Compensation  claimed with
        details of the Event  giving rise  thereto and the Agent shall  promptly
        provide a copy of such notice to the  applicable  Borrower.  Such Lender
        shall at that time or within 20 days thereafter  provide to such Agent a
        certificate  setting  out in  reasonable  detail  a  compilation  of the


<PAGE>


                                      -50-

        Additional  Other  Compensation   claimed  (and  where  appropriate  the
        Lender's  reasonable  allocation  to  a  Facility  of  Additional  Other
        Compensation  with respect to the  aggregate of such similar  facilities
        granted by the Lender  affected by such Event) or, if the Lender is then
        unable to determine the Additional  Other  Compensation or the method of
        compilation  thereof,  an estimate of such Additional Other Compensation
        and/or  the  method  or the  basis on which  the  Lender  estimates  the
        calculation will be made which estimate will be confirmed or adjusted by
        the aforesaid  certificate.  The Agent shall promptly  provide a copy of
        such  certificate to the  applicable  Borrower.  The  certificate of the
        Lender with respect to the Additional Other  Compensation shall,  absent
        manifest error,  constitute  prima facie evidence of the amount payable.
        The  Borrower  shall,  within 60 days of receipt of such notice from the
        Lender, pay to such Agent, for the account of the Lender, the Additional
        Other  Compensation  (or the estimated  Additional  Other  Compensation)
        claimed but if the  Additional  Other  Compensation  claimed and paid is
        greater or lesser  than the  Additional  Other  Compensation  as finally
        determined, the Lender or the Borrower, as the case may be, shall pay to
        the other the amount  required to adjust the  payment to the  Additional
        Other  Compensation  required  to be paid.  The  obligation  to pay such
        Additional  Other  Compensation  for  subsequent  periods will continue,
        subject as herein provided,  until the earlier of the termination of the
        Accommodation  affected by the Event  referred to in the notice given by
        the Lender to the Agent or the lapse or  cessation  of the Event  giving
        rise to the Additional Other Compensation.

(c)     Within 120 days of receipt of the above-mentioned notice from the Agent,
        the Borrower may notify such Agent that it elects to repay or cancel, as
        the case may be, an Accommodation with respect to which Additional Other
        Compensation is claimed, or such Lender's Participation therein, and, if
        such  election to repay or cancel is made,  the  Borrower  shall 45 days
        after the  giving of the notice of  election  to repay or cancel to such
        Agent (for  distribution  to the Lenders or to such Lender,  as the case
        may be) such Accommodation or Participation,  as the case may be, pay or
        cancel the same, together with payment of accrued interest,  if any, and
        the Additional  Other  Compensation  (or the estimated  Additional Other
        Compensation)   applicable  thereto  calculated  to  the  date  of  such
        repayment  or  cancellation.   If  any  such  repayment   constitutes  a
        prepayment of Bankers' Acceptances,  the Canadian Borrower shall deposit
        with  the  Canadian  Agent  (for the  benefit  of the  Canadian  Lenders
        involved) an amount equal to the face amount of all Bankers' Acceptances
        then  outstanding  which  are  to  be  prepaid  (the  "Prepaid  Bankers'
        Acceptances").  The Canadian  Agent shall,  upon maturity of the Prepaid
        Bankers' Acceptances,  apply the sum so deposited against payment of the
        Prepaid  Bankers'  Acceptances  and remit to the  Canadian  Borrower the
        interest earned on the sum deposited.

(d)      For greater  certainty,  the costs  referred to in Section 7.5(a) which
         may be  included in  Additional  Other  Compensation  shall not include
         costs (i) which have already  been  factored  into the Prime Rate,  the
         U.S. Base Rate or the U.S. Prime Rate, as the case may be or (ii) which
         are  attributable  to  staff  time  and  related  administrative  costs
         incurred in the preparation and submission of compliance reports.


<PAGE>


                                      -51-


7.6      ADDITIONAL COST IN RESPECT OF TAX

(a)     Each  payment  to  be  made  by a  Borrower  or an  Unlimited  Guarantor
        hereunder or in  connection  herewith to any other party hereto shall be
        made free and clear of and  without  deduction  for or on account of Tax
        (except  for  Taxes on the net  income or  capital  of a Lender or Taxes
        resulting  from such Lender  changing its  residency  for tax  purposes)
        unless a Borrower or such Unlimited Guarantor is required to make such a
        payment  subject to the deduction or  withholding  of Tax, in which case
        the sum payable by such Borrower or such Unlimited  Guarantor in respect
        of which such  deduction or  withholding is required to be made shall be
        increased to the extent  necessary  to ensure that,  after the making of
        such  deduction or  withholding,  such other party  hereto  receives and
        retains  (free from any  liability  in respect of any such  deduction or
        withholding) a net sum equal to the sum which it would have received and
        so retained had no such deduction or  withholding  been made or required
        to be made.

(b)     If any  Lender or any  Agent,  on  behalf  of such  Lender or on its own
        behalf, is required by law to make any payment on account of Tax (except
        for Taxes on the  overall  net income or capital of such Lender or Agent
        or Taxes  resulting from such Lender or Agent changing its residency for
        tax  purposes)  on or in  relation  to any sum  received  or  receivable
        hereunder by such Lender or such Agent,  or any  liability in respect of
        any such payment is asserted,  imposed,  levied or assessed against such
        Lender  or  such  Agent,  the  applicable  Borrower  and  the  Unlimited
        Guarantors,  as  applicable  will,  upon demand of such Lender or Agent,
        promptly  indemnify  such  Lender or Agent (as the case may be)  against
        such payment or liability,  together  with any  interest,  penalties and
        expenses  payable or incurred in  connection  therewith.  If a Lender or
        Agent has paid over on account of Tax (other than Taxes excepted  above)
        an amount  paid to such  Lender or Agent by a Borrower  or an  Unlimited
        Guarantor  pursuant to the foregoing  indemnification  and the amount so
        paid over is subsequently  refunded to such Lender or Agent, in whole or
        in part,  such Lender shall promptly remit such amount  refunded to such
        Borrower or Unlimited Guarantor, as the case may be.

7.7      CLAIMS UNDER SECTION 7.6

         A Lender or Agent  intending  to make a claim  pursuant  to Section 7.6
shall  deliver  to the  Canadian  Agent or the U.S.  Agent,  as the case may be,
reasonably promptly after becoming aware of the circumstances giving rise to the
claim, a certificate  to that effect  specifying the event by reason of which it
is entitled to make such claim and  setting out in  reasonable  detail the basis
and  computation  of such  claim.  Such  Agent  shall  promptly  deliver  to the
applicable Borrower a copy of such certificate.

7.8      TAX RECEIPTS

         If at any time a Borrower is required by law to make any  deduction  or
withholding  from any sum payable by it hereunder or in connection  herewith (or
if  thereafter  there is any


<PAGE>


                                      -52-


change  in the  rates  at which  or the  manner  in  which  such  deductions  or
withholdings  are  calculated)  such Borrower shall promptly notify the Canadian
Agent or the U.S. Agent, as the case may be, thereof.

         If a Borrower makes any payment hereunder or in connection  herewith in
respect of which it is required by law to make any deduction or  withholding  it
shall pay the full amount to be deducted or withheld to the relevant taxation or
other  authority  within the time allowed for such payment under  applicable law
and shall deliver to such Agent within 30 days after it has made such payment to
the applicable authority:

(a)      a receipt issued by such authority; or

(b)      other evidence  reasonably  satisfactory  to such Agent  evidencing the
         payment to such  authority of all amounts so required to be deducted or
         withheld from such payment.

7.9      INTERNAL REVENUE SERVICE FORMS

(a)     Each U.S.  Lender and each of their  respective  successors and assigns,
        shall  provide  each of the  U.S.  Borrowers  (with  copies  to the U.S.
        Agent),  with (x) Internal  Revenue Service Forms W8ECI or W8BEN or Form
        W-9, as appropriate,  or any successor Forms  prescribed by the Internal
        Revenue  Service,  certifying  that such  Lender is entitled to benefits
        under an income tax treaty to which the United  States is a party  which
        exempts such Lender from United  States  withholding  tax or  certifying
        that  the  income  receivable  by  it  pursuant  to  this  Agreement  is
        effectively  connected  with the  conduct of a trade or  business in the
        United States or certifying that such Lender is a U.S. Person as defined
        by  Section  7701(a)(30)  of the Code or (y)  solely  if such  Lender is
        claiming  exemption  from United  States  withholding  tax under Section
        871(h) or 881(c) of the Code with  respect  to  payments  of  "portfolio
        interest",  a Form W-8, or any successor form prescribed by the Internal
        Revenue Service, and a certificate  representing that such Lender is not
        a bank for purposes of Section  881(c) of the Code,  is not a 10-percent
        shareholder (within the meaning of Section  871(h)(3)(B) of the Code) of
        the U.S. Borrower and is not a controlled foreign corporation related to
        a U.S. Borrower (within the meaning of Section 864(d)(4) of the Code).

(b)     For any period with respect to which a U.S. Lender has failed to provide
        the U.S.  Borrower or the U.S. Agent with the appropriate  form referred
        to in Section  7.9(a) (unless such failure is due to a change in treaty,
        law or regulation occurring after the date on which such form originally
        was  required  to be  provided),  such  Lender  shall not be entitled to
        indemnification  under  Section 7.6 with respect to Taxes imposed by the
        United States;  provided that if a Lender, that is otherwise exempt from
        or subject to a reduced  rate of  withholding  tax,  becomes  subject to
        Taxes because of its failure to deliver a form required  hereunder,  the
        applicable   Borrower  shall  take  such  steps  as  such  Lender  shall
        reasonably request to assist such Lender to recover such Taxes.


<PAGE>


                                      -53-

(c)      If a  Borrower  is  required  to pay  additional  amounts to or for the
         account of any Lender  pursuant to this Section as a result of a change
         in law or treaty  occurring  after such Lender  first became a party to
         this  Agreement,  then such Lender  will,  at the  Borrower's  request,
         change the  jurisdiction  of its  applicable  lending office if, in the
         judgment of such Lender,  such change (i) will  eliminate or reduce any
         such  additional  payment which may  thereafter  accrue and (ii) is not
         otherwise disadvantageous to such Lender.

                                  ARTICLE VIII
                     REPRESENTATIONS, WARRANTIES & COVENANTS

8.1      REPRESENTATIONS AND WARRANTIES

         Each Borrower and each Unlimited  Guarantor  represents and warrants to
each of the Agents and each of the Lenders as of the date of this Agreement, all
of which representations and warranties shall survive the execution and delivery
of this Agreement, that:

(a)     each of the Borrowers and the Guarantors  which is a corporation is duly
        incorporated,  validly  existing  and in good  standing in all  material
        respects  as a  corporation  under  the  laws  of  its  jurisdiction  of
        incorporation  and has full corporate  power,  authority and capacity to
        own its  properties  and conduct its business and each of the  Borrowers
        and the Guarantors  which are corporations has the full corporate power,
        authority and capacity to execute,  deliver and perform its  obligations
        to be performed  under,  in the case of each Borrower and each Unlimited
        Guarantor which are corporations,  this Agreement and under the Security
        provided  or to be provided by it, and, in the case of each of the other
        Guarantors, its guarantee and the Security to be provided by it;

(b)      FSLP is a limited  partnership,  duly  organized and existing under the
         laws of the  State  of  Delaware  and has  full  power,  authority  and
         capacity  to  execute,  deliver  and  perform  its  obligations  to  be
         performed under this Agreement and under the Security provided or to be
         provided by it;

(c)      all acts,  conditions  and things  required to be done and performed by
         each Borrower, or to have occurred prior to the execution, delivery and
         performance,  in the case of each Borrower and each Unlimited Guarantor
         of this  Agreement  and the  Security  provided or to be provided by it
         and, in the case of each of the other Guarantors, its guarantee and the
         Security  provided or to be provided by it to  constitute  it a binding
         obligation of such party enforceable  against it in accordance with its
         terms,  have  been  done  and  performed,  and  have  occurred  in  due
         compliance with all applicable laws;

(d)      the  execution,  delivery and  performance,  in the case of each of the
         Borrowers and each Unlimited Guarantor of this Agreement, any transfer,
         assignment  or  assignment  and  assumption  agreement and the Security
         provided  or to be provided by it and, in the case of each of the other
         Guarantors,  its guarantee, any transfer,  assignment or


<PAGE>


                                      -54-


        assignment and assumption  agreement and the Security  provided or to be
        provided by it has been duly  authorized by all necessary  corporate and
        other action and does not:

         (i)      violate any  provision of law or any  provision of the
                  articles of  incorporation  or other  instrument of formation
                  of such party, or

         (ii)     result in a breach of, a default under, or the creation of any
                  Lien  (other  than  those  in  favour  of the  Agents  and the
                  Lenders)  on the  properties  and  assets of any  Borrower  or
                  Guarantor, as the case may be, under any material agreement or
                  instrument  to which it is a party or by which its  properties
                  and assets may be bound or affected;

(e)      this   Agreement  and  any  transfer,   assignment  or  assignment  and
         assumption  agreement in the case of the Borrowers  and each  Unlimited
         Guarantor and the Security provided or to be provided by it and, in the
         case of each of the other  Guarantors,  its  guarantee,  any  transfer,
         assignment  or  assignment  and  assumption  agreement and the Security
         provided  or to  be  provided  by it  constitutes,  when  executed  and
         delivered,  binding,  direct obligations of such party,  enforceable in
         accordance with its terms, subject to:

         (i)      applicable bankruptcy, insolvency, moratorium,  reorganization
                  and other similar laws affecting  creditors'  rights generally
                  and  statutes  limiting   creditors'  rights,   including  the
                  Personal Property Security Act (Ontario);

         (ii)     the  equitable   and   statutory   powers  of  the  courts  of
                  appropriate  jurisdiction to stay proceedings  before them, to
                  stay the execution of judgments and to award costs;

         (iii)    the  discretion  of  such  courts  as to the  granting  of the
                  remedies of specific performance and injunction; and

         (iv)     the restriction  that Canadian courts can only render
                  judgments in Canadian currency;

(f)      other than as disclosed to the Agents and the Lenders in writing  prior
         to the  date  hereof  there is no  litigation  and  there  are no legal
         proceedings  pending,  or to  the  best  of its  knowledge,  threatened
         against any of the  Borrowers or any  Guarantor  or any  Affiliate of a
         Borrower or any Guarantor before any court or administrative  agency of
         any jurisdiction which is likely to affect materially and adversely the
         financial  condition,  assets  or  operations  of  a  Borrower  or  any
         Guarantor;

(g)      no event has occurred which  constitutes  or which,  with the giving of
         notice,  the lapse of time or both, would constitute a default under or
         in respect of any material  agreement,  undertaking  or  instrument  to
         which any of the  Borrowers or any Guarantor is a party or to which any
         of their respective properties or assets may be


<PAGE>


                                      -55-

        subject  which  is  likely  to  affect  materially  and  adversely,  the
        financial  conditions,  assets  or  operations  of  a  Borrower  or  any
        Guarantor;

(h)      other than as disclosed to the Agents and the Lenders in writing  prior
         to the date hereof each of the Borrowers  and the  Guarantors is not in
         violation  in any  material  respect  of any term of  their  respective
         incorporating  instruments  or  by-laws,  and,  to  the  best  of  each
         Borrower's  and  each  Unlimited  Guarantor's  knowledge,  none  of the
         Borrowers and the Guarantors is in violation of any material  mortgage,
         franchise,   license,   judgment,   decree,  order,  statute,  rule  or
         regulation  which is likely  to affect  materially  and  adversely  the
         financial  condition,  assets  or  operations  of  a  Borrower  or  any
         Guarantor;

(i)      each  Borrower and each  Guarantor has filed all tax returns which were
         required to be filed, paid all Taxes (including interest and penalties)
         which  are due and  payable  by such  Borrower  or such  Guarantor  and
         provided  adequate reserves for payment of any Tax the payment of which
         is being contested;

(j)      each of the  Direct  Guarantors  is a  Wholly-Owned  Subsidiary  of the
         Canadian  Borrower,  FS  (USA)  is a  Wholly-Owned  Subsidiary  of  the
         Canadian  Borrower and each of the other  Guarantors is a Subsidiary of
         the Canadian Borrower or a shareholder of a Subsidiary thereof;

(k)      Jay Hennick  owns,  directly or  indirectly,  more voting shares of the
         Canadian  Borrower  than any other  shareholder  or group of related or
         affiliated shareholders of the Canadian Borrower.

(l)      there exists no Default or Event of Default;

(m)      other than as provided under the applicable  incorporating or formation
         statute of any Borrower or any Guarantor, none of the Borrowers nor any
         Guarantor is subject to  regulation  under the Public  Utility  Holding
         Company Act of 1935, the Federal Power Act, the Interstate Commerce Act
         or the  Investment  Company  Act of 1940  or to any  U.S.  or  Canadian
         federal, state or provincial statute or regulation limiting its ability
         to incur indebtedness for money borrowed;

(n)      none of the  Borrowers  nor any  Guarantor  is by itself,  nor is it by
         virtue of its being under "common control" with any other Person within
         the meaning of Section 414 (b) or (c) of the  Internal  Revenue Code of
         1986 (the "Code"), an "employer" within the meaning of Section 3 (5) of
         the  Employee  Retirement  Income  Security  Act of 1974 of the  United
         States of America,  as amended from time to time ("ERISA"),  in respect
         of any  employee  pension  benefit plan covered by Title IV of ERISA or
         subject to the minimum funding standards under the Code;

(o)      no part of the proceeds of the Borrowings  will be used for any purpose
         that  violates the  provisions  of any of  Regulation  T, U or X of the
         Board  of  Governors  of  the  Federal  Reserve  System  or  any  other
         regulation  of such Board of  Governors;  none of


<PAGE>


                                      -56-

        the  Borrowers nor any Guarantor is engaged in the business of extending
        credit for the purpose of purchasing or carrying margin stock within the
        meaning of Regulation U of the Board of Governors of the Federal Reserve
        System;  none of the Borrowers  nor any Guarantor  owns any such "margin
        stock";

(p)      since January 31, 2001, to the best of its knowledge, there has been no
         material  adverse  change  in  the  business,  operations,  properties,
         prospects  or  condition  (financial  or  otherwise)  of  the  Canadian
         Borrower or its Subsidiaries;

(q)      none of the Borrowers nor any Guarantor has received any notice, or has
         any  knowledge,  that the operations of a Borrower or any Guarantor are
         not  in  compliance  in  all  material  respects  with  all  applicable
         Environmental Laws;

(r)      each  Borrower  and all its  Subsidiaries  have  valid  title  to their
         respective  assets  and,  without  limitation,  own or  possess  or are
         licensed  or  otherwise  have the right to use all  material  licenses,
         permits and other governmental  approvals and authorizations,  patents,
         trademarks,   service  marks,  trade  names,  copyrights,   franchises,
         authorizations  and other rights that are reasonably  necessary for the
         operations of their respective businesses,  without, to the best of the
         knowledge of the Borrowers and the Unlimited Guarantors,  conflict with
         the rights of any other Person with respect thereto; and

(s)      there has not been a Call Option Triggering Event.

8.2      COVENANTS

         Each  Borrower  covenants  with each of the Agents and with each of the
Lenders  that so  long  as  there  shall  remain  any  Borrowings  or any  other
obligations of or affecting any party to this Agreement:

(a)      it will pay duly and  punctually all sums of money due by it under this
         Agreement at the times and places and in the manner provided for herein
         and will cause each Guarantor to do likewise under its Guarantee;

(b)      subject to Section 8.2(p), it will maintain,  and cause each Subsidiary
         to maintain, its existence, corporate and otherwise, in good standing;

(c)      it will not, without the Majority Lenders' prior written consent (which
         consent  shall  not  be  unreasonably  withheld),   sell,  transfer  or
         otherwise  dispose of its control,  direct or  indirect,  of any of its
         Subsidiaries   and  it  will  not,  nor  will  it  permit  any  of  its
         Subsidiaries  to, without the Majority  Lenders' prior written consent,
         sell, lease,  assign,  transfer,  convey or otherwise dispose of any of
         its  properties  or  assets  whether  now owned or  hereafter  acquired
         (including,  without limitation,  receivables and leasehold  interests,
         patents   and   intellectual   property   rights)   (in  each   case  a
         "Disposition") BUT EXCLUDING:

         (i)      inventory disposed of in the ordinary course of business;


<PAGE>


                                      -57-


         (ii)     dispositions of assets among the Borrowers and their
                  Subsidiaries;

         (iii)    proposed  Dispositions  which  would  not  after  giving
                  effect  to such Disposition:

                  (A)      result in a Default or Event of Default occurring and
                           continuing; and

                  (B)      result in the aggregate book value of all assets that
                           have been the  subject  of a  Disposition  during the
                           period  commencing on the date of the Initial Advance
                           hereunder  and  ending  on the  date of the  proposed
                           Disposition,  exceeding  10%  of  Consolidated  Total
                           Assets  as of the  end of the  immediately  preceding
                           Fiscal Year of the Canadian Borrower, and

         (iv)     property which is,  substantially  contemporaneously  with the
                  disposition  thereof,  replaced by property (of  substantially
                  the same kind or nature) of at least equivalent value.

(d)     it will carry on  diligently  and conduct  its  business in a proper and
        efficient  manner so as to preserve and protect its  properties,  assets
        and income in a prudent manner  consistent with usual industry  practice
        and the  preservation of its business and assets,  and it will cause its
        Subsidiaries  to do the same in respect of their  respective  businesses
        and assets and, in particular,  without limiting the foregoing,  it will
        not alter its  business  plan so as to change  materially  the nature or
        scope of business,  operations or activities  currently carried on by it
        or its  Subsidiaries or to shift or transfer same from a Borrower or any
        such  Subsidiaries to other of its  Subsidiaries,  without obtaining the
        prior written  consent of the Majority  Lenders (which consent shall not
        be unreasonably withheld);

(e)     it will  maintain  or  cause  to be  maintained,  with  responsible  and
        reputable insurers, insurance with respect to its properties, assets and
        business and the  respective  properties,  assets and  businesses of its
        Subsidiaries against such casualties and contingencies (including public
        liability)  and in  such  types  and  in  such  amounts  and  with  such
        deductibles and other provisions as are customarily maintained or caused
        to be maintained by persons engaged in the same or similar businesses in
        the same territories under similar  conditions;  it will ensure that the
        Collateral Agent is an additional named loss payee under all policies of
        insurance,  as its interest may appear,  and that such  policies are not
        cancellable  without at least 30 days' prior written  notice being given
        by the insurers to the Collateral Agent;

(f)      it will  do,  execute,  acknowledge  and  deliver  or cause to be done,
         executed,  acknowledged  or delivered all such other acts,  agreements,
         instruments  and  assurances  in law as the Agents or Lenders'  Counsel
         shall reasonably require for the better  accomplishing and effectuating
         of the intentions and provisions of this Agreement and the Security;


<PAGE>


                                      -58-


(g)     it will  do,  observe  and  perform  all  material  matters  and  things
        necessary or expedient to be done,  observed or performed  under any law
        of Canada,  the  United  States of  America,  any  province  or state or
        municipality  thereof or of any other  jurisdiction  for the  purpose of
        carrying on and  conducting  its business and owning and  possessing its
        properties and assets and, without  limitation,  it will maintain at all
        times in full  force and  effect  all  material  certificates,  permits,
        licenses  and other  approvals  required to operate its  business and it
        will  cause  its  Subsidiaries  to do  the  same  in  respect  of  their
        respective businesses,  properties and assets; for greater certainty and
        without in any way limiting the generality of the foregoing:

         (i)      each  Borrower  and each  Guarantor  shall be at all  times in
                  compliance  in  all  material  respects  with  all  applicable
                  Environmental Laws; and

         (ii)     each Borrower shall ensure that each of the real properties or
                  premises  owned,  leased  or  occupied  by it or  any  of  its
                  Subsidiaries  is  free  from   contamination   by  a  release,
                  discharge or emission of any Hazardous Material;

(h)      it will promptly pay or cause to be paid all Taxes levied,  assessed or
         imposed  upon it and/or its  Subsidiaries,  and/or its  properties  and
         assets or those of its Subsidiaries or any part thereof and/or upon its
         income and  profits or that of its  Subsidiaries,  as and when the same
         shall  become due and  payable  save when and so long as any such Taxes
         are in good faith  contested by it or those of its  Subsidiaries as may
         be affected thereby;

(i)      it will furnish to the Canadian  Agent in sufficient  quantities to
         provide 1 copy to each Lender and each Agent:

         (i)      as soon as available and in any event within 45 days after the
                  end of each  Quarter  of  each  Fiscal  Year  of the  Canadian
                  Borrower the unaudited  consolidated  financial  statements of
                  the  Canadian  Borrower  as of the end of such  Quarter  to be
                  prepared   in   accordance   with  GAAP,   accompanied   by  a
                  certificate,  in the form  set out in  Schedule  "J"  attached
                  (without  personal  liability)  from the president,  the chief
                  financial officer or treasurer of the Canadian Borrower:

                  (A)      confirming  that such financial  statements  have not
                           been  prepared  in a manner  and do not  contain  any
                           statement which is inconsistent with GAAP, subject to
                           audit and year-end adjustment,

                  (B)      containing  sufficient  information  to  permit  each
                           Lender to determine  whether the financial  covenants
                           contained  in Section  8.2(o)  are being  maintained,
                           including any adjustments to  Consolidated  EBITDA as
                           the result of Normalizing Adjustments,


<PAGE>


                                      -59-


                  (C)      certifying  that, as of the last day of such Quarter,
                           and, to the best knowledge of such officer, as of the
                           date of such  certificate,  no  Default  or  Event of
                           Default has occurred and is continuing,

                  (D)      certifying that no Call Option  Triggering  Event has
                           occurred  during  such  Quarter  or if a Call  Option
                           Triggering  Event  has  occurred,  the  name  of  the
                           Subsidiary so affected and the amount of  outstanding
                           intercompany debt of such Subsidiary;  provided that,
                           if  the  Canadian   Borrower  has  a  Total  Debt  to
                           Consolidated  EBITDA  Ratio equal to or greater  than
                           3.25 to 1, the Canadian  Borrower  shall  provide the
                           Canadian  Agent with the EBITDA  calculation  for the
                           Canadian Borrower and all of its Subsidiaries and the
                           amount  of  outstanding  inter-company  debt  of each
                           Subsidiary;

                  (E)      providing a report on sales or dispositions of assets
                           in excess of an  aggregate of  Cdn.$5,000,000  during
                           such period; and

                  (F)      providing a report on outstanding  hedging  contracts
                           entered  into  by  the  Canadian   Borrower  and  its
                           Subsidiaries  and the amounts  secured  under Secured
                           Hedging Agreements.

         (ii)     as soon as  practicable  and in any event within 90 days after
                  the end of each Fiscal Year of the Canadian  Borrower,  a copy
                  of the  consolidated  financial  statements  of  the  Canadian
                  Borrower as of the end of such  Fiscal  Year,  such  financial
                  statements  of  the  Canadian   Borrower  to  be  prepared  in
                  accordance with GAAP, such consolidated  financial  statements
                  of the Canadian Borrower to be accompanied by a report thereon
                  by  independent  auditors of recognized  standing  confirming,
                  without  qualification,  that such financial statements of the
                  Canadian  Borrower have been prepared in accordance  with GAAP
                  and,  copies  of  such  auditors'  recommendations,   if  any,
                  together with a  certificate,  in the form set out in Schedule
                  "J" attached  (without  personal  liability) of the president,
                  chief financial officer or treasurer of the Canadian Borrower:

                  (A)      containing  sufficient  information  to  permit  each
                           Lender to determine  whether the financial  covenants
                           contained  in Section  8.2(o)  are being  maintained,
                           including  details of any adjustments to Consolidated
                           EBITDA as the result of Normalizing Adjustments,

                  (B)      containing the  information  required to determine
                           amounts to be paid under Section 6.5,

                  (C)      certifying  that as of the  last  day of such  Fiscal
                           Year,  and  to the  best  of the  knowledge  of  such
                           officer,  as of the  date  of  such  certificate,  no
                           Default  or  Event of  Default  has  occurred  and is
                           continuing, and


<PAGE>


                                      -60-


                  (D)      certifying that no Call Option  Triggering  Event has
                           occurred,   or  in  the  event  that  a  Call  Option
                           Triggering  Event  has  occurred,  the  name  of  the
                           Subsidiary so affected and the amount of intercompany
                           debt of  such  Subsidiary;  provided   that,  if  the
                           Canadian  Borrower  has a Total Debt to  Consolidated
                           EBITDA  Ratio equal to or greater than 3.25 to 1, the
                           Canadian  Borrower  shall provide the Canadian  Agent
                           with the EBITDA calculation for the Canadian Borrower
                           and  all  of  its  Subsidiaries  and  the  amount  of
                           outstanding inter-company debt of each Subsidiary;

         (iii)    as soon as possible and in any event  within 10 Business  Days
                  after any  Borrower or any of its  Subsidiaries  receives  (A)
                  notice of the commencement  thereof,  notice of any actions or
                  proceedings against it or any of its Affiliates or against any
                  of the  property  of a  Borrower  or  any of its  Subsidiaries
                  before any court, governmental agency or arbitrator, which, if
                  determined adversely,  would have a material adverse effect on
                  the  financial  condition or operations of any Borrower or its
                  Subsidiaries, taken as a whole and (B) a copy of any Violation
                  Notice received by a Borrower or any of its Subsidiaries;

         (iv)     within 90 days of the  beginning  of each  Fiscal  Year of the
                  Canadian  Borrower,  the Canadian  Borrower's  annual business
                  plan and financial  projections (for each Quarter),  including
                  profit  and loss  statements,  cash-flow  statements,  balance
                  sheets and projected capital  expenditures for the Fiscal Year
                  then begun;  such business plan and financial  projections not
                  to be prepared in a manner nor contain any statement  which is
                  inconsistent with GAAP;

         (v)      promptly upon request,  such other information  concerning the
                  financial  affairs or operations of any Borrower or any of its
                  Subsidiaries  as the Canadian Agent or the U.S.  Agent, as the
                  case  may  be,  may  reasonably  request  from  time  to  time
                  including for greater  certainty  financial  statements of the
                  U.S. Borrowers,  NSULC, FSLLC and FSLP and if requested by the
                  Canadian Agent, the EBITDA of each Subsidiary;

(j)      it will not, nor will it permit any Subsidiary to, without the Majority
         Lenders' prior written consent, make any advances to or for the benefit
         of, or guarantee  (other than under Permitted VTBS) the indebtedness or
         liabilities  of, or  otherwise  become  liable  for,  any Person or any
         business or project of any Person save and except:

         (i)      the  endorsement  of cheques  and other negotiable instruments
                  for deposit in the ordinary course of business;

         (ii)     advances  and  accounts  between one or more of a Borrower and
                  any  of  its  Subsidiaries  which  shall  be  on  commercially
                  reasonable terms; provided that such advances and accounts are
                  secured by means of security  agreements in form and substance
                  satisfactory  to the  Collateral  Agent,  are  assigned to the


<PAGE>


                                      -61-


                  Collateral  Agent and form part of the  Security  (hereinafter
                  referred to as "Permitted Loans"); and

         (iii)    liabilities,   indebtedness   and   obligations   which  would
                  otherwise constitute Permitted  Encumbrances hereunder but for
                  the lack of a lien to secure  such  liabilities,  indebtedness
                  and obligations.

(k)      it will  permit  from time to time to the  Canadian  Agent and the U.S.
         Agent or their  representatives  or  advisers  access to its  premises,
         assets,  records and meetings of directors and/or of shareholders  upon
         reasonable  (both as to timing  and  advance  notice)  request  of such
         Agent;

(l)      it will give to the Canadian  Agent or the U.S.  Agent prompt notice of
         any Event of Default or any event,  of which it is aware,  which,  with
         the giving of notice and/or the lapse of time or both, would constitute
         an Event of Default;

(m)      it will not, and it will not permit any of its Subsidiaries to, without
         the Majority Lenders' prior written consent,  incur, create,  assume or
         permit  to  exist  any  Lien on any of its or any of its  Subsidiaries'
         property  or  assets,  whether  owned at the date  hereof or  hereafter
         acquired,  except that the following shall be permitted (the "Permitted
         Encumbrances"):

         (i)      Liens  incurred  and pledges and deposits  made in  connection
                  with workers' compensation,  unemployment  insurance,  old-age
                  pensions and similar legislation (other than ERISA);

         (ii)     Liens  securing  the  performance  of bids,  tenders,  leases,
                  contracts  (other than for the  repayment of borrowed  money),
                  and  statutory  obligations  of like  nature,  incurred  as an
                  incident to and in the ordinary course of business;

         (iii)    statutory  Liens of landlords,  undetermined or inchoate Liens
                  and  other   Liens   imposed  by  law,   such  as   carriers',
                  warehousemens',  mechanics',  construction  and  materialmen's
                  Liens,  incurred  in good  faith  in the  ordinary  course  of
                  business  provided that the aggregate amount of any carriers',
                  warehousemens',   mechanics',  construction  or  materialmens'
                  Liens  shall  at  no  time  exceed  an  aggregate   amount  of
                  U.S.$1,000,000  or the Equivalent  Amount thereof in Cdn.$ and
                  the amount thereof shall be paid when same shall become due;

         (iv)     Liens   securing  the  payment  of  Taxes,   assessments   and
                  governmental  charges or levies,  either (A) not delinquent or
                  (B) being contested in good faith by appropriate proceedings;

         (v)      permits,   right-of-way,   zoning   restrictions,   easements,
                  licenses,  reservations,  restrictions  on  the  use  of  real
                  property  or  minor  irregularities  or  minor  title  defects
                  incidental  thereto which do not in the  aggregate  materially
                  detract from the value of the property or assets of a Borrower
                  or any of its Subsidiaries or


<PAGE>


                                      -62-

                  materially  impair the operation of the business of a Borrower
                  or any of its Subsidiaries;

         (vi)     Liens arising out of the leasing of personal property by it or
                  any of its  Subsidiaries in the ordinary course of business up
                  to an amount not  exceeding in the  aggregate  U.S.$15,000,000
                  for all Borrowers  and their  Subsidiaries  or the  Equivalent
                  Amount thereof in Cdn.$;

         (vii)    Liens,  subordinate in priority to the Liens created under the
                  Security,  incurred in the ordinary course of business for the
                  purposes of securing the payment of any purchase price balance
                  or the  refinancing of any purchase price balances not greater
                  than in the aggregate U.S.$25,000,000 or the Equivalent Amount
                  in Cdn.$ of any assets (other than current assets) acquired by
                  a Borrower or any of its  Subsidiaries  provided that any such
                  Liens are  restricted  to the assets so  acquired  ("Permitted
                  VTBS");

         (viii)   reservations, conditions, limitations and exceptions contained
                  in or implied by statute in the original  disposition from the
                  Crown and grants made by the Crown of interests so reserved or
                  accepted;

         (ix)     security  given  in  the  ordinary  course  of  business  by a
                  Borrower,  or any of its  Subsidiaries  to a public utility or
                  any  municipality  or  governmental  or  public  authority  in
                  connection  with  operations  of a  Borrower,  or  any  of its
                  Subsidiaries,  (other than in connection  with borrowed money)
                  securing   not  more  than  an   aggregate   amount  equal  to
                  U.S.$1,000,000 for all Borrowers and their Subsidiaries or the
                  Equivalent Amount thereof in Cdn.$;

         (x)      liens in respect of Permitted Loans;

         (xi)     liens to secure the  obligations  under the Private  Placement
                  provided that and for so long as the  Intercreditor  Agreement
                  is in full force and effect;

         (xii)    the Security and any additional or further security granted to
                  the  Collateral  Agent  and/or the  Lenders by a  Borrower,  a
                  Guarantor or any future Subsidiary of a Borrower;

         (xiii)   purchase money security  interests placed upon fixed assets to
                  secure a portion of the purchase price thereof;  provided that
                  any such lien shall not  encumber any property of the Canadian
                  Borrower and/or its  Subsidiaries  except the purchased asset;
                  and

         (xiv)    the encumbrances described on Schedule "P".

(n)      it will not:


<PAGE>


                                      -63-


         (i)      if an Event of Default has occurred and is  continuing  or an
                  Event of Default will occur as a consequence thereof,

                  (A)      declare dividends, whether in cash or in specie, or
                           make payments thereof ; or

                  (B)      make  or  permit  any  distributions  or  returns  of
                           capital    (whether   by   retirement,    redemption,
                           repurchase, cancellation or otherwise);

         (ii)     without the prior  written  consent of the  Majority  Lenders,
                  make or permit any  withdrawals or any other payments of money
                  or  equivalents   thereof   whatsoever   (including,   without
                  limitation,  royalties,  management fees,  etc.)(which are not
                  otherwise  expressly permitted by the terms of this Agreement)
                  by or to  the  shareholders  of  the  Canadian  Borrower,  its
                  Affiliates or any creditors other than the Lenders and it will
                  cause its Subsidiaries to do likewise save and except for:

                  (A)      payments  in respect of  Permitted  Encumbrances  and
                           payments  of  trade  debt  incurred  in the  ordinary
                           course of business;

                  (B)      interest  dividend  payments,   distributions  and/or
                           returns of capital  made,  directly or  indirectly to
                           any Borrower;

                  (C)      normal course  distributions to other shareholders of
                           such  Subsidiaries  as  contemplated  in the Canadian
                           Borrower's  annual  business  plan and within  limits
                           approved by the Majority Lenders annually;

                  (D)      normal course issuer bids of the Canadian Borrower;

                  (E)      payments  upon  exercise  of  the  put  options
                           under  the   Shareholders' Agreements;

                  (F)      payments  upon  exercise  of  the  call  options
                           under  the  Shareholders' Agreements;

                  (G)      payments  on  account  of  retirement,  termination,
                           death or  disability, redemptions;

                  (H)      payments on account of Permitted VTBS;

                  (I)      payments required to be made in accordance with the
                           terms of the Note Purchase Agreement; and

                  (J)      scheduled  payments  of  interest  and  principal  on
                           account of the Private Placement or prepayments which
                           a Borrower  is  entitled  to make to holders of notes
                           under the Note  Purchase  Agreement  as the result of


<PAGE>


                                      -64-


                           such  noteholder  being  subjected to tax obligations
                           and such Borrower  being  obligated to reimburse such
                           noteholder for such tax obligations;

(o)      the Canadian Borrower will, at all times, maintain :

         (i)      a Total Debt/Consolidated EBITDA Ratio of not more than 3.5
                  to 1;

         (ii)     on a consolidated and rolling 4 Quarters basis, a Fixed Charge
                  Coverage Ratio of at least 1.25 to 1;

         (iii)    on a consolidated and rolling 4 Quarters basis, an Interest
                  Coverage Ratio of at least 2.5 to 1; and

         (iv)     Shareholder's Equity of :

                  (A)      95% of the Shareholders Equity of the Canadian
                           Borrower on March 31, 2001, being US$75,000,000; plus

                  (B)      fifty  percent  (50%) of the  Canadian  Borrower's
                           consolidated  cumulative positive annual net income;
                           plus

                  (C)      one  hundred  percent  (100%)  of  the   consolidated
                           cumulative  proceeds  from (i) any  equity  offerings
                           including, without limitation,  securities offerings,
                           and (ii) any form of equity injection.

(p)      (i)      it will not,  without the Majority  Lenders' prior written
                  consent (which shall not be unreasonably  withheld) enter into
                  a  merger  or  consolidation  or  amalgamation  or  liquidate,
                  wind-up or  dissolve  itself (or  suffer  any  liquidation  or
                  dissolution)  except mergers,  consolidations or amalgamations
                  between the Canadian Borrower and its Subsidiaries;

         (ii)     it will not permit any of its  Subsidiaries  to,  without  the
                  Majority  Lenders'  prior written  consent (which shall not be
                  unreasonably  withheld),  enter into a merger or consolidation
                  or amalgamation,  or liquidate, wind up or dissolve itself (or
                  suffer any liquidation or dissolution) unless as the result of
                  such   merger,   consolidation,   amalgamation,   liquidation,
                  winding-up or dissolution,

                  (A)      no Event of Default has occurred and is continuing or
                           will occur as a consequence thereof; and

                  (B)      the  surviving or  resulting  entity continues to  be
                           bound   by  the obligations   of  such   predecessor
                           entity  or   entities   under   this Agreement  and
                           under  any  Security delivered by such predecessor
                           entity or entities,


<PAGE>


                                      -65-


         or, except as permitted  under Section  8.2(c),  convey,  sell,  lease,
         transfer or  otherwise  dispose of, in one  transaction  or a series of
         transactions,  all or a  substantial  part of its or such  Subsidiary's
         business, properties or assets;

(q)      it will not, nor will it permit any of its  Subsidiaries  to, incur any
         other indebtedness  (including senior and subordinated  debt), loans or
         financing  of any kind or  nature  whatsoever  (whether  in the form of
         capital leases or  sale-leaseback  transactions  or otherwise) or incur
         any contingent  obligations or liabilities (including guarantees) other
         than trade  payables  incurred in the  ordinary  course of business and
         indebtedness  or  contingent  obligations  or  liabilities  secured  by
         Permitted  Encumbrances  without obtaining the prior written consent of
         the Majority Lenders;

(r)      it will not,  nor will it permit any of its  Subsidiaries  to,  without
         obtaining the prior written consent of the Majority Lenders, other than
         in the ordinary course of business:

         (i)      make any acquisition of any business other than the
                  acquisition of an Eligible Business, or

         (ii)     make any investment in, properties, assets, businesses, shares
                  or Persons; or

         (iii)    establish, incorporate,  otherwise form, charter or create any
                  new Subsidiary  other than in connection  with the acquisition
                  of an Eligible Business;

(s)      it will  ensure  that all  Security  granted to the  Collateral  Agent,
         and/or the Lenders  continues  to be  perfected  and preserve the first
         priority thereof (subject to Permitted Encumbrances);

(t)      it will not make,  or permit the making of, any change or  modification
         to the call option provisions in the Shareholders' Agreements,  without
         the prior written consent of the Majority Lenders; and

(u)     it will cause any entity  which  after the date  hereof  shall  become a
        Subsidiary of a Borrower (such entity,  a "New  Subsidiary")  to execute
        and deliver in favour of the Collateral Agent and the Lenders either (i)
        the Direct  Security or (ii) an  Undertaking  to Secure,  together  with
        favourable  supporting  legal  opinions,  in  either  case,  as  soon as
        reasonably practicable after becoming a Subsidiary and no later than (A)
        in the case of an  Acquisition  Entity  where the  acquisition  has been
        financed,  wholly or partially, by way of Borrowings under the Facility,
        on the date of completion of the  acquisition,  or (B) in any other case
        within  10  Business  Days  following  the  date  of  completion  of the
        acquisition or creation of the New Subsidiary, as the case may be.

         For greater certainty,  with respect to the covenants contained in this
Section 8.2, the ordinary courses of business of:

(a)      FSLP is limited to holding the shares of NSULC;


<PAGE>


                                      -66-



(b)      NSULC is limited to holding the units of FSLLC;

(c)      FSLLC is  limited  to  making  loans to  Subsidiaries  of the  Canadian
         Borrower and taking security for such loans; and

(d)      FS USA is  limited  to making  loans to  Subsidiaries  of the  Canadian
         Borrower and taking security for such loans.

                                   ARTICLE IX
                                EVENTS OF DEFAULT

9.1      EVENTS OF DEFAULT

         Upon the  occurrence  of any one or more of the  following  events  (an
"Event of Default"):

(a)      the  non-payment  by a Borrower when due,  whether by  acceleration  or
         otherwise,  of any payment of principal  due under the  Facilities,  or
         otherwise hereunder;

(b)      the  non-payment  by a Borrower  when due (or  within 3  Business  Days
         thereafter) whether by acceleration or otherwise, of any payment (other
         than a payment of  principal)  due under the  Facilities  or  otherwise
         hereunder;

(c)      the commencement of proceedings by or against a Borrower, any Guarantor
         or any of their Subsidiaries for the dissolution, merger, amalgamation,
         liquidation  or winding-up of any of a Borrower or any Guarantor or any
         of their Subsidiaries or for the suspension of the operations of any of
         a Borrower or any Guarantor or any of their  Subsidiaries,  unless,  in
         the case of  proceedings  against a Borrower,  any  Guarantor or any of
         their Subsidiaries,  such proceedings are being actively and diligently
         contested by the Borrower, or Guarantor or such Subsidiary, as the case
         may be, in good faith to the satisfaction of the Majority Lenders;

(d)     a Borrower or any Guarantor or any of their  Subsidiaries is adjudged or
        declared bankrupt or insolvent or makes an assignment for the benefit of
        creditors,  or petitions or applies to any tribunal for the  appointment
        of a receiver, custodian or trustee for a Borrower, any Guarantor or any
        such  Subsidiary  or  for  any  substantial  part  of its  property,  or
        commences  any  proceedings  relating  to it under  any  reorganization,
        arrangement,  readjustment  of debt,  dissolution or liquidation  law or
        statute of any jurisdiction  whether now or hereafter in effect relating
        to or governing  debtors or such  proceedings  are commenced  against it
        (unless,  in  the  case  of  proceedings   commenced  against  it,  such
        proceedings  are  being  actively  and  diligently   contested  by  such
        Borrower,  such  Guarantor  or  such  Subsidiary  in good  faith  to the
        satisfaction  of the  Majority  Lenders),  or by any act  indicates  its
        consent to, approval of, or  acquiescence  in, any such proceeding for a
        Borrower,  any Guarantor or any such  Subsidiary or for any  substantial
        part of its  property,  or  suffers  the  appointment  of any  receiver,
        custodian or trustee and any such appointment continues undischarged and
        in effect


<PAGE>


                                      -67-

        for a period of 30 days;  provided  that  during such 30 day period such
        appointment is being actively and diligently  contested by such Borrower
        or  Guarantor or  Subsidiary  in good faith to the  satisfaction  of the
        Majority Lenders and in the case of a Borrower such receiver,  custodian
        or trustee shall not have taken possession of or otherwise  enforced its
        rights over the property in respect of which it has been appointed;

(e)     any material  representation  or warranty made in this  Agreement or any
        Security  by a  Borrower,  the  Unlimited  Guarantor,  or any  of  their
        Subsidiaries  or any  information  furnished  in  writing to an Agent or
        Lender by a Borrower,  any  Guarantor or any such  Subsidiary  proves to
        have been incorrect in any material  respect when made or furnished save
        that if any such  materially  incorrect  representation  or  warranty is
        capable of being  corrected  and none of the Agents and the  Lenders has
        been prejudiced by such materially incorrect representation or warranty,
        then the Borrowers  shall have 30 days after written  notice to do so by
        the Collateral Agent to take such action to make the  representation  or
        warranty   true  and   correct  at  such   time,   in  which  case  such
        representation or warranty shall be deemed to have been true and correct
        when originally made or furnished;

(f)     a writ,  execution or attachment or similar  process is issued or levied
        against all or a substantial portion of the property of a Borrower,  any
        Guarantor or any of their  Subsidiaries  in connection with any judgment
        against a Borrower,  any Guarantor or any of their  Subsidiaries  in any
        amount which materially affects the assets of a Borrower,  any Guarantor
        or its  Subsidiaries,  and such writ,  execution,  attachment or similar
        process  is not  released,  bonded,  satisfied,  discharged,  vacated or
        stayed within 30 days after its entry,  commencement  or levy;  provided
        that  during  such 30 day  period  such  process if being  actively  and
        diligently contested by such Borrower or Guarantor or Subsidiary in good
        faith to the satisfaction of the Majority Lenders;

(g)     the breach or failure by the  Borrowers,  a Guarantor or any  Subsidiary
        to perform or  observe  the  covenants  contained  in  Sections  8.2(c),
        8.2(n), 8.2(o), 8.2(p) and 8.2(r)(i).

(h)     the  breach or failure of due performance by a Borrower or any Guarantor
        of  any  covenant  or  provision  of this  Agreement,  other  than those
        heretofore  dealt with  in this  Section  9.1,  which is not remedied by
        such  Borrower,  or  Guarantor  within 10 Business  Days,  after written
        notice to do so  by the  Collateral  Agent or any Lender;  provided that
        such breach or  failure is capable of being  remedied and during such 10
        Business Day  period the Borrower or  Guarantor is  proceeding  actively
        and  diligently  in good  faith to remedy  such breach or failure to the
        satisfaction of the Majority Lenders;

(i)     demand by any Person (including, without limitation, any Lender) is made
        on a Borrower,  any Guarantor or any of their Subsidiaries in respect of
        indebtedness,  in an aggregate amount of US$5,000,000 (or the Equivalent
        Amount  thereof  in Cdn$)  payable  on  demand  by such  Borrower,  such
        Guarantor or such  Subsidiary and such Borrower,  such Guarantor or such
        Subsidiary has not, when due and payable,  made


<PAGE>


                                      -68-


        payment of the amount so  demanded  or  contested  the  validity of such
        demand  in good  faith  or a  Borrower,  any  Guarantor  or any of their
        Subsidiaries is in default under any term or provision of any agreement,
        deed,  indenture or instrument (other than this Agreement)  between such
        Borrower,  such Guarantor or such Subsidiary as the case may be, and any
        Person   (including,   without   limitation,   any  Lender)  shall  have
        accelerated  or shall  have the  right to  accelerate  any  indebtedness
        (including  Financial  Contract  Obligations) in the aggregate amount of
        US$5,000,000 (or the Equivalent  Amount thereof in Cdn.$) of a Borrower,
        such Guarantor or such Subsidiary, as the case may be;

(j)      an Event of Default (as defined in the Note Purchase  Agreement)  shall
         have occurred and be continuing under the Note Purchase Agreement;

(k)      Intentionally Deleted;

(l)      a  Borrower,  any  Guarantor  or any of their  Subsidiaries  ceases  or
         threatens  to  cease  to  carry  on all or a  substantial  part  of the
         business currently carried on by such Borrower,  such Guarantor or such
         Subsidiary;

(m)      there is any change in  ownership  of shares of the  Canadian  Borrower
         which results in Jay Hennick,  his spouse,  descendants  and ascendants
         and any entities controlled by any of them or trusts established by, or
         for  the  benefit  of,  any  of  them,  ceasing  to  own,  directly  or
         indirectly,  more voting shares of the Canadian Borrower than any other
         shareholder or group of related or affiliated  shareholders without the
         prior written consent of the Majority Lenders; or

(n)      a  Borrower  shall have  failed  within 30 days of the giving of a Call
         Option Triggering Event Notice to have caused an Affected Subsidiary to
         become a Direct Guarantor;

the Collateral Agent shall, if so instructed by the Majority Lenders, by written
notice to the  Borrowers  declare the  Borrowings,  including  accrued  interest
thereon,  and all other  indebtedness  of the  Borrowers  to any of the  Lenders
and/or the  Agents in  connection  with this  Agreement  to be due and  payable,
whereupon:

         (i)      any right of the  Borrowers  to any further  utilization  of
                  the  Facilities  and any  obligations  of the Lenders under
                  the Commitments terminates; and

         (ii)     all Borrowings and other  indebtedness of the Borrowers to any
                  of the Lenders  and/or to the Agents in  connection  with this
                  Agreement are,  notwithstanding  anything in this Agreement to
                  the  contrary,  immediately  due and payable  without  further
                  demand or other notice of any kind, all of which are expressly
                  waived by the  Borrowers  and  Guarantors,  and the  Borrowers
                  shall immediately:


<PAGE>


                                      -69-


                  (A)      pay to the Canadian Agent and/or the U.S.  Agent,  as
                           the case may be, the amount so declared to be due and
                           payable  (except  for  the  Principal  Amount  of the
                           Bankers' Acceptances then issued and outstanding);

                  (B)      pay to the Canadian  Agent,  a sum of money in Cdn. $
                           equal to such amount which the  Canadian  Agent shall
                           establish  as being the amount  which if  invested in
                           certificates  of  deposit  or  similar  money  market
                           instruments   issued  by  the  Canadian  Agent  will,
                           together with the yield derived from such investments
                           (the sum of such amount and such yield the "Amount"),
                           equal   the   Principal   Amount   of  all   Bankers'
                           Acceptances then issued and outstanding. The Canadian
                           Agent  shall,  promptly  upon  receipt  of the Amount
                           distribute  among  the  Lenders  the  Amount  or  the
                           applicable   portion   thereof   for  such   Bankers'
                           Acceptances; and

                  (C)      if so  requested  by the  Canadian  Agent or the U.S.
                           Agent,  as the  case  may be,  pay to such  Agent  an
                           amount in  immediately  available  funds (which funds
                           shall be held as collateral  pursuant to arrangements
                           satisfactory  to such Agent)  equal to the  aggregate
                           amount  available  for  drawing  under all Letters of
                           Credit then outstanding.

9.2      SECURITY

(a)      Upon the  occurrence  of an Event of Default,  the Security held by the
         Collateral Agent and/or any Lender shall become immediately enforceable
         and the Majority  Lenders may, in their absolute  discretion,  instruct
         the Collateral  Agent or, in respect of any Security held by any Lender
         directly,  such  Lender,  to take any and all steps in order to enforce
         and realize upon the Security, in whole or in part.

(b)      The Borrowers'  obligations and liabilities under this Agreement are in
         no way affected or diminished in the event of any such  enforcement  of
         or realization  upon any Security by the  Collateral  Agent or any such
         Lender.

9.3      REMEDIES NOT EXCLUSIVE

         The Borrowers and the  Guarantors  expressly  agree that the rights and
remedies of the Agents and the Lenders under this Agreement and the Security are
cumulative  and in  addition  to,  and not in  substitution  for,  any rights or
remedies  provided  by law;  any single or partial  exercise  by an Agent or any
Lender  of any right or remedy  for a default  or breach of any term,  covenant,
condition or agreement in this Agreement does not affect its or their rights and
does not waive,  alter,  affect, or prejudice any other right or remedy to which
an Agent or the Lenders may be lawfully entitled for the same default or breach.
Any  waiver  by an Agent or any of the  Lenders  of the  strict  observance  of,
performance of or compliance with any term, covenant,  condition or agreement of
this  Agreement,  and any indulgence by any Agent or any of the Lenders is not a
waiver of that or any subsequent default.

9.4      SET-OFF


<PAGE>


                                      -70-

         In addition to any rights now or hereafter granted under applicable law
and  not by way of  limitation  of any  such  rights,  each  of the  Lenders  is
authorized during an Event of Default which is continuing, without notice to the
Borrowers, any Guarantor or to any other Person, any such notice being expressly
waived by the Borrowers and each Guarantor, to set-off and to appropriate and to
apply any and all  deposits,  matured or  unmatured,  general or special and any
other indebtedness at any time held by or owing by each of the Lenders to or for
the credit of or the account of any of the  Borrowers or any  Guarantor  against
and on account of the  obligations  and  liabilities  of the  Borrowers  and the
Guarantors  due and  payable  to  each  of the  Lenders  under  this  Agreement,
including without  limitation,  all claims of any nature or description  arising
out of or connected with this Agreement.

                                   ARTICLE X
                                    PAYMENTS

10.1     PAYMENTS TO AGENTS/SWINGLINE LENDERS

(a)     All payments to be made by the Canadian Borrower in connection with this
        Agreement  shall be made in funds  having same day value to the Canadian
        Agent,  for its own account or for the account of the Canadian  Lenders,
        at the Toronto-Dominion Bank, International Centre Toronto, For account:
        Asset Sales & Loan  Syndications,  CAN$ Account  Number  0360-01-2268079
        (Ref:  FirstService Corp) for Cdn.$ and Bank of America National Trust &
        Savings Association,  SWIFT BOFAUS3N,  ABA#026 009 593, in favour of: TD
        Bank  Toronto,   Account  #6550-8-26336,   For  further  credit:  Agency
        Administration,  US$ Account  #0360-01-2268176 (Ref:  FirstService Corp)
        for US$ or at any other  office or account  designated  by the  Canadian
        Agent.  Any  such  payment  shall be made on the date  upon  which  such
        payment is due, in accordance with the terms hereof, no later than 10:00
        a.m. Any such payment shall be a good discharge to the Canadian Borrower
        for such  payment  and,  if any such  payment is for the  account of the
        Lenders, the Canadian Agent shall hold the amount so paid "in trust" for
        the Lenders until distributed to them in accordance with this Agreement.

(b)     All payments to be made by the U.S.  Borrowers in  connection  with this
        Agreement  shall be made in  funds  having  same  day  value to the U.S.
        Agent, for the account of the U.S. Lenders,  at Bank of America NT & SA,
        ABA#026009595,  Toronto  Dominion  (Texas) Inc.  Acct#6550-6-52270  Ref:
        FirstService  (USA),  Attention:  Lynn Chasin or at any other  office or
        account  designated by the U.S. Agent. Any such payment shall be made on
        the date upon which such  payment is due, in  accordance  with the terms
        hereof,  no later  than  10:00  a.m.  Any such  payment  shall be a good
        discharge  to the U.S.  Borrowers  for  such  payment  and,  if any such
        payment is for the  account of the U.S.  Lenders,  the U.S.  Agent shall
        hold  the  amount  so  paid  "in  trust"  for  the  U.S.  Lenders  until
        distributed to them in accordance with this Agreement.


<PAGE>


                                      -71-


(c)      Payments to the Canadian  Swingline  Lenders  shall be made directly to
         the Canadian  Swingline  Lender as directed by the  Canadian  Swingline
         Lender to the Canadian  Borrower  from time to time and payments to the
         U.S.  Swingline  Lender  shall be made  directly to the U.S.  Swingline
         Lender  as  directed  by the  Canadian  Swingline  Lender  to the  U.S.
         Borrowers from time to time.

(d)      Whenever a payment is due on a day which is not a Business Day, the day
         for payment is the following Business Day.

10.2     PAYMENTS BY LENDERS TO AGENTS

         All  payments to be made by any Lender to an Agent in  connection  with
Borrowings  shall be made in funds having same day value to such Agent,  for the
applicable  Borrower's  applicable  Cdn. $ or U.S. $ account  (unless  otherwise
specified),  at the branch,  office or account  mentioned in or designated under
Section 10.1 (a) or (b) and by the time designated therein.

10.3     PAYMENTS BY AGENTS TO BORROWERS

         Any payment received by an Agent for the account of a Borrower shall be
paid in funds  having same day value to such  Borrower by such Agent on the date
of receipt or, if such date is not a Business  Day, on the next Business Day, to
the Canadian  Borrower's  Operating Accounts or each U.S.  Borrower's  Operating
Account,  as the case may be, at the same branch, or to such other accounts as a
Borrower may designate.

10.4     DISTRIBUTION TO LENDERS AND APPLICATION OF PAYMENTS

(a)      Except as otherwise  indicated  herein,  all payments made to an Agent,
         Swingline  Lender or Issuing  Bank by a Borrower for the account of the
         Lenders in connection  herewith  shall be  distributed  the same day by
         such  Person in funds  having  same day value  among the Lenders to the
         accounts last designated in writing by such Lenders respectively to the
         Agents pro rata, in  accordance  with their  respective  Participations
         with respect to the Loans, Bankers' Acceptances or Letters of Credit in
         respect of which any such payment is made.

(b)      Any amounts so distributed  shall be applied by the Lenders in the
         following order:

         (i)      to amounts due pursuant to Articles VII or XI;

         (ii)     to amounts due pursuant to Articles XII;

         (iii)    to amounts due pursuant to Article IV; and

         (iv) to any other amounts due pursuant to this Agreement.

10.5     NO SET-OFF OR COUNTERCLAIM


<PAGE>


                                      -72-


         All  payments  by a Borrower  or any  Guarantor  shall be made free and
clear  of and  without  any  deduction  for or on  account  of  any  set-off  or
counterclaim.

10.6     NON-RECEIPT BY AGENTS

         Where a sum is to be paid  hereunder  to an Agent  for the  account  of
another party hereto, such Agent shall not be obliged to make the same available
to that  other  party  hereto  until it has been able to  establish  that it has
actually received such sum, but if it does pay out a sum and it proves to be the
case  that it had not  actually  received  the sum it paid  out,  then the party
hereto to whom such sum was so made  available  shall on request ensure that the
amount so made available is refunded to such Agent and shall on demand indemnify
such Agent  against any cost or loss it may have  suffered or incurred by reason
of its having paid out such sum prior to its having received such sum.

10.7     WHEN DUE DATE NOT SPECIFIED

         Whenever this Agreement does not provide a date when any amount payable
hereunder  shall be due and payable  such amount shall be due and payable on the
5th Business Day following  written  notice or demand for payment  thereof by an
Agent or any Lender save that  nothing  hereinbefore  provided  shall in any way
affect or alter the rights and  remedies  available to the Agents and any Lender
under Article IX.

10.8     AGENTS' AUTHORITY TO DEBIT

         In respect of all amounts  payable by a Borrower under this  Agreement,
the Borrowers and each  Unlimited  Guarantor  hereby  authorize and instruct the
Agents, as applicable, to debit, from time to time when such amounts are due and
payable,  the account or accounts  designated  pursuant to Section  10.3 and all
other accounts of the applicable Borrower or Unlimited  Guarantor,  whether such
accounts  are  maintained  with  an  Agent  or  otherwise,  for the  purpose  of
satisfying payment thereof.

                                   ARTICLE XI
                                    EXPENSES

11.1     PAYMENT OF EXPENSES

         Whether or not an Event of Default exists, the Borrowers shall, jointly
and severally:

(a)      pay (i) all  reasonable  out-of-pocket  expenses  of the Agents and the
         Lenders  incurred  in  the  preparation,   negotiation,  execution  and
         delivery  of this  Agreement,  the  Security  and all  other  documents
         relating  hereto  including,   without   limitation,   legal  fees  and
         out-of-pocket  expenses of Lenders'  Counsel and their  agents (but not
         including  separate legal counsel engaged by any particular Lender) and
         (ii) all other reasonable out-of-pocket expenses of the Agents incurred
         in connection with the  establishment and maintenance of the Facilities
         including,  without  limitation,  environmental and other  consultants'
         fees and expenses;


<PAGE>


                                      -73-


(b)      pay all reasonable out-of-pocket expenses of the Agents incurred in the
         amendment or  modification  of this  Agreement or documents  (including
         waivers or consents)  relating thereto at a Borrower's request (whether
         or not any such  amendment  or  modification  is actually  consummated)
         including without limitation,  legal fees and out-of-pocket expenses of
         Lenders' Counsel and their agents;

(c)      pay all reasonable out-of-pocket expenses of the Agents and the Lenders
         incurred in the  enforcement  and  preservation  of any of their rights
         under this Agreement or any Security,  including,  without  limitation,
         legal fees and  out-of-pocket  expenses  of  Lenders'  Counsel or other
         counsel and their agents; and

(d)     indemnify  the Agents and the Lenders from all losses,  costs,  damages,
        out-of-pocket  expenses  and  liabilities  which any Agent or any Lender
        sustains or incurs (including, without limitation, any loss of profit or
        expenses any Lender incurs by reason of the  liquidation or redeployment
        of  deposits  or  other  funds  acquired  by  such  Lender  to  maintain
        Borrowings  or any interest or other  charges  payable by such Lender to
        other lenders of funds borrowed in order to make, to fund or to maintain
        the Loans or to maintain any amount in default) as a consequence  of (I)
        any prepayment (it being understood that the mandatory  repayments to be
        made pursuant to Section 3.1 do not  constitute  prepayments),  (II) any
        acceleration  of the  payment of  Borrowings  pursuant to Section 9.1 or
        17.8 or (III) any default by a Borrower  under any of the  provisions of
        this Agreement including,  without limitation,  a failure to borrow on a
        Drawdown Date or to issue Bankers'  Acceptances on an Acceptance Date, a
        failure to pay interest  on, or  principal  amounts of, the Loans on the
        dates due,  the failure to make a payment on the  specified  date or the
        failure  to make a payment  in  accordance  with this  Agreement  or any
        misrepresentation  by a Borrower contained in or delivered in writing in
        connection with this Agreement. The certificate of an officer or manager
        of any Agent or any such  Lender  setting  forth the  amount of any such
        losses,  damages,  expenses and  liabilities  shall  constitute,  absent
        manifest  error,  prima facie  evidence of any such amount and any Agent
        shall debit, from any Borrower's accounts,  the amount stipulated in the
        certificate  in  accordance  with Section  10.8.  The affected  Agent or
        Lender shall also provide to the affected  Borrower a statement  setting
        out the basis for the calculation of such amount.

11.2     SURVIVAL

         Without prejudice to the survival or termination of any other agreement
of the Borrowers  under this  Agreement,  the obligations of the Borrowers under
Section 11.1 survive the repayment of all the Borrowings and the  termination of
the Commitments.

11.3     ENVIRONMENTAL INDEMNITY

(a)     Subject to the  limitations in this Section 11.3, the Borrowers agree to
        and do hereby,  jointly and  severally,  indemnify and save harmless the
        Agents and the Lenders and their officers, directors,  employees, agents
        and shareholders in such capacities (the "Indemnified Parties") from and
        against any and all losses, damages, costs and


<PAGE>


                                      -74-

        expenses of any and every nature and kind  whatsoever  which at any time
        or from  time  to time  may be  paid  by or  incurred  by them  (without
        duplication and net of Tax Recoveries by any of the Indemnified Parties)
        for, with respect to, or as a direct or indirect result of the disposal,
        refining,  generation,   manufacture,   production,  storage,  handling,
        presence, treatment,  transfer, release, processing or transportation of
        any Hazardous Material in, on or under any property of whatsoever nature
        or kind of a Borrower,  or any  Subsidiary  thereof,  or the  discharge,
        emission,  spill or disposal  from such  property into or upon any land,
        the  atmosphere  or any  watercourse,  body of water or  wetland  of any
        Hazardous  Material  where it has been  proven  that the  source  of the
        Hazardous  Material is the said property to the extent that such losses,
        damages,  costs and expenses arise out of the  relationship  between the
        Indemnified  Parties and a Borrower reflected herein including,  without
        limitation:

         (i)      the cost of defending and/or  counterclaiming or claiming over
                  against  third  parties  in  respect  of any  action or matter
                  referred to above;

         (ii)     any cost, liability or damage arising out of any settlement of
                  any action referred to above to which any Indemnified Party is
                  a party; and

         (iii)    costs of any cleanup in connection with any matter referred
                  to above.

(b)      In the  event  that  any  claim,  action,  order,  suit or  proceeding,
         including,  without  limiting  the  generality  of the  foregoing,  any
         inquiry or  investigation  (whether  formal or  informal) is brought or
         instituted  against any Indemnified  Party, the Indemnified Party shall
         promptly  notify the Borrowers and the Borrowers  shall promptly retain
         counsel who shall be reasonably satisfactory to the Indemnified Parties
         to represent the Indemnified Parties in such claim, action, order, suit
         or proceeding and the Borrowers  shall pay all of the  reasonable  fees
         and  disbursements  of such  counsel  relating to such  claim,  action,
         order, suit or proceeding.

(c)      In any such claim, action,  order, suit or proceeding,  the Indemnified
         Parties shall have the rights to retain  other  counsel to act on their
         behalf, provided that the fees and  disbursements of such other counsel
         shall be paid by the Indemnified Parties unless:  (i) the Borrowers and
         the  Indemnified Parties shall have mutually agreed to the retention of
         such other  counsel;  or  (ii)  the named  parties to  any such  claim,
         action, order,  suit  or   proceeding  (including  any added,  third or
         impleaded parties) include  the Borrowers  and the  Indemnified Parties
         and representation of all such  parties by the  same counsel  would  be
         inappropriate  due to actual or potential  differing interests  between
         them (such as the availability of different defences).

(d)      Notwithstanding  anything  contained in this Section 11.3,  none of the
         Indemnified  Parties  shall agree to any  settlement of any such claim,
         action,  order,  suit or  proceeding  unless the  Borrowers  shall have
         consented in writing thereto, and the Borrowers shall not be liable for
         any  settlement of any such claim,  action,  order,  suit or proceeding
         unless they have consented in writing  thereto.  The Borrowers shall be


<PAGE>


                                      -75-


         entitled to settle any such claim, action, order, suit or proceeding on
         any terms it deems appropriate.

(e)      The  provisions of this Section 11.3 shall  survive the Final  Maturity
         Date and the repayment of all Borrowings hereunder and the satisfaction
         by the Borrowers of all other obligations hereunder.

(f)      For the purposes of this Section 11.3,  "Tax  Recoveries" of any Person
         in respect of a payment or outlay made or incurred by such Person means
         the Taxes  that  would be saved or  recovered  by such  Person  and the
         creation or increase of a loss or credit for Tax purposes  which may be
         used to reduce Taxes payable by such Person.

                                  ARTICLE XII
                                      FEES

12.1     AGENCY FEE

         The  Borrowers  shall pay to the Agents,  the agency fees for acting in
the  capacity of  Administration  Agents  hereunder  contained  in an agency fee
agreement between the Borrowers and the Agents.

12.2     MISCELLANEOUS

         Fees payable by the Canadian Borrower hereunder shall be debited by the
Canadian  Agent from the Canadian  Borrower's  Cdn. $ account  designated  under
Section  10.3 on the first  Business Day of each Quarter and fees payable by the
U.S.  Borrowers  to the U.S.  Agent shall be sent by the U.S.  Borrowers by wire
transfer to the U.S.  Agent's  account  designated  under Section 10.1(b) on the
first Business Day of each Quarter.

                                  ARTICLE XIII
                                   THE AGENTS

13.1     AGENTS

         Each  Lender  hereby  appoints  each  Agent  to act as  its  agent,  as
specified   hereunder,   in  connection  with  this  Agreement  and  any  matter
contemplated hereunder and authorizes irrevocably each Agent for the duration of
such  appointment  to  exercise  such  rights,  powers  and  discretions  as are
delegated to such Agent  pursuant to this  Agreement  and the Security  together
with all such  rights,  powers  and  discretions  as are  incidental  hereto  or
thereto. Each Agent shall have only those duties and responsibilities  which are
expressly specified in this Agreement and the Security,  and it may perform such
duties by or through its agents or  employees.  This  Agreement and the Security
shall not place any Agent under any  fiduciary  duties in respect of any Lender.
Each  Agent  and any  other  Person  to whom an Agent  may  delegate  duties  or
responsibilities  as  permitted  under  Section  13.2 (h)  shall  enjoy the same


<PAGE>


                                      -76-


benefits,  rights and  protections  as those  provided to the Agents  under this
Article "mutatis mutandis".

13.2     AGENTS' RESPONSIBILITY

         Each Agent may:

(a)      assume,  until it is  notified  in writing  or has actual  notice or
         actual knowledge to the contrary, that:

         (i)      any   representation   made  by  a  Borrower  or  any  of  its
                  Subsidiaries  in or in connection  with any of this Agreement,
                  any notice or other  document,  instrument or  certificate  is
                  true;

         (ii)     no Event of Default has occurred; and

         (iii)    each  Borrower or a Subsidiary  of a Borrower is not in breach
                  of or in  default  under,  its  obligations  under any of this
                  Agreement or the Security;

and each Agent may also:

(b)      unless  such  Agent  has  actual  knowledge  or  actual  notice  to the
         contrary, assume that each Lender's address is that identified with its
         signature  below  until  it has  received  from  such  Lender  a notice
         designating  some other  office of such  Lender as its  address and act
         upon any such notice  until the same is  superseded  by a further  such
         notice;

(c)      engage and pay for the advice or services of any  lawyers,  accountants
         or other  experts  whose advice or services  may to it seem  necessary,
         expedient or desirable and rely upon any advice so obtained;

(d)      unless  such  Agent  has  actual  knowledge  or  actual  notice  to the
         contrary, rely as to matters of fact which might reasonably be expected
         to be  within  the  knowledge  of a  Borrower  or any  Subsidiary  of a
         Borrower  upon a statement  signed by or on behalf of a Borrower or any
         Subsidiary of a Borrower;

(e)      unless  such  Agent  has  actual  knowledge  or  actual  notice  to the
         contrary,  rely upon any communication or document believed by it to be
         genuine;

(f)      refrain from  exercising  any right,  power or discretion  vested in it
         under this Agreement or any Security unless and until instructed by the
         Majority  Lenders as to whether or not such right,  power or discretion
         is to be exercised  and, if it is to be exercised,  as to the manner in
         which it should be exercised;

(g)      refrain from  exercising  any right,  power or discretion  vested in it
         which  would or  might in its  opinion  be  contrary  to any law of any
         jurisdiction  or any  directive  or


<PAGE>


                                      -77-


         otherwise  render it liable to any Person, and may do anything which is
         in its opinion necessary to comply with any such law or directive;

(h)      retain for its own benefit,  and without  liability to account for, any
         fee or other sum receivable by it for its own account;

(i)      accept  deposits  from,  lend money to,  provide any  advisory or other
         services to or engage in any kind of banking or other business with any
         party (including any Affiliate thereof) to this Agreement; and

(j)      refrain from acting in accordance with any instructions of the Majority
         Lenders to begin any legal  action or  proceeding  arising out of or in
         connection  with any of this Agreement or any Bankers'  Acceptance,  or
         take any steps to enforce or realize upon any Security,  until it shall
         have  received  such  security  as it may  require  (whether  by way of
         payment in advance or otherwise)  against all costs,  claims,  expenses
         (including  legal fees) and liabilities  which it will or may expend or
         incur in complying with such instruction.

13.3     AGENTS' DUTIES

         Each Agent shall:

(a)      promptly  upon receipt  thereof,  inform each Lender of the contents of
         any notice,  document,  request or other information  received by it in
         its capacity as an Agent hereunder from a Borrower or any Subsidiary of
         a Borrower;

(b)      promptly  notify each Lender of the  occurrence of any Event of Default
         or any Default by a Borrower or a Guarantor in the due  performance  of
         its  obligations  under this  Agreement,  any  Security or any document
         incidental  thereto to which it is expressed to be a party and of which
         the Agent has actual knowledge or actual notice;

(c)      each time the  Borrowers  request  the  prior  written  consent  of the
         Majority Lenders, use its best efforts to obtain and communicate to the
         Borrowers  the  response of the Majority  Lenders in a  reasonable  and
         timely manner having due regard to the nature and  circumstances of the
         request;

(d)      subject  to the  foregoing  provisions  of this  Section  13.3,  act in
         accordance with any  instructions  given to it by the Majority  Lenders
         and, in particular, only take steps to enforce or realize upon Security
         in  accordance  with the  instructions  or  delegated  authority of the
         Majority Lenders; and

(e)      if so instructed by the Majority  Lenders,  refrain from exercising any
         right,  power or  discretion  vested in it under  this  Agreement,  the
         Security or any document incidental thereto.

13.4     PROTECTION OF AGENTS


<PAGE>


                                      -78-


Notwithstanding  anything to the contrary  expressed or implied herein,  each of
the Agents shall not:

(a)      be bound to enquire as to:

         (i)      whether any representation made by a Borrower,  a Guarantor or
                  any  of  their  Subsidiaries  in or in  connection  with  this
                  Agreement,  the Security or any document incidental thereto is
                  true;

         (ii)     the occurrence or otherwise of any Event of Default;

         (iii)    the  performance  by a Borrower,  a Guarantor  or any of their
                  Subsidiaries of its  obligations  under any of this Agreement,
                  the Security or any document incidental thereto;

         (iv)     any breach of or default by a Borrower,  a Guarantor or any of
                  their  Subsidiaries  of or under its  obligations  under  this
                  Agreement, the Security or any document incidental thereto; or

         (v)      the use or application by a Borrower of any of the proceeds of
                  the Facilities;

(b)      be bound to account to any Lender  for any sum or the  profit  element
         of any sum  received  by it for its own account;

(c)      be bound to  disclose  to any  Person  any  information  relating  to a
         Borrower  or a  Guarantor  if such  disclosure  would  or  might in its
         opinion  constitute a breach of any law or  regulation  or be otherwise
         actionable at the suit of any Person; or

(d)     accept any  responsibility  for the accuracy and/or  completeness of any
        information  supplied  in  connection  herewith  or  for  the  legality,
        validity,  effectiveness,  adequacy or enforceability of this Agreement,
        any Bankers' Acceptance or any document incidental hereto or thereto and
        no Agent  shall be under  any  liability  to any  Lender  as a result of
        taking or omitting to take any action in relation to this Agreement, any
        Bankers'  Acceptance,  the Security or any document incidental hereto or
        thereto save in the case of gross negligence or wilful  misconduct,  and
        each of the  Lenders  agrees  that it will not  assert or seek to assert
        against any director,  officer, employee or agent of any Agent any claim
        it might have against any of them in respect of the matters  referred to
        in this Section 13.4.

13.5     INDEMNIFICATION OF AGENTS

         Each Lender shall, on demand by an Agent, indemnify such Agent pro rata
in  accordance  with  such  Lender's  Participation  at the time of such  demand
against any and all costs,  claims,  reasonable  expenses (including legal fees)
and  liabilities  which such Agent may incur (and which have not been reimbursed
by a Borrower),  otherwise than by reason of its own gross  negligence or wilful
misconduct,  in acting in its  capacity  as an Agent under this


<PAGE>


                                      -79-


Agreement,  any Bankers'  Acceptance,  the  Security or any document  incidental
hereto or thereto.

13.6     TERMINATION OR RESIGNATION OF AGENT

(a)      Notwithstanding  the appointment of an Agent,  the Majority Lenders may
         (with the consent of the Canadian Borrower prior to an Event of Default
         and without  requiring such consent after the occurrence of an Event of
         Default  which  is  continuing;  such  consent  not to be  unreasonably
         withheld or delayed), upon giving an Agent 90 days prior written notice
         to such effect, terminate an Agent's appointment hereunder.

(b)      An Agent may  resign  its  appointment  hereunder  at any time  without
         assigning any reason  therefor by giving  written notice to such effect
         to each of the other parties hereto.

(c)      In the event of any  such  termination  or  resignation,  the  Majority
         Lenders shall  appoint  a  successor  Agent  (with the  consent  of the
         Canadian Borrower  prior to an Event of Default and  without  requiring
         such  consent after  the  occurrence  of an Event of  Default  which is
         continuing, such consent not to be  unreasonably  withheld or delayed).
         The Canadian Agent or the U.S. Agent, as the case may be, (if it is the
         Agent  being replaced)  shall  deliver  copies of the  Accounts to such
         successor and the retiring Agent shall be  discharged  from any further
         obligation  hereunder  but shall remain  entitled to the benefit of the
         provisions  of this Article XIII and the Agent's successor  and each of
         the other  parties  hereto  shall have the same rights and  obligations
         among  themselves as  they would  have had if such successor originally
         had been a party hereto as an Agent.

13.7     RIGHTS OF AN AGENT AS LENDER

         With respect to its Commitment and its  Participation,  and to Bankers'
Acceptances  and  Letters of  Credit,  an Agent  shall have the same  rights and
powers under this  Agreement and any Bankers'  Acceptances  as any other Lender,
and it may exercise such rights and powers as though it were not  performing the
duties  and  functions  delegated  to it as an  Agent  hereunder,  and the  term
"Lender" or any other similar term shall, unless the context otherwise requires,
include any Agent in its capacity as a Lender.

13.8     AUTHORIZED WAIVERS, VARIATIONS AND OMISSIONS

         If so authorized  in writing by the Majority  Lenders,  the  Collateral
Agent may grant  waivers,  consents,  vary the terms of this Agreement and do or
omit to do all acts and things in connection herewith or therewith.  Except with
the prior  written  agreement of all the  Lenders,  nothing in this Section 13.8
shall authorize:

(a)     any  decrease in the  Acceptance  Fee, the Libor  Margin,  the Letter of
        Credit Fee, the Prime Rate Margin,  the U.S. Base Rate Margin,  the U.S.
        Prime Rate Margin or the Commitment Fees;


<PAGE>


                                      -80-


(b)      any extension of the date for, or alteration in the amount, currency or
         mode of  calculation  or  computation  of any payment of  principal  or
         interest or other amount;

(c)      any increase in the Commitment of a Lender or subject any Lender to any
         additional obligations hereunder;

(d)      any amendments to Section 3.11;

(e)      any change in the terms of Article IX;

(f)      any change in the definition of Majority Lenders;

(g)      the release or discharge of a Borrower or a Guarantor; provided however
         and  notwithstanding  the foregoing,  the Collateral Agent may, without
         the consent of the Lenders,  grant partial  releases and  discharges of
         the Security in connection with any sale, lease, transfer,  assignment,
         disposition  or conveyance by the Canadian  Borrower  and/or any of its
         Subsidiaries  of properties or assets  permitted  under Section  8.2(c)
         hereof; or

(h)      any amendments to this Section 13.8.

13.9     FINANCIAL INFORMATION CONCERNING THE BORROWERS OR GUARANTORS

         Subject  to  Section  13.3  (a),  no  Agent  shall  have  any  duty  or
responsibility  either  initially or on a continuing basis to provide any Lender
with any credit or other information with respect to the financial condition and
affairs of the Borrowers or Guarantors.

13.10    KNOWLEDGE OF FINANCIAL SITUATION OF BORROWERS

         Each of the Lenders  represents  and warrants to the Agents that it has
made its own independent investigation of the financial condition and affairs of
the Borrowers and each Guarantor in connection with the making and  continuation
of its  Participation  in this  Agreement  and  that it has  not  relied  on any
information provided to it by any Agent in connection herewith or therewith, and
each  represents  and warrants to the Agents that it shall  continue to make its
own appraisal of the  creditworthiness  of the Borrowers and the Guarantors from
time to time.

13.11    LEGAL PROCEEDINGS

         No Agent shall be  obligated  to take any legal  proceedings  against a
Borrower  or any other  Person  for the  recovery  of any  amount due under this
Agreement  or under any  Bankers'  Acceptances.  No  Lender  shall  bring  legal
proceedings  against a Borrower,  any  Guarantor or  Subsidiary  hereunder or in
connection  herewith,  or exercise any right arising  hereunder or in connection
herewith  over the  property  and assets of a  Borrower,  any  Guarantor  or any
Subsidiary, without the prior written consent of the Majority Lenders.

13.12    CAPACITY AS AGENT


<PAGE>


                                      -81-


         In performing its functions and duties under this Agreement, each Agent
shall act solely as the agent of the Lenders and shall not assume, and shall not
be deemed to have assumed,  any obligation as agent or trustee for a Borrower or
any other Person. No Agent shall be under any liability or responsibility of any
kind to the  Borrowers,  the Lenders or to any other Person arising out of or in
relation  to any  failure  or delay in  performance  or breach by any  Lender or
Lenders or, as the case may be, by the  Borrowers,  any  Guarantor  or any other
Person  (other than such Agent in respect of its own gross  negligence or wilful
misconduct) pursuant to or in any way in connection with this Agreement.

13.13    DEPOSITS OR LOANS RESPECTING THE BORROWERS

         Each Agent and each of the Lenders may accept deposits from, lend money
to and  generally  engage  in any kind of  banking  or other  business  with the
Borrowers  or the  Guarantors  without  liability to account to any Agent or any
Lender.

                                  ARTICLE XIV
                            ASSIGNMENTS AND TRANSFERS

14.1     BENEFIT OF AGREEMENT

         This  Agreement  shall be binding upon and enure to the benefit of each
party hereto and its successors and permitted assigns.

14.2     ASSIGNMENTS AND TRANSFERS BY A BORROWER OR AN UNLIMITED GUARANTOR

         No Borrower nor the Unlimited  Guarantor shall be entitled to assign or
transfer all or any of its rights, benefits and obligations hereunder.

14.3     ASSIGNMENTS AND TRANSFERS BY A LENDER

(a)      Subject to Section 14.4, any Lender may, at its cost, assign or
         transfer:

         (i)      to an affiliate of such Lender at any time; and

         (ii)     with:

                  (A)      the consent of the  Canadian  Agent with respect to a
                           Canadian  Lender and the U.S. Agent with respect to a
                           U.S. Lender (which consents shall not be unreasonably
                           withheld or delayed); and

                  (B)      (unless there exists an Event of Default) the consent
                           of  the  Canadian   Borrower   (which  shall  not  be
                           unreasonably withheld or delayed)

         and upon such terms and conditions as such Lender shall determine,  all
         or any portion of its rights,  benefits and/or obligations hereunder in
         relation  to a portion of such  Lender's  Commitment  of not less than,
         with  respect  to the  Canadian  Facilities,


<PAGE>


                                      -82-


        Cdn.$1,000,000 and with respect to the U.S. Facilities, U.S. $2,500,000,
        to an assignee or a  transferee  which in the case of  assignments  by a
        Canadian  Lender is a resident in Canada (a "Canadian  Assignee") and in
        the case of assignments by a U.S.  Lender,  is a Person which can comply
        with the  provisions  of Section  7.9(a) of this  Agreement and provides
        evidence thereof  satisfactory to the U.S.  Borrowers acting  reasonably
        and is in the  business of making  loans (a "U.S.  Assignee");  provided
        that in the case of an assignment or transfer by a Canadian Lender there
        is a  corresponding  assignment  or transfer by the related U.S.  Lender
        (which may, in certain  circumstances be the same institution) to a U.S.
        Assignee  related  to  the  Canadian  Assignee  (which  may  in  certain
        circumstances be the same institution) of an amount which bears the same
        proportion  to the  related  U.S.  Lender's  Commitment  as  the  amount
        assigned or  transferred  by the  Canadian  Lender bears to the Canadian
        Lender's  Commitment,  and vice  versa in the case of an  assignment  or
        transfer by a U.S. Lender.

(b)     Where  obligations  of any Lender are so  assigned or  transferred,  the
        assignee or transferee shall confirm in writing to the Borrowers and the
        Canadian  Agent and the U.S.  Agent,  as the case may be,  prior to such
        assignment or transfer taking effect, that it shall be bound towards the
        Borrowers  and  the  Agents  by  the  terms  hereof   relating  to  such
        obligations.  On the assignment and transfer being made and such written
        confirmation,  as aforesaid,  being  delivered to the Borrowers and such
        Agent, such Lender shall be relieved of its obligations to the extent of
        such  assignment  or transfer  thereof and such  assignee or  transferee
        shall become a Lender for all purposes of this Agreement and the related
        documents and  transactions  provided herein or contemplated  thereby to
        the extent of such assigned or transferred  interest on the 5th Business
        Day  following  receipt  by the  Canadian  Agent or the U.S.  Agent,  as
        applicable, of the confirmation of assignment.

14.4     TRANSFER CERTIFICATE

         If any Lender  wishes to assign or  transfer  all or any of its rights,
benefits and  obligations  hereunder in accordance  with Section 14.3, then such
assignment  or transfer  shall be effected by the delivery by such Lender to the
Canadian  Agent and the U.S.  Agent and the  Borrowers of a duly  completed  and
executed  Transfer  Certificate  whereupon,  to the extent that in such Transfer
Certificate the Lenders party thereto seeks to assign or transfer its rights and
obligations hereunder:

(a)      the applicable  Borrower(s) and such Lender shall each be released from
         further obligations to the other hereunder, and their respective rights
         against  each other shall be  cancelled  (such  rights and  obligations
         being  referred  to in this  Section  14.4 as  "discharged  rights  and
         obligations");

(b)      the applicable  Borrower(s) and the Transferee party thereto shall each
         assume obligations  towards and acquire rights in respect of each other
         which differ from the discharged rights and obligations only insofar as
         the  obligations so assumed and the


<PAGE>


                                      -83-

        rights so  acquired  by the  Borrowers  are owed to and  constituted  by
        claims  against  such  Transferee  and not  such  Lender,  so  that  the
        Borrowers and the Transferee  shall have the same rights and obligations
        towards  each other which they would have  acquired  had the  Transferee
        been an original party hereto;

(c)      the Agents, the Transferee and the other Lenders shall acquire the same
         rights and assume the same obligations between themselves as they would
         have  acquired and assumed had the  Transferee  been an original  party
         hereto with the obligations  assumed and the rights acquired by it as a
         result of such assignment or transfer.

(d)      the amounts  payable by any  Borrower  under this  Agreement  shall not
         increase,  whether  in respect  of  withholding  on account of taxes or
         otherwise,  as a result of any such  assignment or transfer to a Lender
         which  is,  or is  deemed  to be  (i)  in  the  case  of  the  Canadian
         Facilities,  not  resident in Canada for the purposes of the Income Tax
         Act (Canada)  with respect to any such  Transferee  becoming a Canadian
         Lender or (ii) in the case of the U.S. Facilities, is not a resident of
         the  U.S.  for  the  purpose  of the  Code  with  respect  to any  such
         Transferee becoming a U.S. Lender.

14.5     NOTICE

         The Canadian Agent or the U.S.  Agent, as the case may be, shall notify
promptly  the  appropriate  parties  hereto of the receipt by it of any Transfer
Certificate,  and shall promptly deliver a copy of such Transfer  Certificate to
the Borrowers.

14.6     SUB-PARTICIPATIONS

         Any Lender may, at its own cost,  grant one or more  sub-participations
in all or any portion of its rights,  benefits and/or  obligations  hereunder to
third  parties,  without the consent of the  Borrowers,  and upon such terms and
conditions as such Lender shall determine,  provided that,  notwithstanding  any
such sub-participation, such Lender shall remain, in so far as the other parties
hereto are concerned, entitled to its rights and benefits hereunder and bound by
its  obligations  hereunder and the Borrowers,  the other Lenders and the Agents
shall not be obliged  to  recognize  any such  third  party as having the rights
against  any of them  which it would  have if it had  been a party  hereto,  and
provided further that in the case of any  sub-participation by a Canadian Lender
to  a  Canadian  participant  (a  "Canadian  Participant"),  there  shall  be  a
corresponding sub-participation by the related U.S. Lender (which may in certain
circumstances  be  the  same  institution)  to  a  U.S.   participant  (a  "U.S.
Participant")  related to the  Canadian  Participant  of an amount which has the
same  proportion  to  the  related  U.S.  Lender's   Commitment  as  the  amount
sub-participated by the Canadian Lender has to the Canadian Lender's Commitment,
and vice versa in the case of  sub-participation  by a U.S. Lender.  For greater
certainty,  the  Borrowers  shall not be  obligated  to pay,  in  respect of any
rights,  benefits  and/or  obligations in which a Lender has granted one or more
such  sub-participations,  to such Lender or to any sub-participant  thereof any
amount(s)  pursuant to Article VII of this Agreement which is (are) greater than
the amount(s),  if any, which the Borrowers  would otherwise have been obligated
to pay in respect of such rights,  benefits  and/or  obligations to such Lender,
had such sub-participation(s) not been granted.


<PAGE>

                                      -84-


14.7     DISCLOSURE

         Each Lender is hereby  authorized by the  Borrowers and each  Unlimited
Guarantor to disclose to any proposed  assignee,  Transferee or  sub-participant
information  in such  Lender's  possession  relating to the  Borrowers  and each
Unlimited  Guarantor  provided  that  such  proposed  assignee,   transferee  or
sub-participant  shall have  executed  and  delivered  to such  Lender a written
undertaking  to keep  confidential  any such  information  which is not publicly
available.

14.8     ASSIGNMENT TO FEDERAL RESERVE BANK

         Notwithstanding  anything  to the  contrary  provided  herein,  without
seeking or obtaining the consent of any party,  any U.S.  Lender may at any time
assign and transfer all or any portion of its rights  under this  Agreement  and
any promissory  notes issued to such U.S. Lender  hereunder to a Federal Reserve
Bank in the United States. No such assignment shall release such Lender from its
obligations hereunder.

                                   ARTICLE XV
                   GOVERNING LAW, COURTS AND JUDGMENT CURRENCY

15.1     GOVERNING LAW

         This  Agreement  shall be governed by and construed in accordance  with
the laws of the Province of Ontario and the laws of Canada applicable therein.

15.2     COURTS

         Any legal action or  proceeding  with respect to this  Agreement or any
Security  against a Borrower or the  Unlimited  Guarantor  may be brought in the
courts of the Province of Ontario,  which courts the parties hereto  acknowledge
irrevocably to be a convenient forum for the resolution of any such legal action
or proceeding.  Each Borrower and each Unlimited  Guarantor hereby accepts,  for
itself and in respect of its assets and revenues,  generally and unconditionally
the non-exclusive jurisdiction of the aforesaid courts.

         Each  Unlimited  Guarantor  and  each  of  the  U.S.  Borrowers  hereby
irrevocably  designates and appoints the Canadian Borrower (the "Process Agent")
at its registered office from time to time and of which the Canadian Agent shall
have been notified,  which office is currently  located at 66 Wellington  Street
West, 38th Floor,  Toronto-Dominion Bank Tower, Toronto, Ontario M5K 1A2, as the
authorized agent of each of the U.S. Borrowers and each Unlimited Guarantor upon
which  process  may be served  in any suit or  proceeding  arising  out of or in
connection  with this  Agreement  or any  Security or other  documents  relating
hereto or thereto  which may be instituted in the Province of Ontario and agrees
that service of process on the Process  Agent  together  with written  notice of
such  service to such U.S.  Borrower or such  Unlimited  Guarantor by the Person
serving  the same  shall,  to the extent  permitted  by law,  be deemed in every
respect  to be  effective  service  of  process  on such U.S.  Borrower  or such
Unlimited  Guarantor,  as the case may be.  Notwithstanding the address


<PAGE>


                                      -85-


noted on the execution pages hereof,  process may be served on a Borrower at its
registered office. However,  nothing in this Section 15.2 shall affect the right
of any Agent or Lender to serve legal  process in any other manner  permitted by
law or affect the right of any Agent or Lender to bring any action or proceeding
against a Borrower or the Unlimited  Guarantor or their properties in the courts
of any other jurisdiction including, without limitation the State of New York.

15.3     JUDGMENT CURRENCY

(a)     If for the purpose of obtaining judgment in any court it is necessary to
        convert an amount due  hereunder in the currency in which it is due (the
        "Original Currency") into another currency (the "Second Currency"),  the
        rate of exchange  applied  shall be that at which,  in  accordance  with
        normal  banking  procedures,  a Lender  could  purchase,  in the Toronto
        foreign exchange market,  the Original Currency with the Second Currency
        on the date 2 Business Days  preceding  that on which judgment is given.
        Each Borrower and each Unlimited Guarantor agrees that its obligation in
        respect of any  Original  Currency  due from it to any Lender  hereunder
        shall,  notwithstanding  any judgment or payment in such other currency,
        be discharged only to the extent that, on the Business Day following the
        date such  Lender  receives  payment  of any sum so  adjudged  to be due
        hereunder in the Second  Currency  such Lender may, in  accordance  with
        normal banking  procedures,  purchase,  in the Toronto foreign  exchange
        market the Original  Currency with the amount of the Second  Currency so
        paid;  and if the amount of the Original  Currency so purchased or could
        have been so  purchased  is less than the amount  originally  due in the
        Original Currency,  each Borrower and each Unlimited Guarantor agrees as
        a separate  obligation and  notwithstanding any such payment or judgment
        to indemnify such Lender against such loss.

(b)      The term "rate of exchange" in this Section 15.3 means the spot rate at
         which the Lender in  accordance  with normal  practices  is able on the
         relevant  date to  purchase  the  Original  Currency  with  the  Second
         Currency  and  includes  any premium  and costs of exchange  payable in
         connection with such purchase.

                                  ARTICLE XVI
                             GUARANTORS' OBLIGATIONS

16.1     GUARANTEE

(a)      The Canadian  Borrower,  as primary obligor and not as a surety merely,
         hereby unconditionally and irrevocably guarantees to each of the Agents
         and each of the Lenders the  punctual  payment  when due in  accordance
         with  the  terms  hereof  of all  obligations,  of  whatever  kind  and
         description,  of the U.S.  Borrowers and each of them to the Agents and
         each of the  Lenders  now or  hereafter  existing,  whether  direct  or
         indirect,  absolute or  contingent,  matured or  unmatured,  secured or
         unsecured joint,  several or independent  pursuant to or arising out of
         or under this  Agreement  and the


<PAGE>


                                      -86-


        Security (all such  obligations  so guaranteed are referred to herein as
        the "Canadian Borrower's Guaranteed Obligations").

(b)      Each Unlimited Guarantor hereby:

         (i)      unconditionally and irrevocably guarantees; and

         (ii)     is  jointly  and  severally  liable  and  obligated  with  the
                  Canadian Borrower to each of the Agents and the Lenders for;

                  (A)      the due and punctual payment of amounts of principal,
                           interest or fees in respect of all Borrowings and all
                           other amounts payable to the Agents or the Lenders by
                           the Canadian  Borrower under this  Agreement,  or any
                           portion thereof; and

                  (B)      all other  obligations of the Canadian Borrower to
                           the Agents or the Lenders under this Agreement

(collectively the "Unlimited Guarantors' Guaranteed Obligations").

(c)      Without  in any  way  limiting  the  foregoing,  each  of the  Canadian
         Borrower  and  the  Unlimited  Guarantors  hereby  unconditionally  and
         irrevocably agrees and covenants with the Agents and the Lenders that:

         (i)      the Guaranteed Obligations shall be a guarantee of payment and
                  not merely of collection and shall be a primary  obligation of
                  each of the Canadian Borrower and the Unlimited Guarantor.

         (ii)     it will pay duly and punctually all its  Guaranteed
                  Obligations  under the terms of this Agreement;

         (iii)    its Guaranteed  Obligations  shall not be affected by any act,
                  omission or  circumstances  which but for this provision might
                  operate  to  release  or  otherwise  exonerate  it  from  such
                  Guaranteed  Obligations or limit or reduce or otherwise affect
                  such Guaranteed  Obligations  including without limitation and
                  whether or not known to it or the Lenders or an Agent:

                  (A)      any time or indulgence granted to or composition with
                           any  Borrower or any other Person;

                  (B)      the  variation,  extension,  compromise,  renewal  or
                           release  of, or  refusal  or  neglect  to  perfect or
                           enforce, any terms of this Agreement, the Borrowings,
                           the  Security or any rights or remedies  against,  or
                           security  granted  by,  any  Borrower  or  any  other
                           Person; or

                  (C)      any   irregularity   or   unenforceability   of   any
                           obligations of any Borrower or any other Person under
                           this  Agreement,   the  Borrowings,   any


<PAGE>


                                      -87-


                           Guaranteed  Obligations  or any present or future law
                           or order of any  government or authority  (whether of
                           right or in fact)  purporting  to reduce or otherwise
                           affect any of such  obligations,  it being the intent
                           that its Guaranteed  Obligations under this Agreement
                           shall remain in full force and this  Agreement  shall
                           be  construed  accordingly  as if there  were no such
                           irregularity, unenforceability, law or order;

         (iv)     it waives any right it may have of first  requiring  any Agent
                  or any  Lender,  before  enforcing  its rights  against it, to
                  proceed  against or claim payment from a Borrower or any other
                  Person or enforce any Security; and

         (v)      if any  claim  is made by an Agent or any  Lender  against  it
                  under this Agreement and is not entirely and irrevocably  paid
                  and  discharged,  it shall  not  have  the  right to rank as a
                  creditor  in  competition  with any Agent or any Lender in the
                  bankruptcy, liquidation or dissolution of a Borrower and shall
                  not attempt to do so until payment in full of all indebtedness
                  and  liabilities  which may be owing by such  Borrower  to any
                  Agent or Lender under this Agreement and all Borrowings.

         (vi)     The Guaranteed Obligations shall survive the repayment thereof
                  and  shall  be  reinstated  as to any  Guaranteed  Obligations
                  incurred prior to the termination hereof if any payment of any
                  Guaranteed  Obligation  is  at  any  time  rescinded  or  must
                  otherwise   be  returned  as  a  result  of  the   bankruptcy,
                  insolvency  or  reorganization  of any of the U.S.  Borrowers,
                  Canadian  Borrower  and/or  the  Unlimited  Guarantor,  all as
                  though such payment had not been made.

                                  ARTICLE XVII
                                  MISCELLANEOUS

17.1     EQUAL RANKING OF LENDERS

         The Lenders, and to the extent necessary the Borrowers,  agree that any
indebtedness of a Borrower towards any of the Agents and any of the Lenders:

(a)      hereunder; and

(b)      under  Hedging  Agreements  for so long as such  Lender  remains  a
         Lender hereunder,

shall be  secured  by the  Security  and shall be  recoverable  by the Agents in
accordance  with  the  terms of this  Agreement  and the  Security  and all such
obligations  shall rank  equally  without  preference  or  distinction  with the
indebtedness  of a Borrower  towards any Lender  hereunder  or under any Hedging
Agreements.

17.2     SHARING OF INFORMATION


<PAGE>


                                      -88-


         Each Borrower and the Unlimited Guarantor agree that the Agents and the
Lenders  may share  amongst  themselves  any  information  which any of them may
possess concerning any Borrower or the Unlimited Guarantor,  as the case may be,
in  respect  of  a  Borrower's  or  the  Unlimited   Guarantor's   undertakings,
obligations  or  indebtedness  towards any Lender  pursuant to this Agreement as
well as any payment  received from a Borrower or the Unlimited  Guarantor by any
Lender pursuant to this Agreement.

17.3     SEVERABILITY

         If any of the provisions of this Agreement, any Article, any Section or
any Bankers'  Acceptance shall be unenforceable or invalid in any  jurisdiction,
the validity and  enforceability  of such  provisions in any other  jurisdiction
shall not be impaired thereby nor shall the  enforceability  and validity of any
other  provisions of this  Agreement,  any Article,  any Section or any Bankers'
Acceptance be impaired thereby.

17.4     REMEDIES AND WAIVERS

         No failure to exercise, and no delay in exercising,  on the part of the
Agents  or the  Lenders  or any of them,  any right or  remedy  hereunder  shall
operate as a waiver  thereof,  nor shall any single or partial  exercise  of any
right or remedy prevent any further or other exercise thereof or the exercise of
any  other  right or  remedy.  The  rights  and  remedies  herein  provided  are
cumulative and not exclusive of any rights or remedies provided by law.

17.5     DIRECT OBLIGATION

         Notwithstanding  any other  provision  hereof,  the Borrowers  shall be
obligated  directly towards the Agents and each of the Lenders in respect of the
Participation  of each of the Lenders which are made  available to such Borrower
as well as any other amounts  which may be payable by the Borrowers  pursuant to
or in connection with this Agreement or any Borrowings.  The obligations of each
of the Lenders are independent from one another,  are not joint and several, and
may not be increased,  reduced,  extinguished  or otherwise  affected due to the
default of another Lender  pursuant  hereto.  Any default of any party hereto in
the  performance of its  obligations  shall not release any of the other parties
hereto from the performance of any of its respective obligations.

17.6     NOTICES

         The  following  provisions  shall  govern  in  respect  of  notices  or
communications contemplated hereunder:

(a)      unless otherwise stated, each communication to be made hereunder shall
         be made in writing;

(b)      all communications or notices to be made to:


<PAGE>


                                      -89-


         (i)      any Borrower, shall be made to the Canadian Borrower, as
                  provided in Section 17.6 (c); and

         (ii)     an  Unlimited  Guarantor,  shall  be made  to  such  Unlimited
                  Guarantor with a copy to the Canadian Borrower, as provided in
                  Section 17.6 (c);

(c)     subject  to  Section  17.6 (b) and to an  Agent's  irrevocable  right to
        deliver  communications  or notices to the Canadian  Borrower's  address
        specified in Section 15.2, any written  communication  or document to be
        made or  delivered  by one party to another  pursuant to this  Agreement
        shall  (unless  otherwise  specified  herein or that other  party has by
        notice to the Agent specified  another  address or facsimile  number) be
        made or  delivered  to that other  Person at the  address  or  facsimile
        number  identified  with its  signature  below and shall in any event be
        deemed to have been made or  delivered or (in the case of any other form
        of  written  communication)  when  left at  that  address  or  otherwise
        received  or, as the case may be, 10 days after being  deposited  in the
        post first class postage prepaid in an envelope  addressed to it at that
        address,  provided  that any  communication  or  document  to be made or
        delivered  to any Agent shall be  effective  only when  received by such
        Agent; it is agreed that parties shall not send  communications  by mail
        or postal  service when there is an actual or likely  pending  strike or
        similar disruption of mail or postal services;

(d)     subject to  Section  17.6 (b),  where any  provision  of this  Agreement
        specifically  contemplates telephone  communication,  such communication
        shall  (unless  otherwise  specified  herein or that other  party has by
        written notice to the Agents specified another telephone number) be made
        to  that  other  party  at the  telephone  number  identified  with  its
        signature below; each such telephone communication shall be expressed to
        be for the attention of the officer whose name has been  identified with
        its signature below; and

(e)     each party  hereto  shall  confirm  promptly  by writing  any  telephone
        communication  made by it to another party  pursuant to this  Agreement,
        however the absence of such  confirmation  shall not affect the validity
        of such communication.

17.7     COUNTERPARTS

         This Agreement may be executed in any number of counterparts and all of
such  counterparts  taken together shall be deemed to constitute one and the
same instrument.

17.8     CALCULATION/LIMIT ON RATE OF INTEREST

(a)      for  purposes of this  agreement  whenever  interest is to be paid on a
         basis of a year of less than a calendar year (the "calculation period")
         the yearly rate of interest  to which the rate  determined  pursuant to
         such calculation is equivalent, is the rate so determined multiplied by
         the actual  number of days in the calendar year in which the same is to
         be ascertained and divided by the calculation period.


<PAGE>


                                      -90-


(b)      Notwithstanding  any  provision   contained  in  this  Agreement,   the
         Borrowers  shall not be obliged to make any  payments  of  interest  or
         other amounts payable to a Lender  hereunder in excess of the amount or
         rate which would be prohibited by applicable law or would result in the
         receipt by a Lender of interest  at a criminal  rate (as such terms are
         construed under the Criminal Code (Canada) or other applicable law).

(c)      In the event  that any such  payments  are  limited  or  prohibited  as
         provided  in  Section  17.8 (a),  the  Lenders  shall  have no  further
         obligation to make any  Borrowings  available  hereunder and the entire
         amount of Borrowings then outstanding shall become  immediately due and
         payable.

17.9     NO MERGER OR NOVATION

         All  guarantees  and  Security  provided to an Agent and/or the Lenders
prior to the date hereof in connection with the Original Credit  Agreement,  the
First Amended and Restated  Credit  Agreement,  the Second  Amended and Restated
Credit Agreement or the indebtedness of the Borrowers  thereunder remain in full
force and  effect  with  respect  to this  Third  Amended  and  Restated  Credit
Agreement,  as amended,  modified or supplemented from time to time, there being
no novation or merger hereby of the Original Credit Agreement, the First Amended
and Restated Credit Agreement, the Second Amended and Restated Credit Agreement,
such guarantees or the Security.

17.10    PRECEDENCE

         For so long as the Intercreditor Agreement is in full force and effect,
in the event that the provisions of the  Intercreditor  Agreement  contradict or
are otherwise incapable of being construed in conjunction with the provisions of
this  Agreement,  the  provisions  of the  Intercreditor  Agreement  shall  take
precedence over those provisions contained herein.

         AS  WITNESS  the hands of the duly  authorized  representatives  of the
parties hereto on the execution pages hereof as of the day and year first before
written.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>4
<FILENAME>a2056788zex-10_5.txt
<DESCRIPTION>EXHIBIT 10.5
<TEXT>
<PAGE>


                                                                    Exhibit 10.5


                                                                  EXECUTION COPY


================================================================================


                            FIRSTSERVICE CORPORATION


                            FIRSTSERVICE DELAWARE, LP



                                U.S.$100,000,000



                 8.06% Guaranteed Senior Secured Notes due 2011






                                   ----------

                          NOTE AND GUARANTEE AGREEMENT

                                   ----------




                            Dated as of June 21, 2001


================================================================================


<PAGE>



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>


Section                                                                                               Page
- -------                                                                                               ----
<S>      <C>                                                                                            <C>
1.       AUTHORIZATION OF NOTES..........................................................................1

2.       SALE AND PURCHASE OF NOTES......................................................................2

3.       CLOSING.........................................................................................2

4.       CONDITIONS TO CLOSING...........................................................................2
         4.1.     Representations and Warranties.........................................................3
         4.2.     Performance; No Default................................................................3
         4.3.     Compliance Certificates................................................................3
         4.4.     Opinions of Counsel....................................................................3
         4.5.     Purchase Permitted By Applicable Law, etc..............................................4
         4.6.     Sale of Other Notes....................................................................4
         4.7.     Payment of Special Counsel Fees, etc...................................................4
         4.8.     Private Placement Number...............................................................4
         4.9.     Changes in Corporate Structure.........................................................4
         4.10.    Evidence of Consent to Receive Service of Process......................................5
         4.15.    Subsidiary Guarantee; Undertakings to Secure...........................................5
         4.12.    Financing Documents; Security Interests................................................5
         4.13.    Lien Searches..........................................................................5
         4.14.    Intercreditor Agreement................................................................5
         4.15.    Proceedings and Documents..............................................................6

5.       REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS..................................................6
         5.1.     Organization; Power and Authority......................................................6
         5.2.     Authorization, etc.....................................................................6
         5.3.     Disclosure.............................................................................7
         5.4.     Organization and Ownership of Shares of Subsidiaries; Affiliates.......................7
         5.5.     Financial Statements...................................................................8
         5.6.     Compliance with Laws, Other Instruments, etc...........................................8
         5.7.     Governmental Authorizations, etc.......................................................9
         5.8.     Litigation; Observance of Agreements, Statutes and Orders;
                  Call Option Triggering Events..........................................................9
         5.9.     Taxes; Foreign Taxes..................................................................10
         5.10.    Title to Property; Leases.............................................................10
         5.11.    Licenses, Permits, etc................................................................11
         5.12.    Compliance with ERISA.................................................................11
         5.13.    Private Offering by the Obligors......................................................12
</TABLE>


                                       i


<PAGE>
<TABLE>
<CAPTION>
<S>      <C>                                                                                            <C>
         5.14.    Use of Proceeds; Margin Regulations...................................................13
         5.15.    Existing Indebtedness; Future Liens...................................................13
         5.16.    Foreign Assets Control Regulations, etc...............................................14
         5.17.    Status under Certain Statutes.........................................................14
         5.18.    Environmental Matters.................................................................14
         5.19.    Ranking...............................................................................15
         5.20.    Subsidiary Guarantee..................................................................15
         5.21.    Ownership; Security Documents.........................................................16
         5.22.    Chief Executive Office................................................................16

6.       REPRESENTATIONS OF THE PURCHASERS..............................................................16
         6.1.     Purchase for Investment...............................................................16
         6.2.     Source of Funds.......................................................................16

7.       INFORMATION AS TO THE OBLIGORS.................................................................18
         7.1.     Financial and Business Information....................................................18
         7.2.     Officer's Certificate.................................................................21
         7.3.     Inspection............................................................................22

8.       PREPAYMENT OF THE NOTES........................................................................23
         8.1.     Required Prepayments..................................................................23
         8.2.     Optional Prepayments with Make-Whole Amount...........................................23
         8.3.     Prepayment in Connection with a Payment under Section 13..............................23
         8.4.     Notices, Etc..........................................................................24
         8.5.     Allocation of Partial Prepayments.....................................................25
         8.6.     Maturity; Surrender, etc..............................................................25
         8.7.     Purchase of Notes.....................................................................25
         8.8.     Make-Whole Amount.....................................................................25

9.       AFFIRMATIVE COVENANTS..........................................................................27
         9.1.     Compliance with Law...................................................................27
         9.2.     Insurance.............................................................................27
         9.3.     Maintenance of Properties.............................................................28
         9.4.     Payment of Taxes and Claims...........................................................28
         9.5.     Corporate Existence, etc..............................................................28
         9.6.     Ownership of the Company..............................................................29
         9.7.     Ranking...............................................................................29
         9.8.     Subsidiary Guarantors; Undertakings to Secure.........................................29
         9.9.     Further Assurances; Release of Collateral.............................................29
         9.10.    Lines of Business.....................................................................30

10.      NEGATIVE COVENANTS.............................................................................30
</TABLE>


                                       ii

<PAGE>
<TABLE>
<CAPTION>
<S>      <C>                                                                                            <C>
         10.1.    Transactions with Affiliates..........................................................30
         10.2.    Merger, Consolidation, etc............................................................31
         10.3.    Liens.................................................................................32
         10.4.    Consolidated Net Worth................................................................34
         10.5.    Leverage Ratio........................................................................34
         10.6.    Fixed Charge Coverage Ratio...........................................................34
         10.7.    Subsidiary Indebtedness...............................................................35
         10.8.    Disposition of Assets.................................................................35
         10.9.    Call Options..........................................................................36

11.      EVENTS OF DEFAULT..............................................................................36

12.      REMEDIES ON DEFAULT, ETC.......................................................................39
         12.1.    Acceleration..........................................................................40
         12.2.    Other Remedies........................................................................40
         12.3.    Rescission............................................................................40
         12.4.    No Waivers or Election of Remedies, Expenses, etc.....................................41

13.      TAX INDEMNIFICATION............................................................................41

14.      GUARANTEE, ETC.................................................................................43
         14.1.    Guarantee.............................................................................43
         14.2.    Obligations Unconditional.............................................................44
         14.3.    Guarantees Endorsed on the Notes......................................................46

15.      REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES..................................................46
         15.1.    Registration of Notes.................................................................47
         15.2.    Transfer and Exchange of Notes........................................................47
         15.3.    Replacement of Notes..................................................................47

16.      PAYMENTS ON NOTES..............................................................................48
         16.1.    Place of Payment......................................................................48
         16.2.    Home Office Payment...................................................................48

17.      EXPENSES, ETC..................................................................................49
         17.1.    Transaction Expenses..................................................................49
         17.2.    Taxes.................................................................................49
         17.3.    Survival..............................................................................50

18.      SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT...................................50

19.      AMENDMENT AND WAIVER...........................................................................50
</TABLE>


                                      iii

<PAGE>
<TABLE>
<CAPTION>
<S>      <C>                                                                                            <C>
         19.1.    Requirements..........................................................................50
         19.2.    Solicitation of Holders of Notes......................................................51
         19.3.    Binding Effect, etc...................................................................51
         19.4.    Notes held by Obligors, etc...........................................................51

20.      NOTICES........................................................................................52

21.      REPRODUCTION OF DOCUMENTS......................................................................52

22.      CONFIDENTIAL INFORMATION.......................................................................53

23.      SUBSTITUTION OF PURCHASER......................................................................54

24.      JURISDICTION AND PROCESS.......................................................................54

25.      OBLIGATION TO MAKE PAYMENTS IN U.S. DOLLARS....................................................55

26.      MISCELLANEOUS..................................................................................56
         26.1.    Successors and Assigns................................................................56
         26.2.    Payments Due on Non-Business Days.....................................................56
         26.3.    Severability..........................................................................56
         26.4.    Construction..........................................................................56
         26.5.    Statement of Interest Rate............................................................57
         26.6.    Counterparts..........................................................................57
         26.7.    Governing Law.........................................................................57
</TABLE>

      SCHEDULE A                --   INFORMATION RELATING TO PURCHASERS

      SCHEDULE B                --   DEFINED TERMS

      SCHEDULE 4.9              --   Changes in Corporate Structure

      SCHEDULE 4.12             --   Filings and Recordings

      SCHEDULE 5.3              --   Disclosure Materials

      SCHEDULE 5.4              --   Subsidiaries and Ownership
                                       of Subsidiary Stock

      SCHEDULE 5.5              --   Financial Statements

      SCHEDULE 5.8              --   Certain Litigation


                                       iv

<PAGE>


      SCHEDULE 5.11             --   Patents, etc.

      SCHEDULE 5.14             --   Use of Proceeds

      SCHEDULE 5.15             --   Existing Indebtedness/Liens

      SCHEDULE 5.21             --   Security Documents


      EXHIBIT 1                 --   Form of 8.06% Guaranteed Senior Secured
                                     Note due 2001

      EXHIBIT 1-A               --   Form of Guarantee

      EXHIBIT 4.4(a)(i)         --   Matters to be Covered in Opinion of U.S.
                                     Counsel for the Obligors

      EXHIBIT 4.4(a)(ii)        --   Matters to be Covered in Opinion of
                                     Canadian Counsel for the Obligors

      EXHIBIT 4.4(b)            --   Form of Opinion of Special U.S. Counsel
                                     for the Purchasers

      EXHIBIT 4.10              --   Form of Subsidiary Guarantee

      EXHIBIT 4.11              --   Form of Undertaking to Secure


                                       v

<PAGE>


                            FIRSTSERVICE CORPORATION

                                 1140 Bay Street
                                   Suite 4000
                                Toronto, Ontario
                                 Canada M5S 2B4

                            FIRSTSERVICE DELAWARE, LP

                               1526 Braken Avenue
                              Wellington, Delaware
                         United States of America 19808

                 8.06% Guaranteed Senior Secured Notes due 2011



                                                            As of June 21, 2001


TO THE  PURCHASERS  WHOSE NAMES
        APPEAR IN THE  ACCEPTANCE
        FORM AT THE END HEREOF:

Ladies and Gentlemen:

                  FIRSTSERVICE  DELAWARE,  LP, a limited  partnership  organized
under the laws of Delaware (the  "Company"),  and  FIRSTSERVICE  CORPORATION,  a
company  incorporated  under the laws of Ontario,  Canada (the  "Guarantor" and,
together with the Company,  the  "Obligors"),  agree with each of the purchasers
whose names appear in the acceptance form at the end hereof (each, a "Purchaser"
and, collectively, the "Purchasers") as follows:

1. AUTHORIZATION OF NOTES.

                  The   Company   will   authorize   the   issue   and  sale  of
U.S.$100,000,000  aggregate  principal  amount  of its 8.06%  Guaranteed  Senior
Secured Notes due 2011 (the "NOTES",  such term to include any such notes issued
in  substitution   therefor   pursuant  to  Section  15).  The  Notes  shall  be
substantially in the form set out in Exhibit 1, with such changes therefrom,  if
any, as may be approved by each Purchaser and the Company.  Certain  capitalized
terms  used in this  Agreement  are  defined  in  Schedule  B;  references  to a
"Schedule" or an "Exhibit" are, unless otherwise specified,  to a Schedule or an
Exhibit attached to this Agreement. The Notes will be secured by the Collateral,
all as provided in the Security Documents.


<PAGE>


                  Payment of the  principal of,  Make-Whole  Amount (if any) and
interest on the Notes and other amounts owing hereunder shall be unconditionally
guaranteed  by the  Guarantor as provided in Section 14 (and each Note will have
the guarantee (the  "GUARANTEE") of the Guarantor  endorsed  thereon in the form
set out in Exhibit 1-A).

2. SALE AND PURCHASE OF NOTES.

                  Subject to the terms and  conditions  of this  Agreement,  the
Company will issue and sell to each  Purchaser and each  Purchaser will purchase
from the  Company,  at the  Closing  provided  for in  Section  3,  Notes in the
principal amount  specified  opposite such Purchaser's name in Schedule A at the
purchase  price  of  100%  of the  principal  amount  thereof.  The  Purchasers'
obligations  hereunder  are several and not joint  obligations  and no Purchaser
shall have any liability to any Person for the performance or non-performance of
any obligation by any other Purchaser hereunder.

3. CLOSING.

                  The sale and  purchase  of the Notes to be  purchased  by each
Purchaser shall occur at the offices of Milbank, Tweed, Hadley & McCloy LLP, One
Chase  Manhattan  Plaza,  New York, New York 10005, at 10:00 a.m., New York City
time, at a closing (the  "CLOSING")  on June 26, 2001 or on such other  Business
Day thereafter as may be agreed upon by the Obligors and the Purchasers.  At the
Closing the Company will deliver to each  Purchaser the Notes to be purchased by
such  Purchaser in the form of a single Note (or such greater number of Notes in
denominations of at least  U.S.$100,000 as such Purchaser may request) dated the
date of the Closing and registered in such  Purchaser's  name (or in the name of
such Purchaser's nominee), with the Guarantee of the Guarantor endorsed thereon,
against  delivery by such  Purchaser to the Company or its order of  immediately
available funds in the amount of the purchase price therefor by wire transfer of
immediately  available  funds for the account of the  Company to account  number
5142288 at Bank One, NA, Chicago,  Illinois,  ABA# 071000013.  If at the Closing
the Company shall fail to tender such Notes to any  Purchaser as provided  above
in this  Section 3, or any of the  conditions  specified  in Section 4 shall not
have been fulfilled to such Purchaser's  satisfaction,  such Purchaser shall, at
such Purchaser's  election,  be relieved of all further  obligations  under this
Agreement,  without thereby waiving any rights such Purchaser may have by reason
of such failure or such nonfulfillment.

4. CONDITIONS TO CLOSING.

                  Each Purchaser's  obligation to purchase and pay for the Notes
to be sold to such  Purchaser  at the Closing is subject to the  fulfillment  to
such  Purchaser's  satisfaction,  prior to or at the Closing,  of the  following
conditions:

                                       2

<PAGE>


4.1.     REPRESENTATIONS AND WARRANTIES.

                  The  representations  and  warranties  of the Obligors in each
Financing Document shall be correct when made and at the time of the Closing.

4.2.     PERFORMANCE; NO DEFAULT.

                  Each  Obligor  shall  have  performed  and  complied  with all
agreements and conditions  contained in each Financing  Document  required to be
performed  or complied  with by it prior to or at the  Closing and after  giving
effect to the issue and sale of the Notes (and the  application  of the proceeds
thereof as  contemplated  by Schedule 5.14) no Default or Event of Default shall
have occurred and be continuing.  Neither Obligor nor any Subsidiary  shall have
entered into any  transaction  since the date of the Memorandum  that would have
been  prohibited  by Section 10.1,  10.3,  10.7 or 10.8 hereof had such Sections
applied since such date.

4.3.     COMPLIANCE CERTIFICATES.

                  (a) OFFICER'S  CERTIFICATE.  Each Obligor shall have delivered
to such  Purchaser  an  Officer's  Certificate,  dated the date of the  Closing,
certifying that the conditions  specified in Sections 4.1, 4.2 and 4.9 have been
fulfilled.

                  (b) SECRETARY'S CERTIFICATE.  Each Obligor and each Subsidiary
Guarantor shall have delivered to such Purchaser a certificate  certifying as to
the  resolutions  attached  thereto  and  other  corporate  or  partnership  (as
applicable) proceedings relating to the authorization, execution and delivery of
each  Financing  Document to which such  Obligor or  Subsidiary  Guarantor  is a
party.

4.4. OPINIONS OF COUNSEL.

                  Such  Purchaser  shall  have  received  opinions  in form  and
substance satisfactory to such Purchaser, dated the date of the Closing (a) from
(i)  Shearman & Sterling,  U.S.  counsel  for the  Obligors  and the  Subsidiary
Guarantors,  (ii) Fogler Rubinoff LLP, Canadian counsel for the Obligors and the
Subsidiary  Guarantors  and  (iii)  local  counsel  for  the  Obligors  and  the
Subsidiary  Guarantors  in  applicable  jurisdictions  (which  counsel  shall be
reasonably  acceptable  to the  Purchasers),  covering  the matters set forth in
Exhibit 4.4(a)(i),  4.4(a)(ii) and 4.4(a)(iii),  respectively,  (and the Company
hereby instructs its counsel to deliver such opinions to the Purchasers) and (b)
from  Milbank,  Tweed,  Hadley & McCloy LLP,  the  Purchasers'  special New York
counsel in  connection  with such  transactions,  substantially  in the form set
forth in  Exhibit  4.4(b)  and  covering  such other  matters  incident  to such
transactions as such Purchaser may reasonably  request.


                                       3

<PAGE>


4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.

                  On the date of the Closing such Purchaser's  purchase of Notes
shall (i) be permitted by the laws and regulations of each jurisdiction to which
such  Purchaser  is subject,  without  recourse to  provisions  (such as Section
1405(a)(8) of the New York  Insurance  Law)  permitting  limited  investments by
insurance  companies  without  restriction as to the character of the particular
investment,  (ii) not  violate  any  applicable  law or  regulation  (including,
without  limitation,  Regulation  T, U or X of the  Board  of  Governors  of the
Federal Reserve System) and (iii) not subject such Purchaser to any tax, penalty
or liability under or pursuant to any applicable law or regulation, which law or
regulation was not in effect on the date hereof. If requested by such Purchaser,
such Purchaser shall have received an Officer's  Certificate  from the Guarantor
certifying as to such matters of fact as such Purchaser may  reasonably  specify
to enable such Purchaser to determine whether such purchase is so permitted.

4.6.     SALE OF OTHER NOTES.

                  Contemporaneously  with the Closing the Company  shall sell to
each other  Purchaser and each other  Purchaser  shall  purchase the Notes to be
purchased by it at the Closing as specified in Schedule A.

4.7.     PAYMENT OF SPECIAL COUNSEL FEES, ETC.

                  Without  limiting the provisions of Section 17.1, the Obligors
shall  have  paid on or  before  the  Closing  any  fees  due and  owing  to the
Collateral  Agent and the  reasonable  fees,  charges and  disbursements  of the
Purchasers'  special counsel  referred to in Section 4.4 to the extent reflected
in a statement of such counsel  rendered to the  Guarantor at least one Business
Day prior to the Closing.  In  addition,  all taxes due in  connection  with the
preparation,   execution,   delivery,  filing,  recordation,   registration  and
notarization  of any Financing  Document or any document  furnished  under or in
connection  with any  Financing  Document  shall  have  been paid in full by the
Obligors and such  Purchaser  shall have received  evidence  thereof  reasonably
satisfactory to such Purchaser.

4.8.     PRIVATE PLACEMENT NUMBER.

                  A Private  Placement  number issued by Standard & Poor's CUSIP
Service  Bureau (in  cooperation  with the  Securities  Valuation  Office of the
National  Association of Insurance  Commissioners)  shall have been obtained for
the Notes.

4.9.     CHANGES IN CORPORATE STRUCTURE.

                  Except as specified in Schedule  4.9,  neither  Obligor  shall
have changed its  jurisdiction of  incorporation or formation (as applicable) or
been a party to any merger or


                                       4

<PAGE>


consolidation  or shall have  succeeded  to all or any  substantial  part of the
liabilities  of any other  entity,  at any time  following  the date of the most
recent financial statements referred to in Schedule 5.5.

4.10. EVIDENCE OF CONSENT TO RECEIVE SERVICE OF PROCESS.

                  Such  Purchaser  shall have  received,  in form and  substance
satisfactory to such Purchaser, evidence of the consent of CT Corporation System
in New York, New York to the appointment and designation provided for by Section
24 hereof and Section 5.03 of the  Subsidiary  Guarantee for the period from the
date of Closing  through  June 21,  2012 (and the payment in full of all fees in
respect thereof).

4.11. SUBSIDIARY GUARANTEE; UNDERTAKINGS TO SECURE

                  Such Purchaser shall have received a true and complete copy of
the  Subsidiary  Guarantee,  duly  executed  and  delivered  by each  Subsidiary
Guarantor  identified in Schedule 5.4, and the Subsidiary  Guarantee shall be in
full  force and  effect;  and such  Purchaser  shall  have  received  a true and
complete copy of each Undertaking to Secure, duly executed and delivered by each
Undertaking  Subsidiary identified in Schedule 5.4, and each of the Undertakings
to Secure shall be in full force and effect.

4.12. FINANCING DOCUMENTS; SECURITY INTERESTS.

                  This  Agreement and each other  Financing  Document shall have
been duly executed and  delivered by each of the parties  hereto and thereto and
shall be in full  force and  effect.  In  addition,  such  Purchaser  shall have
received  evidence  reasonably  satisfactory to such Purchaser that the Obligors
shall have taken all actions (including,  without limitation,  the making of all
recordings  and  filings  set forth in  Schedule  4.12) as may be  necessary  or
appropriate in order to create and perfect the security interests intended to be
created pursuant to the Security Documents.

4.13. LIEN SEARCHES.

                  Such  Purchaser  shall  have  received  the  results of recent
searches,  conducted by a Person reasonably  satisfactory to such Purchaser,  of
PERSONAL  PROPERTY SECURITY ACT (Ontario),  Uniform  Commercial Code and similar
registrations  and filings and tax and judgment  Liens filed with respect to the
Collateral in such filing offices as such Purchaser may reasonably request.

4.14. INTERCREDITOR AGREEMENT.

                  The Intercreditor  Agreement shall have been duly executed and
delivered by the parties thereto and shall be in full force and effect.


                                       5

<PAGE>


4.15. PROCEEDINGS AND DOCUMENTS.

                  All partnership, corporate and other proceedings in connection
with the transactions  contemplated by the Financing Documents and all documents
and  instruments  incident to such  transactions  shall be  satisfactory to such
Purchaser  and the  Purchasers'  special  counsel,  and such  Purchaser and such
special counsel shall have received all such counterpart  originals or certified
or other copies of such documents as such Purchaser or such special  counsel may
reasonably request.

5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS.

                  The Company and the Guarantor jointly and severally  represent
and warrant to each Purchaser that:

5.1. ORGANIZATION; POWER AND AUTHORITY.

                  Each  Obligor  is a  corporation  or limited  partnership  (as
applicable) duly organized, validly existing and in good standing under the laws
of  its  jurisdiction  of  organization,  and is  duly  qualified  as a  foreign
corporation  or  partnership  (as  applicable)  and, if  applicable,  is in good
standing in each  jurisdiction in which such  qualification  is required by law,
other than those  jurisdictions as to which the failure to be so qualified or in
good  standing  could  not,  individually  or in the  aggregate,  reasonably  be
expected to have a Material  Adverse  Effect.  Each Obligor has the corporate or
partnership (as  applicable)  power and authority to own or hold under lease the
properties  it purports to own or hold under lease,  to transact the business it
transacts  and proposes to transact as described in the  Memorandum,  to execute
and deliver this Agreement, the Notes and each other Financing Document to which
the  Company is a party (in the case of the  Company)  and this  Agreement,  the
Guarantees and each other  Financing  Document to which the Guarantor is a party
(in the  case of the  Guarantor),  and to  perform  the  provisions  hereof  and
thereof.

5.2. AUTHORIZATION, ETC.

                  This Agreement, the Notes and each other Financing Document to
which  the  Company  is a party  have  been  duly  authorized  by all  necessary
partnership action on the part of the Company,  and this Agreement  constitutes,
and upon  execution  and  delivery  thereof  each Note and each other  Financing
Document to which the  Company is a party will  constitute,  a legal,  valid and
binding obligation of the Company  enforceable against the Company in accordance
with its terms,  and this  Agreement,  the Guarantees  and each other  Financing
Document  to which the  Guarantor  is a party have been duly  authorized  by all
necessary  corporate  action on the part of the  Guarantor,  and this  Agreement
constitutes  and, upon execution and delivery  thereof,  each Guarantee and each
other Financing  Document to which the Guarantor is a party will  constitute,  a
legal,  valid and binding  obligation of the Guarantor  enforceable  against the
Guarantor  in  accordance  with  its  terms,  except,  in  each

                                       6

<PAGE>


case,  as such  enforceability  may be  limited  by (i)  applicable  bankruptcy,
insolvency,  reorganization,  moratorium  or other  similar laws  affecting  the
enforcement of creditors' rights generally and (ii) general principles of equity
(regardless  of whether such  enforceability  is  considered  in a proceeding in
equity or at law).

5.3. DISCLOSURE.

                  The Obligors,  through  their agent,  Merrill  Lynch,  Pierce,
Fenner  & Smith  Incorporated,  have  delivered  to each  Purchaser  a copy of a
Private Placement Memorandum,  dated April 2001 (the "MEMORANDUM"),  relating to
the transactions  contemplated  hereby. The Memorandum fairly describes,  in all
material respects,  the general nature of the business and principal  properties
of the Guarantor and its Subsidiaries. Except as disclosed in Schedule 5.3, this
Agreement,  the  other  Financing  Documents,  the  Memorandum,  the  documents,
certificates  or other  writings  delivered to the Purchasers by or on behalf of
the Obligors in connection  with the  transactions  contemplated  hereby and the
financial  statements  listed in Schedule 5.5, taken as a whole,  do not contain
any untrue  statement  of a  material  fact or omit to state any  material  fact
necessary  to make  the  statements  therein  not  misleading  in  light  of the
circumstances  under which they were made. Except as disclosed in the Memorandum
or as  expressly  described  in  Schedule  5.3,  or in  one  of  the  documents,
certificates  or  other  writings   identified  therein,  or  in  the  financial
statements  listed in  Schedule  5.5,  since March 31,  2000,  there has been no
change,  and there is no fact  known to the  Company  that could  reasonably  be
expected to result in a change, in the financial condition, operations, business
or  properties  of  either  Obligor  or  any  Subsidiary   except  changes  that
individually  or in the  aggregate  could not  reasonably  be expected to have a
Material Adverse Effect.

5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES.

                  (a) Schedule 5.4 contains  (except as noted therein)  complete
and  correct  lists (i) of the  Guarantor's  Subsidiaries,  showing,  as to each
Subsidiary, the correct name thereof, the jurisdiction of its organization,  and
the  percentage of shares of each class of its capital  stock or similar  equity
interests  outstanding  owned by the  Guarantor  and each other  Subsidiary  and
whether  such  Subsidiary  shall be a  Subsidiary  Guarantor  or an  Undertaking
Subsidiary  as of the date of Closing  and (ii) of the  Guarantor's  Affiliates,
other than Subsidiaries.

                  (b) All of the outstanding  shares of capital stock or similar
equity  interests of each Subsidiary shown in Schedule 5.4 as being owned by the
Guarantor  and its  Subsidiaries  have been validly  issued,  are fully paid and
nonassessable  and are owned by the  Guarantor  or another  Subsidiary  free and
clear of any Lien (except as  otherwise  disclosed in Schedule 5.4 and except as
created by any Security Document and in connection with the Credit Agreement).

                                       7

<PAGE>


                  (c)  Each   Subsidiary   identified   in  Schedule  5.4  is  a
corporation  or other legal  entity duly  organized,  validly  existing  and, if
applicable, in good standing under the laws of its jurisdiction of organization,
and is duly qualified as a foreign  corporation or other legal entity and is, if
applicable, in good standing in each jurisdiction in which such qualification is
required by law, other than those jurisdictions as to which the failure to be so
qualified  or in good  standing  could not,  individually  or in the  aggregate,
reasonably be expected to have a Material  Adverse Effect.  Each such Subsidiary
has the  corporate  or other power and  authority to own or hold under lease the
properties  it purports to own or hold under lease and to transact  the business
it transacts and proposes to transact as described in the Memorandum.

                  (d) No Subsidiary  is a party to, or otherwise  subject to any
legal  restriction or any agreement  (other than this Agreement,  the agreements
listed on Schedule 5.4, the Credit Agreement and customary  limitations  imposed
by corporate law  statutes)  restricting  the ability of such  Subsidiary to pay
dividends out of profits or make any other similar  distributions  of profits to
the Guarantor or any of its Subsidiaries that owns outstanding shares of capital
stock or similar equity interests of such Subsidiary.

5.5. FINANCIAL STATEMENTS.

                  The Obligors have  delivered to each  Purchaser  copies of the
financial  statements  listed on Schedule 5.5. All of said financial  statements
(including in each case the related  schedules and notes) fairly  present in all
material respects the consolidated  financial  position of the Guarantor and its
Subsidiaries  as of the  respective  dates  specified  in such  Schedule and the
consolidated earnings and cash flows for the respective periods so specified and
have been prepared in accordance with U.S. GAAP consistently  applied throughout
the periods involved except as set forth in the notes thereto  (subject,  in the
case of any interim financial statements, to normal year-end adjustments).

5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC.

                  The execution, delivery and performance by the Company of this
Agreement, the Notes and the other Financing Documents to which the Company is a
party and by the  Guarantor  of this  Agreement,  the  Guarantees  and the other
Financing  Documents to which the Guarantor is a party will not (i)  contravene,
result  in any  breach  of, or  constitute  a  default  under,  or result in the
creation  of any Lien  (other than the Liens  created  pursuant to the  Security
Documents) in respect of any property of either Obligor or any Subsidiary under,
any indenture,  mortgage,  deed of trust,  loan,  purchase or credit  agreement,
lease,  corporate  charter  or  by-laws,  partnership  agreement  or  any  other
agreement or instrument to which either Obligor or any Subsidiary is bound or by
which either Obligor or any Subsidiary or any of their respective properties may
be bound or

                                       8

<PAGE>


affected,  (ii)  conflict  with  or  result  in a  breach  of any of the  terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental  Authority having jurisdiction over either Obligor or
any  Subsidiary  or (iii)  violate any provision of any statute or other rule or
regulation of any  Governmental  Authority  applicable to either  Obligor or any
Subsidiary.

5.7. GOVERNMENTAL AUTHORIZATIONS, ETC.

                  No consent,  approval or  authorization  of, or  registration,
filing or declaration with, any Governmental Authority (other than the making of
the  recordings  and filings set forth in Schedule 4.12 for purposes of creating
and perfecting  the security  interests  intended to be created  pursuant to the
Security  Documents) is required in connection  with the execution,  delivery or
performance by the Company of this  Agreement,  the Notes or the other Financing
Documents to which the Company is a party or by the Guarantor of this Agreement,
the  Guarantees  or the other  Financing  Documents to which the  Guarantor is a
party including, without limitation, any thereof required in connection with the
obtaining of U.S. Dollars to make payments under this Agreement,  the Notes, the
Guarantees or the other Financing Documents and the payment of such U.S. Dollars
to Persons  resident in the United  States of America or Canada,  other than the
execution  and filing of a report of exempt  trade on Form  45-501F1  under Rule
45-501 made under the  SECURITIES  ACT  (Ontario)  together  with the  requisite
filing  fee with the  Ontario  Securities  Commission  (or any other  applicable
Canadian  securities  regulatory  authority),  within  ten  days of the sale and
purchase of the Notes.  It is not  necessary to ensure the  legality,  validity,
enforceability or admissibility  into evidence in Canada of this Agreement,  the
Notes,  the Guarantees or the other Financing  Documents that any thereof or any
other document be filed,  recorded or enrolled with any Governmental  Authority,
or that any such  agreement or document be stamped with any stamp,  registration
or similar transaction tax.


5.8. LITIGATION;  OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS; CALL OPTION
     TRIGGERING EVENTS.

                  (a) Except as disclosed in Schedule 5.8, there are no actions,
suits or proceedings pending or, to the knowledge of either Obligor,  threatened
against or affecting  either Obligor or any Subsidiary or any property of either
Obligor or any  Subsidiary in any court or before any  arbitrator of any kind or
before or by any Governmental Authority that,  individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.

                  (b) Neither of the Obligors nor any  Subsidiary  is in default
under any term of any agreement or instrument to which it is a party or by which
it is bound, or any order, judgment,  decree or ruling of any court,  arbitrator
or Governmental  Authority or is in violation of any applicable law,  ordinance,
rule or regulation  (including  without  limitation  Envi-

                                       9

<PAGE>

ronmental  Laws) of any  Governmental  Authority,  which  default or  violation,
individually  or in the  aggregate,  could  reasonably  be  expected  to  have a
Material Adverse Effect.

                  (c)  No Call Option Triggering Event has occurred and is
continuing.

5.9. TAXES; FOREIGN TAXES.

                  (a) The  Obligors  and  each  Subsidiary  have  filed  all tax
returns that are required to have been filed in any jurisdiction,  and have paid
all taxes  shown to be due and  payable on such  returns and all other taxes and
assessments levied upon them or their properties,  assets, income or franchises,
to the extent such taxes and assessments  have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which is not  individually  or in the aggregate  Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which the Guarantor or a Subsidiary,
as the case may be, has  established  adequate  reserves in accordance with U.S.
GAAP.  Neither  Obligor knows of any basis for any other tax or assessment  that
could reasonably be expected to have a Material Adverse Effect.

                  (b) No  liability  for any tax (whether  income,  documentary,
sales, stamp,  registration,  issue,  capital,  property,  excise or otherwise),
duty, levy,  impost,  fee, charge or withholding  (each a "TAX" and collectively
"TAXES"),  directly or indirectly,  imposed, assessed, levied or collected by or
for the account of any  Governmental  Authority of or in Canada or any political
subdivision  thereof or  therein  (an  "APPLICABLE  TAXING  AUTHORITY")  will be
incurred by either  Obligor or any holder of a Note as a result of the execution
or delivery of this Agreement, the Notes or the Guarantees and, based on present
law,  no  deduction  or  withholding  in respect of Taxes  imposed by or for the
account of any  Applicable  Taxing  Authority  is  required  to be made from any
payment by the Company  under this  Agreement  or the Notes or by the  Guarantor
under  this  Agreement  or the  Guarantees  except for any such  withholding  or
deduction  arising  out of the  conditions  described  in the proviso to Section
13(a).

5.10. TITLE TO PROPERTY; LEASES.

                  The  Obligors  and each  Subsidiary  have good and  sufficient
title to their respective  properties that  individually or in the aggregate are
Material,  including all such  properties  reflected in the most recent  audited
balance  sheet  referred to in Section 5.5 or purported to have been acquired by
either  Obligor or any  Subsidiary  after said date (except as sold or otherwise
disposed of in the ordinary course of business),  in each case free and clear of
Liens prohibited by this Agreement or any other Financing  Document.  All leases
that  either  Obligor  or  any  Subsidiary  is  party  to  as  lessee  and  that
individually  or in the

                                       10

<PAGE>

aggregate are Material are valid and subsisting and are in full force and effect
in all material respects.

5.11. LICENSES, PERMITS, ETC.

                  Except as disclosed in Schedule 5.11,

                  (a) the  Obligors  and each  Subsidiary  own,  possess  or are
         licensed  to use all  licenses,  permits,  franchises,  authorizations,
         patents,  copyrights,  service marks,  trademarks  and trade names,  or
         rights  thereto,  that  individually  or in the aggregate are Material,
         without known conflict with the rights of others;

                  (b) to the best  knowledge  of the  Obligors,  no  product  of
         either Obligor or any Subsidiary  infringes in any material respect any
         license, permit, franchise,  authorization,  patent, copyright, service
         mark,  trademark,  trade name or other right owned by any other Person;
         and

                  (c)  to  the  best  knowledge  of the  Obligors,  there  is no
         Material  violation by any Person of any right of either Obligor or any
         Subsidiary  with  respect  to  any  patent,  copyright,  service  mark,
         trademark, trade name or other right owned or used by either Obligor or
         any Subsidiary.

5.12.    COMPLIANCE WITH ERISA.

                  (a) The Obligors and each ERISA  Affiliate  have  operated and
administered  each Plan in compliance  with all applicable  laws except for such
instances of  noncompliance  as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither of the Obligors nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or
the penalty or excise tax  provisions of the Code  relating to employee  benefit
plans (as defined in section 3 of ERISA), and no event, transaction or condition
has  occurred  or exists  that could  reasonably  be  expected  to result in the
incurrence of any such liability by either Obligor or any ERISA Affiliate, or in
the imposition of any Lien on any of the rights,  properties or assets of either
Obligor or any ERISA  Affiliate,  in either  case  pursuant  to Title I or IV of
ERISA or to such penalty or excise tax  provisions  or to section  401(a)(29) or
412  of the  Code,  other  than  such  liabilities  or  Liens  as  would  not be
individually or in the aggregate Material.

                  (b) The present  value of the  aggregate  benefit  liabilities
under each of the Plans (other than Multiemployer  Plans),  determined as of the
end of such Plan's most  recently  ended plan year on the basis of the actuarial
assumptions  specified for funding purposes in such Plan's most recent actuarial
valuation  report,  did not exceed the aggregate  current value of the assets of
such Plan allocable to such benefit  liabilities by more than

                                       11

<PAGE>


U.S.$5,000,000  in the aggregate for all Plans.  The term "BENEFIT  LIABILITIES"
has the meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE"
and "PRESENT VALUE" have the meaning specified in section 3 of ERISA.

                  (c) The  Obligors and each ERISA  Affiliate  have not incurred
withdrawal   liabilities   (and  are  not  subject  to   contingent   withdrawal
liabilities)  under  section  4201 or 4204 of ERISA in respect of  Multiemployer
Plans that individually or in the aggregate are Material.

                  (d) The expected postretirement benefit obligation (determined
as of the  last  day of the  Guarantor's  most  recently  ended  fiscal  year in
accordance with Financial  Accounting Standards Board Statement No. 106, without
regard to liabilities  attributable to continuation coverage mandated by section
4980B of the Code) of the Guarantor and its Subsidiaries is not Material.

                  (e) The  execution  and  delivery  of this  Agreement  and the
issuance  and sale of the Notes and  Guarantees  hereunder  will not involve any
transaction  that is subject to the  prohibitions  of section 406 of ERISA or in
connection   with   which  a  tax  could  be   imposed   pursuant   to   section
4975(c)(1)(A)-(D)  of the Code. The  representation by the Obligors in the first
sentence of this  Section  5.12(e) is made in  reliance  upon and subject to the
accuracy of the Purchasers'  representation  in Section 6.2 as to the sources of
the funds used to pay the  purchase  price of the Notes to be  purchased  by the
Purchasers.

                  (f)  Each  Foreign   Pension  Plan  has  been   maintained  in
compliance  with its terms and with the  requirements  of any and all applicable
laws, statutes,  rules,  regulations and court orders and has been maintained in
good standing with  applicable  regulatory  authorities  except for instances of
non-compliance  which have not resulted and could not  reasonably be expected to
result in a Material  Adverse Effect.  For purposes of this paragraph,  "FOREIGN
PENSION  PLAN"  means  any  plan,  fund  (including,   without  limitation,  any
superannuation  fund) or other similar program established or maintained outside
the United States of America by either Obligor or any  Subsidiary  primarily for
the benefit of employees  residing  outside the United States of America of such
Obligor or such Subsidiary  which plan,  fund or other similar program  provides
for retirement  income for such  employees,  results in a deferral of income for
such  employees in  contemplation  of  retirement or provides for payments to be
made to such  employees upon  termination  of employment,  and which plan is not
subject to ERISA or the Code.

5.13. PRIVATE OFFERING BY THE OBLIGORS.

                  Neither the  Obligors  nor anyone  acting on their  behalf has
offered the Notes or the  Guarantees or any similar  securities  for sale to, or
solicited  any offer to buy any of the same from,  or  otherwise  approached  or
negotiated in respect thereof with, any Person other

                                       12

<PAGE>


than  the  Purchasers  and not  more  than 125  other  Institutional  Accredited
Investors,  each of which  has been  offered  the  Notes at a  private  sale for
investment. Neither the Obligors nor anyone acting on their behalf has taken, or
will take,  any action that would  subject the  issuance or sale of the Notes or
the Guarantees to the  registration  requirements of Section 5 of the Securities
Act.

5.14. USE OF PROCEEDS; MARGIN REGULATIONS.

                  The Company  will apply the  proceeds of the sale of the Notes
as set forth in  Schedule  5.14.  No part of the  proceeds  from the sale of the
Notes hereunder will be used, directly or indirectly,  for the purpose of buying
or carrying any margin stock within the meaning of  Regulation U of the Board of
Governors of the United States  Federal  Reserve System (12 CFR 221), or for the
purpose  of  buying  or  carrying  or  trading  in  any  securities  under  such
circumstances  as to involve  either  Obligor in a violation of  Regulation X of
said Board (12 CFR 224) or to involve  any  broker or dealer in a  violation  of
Regulation T of said Board (12 CFR 220).  Margin stock does not constitute  more
than  5% of the  value  of the  consolidated  assets  of the  Guarantor  and its
Subsidiaries  and the Guarantor does not have any present  intention that margin
stock will constitute more than 5% of the value of such assets.  As used in this
Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have
the meanings assigned to them in said Regulation U.

5.15. EXISTING INDEBTEDNESS; FUTURE LIENS.

                  (a) Except as described  therein,  Schedule  5.15 sets forth a
complete and correct list of all  outstanding  Indebtedness of the Guarantor and
its  Subsidiaries  as of March 31,  2001,  since  which  date  there has been no
Material  change in the amounts,  interest  rates,  sinking  funds,  installment
payments or maturities of the Indebtedness of the Guarantor or its Subsidiaries.
Neither  of the  Obligors  nor any  Subsidiary  is in  default  and no waiver of
default is currently in effect,  in the payment of any  principal or interest on
any  Indebtedness of either Obligor or such Subsidiary and no event or condition
exists with respect to any Indebtedness of either Obligor or any Subsidiary that
would permit (or that with notice or the lapse of time,  or both,  would permit)
one or more Persons to cause such  Indebtedness to become due and payable before
its stated maturity or before its regularly scheduled dates of payment.

                  (b) A true and complete copy of the Credit  Agreement has been
provided to each Purchaser.

                  (c)  Except as  disclosed  in  Schedule  5.15,  neither of the
Obligors  nor any  Subsidiary  has agreed or consented to cause or permit in the
future (upon the happening of a contingency  or otherwise)  any of its property,
whether now owned or hereafter  acquired,  to be subject to a Lien not permitted
by Section 10.3.

                                       13

<PAGE>


5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC.

                  Neither  the sale of the Notes by the Company  hereunder  with
the benefit of the  Guarantees  of the  Guarantor  nor the  Company's use of the
proceeds  thereof will violate the United States  Trading with the Enemy Act, as
amended,  or any of the foreign assets control  regulations of the United States
Treasury  Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive  order  relating  thereto.

5.17.  STATUS UNDER CERTAIN STATUTES.

                  Neither of the Obligors nor any  Subsidiary  is required to be
registered under the United States  Investment  Company Act of 1940, as amended,
the United States Public Utility  Holding  Company Act of 1935, as amended,  the
United States Interstate  Commerce Act, as amended, or the United States Federal
Power Act, as amended.

5.18. ENVIRONMENTAL MATTERS.

                  Neither of the Obligors nor any  Subsidiary  has  knowledge of
any claim or has received any notice of any claim,  and no  proceeding  has been
instituted  raising any claim against either Obligor or any Subsidiary or any of
their  respective real  properties now or formerly owned,  leased or operated by
any of them or other assets, alleging any damage to the environment or violation
of any Environmental Laws, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect.  Except as otherwise  disclosed
to the Purchasers in writing,

                           (a) neither of the  Obligors nor any  Subsidiary  has
                  knowledge  of any facts  which  would  give rise to any claim,
                  public or  private,  of  violation  of  Environmental  Laws or
                  damage to the environment  emanating from,  occurring on or in
                  any way  related to real  properties  now or  formerly  owned,
                  leased or operated by any of them or to other  assets or their
                  use,  except,  in each case,  such as could not  reasonably be
                  expected to result in a Material Adverse Effect;

                           (b) neither of the  Obligors nor any  Subsidiary  has
                  stored  any  Hazardous  Materials  on real  properties  now or
                  formerly owned,  leased or operated by any of them and has not
                  disposed of any  Hazardous  Materials in a manner  contrary to
                  any  Environmental  Laws in each case in any manner that could
                  reasonably be expected to result in a Material Adverse Effect;
                  and

                           (c) all buildings on all real  properties  now owned,
                  leased or operated by either  Obligor or any Subsidiary are in
                  compliance with applicable

                                       14

<PAGE>


                  Environmental  Laws,  except where failure to comply could not
                  reasonably be expected to result in a Material Adverse Effect.

5.19. RANKING.

                  All  liabilities  of the  Company  under  the Notes and of the
Guarantor  under the Guarantees  constitute  direct,  unconditional  and general
obligations  of such  Obligor and rank in right of payment  either PARI PASSU or
senior to all other  Indebtedness of such Obligor,  except for such Indebtedness
which is  preferred  as a result  of being  secured  by  assets  other  than the
Collateral  (but then only to the  extent of such  security).

5.20.  SUBSIDIARY GUARANTEE.

                  The   representations   and  warranties  of  each   Subsidiary
Guarantor  contained in the Subsidiary  Guarantee are true and correct as of the
date they are made and will be true and correct at the time of Closing.

5.21. OWNERSHIP; SECURITY DOCUMENTS.

                  The  Obligors  are  the  sole  and  beneficial  owners  of the
Collateral  being  provided  thereby  and no Lien exists or will exist upon such
Collateral  at any  time,  except  for the  security  interest  in  favor of the
Collateral  Agent for the benefit of the Secured Parties created or provided for
in the  Security  Documents  (except  as  otherwise  permitted  by the  Security
Documents and except for Liens arising in connection  with the Credit  Agreement
and any other  Permitted  Liens).  The provisions of the Security  Documents are
effective to create,  in favor of the Collateral  Agent on behalf of the Secured
Parties,  legal,  valid  and  enforceable  Liens on or in all of the  Collateral
intended to be covered thereby,  and as of the date of the Closing all necessary
recordings and filings will have been made in all necessary public offices (such
recordings  and  filings  being  identified  on  Schedule  4.12)  and all  other
necessary and appropriate  action will have been taken so that the Liens created
by  the  Security  Documents  will  constitute  perfected  Liens  on or  in  the
Collateral intended to be covered thereby, prior and superior to all other Liens
(other than Liens arising in connection with the Credit  Agreement and any other
Permitted  Liens),  and  all  necessary  consents,  if  any,  to  the  creation,
effectiveness,  priority and perfection of each such Lien have been obtained. No
mortgage or financing statement or other instrument or recordation  covering all
or any part of the Collateral is on file in any recording office, except such as
may have been  filed in favor of the  Collateral  Agent for the  benefit  of the
Secured Parties.  Schedule 5.21 sets forth a complete and correct list of all of
the  Security  Documents in effect on the date of the  Closing.  The  Collateral
being  provided  on and as of the date of Closing in favor of the  holders  from
time to time of Notes  and the  Collateral  Agent is the same as the  collateral
being  provided in favor of the Lenders and the  Collateral  Agent (under and as
defined in the Credit Agreement) on and as of such date.

                                       15

<PAGE>


5.22. CHIEF EXECUTIVE OFFICE.

                  The chief place of business and chief executive  office of the
Guarantor,  and the office where the Guarantor keeps its records  concerning the
Collateral,  is 1140 Bay Street, Suite 4000, Toronto,  Ontario,  Canada M5S 2B4.
The chief place of business and chief executive  office of the Company,  and the
office where the Company keeps its records  concerning the  Collateral,  is 1526
Braken Avenue, Wellington, Delaware, United States of America 19808.

6.       REPRESENTATIONS OF THE PURCHASERS.

6.1.     PURCHASE FOR INVESTMENT.

                  Each  Purchaser  represents  that  such  Purchaser  is  (i) an
Institutional  Accredited  Investor  and (ii)  purchasing  the Notes for its own
account or for one or more separate accounts maintained by it or for the account
of one or more  pension or trust  funds and not with a view to the  distribution
thereof,  PROVIDED that the  disposition  of such  Purchaser's or their property
shall at all times be within such  Purchaser's or their control.  Each Purchaser
understands that the Notes have not been registered under the Securities Act and
may be resold only if registered  pursuant to the  provisions of the  Securities
Act  or  if  an  exemption  from   registration   is  available,   except  under
circumstances  where neither such registration nor such an exemption is required
by law, and that neither Obligor is required to register the Notes.

6.2. SOURCE OF FUNDS.

                  Each Purchaser  represents  that at least one of the following
statements is an accurate representation as to each source of funds (a "Source")
to be used by such  Purchaser  to pay the  purchase  price  of the  Notes  to be
purchased by such Purchaser hereunder:

                  (a) the Source is an "insurance  company general  account" (as
         the term is defined in PTE 95-60  (issued July 12, 1995)) in respect of
         which the reserves and liabilities (as defined by the annual  statement
         for life insurance  companies  approved by the National  Association of
         Insurance  Commissioners (the "NAIC ANNUAL STATEMENT")) for the general
         account  contract(s)  held by or on behalf of any employee benefit plan
         together  with the  amount  of the  reserves  and  liabilities  for the
         general account  contract(s) held by or on behalf of any other employee
         benefit plans maintained by the same employer (or affiliate  thereof as
         defined  in PTE  95-60)  or by the same  employee  organization  in the
         general account do not exceed 10% of the total reserves and liabilities
         of the general account (exclusive

                                       16

<PAGE>


         of separate account  liabilities) plus surplus as set forth in the NAIC
         Annual Statement filed with such Purchaser's state of domicile; or

                  (b) the Source is a separate account that is maintained solely
         in connection with such Purchaser's fixed contractual obligations under
         which the amounts  payable,  or credited,  to any employee benefit plan
         (or its related  trust) that has any interest in such separate  account
         (or to any  participant  or  beneficiary  of such plan  (including  any
         annuitant))   are  not  affected  in  any  manner  by  the   investment
         performance of the separate account; or

                  (c) the  Source  is either  (i) an  insurance  company  pooled
         separate  account,  within the meaning of PTE 90-1 (issued  January 29,
         1990), or (ii) a bank collective investment fund, within the meaning of
         the PTE 91-38  (issued July 12, 1991) and,  except as disclosed by such
         Purchaser to the Company in writing  pursuant to this paragraph (c), no
         employee benefit plan or group of plans maintained by the same employer
         or employee organization  beneficially owns more than 10% of all assets
         allocated  to such pooled  separate  account or  collective  investment
         fund; or

                  (d) the  Source  constitutes  assets of an  "investment  fund"
         (within  the  meaning  of Part V of the QPAM  Exemption)  managed  by a
         "qualified professional asset manager" or "QPAM" (within the meaning of
         Part V of the QPAM  Exemption),  no employee benefit plan's assets that
         are included in such investment  fund, when combined with the assets of
         all other employee benefit plans  established or maintained by the same
         employer or by an affiliate  (within the meaning of Section  V(c)(1) of
         the  QPAM   Exemption)  of  such  employer  or  by  the  same  employee
         organization  and managed by such QPAM,  exceed 20% of the total client
         assets managed by such QPAM, the conditions of Part I(c) and (g) of the
         QPAM Exemption are satisfied, neither the QPAM nor a person controlling
         or  controlled  by the QPAM  (applying  the  definition of "control" in
         Section V(e) of the QPAM  Exemption)  owns a 5% or more interest in the
         Company  and (i) the  identity  of such  QPAM and (ii) the names of all
         employee  benefit  plans whose assets are  included in such  investment
         fund have been  disclosed  to the  Company in writing  pursuant to this
         paragraph (d); or

                  (e) the Source  constitutes  assets of a "plan(s)" (within the
         meaning of Section IV of PTE 96-23 (the "INHAM Exemption"))  managed by
         an "in-house  asset manager" or "INHAM"  (within the meaning of Part IV
         of the INHAM  Exemption),  the  conditions of Part I(a), (g) and (h) of
         the  INHAM  Exemption  are  satisfied,  neither  the INHAM nor a person
         controlling  or  controlled by the INHAM  (applying  the  definition of
         "control" in Section  IV(h) of the INHAM  Exemption)  owns a 5% or more
         interest in the Company and (i) the identity of such INHAM and (ii) the
         name(s) of the employee  benefit  plan(s) whose assets

                                       17

<PAGE>


         constitute  the Source  have been  disclosed  to the Company in writing
         pursuant to this paragraph (e); or

                  (f)  the Source is a governmental plan; or

                  (g) the Source does not include assets of any employee benefit
         plan, other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms  "EMPLOYEE  BENEFIT PLAN",  "GOVERNMENTAL
PLAN" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.

7.       INFORMATION AS TO THE OBLIGORS.

7.1.     FINANCIAL AND BUSINESS INFORMATION.

                  The Obligors  shall deliver to each holder of Notes that is an
Institutional Investor:

                  (a)  QUARTERLY  STATEMENTS  -- within 45 days after the end of
         each of the first  three  quarterly  periods in each fiscal year of the
         Guarantor, duplicate copies of,

                       (i)      a consolidated  balance sheet of the Guarantor
                       and its  Subsidiaries  as at the end of such period, and

                       (ii)     consolidated  statements  of  earnings  and cash
                       flows of the Guarantor and its Subsidiaries, for such
                       period  and (in the case of the second and third
                       quarterly  periods) for the portion of the fiscal year
                       ending with such period,

         setting  forth in each case in  comparative  form the  figures  for the
         corresponding  period in the previous  fiscal year,  all in  reasonable
         detail,  prepared in accordance  with U.S.  GAAP  applicable to interim
         financial  statements  generally,  and certified by a Senior  Financial
         Officer  of  the  Guarantor  as  fairly  presenting,  in  all  material
         respects, the financial position of the companies being reported on and
         their  earnings  and cash  flows,  subject  to changes  resulting  from
         year-end  adjustments,  PROVIDED that  delivery  within the time period
         specified above of copies of the Guarantor's  Quarterly  Report on Form
         10-Q prepared in compliance  with the  requirements  therefor and filed
         with the United  States  Securities  and Exchange  Commission  shall be
         deemed to satisfy the requirements of this Section 7.1(a);

                                       18

<PAGE>

                  (b)      ANNUAL STATEMENTS -- within 90 days after the end of
         each fiscal year of the Guarantor, duplicate copies of,

                           (i)   a consolidated  balance sheet of the Guarantor
         and its Subsidiaries, as at the end of such year, and

                           (ii)  consolidated  statements  of earnings  and cash
                  flows of the Guarantor and its Subsidiaries, for such year,

         setting  forth in each case in  comparative  form the  figures  for the
         previous fiscal year, all in reasonable detail,  prepared in accordance
         with U.S. GAAP, and accompanied by

                           (A)  an  opinion  thereon  of  independent  chartered
                  accountants  of  recognized   international  standing,   which
                  opinion  shall state that such  financial  statements  present
                  fairly, in all material  respects,  the financial  position of
                  the companies  being reported upon and their earnings and cash
                  flows and have been prepared in conformity with U.S. GAAP, and
                  that the  examination of such  accountants in connection  with
                  such  financial  statements  has been made in accordance  with
                  generally  accepted  auditing  standards,  and that such audit
                  provides  a   reasonable   basis  for  such   opinion  in  the
                  circumstances, and

                           (B) a certificate  of such  accountants  stating that
                  they have  reviewed  this  Agreement  and the other  Financing
                  Documents and stating further whether,  in making their audit,
                  they have  become  aware of any  condition  or event that then
                  constitutes a Default or an Event of Default, and, if they are
                  aware that any such condition or event then exists, specifying
                  the  nature  and  period of the  existence  thereof  (it being
                  understood that such accountants shall not be liable, directly
                  or  indirectly,  for any  failure to obtain  knowledge  of any
                  Default or Event of Default  unless  such  accountants  should
                  have  obtained   knowledge  thereof  in  making  an  audit  in
                  accordance with generally  accepted auditing  standards or did
                  not make such an audit),

         PROVIDED that the delivery  within the time period  specified  above of
         the  Guarantor's  Annual  Report  on Form  10-K  for such  fiscal  year
         prepared in accordance  with the  requirements  therefor and filed with
         the United States Securities and Exchange Commission, together with the
         accountant's certificate described in clause (B) above, shall be deemed
         to satisfy the requirements of this Section 7.1(b);

                  (c) OTHER REPORTS -- promptly upon their  becoming  available,
         one copy of (i)  each  financial  statement,  report,  notice  or proxy
         statement sent by either

                                       19

<PAGE>


         Obligor or any Subsidiary to public securities holders  generally,  and
         (ii) each regular or periodic  report and each  registration  statement
         (without  exhibits except as expressly  requested by such holder) filed
         by either Obligor or any Subsidiary  with the Toronto Stock Exchange or
         any other stock  exchange or the United States  Securities and Exchange
         Commission  and  of  all  press  releases  and  other  statements  made
         available  generally by either  Obligor or any Subsidiary to the public
         concerning developments that are Material;

                  (d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly,  and in
         any  event  within  five  Business  Days  after a  Responsible  Officer
         becoming  aware of the  existence of any Default or Event of Default or
         that any Person has given any notice or taken any action  with  respect
         to a claimed default  hereunder or that any Person has given any notice
         or taken any  action  with  respect  to a claimed  default  of the type
         referred to in Section 11(e),  a written  notice  specifying the nature
         and period of existence thereof and what action the Obligors are taking
         or propose to take with respect thereto;

                  (e) ERISA MATTERS -- promptly, and in any event within 15 days
         after a Responsible  Officer becoming aware of any of the following,  a
         written notice setting forth the nature thereof and the action, if any,
         that the  Guarantor  or the Company or an ERISA  Affiliate  proposes to
         take with respect thereto:

                           (i) with respect to any Plan, any  reportable  event,
                  as  defined in  section  4043(c) of ERISA and the  regulations
                  thereunder,  for  which  notice  thereof  has not been  waived
                  pursuant to such  regulations  as in effect on the date hereof
                  that  could  reasonably  be  expected  to result in a Material
                  Adverse Effect; or

                           (ii) the taking by the PBGC of steps to institute, or
                  the threatening by the PBGC of the institution of, proceedings
                  under  section  4042 of ERISA for the  termination  of, or the
                  appointment  of a trustee  to  administer,  any  Plan,  or the
                  receipt by either  Obligor or any ERISA  Affiliate of a notice
                  from a  Multiemployer  Plan that such action has been taken by
                  the PBGC with respect to such Multiemployer Plan; or

                           (iii) any event,  transaction or condition that could
                  result in the incurrence of any liability by either Obligor or
                  any ERISA Affiliate  pursuant to Title I or IV of ERISA or the
                  penalty  or excise  tax  provisions  of the Code  relating  to
                  employee  benefit  plans,  or in the imposition of any Lien on
                  any of the rights,  properties or assets of either  Obligor or
                  any ERISA Affiliate pursuant to Title I or IV of ERISA or such
                  penalty or excise tax  provisions,  if such liability or Lien,
                  taken  together with any other such  liabilities or

                                       20

<PAGE>


                  Liens then  existing,  could  reasonably be expected to have a
                  Material Adverse Effect;

                  (f) NOTICES FROM  GOVERNMENTAL  AUTHORITY -- promptly,  and in
         any event  within 30 days of receipt  thereof,  copies of any notice to
         either  Obligor  or any  Subsidiary  from  any  Governmental  Authority
         relating to any order, ruling,  statute or other law or regulation that
         could reasonably be expected to have a Material Adverse Effect;

                  (g) ANNUAL BUSINESS PLAN AND  PROJECTIONS -- promptly,  and in
         any event  within 90 days of the  beginning  of each fiscal year of the
         Guarantor, copies of the Guarantor's annual business plan and financial
         projections  (for  each  fiscal  quarter),  including  profit  and loss
         statements,  cash-flow statements, balance sheets and projected capital
         expenditures  for the fiscal year then begun,  such  business  plan and
         financial projections not to be prepared in a manner and not to contain
         any statements inconsistent with GAAP;

                  (h) CALL OPTION  TRIGGERING  EVENT - promptly upon the earlier
         of either Obligor (i) receiving a Call Option  Triggering  Event Notice
         or (ii)  otherwise  becoming aware of the occurrence of any Call Option
         Triggering Event, written notice of such occurrence (which notice shall
         identify  the name of the  relevant  Subsidiary  and the amount of such
         Subsidiary's intercompany  Indebtedness,  and, if the Total Debt/EBIDTA
         Ratio at such time is equal to or  greater  than 3.25 to 1, the  EBITDA
         for the  applicable  fiscal  quarter  and  the  amount  of  outstanding
         intercompany Indebtedness of each Subsidiary); and

                  (i) REQUESTED INFORMATION -- with reasonable promptness,  such
         other  data  and  information  relating  to the  business,  operations,
         affairs, financial condition, assets or properties of either Obligor or
         any  Subsidiary  or relating to the ability of the  Obligors to perform
         their respective obligations under the Financing Documents as from time
         to time may be reasonably requested by any such holder of Notes.

7.2. OFFICER'S CERTIFICATE.

                  Each set of  financial  statements  delivered  to a holder  of
Notes  pursuant to Section  7.1(a) or Section 7.1(b) hereof shall be accompanied
by a certificate of a Senior Financial Officer of the Guarantor setting forth:

                  (a) COVENANT COMPLIANCE -- the information (including detailed
         calculations)  required in order to establish whether the Obligors were
         in compliance  with the  requirements  of Section 10.3 through  Section
         10.8 hereof,  inclusive,  during the quarterly or annual period covered
         by the statements then being furnished

                                       21

<PAGE>


         (including  with respect to each such Section,  where  applicable,  the
         calculations of the maximum or minimum amount, ratio or percentage,  as
         the case may be, permissible under the terms of such Sections,  and the
         calculation of the amount,  ratio or percentage then in existence,  and
         also  including  details  of any  adjustments  to EBITDA as a result of
         Normalizing Adjustments); and

                  (b) EVENT OF  DEFAULT -- a  statement  that such  officer  has
         reviewed the relevant  terms hereof and has made, or caused to be made,
         under  his  or her  supervision,  a  review  of  the  transactions  and
         conditions of the Guarantor and its Subsidiaries  from the beginning of
         the quarterly or annual  period  covered by the  statements  then being
         furnished to the date of the certificate and that such review shall not
         have  disclosed  the  existence  during such period of any condition or
         event that constitutes a Default or an Event of Default or, if any such
         condition or event existed or exists  (including,  without  limitation,
         any such  event or  condition  resulting  from the  failure  of  either
         Obligor  or any  Subsidiary  to  comply  with any  Environmental  Law),
         specifying  the nature and period of existence  thereof and what action
         the Obligors shall have taken or propose to take with respect thereto.

7.3. INSPECTION.

                  The Obligors shall permit the  representatives  of each holder
of Notes that is an Institutional Investor:

                  (a) NO  DEFAULT  -- if no  Default  or Event of  Default  then
         exists,  at the expense of such holder and upon reasonable prior notice
         to the  Guarantor,  to visit  the  principal  executive  office  of the
         Guarantor  and the  Company,  to  discuss  the  affairs,  finances  and
         accounts of the Guarantor and the Company and their  Subsidiaries  with
         the Guarantor's or the Company's officers, and (with the consent of the
         Guarantor or the Company, as the case may be, which consent will not be
         unreasonably withheld) its independent chartered accountants, and (with
         the consent of the Guarantor or the Company,  as the case may be, which
         consent will not be  unreasonably  withheld) to visit the other offices
         and  properties of the  Guarantor and the Company and each  Subsidiary,
         all at  such  reasonable  times  and  as  often  as  may be  reasonably
         requested in writing; and

                  (b) DEFAULT -- if a Default or Event of Default  then  exists,
         at the expense of the Obligors and upon reasonable  prior notice to the
         Guarantor, to visit and inspect any of the offices or properties of the
         Guarantor,  the  Company  or  any  Subsidiary,  to  examine  all  their
         respective books of account, records, reports and other papers, to make
         copies and extracts therefrom, and to discuss their respective affairs,
         finances and accounts with their  respective  officers and  independent
         chartered  accountants  (and by this  provision the Obligors  authorize
         said  accountants

                                       22

<PAGE>


         to discuss the affairs, finances and accounts of the Obligors and their
         Subsidiaries), all at such times and as often as may be requested.

8. PREPAYMENT OF THE NOTES.

8.1. REQUIRED PREPAYMENTS.

                  On June  29,  2005  and on  each  June  29  thereafter  to and
including June 29, 2010 the Company will prepay U.S.$14,286,000 principal amount
(or such lesser  principal  amount as shall then be outstanding) of the Notes at
par and without payment of the Make-Whole  Amount or any premium,  PROVIDED that
upon any  partial  prepayment  of the Notes  pursuant  to Section 8.2 or 8.3 the
principal  amount of each required  prepayment  of the Notes  becoming due under
this  Section 8.1 on and after the date of such  prepayment  shall be reduced in
the same  proportion as the aggregate  unpaid  principal  amount of the Notes is
reduced  as  a  result  of  such  prepayment.

8.2.  OPTIONAL  PREPAYMENTS  WITH MAKE-WHOLE AMOUNT.

                  The Company  may,  at its  option,  upon notice as provided in
Section  8.4,  prepay  at any time all,  or from  time to time any part of,  the
Notes,  in an amount not less than 5% of the aggregate  principal  amount of the
Notes  then  outstanding  in the case of a  partial  prepayment,  at 100% of the
principal amount so prepaid,  plus the applicable  Make-Whole  Amount determined
for the prepayment date with respect to such principal amount.

8.3.  PREPAYMENT IN CONNECTION WITH A PAYMENT UNDER SECTION 13.

                  (a) Subject to  Subsection  (b) below,  if, as a result of the
occurrence  of any Tax Event,  the Company or the Guarantor  (assuming  that the
Guarantor  is  required  to make a  payment)  on any date  shall have (i) made a
payment  under  Section 13 with respect to any Note or the  Guarantee in respect
thereof or become  obligated to make a payment  under Section 13 with respect to
any Note or the Guarantee in respect thereof on the next date on which a payment
of interest is scheduled to be made (such payment in either case being in excess
of the amount  that such  Obligor  would have been  required  to pay but for the
occurrence  of such Tax  Event)  (in either  case,  any such Note  being  herein
referred  to as an  "AFFECTED  NOTE") and (ii)  furnished  to each holder of any
Affected Note a notice from a Responsible  Officer of such Obligor setting forth
in  reasonable  detail  the nature of such Tax Event and an  explanation  of the
basis on which such Obligor is then so obligated to make payment  under  Section
13, the Company may,  upon notice  given as provided in Section 8.4,  prepay the
Affected  Notes in  whole  (and  not in  part)  at a price  equal to the  unpaid
principal  amount of such Notes,  together with interest  accrued thereon to the
date fixed for such prepayment, plus the applicable Make-Whole Amount determined
for the prepayment date with respect to such principal amount.

                                       23

<PAGE>


                  (b)  Notwithstanding  Subsection  (a) above,  no Affected Note
shall be prepaid  pursuant to this Section 8.3 if the holder  thereof,  at least
five Business Days prior to the  prepayment  date under this Section 8.3,  shall
have delivered a notice to the Company stating that such holder waives any right
to any future payment under Section 13 in respect of the specific Tax Event that
shall have given rise to the Company's  prepayment right under this Section 8.3;
PROVIDED that

                  (1) no such waiver (x) shall be deemed to  constitute a waiver
         of any right to receive a payment  in full under  Section 13 in respect
         of any other Tax Event that  shall  have  given  rise to the  Company's
         prepayment  right under this  Section 8.3 or (y)  preclude  the Company
         from  exercising  any such right of prepayment in respect of such other
         Tax Event; and

                  (2) if on any date the amount of any payment  that a holder of
         a Note would be entitled to receive under Section 13 shall increase (in
         proportion  to the total amount in respect of which the amount  payable
         under Section 13 is determined),

                           (x) the  occurrence  of any  such  increase  shall be
                  deemed to be a new Tax Event giving rise to a prepayment right
                  under this Section 8.3, and

                           (y)  such  holder  thereafter  shall be  entitled  to
                  receive the full amount of any future  payment  provided under
                  Section 13,  notwithstanding  any waiver previously  delivered
                  pursuant to this  Section  8.3 unless  such holder  shall have
                  delivered a notice under Section 8.3(b) in respect of any such
                  prepayment.

                  In  addition,  no  prepayment  of any Note shall be  permitted
pursuant to Section 8.3(a) if the underlying Tax payment under Section 13 arises
as a result of the  failure of the  Company  to make any  request  specified  in
Section 13(a)(ii) or any other act or omission by either Obligor.

8.4. NOTICES, ETC.

                  The Company will give each holder of Notes  written  notice of
each optional  prepayment under Section 8.2 and each holder of any Affected Note
written notice of each prepayment  under Section 8.3, in each case not less than
30 days and not more than 60 days prior to the date  fixed for such  prepayment.
Each such notice shall specify such date, the aggregate  principal amount of the
Notes or  Affected  Notes,  as the case may be, to be prepaid on such date,  the
principal amount of each Note or Affected Note, as the case may be, held by such
holder to be prepaid,  and the interest to be paid on the  prepayment  date with
respect to such  principal  amount  being  prepaid.  Each such  notice  shall be

                                       24

<PAGE>


accompanied by a certificate of a Senior  Financial  Officer as to the estimated
applicable Make-Whole Amount due in connection with such prepayment  (calculated
as if the date of such notice were the date of the  prepayment),  setting  forth
the details of such computation, and two Business Days prior to such prepayment,
the Company shall deliver to each holder of Notes or Affected Notes, as the case
may be, a certificate of a Senior Financial  Officer  specifying the calculation
of such Make-Whole Amount as of the specified  prepayment date.

8.5.  ALLOCATION OF PARTIAL PREPAYMENTS.

                  In the case of each partial  prepayment of the Notes  pursuant
to Section 8.1 or Section 8.2, the  principal  amount of the Notes to be prepaid
shall be allocated among all of the Notes at the time outstanding in proportion,
as nearly as practicable, to the respective unpaid principal amounts thereof not
theretofore called for prepayment.

8.6. MATURITY; SURRENDER, ETC.

                  In the  case of each  prepayment  of  Notes  pursuant  to this
Section  8, the  principal  amount of each Note to be prepaid  shall  mature and
become  due and  payable on the date fixed for such  prepayment,  together  with
interest  on such  principal  amount  accrued  to such  date and the  applicable
Make-Whole  Amount,  if any. From and after such date,  unless the Company shall
fail to pay such  principal  amount when so due and payable,  together  with the
interest and Make-Whole Amount, if any, as aforesaid, interest on such principal
amount  shall  cease  to  accrue.  Any Note  paid or  prepaid  in full  shall be
surrendered  to the Company and canceled and shall not be reissued,  and no Note
shall be issued in lieu of any prepaid principal amount of any Note.

8.7. PURCHASE OF NOTES.

                  Neither  Obligor  will  nor will  either  Obligor  permit  any
Affiliate  to  purchase,  redeem,  prepay  or  otherwise  acquire,  directly  or
indirectly,  any of the outstanding  Notes except upon the payment or prepayment
of the Notes in accordance  with the terms of this Agreement and the Notes.  The
Company  will  promptly  cancel  all Notes  acquired  by either  Obligor  or any
Affiliate  pursuant to any payment,  prepayment or purchase of Notes pursuant to
any provision of this  Agreement and no Notes may be issued in  substitution  or
exchange for any such Notes.

8.8. MAKE-WHOLE AMOUNT.

                  The term "MAKE-WHOLE  AMOUNT" means, with respect to any Note,
an amount equal to the excess,  if any, of the Discounted Value of the Remaining
Scheduled  Payments  with respect to the Called  Principal of such Note over the
amount of such Called  Principal,  PROVIDED that the Make-Whole Amount may in no
event be less than zero. For

                                       25

<PAGE>


the purposes of determining the Make-Whole  Amount, the following terms have the
following meanings:

                  "CALLED  PRINCIPAL"  means,  with  respect  to any  Note,  the
         principal of such Note that is to be prepaid pursuant to Section 8.2 or
         8.3 or has become or is  declared  to be  immediately  due and  payable
         pursuant to Section 12.1, as the context requires.

                  "DISCOUNTED VALUE" means, with respect to the Called Principal
         of any Note, the amount obtained by discounting all Remaining Scheduled
         Payments with respect to such Called  Principal  from their  respective
         scheduled due dates to the Settlement  Date with respect to such Called
         Principal,  in  accordance  with accepted  financial  practice and at a
         discount  factor  (applied on the same periodic  basis as that on which
         interest on the Notes is payable) equal to the Reinvestment  Yield with
         respect to such Called Principal.

                  "REINVESTMENT   YIELD"  means,  with  respect  to  the  Called
         Principal of any Note, the sum of (x)(i) if such Called Principal is to
         be  prepaid  pursuant  to  Section  8.3,  1.00% or (ii) if such  Called
         Principal is to be prepaid  pursuant to Section 8.2 or has become or is
         declared to be  immediately  due and payable  pursuant to Section 12.1,
         0.50%  plus  (y) the  yield  to  maturity  implied  by (i)  the  yields
         reported,  as of 10:00 A.M. (New York City time) on the second Business
         Day  preceding  the  Settlement   Date  with  respect  to  such  Called
         Principal,  on the  display  designated  as "Page 678" on the  Telerate
         Service of Bridge  Information  Services (or such other  display as may
         replace Page 678 on Telerate  Service of Bridge  Information  Services)
         for actively traded U.S. Treasury securities having a maturity equal to
         the  Remaining  Average  Life  of  such  Called  Principal  as of  such
         Settlement  Date,  or (ii) if such  yields are not  reported as of such
         time or the yields reported as of such time are not ascertainable,  the
         Treasury Constant  Maturity Series Yields reported,  for the latest day
         for which such yields  have been so reported as of the second  Business
         Day  preceding  the  Settlement   Date  with  respect  to  such  Called
         Principal,  in U.S. Federal Reserve  Statistical Release H.15 (519) (or
         any comparable successor publication) for actively traded U.S. Treasury
         securities  having a constant  maturity equal to the Remaining  Average
         Life of such Called  Principal as of such Settlement Date. Such implied
         yield will be determined, if necessary, by (a) converting U.S. Treasury
         bill quotations to  bond-equivalent  yields in accordance with accepted
         financial  practice  and (b)  interpolating  linearly  between  (1) the
         actively traded U.S. Treasury security with the duration closest to and
         greater than the  Remaining  Average  Life and (2) the actively  traded
         U.S.  Treasury  security with the duration closest to and less than the
         Remaining Average Life.

                  "REMAINING  AVERAGE  LIFE"  means,  with respect to any Called
         Principal,  the number of years (calculated to the nearest  one-twelfth
         year) obtained by dividing

                                       26

<PAGE>


         (i) such Called Principal into (ii) the sum of the products obtained by
         multiplying  (a) the principal  component of each  Remaining  Scheduled
         Payment  with  respect to such  Called  Principal  by (b) the number of
         years  (calculated  to the nearest  one-twelfth  year) that will elapse
         between the Settlement  Date with respect to such Called  Principal and
         the scheduled due date of such Remaining Scheduled Payment.

                  "REMAINING  SCHEDULED  PAYMENTS"  means,  with  respect to the
         Called Principal of any Note, all payments of such Called Principal and
         interest  thereon  that  would be due  after the  Settlement  Date with
         respect to such Called Principal if no payment of such Called Principal
         were  made  prior to its  scheduled  due  date,  PROVIDED  that if such
         Settlement Date is not a date on which interest  payments are due to be
         made  under  the  terms  of the  Notes,  then  the  amount  of the next
         succeeding  scheduled interest payment will be reduced by the amount of
         interest  accrued to such  Settlement  Date and  required to be paid on
         such Settlement Date pursuant to Section 8.2, 8.3 or 12.1.

                  "SETTLEMENT  DATE" means, with respect to the Called Principal
         of any Note,  the date on which such Called  Principal is to be prepaid
         pursuant  to  Section  8.2 or 8.3 or has  become or is  declared  to be
         immediately  due and payable  pursuant to Section  12.1, as the context
         requires.

9.       AFFIRMATIVE COVENANTS.

                  The Company and the Guarantor  jointly and severally  covenant
that so long as any of the Notes are outstanding:

9.1.     COMPLIANCE WITH LAW.

                  The Obligors will and will cause each of their Subsidiaries to
comply with all laws,  ordinances or governmental  rules or regulations to which
each of them is subject, including, without limitation,  Environmental Laws, and
will  obtain  and  maintain  in  effect  all  licenses,  certificates,  permits,
franchises and other governmental  authorizations  necessary to the ownership of
their respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that  non-compliance with such laws,
ordinances  or  governmental  rules or  regulations  or  failures  to  obtain or
maintain in effect such licenses,  certificates,  permits,  franchises and other
governmental  authorizations  could  not,  individually  or  in  the  aggregate,
reasonably be expected to have a Material Adverse Effect.

9.2. INSURANCE.

                                       27

<PAGE>


                  The Obligors will and will cause each of their Subsidiaries to
(a) maintain,  with  financially  sound and reputable  insurers,  insurance with
respect to their  respective  properties and businesses  against such casualties
and  contingencies,  of such types, on such terms and in such amounts (including
deductibles,   co-insurance  and   self-insurance,   if  adequate  reserves  are
maintained  with  respect  thereto) as is  customary  in the case of entities of
established  reputations engaged in the same or a similar business and similarly
situated and (b), for so long as the Lien of the Security  Documents is required
to be in effect,  ensure that the Collateral  Agent is an additional  named loss
payee under all policies of  insurance,  as the  Obligor's or such  Subsidiary's
interest may appear, and that such policies are not cancellable without at least
30 days' prior  written  notice  being given by the  insurers to the  Collateral
Agent.

9.3. MAINTENANCE OF PROPERTIES.

                  The Obligors will and will cause each of their Subsidiaries to
maintain  and  keep,  or cause  to be  maintained  and  kept,  their  respective
properties in good repair, working order and condition (other than ordinary wear
and tear),  so that the  business  carried  on in  connection  therewith  may be
properly  conducted at all times,  PROVIDED  that this Section shall not prevent
either  Obligor or any  Subsidiary  from  discontinuing  the  operation  and the
maintenance of any of its properties if such  discontinuance is desirable in the
conduct of its business and the Guarantor has concluded that such discontinuance
could not,  individually  or in the aggregate,  reasonably be expected to have a
Material Adverse Effect.

9.4. PAYMENT OF TAXES AND CLAIMS.

                  The Obligors will and will cause each of their Subsidiaries to
file all tax  returns  required to be filed in any  jurisdiction  and to pay and
discharge  all taxes shown to be due and  payable on such  returns and all other
taxes,  assessments,  governmental  charges, or levies imposed on them or any of
their  properties,  assets,  income or franchises,  to the extent such taxes and
assessments have become due and payable and before they have become  delinquent,
and all  claims for which sums have  become due and  payable  that have or might
become a Lien on  properties  or  assets of either  Obligor  or any  Subsidiary,
PROVIDED that neither of the Obligors nor any  Subsidiary  need pay any such tax
or assessment or claims if (i) the amount,  applicability or validity thereof is
contested by such Obligor or such Subsidiary on a timely basis in good faith and
in appropriate proceedings,  and such Obligor or such Subsidiary has established
adequate  reserves  therefor in  accordance  with U.S. GAAP on the books of such
Obligor or such Subsidiary or (ii) the nonpayment of all such taxes, assessments
and claims in the aggregate  could not reasonably be expected to have a Material
Adverse Effect.

9.5. CORPORATE EXISTENCE, ETC.

                                       28

<PAGE>


                  Subject to Sections  10.2 and 10.8,  the Obligors  will at all
times preserve and keep in full force and effect their  respective  corporate or
partnership  existences  (as  applicable),  and the  Obligors  will at all times
preserve  and keep in full force and effect the  corporate  existence of each of
their  Subsidiaries  and all rights and  franchises  of the  Obligors  and their
Subsidiaries  unless,  in  the  good  faith  judgment  of  the  Guarantor,   the
termination  of or  failure  to  preserve  and keep in full force and effect the
corporate  existence of any  Subsidiary  (other than the  Company),  or any such
right or franchise could not, individually or in the aggregate,  have a Material
Adverse Effect.

9.6. OWNERSHIP OF THE COMPANY.

                  The Guarantor shall at all times own,  directly or indirectly,
100% of the  partnership  interests  in the  Company  free and clear of any Lien
(other than Liens created under the Security  Documents or arising in connection
with the Credit Agreement).

9.7. RANKING.

                  Each Obligor will ensure that, at all times,  all  liabilities
of such Obligor under the Notes (in the case of the Company) and the  Guarantees
(in the case of the  Guarantor)  will rank in right of payment either PARI PASSU
or senior to all other  Indebtedness  of such  Obligor  except for  Indebtedness
which is  preferred  as a result  of being  secured  by  assets  other  than the
Collateral  (but then  only to the  extent of such  security).

9.8.  SUBSIDIARY GUARANTORS; UNDERTAKINGS TO SECURE.

                  The Obligors will ensure that each Person which after the date
hereof  becomes  (i) a  Wholly-Owned  Subsidiary,  is or  becomes  a  Subsidiary
Guarantor and grants and delivers the other applicable  Direct Security in favor
of the Secured Parties or (ii) a Non Wholly-Owned  Subsidiary,  is or becomes an
Undertaking  Subsidiary,  in each  case,  as soon as  possible  and in any event
within 10  Business  Days  following  the date on which  such  Person  becomes a
Wholly-Owned  Subsidiary or Non Wholly-Owned  Subsidiary (as  applicable).

9.9. FURTHER ASSURANCES; RELEASE OF COLLATERAL.

                  (a) Subject to Section  9.9(b),  the Obligors  shall take,  or
cause to be taken,  all action  required or desirable to maintain good and valid
title to the Collateral and shall maintain and preserve the Liens created by the
Security  Documents  and the  superiority  of the priority  thereof to all Liens
other than the Liens  arising in  connection  with the Credit  Agreement and any
other Permitted Liens.

                  (b) At any time on or after the  release by the Lenders of all
of the Security (each under and as defined in the Credit Agreement) and provided
that no Default or Event

                                       29

<PAGE>


or Default  shall have  occurred  and be  continuing,  the  Company may elect to
require the holders of Notes and the Collateral  Agent to release the Collateral
at such time existing in favor thereof.  Upon such election by the Company,  the
holders of Notes shall (and shall instruct the Collateral  Agent to) (x) release
such Collateral,  (y) surrender to the Company all documents by which perfection
of the  Liens  of  such  holders  and of the  Collateral  Agent  on and in  such
Collateral were perfected by possession and (z) register such PERSONAL  PROPERTY
SECURITY ACT (Ontario),  Uniform  Commercial  Code and other  personal  property
security  discharge  statements with respect to the Liens of such holders and of
the  Collateral  Agent on and in such  Collateral as the Company may  reasonably
request, in each case, at the expense of the Company.

                  (c)  Provided  that no Default or Event or Default  shall have
occurred and be  continuing,  the holders of Notes shall (and shall instruct the
Collateral  Agent to) (x) release  Collateral  in respect of assets  disposed of
pursuant to  Dispositions  permitted  pursuant to Section 10.2, (y) surrender to
the Company all  documents by which  perfection of the Liens of such holders and
of the Collateral  Agent on and in such  Collateral were perfected by possession
and  (z)  register  such  PERSONAL  PROPERTY  SECURITY  ACT  (Ontario),  Uniform
Commercial Code and other personal property security  discharge  statements with
respect to the Liens of such holders and of the Collateral  Agent on and in such
Collateral as the Company may reasonably  request,  in each case, at the expense
of the Company.


9.10. LINES OF BUSINESS.

                  The Obligors will not, and will not permit any  Subsidiary to,
engage to any  substantial  extent in any  business  other than the  business in
which  the  Obligors  and their  Subsidiaries  are  engaged  on the date of this
Agreement as described  in the  Memorandum  and  businesses  reasonably  related
thereto or in furtherance thereof.

10. NEGATIVE COVENANTS.

                  The Company and the Guarantor jointly and severally covenant
that so long as any of the Notes are outstanding:

10.1. TRANSACTIONS WITH AFFILIATES.

                  The Guarantor will not, and will not permit any Subsidiary to,
enter  into  directly  or  indirectly  any   transaction  or  group  of  related
transactions (including without limitation the purchase, lease, sale or exchange
of  properties  of any kind or the  rendering of any service) with any Affiliate
(other than the Guarantor or another Subsidiary),  except in the ordinary course
and  pursuant  to  the  reasonable  requirements  of  the  Guarantor's  or  such
Subsidiary's  business and upon fair and  reasonable  terms no less favorable to
the  Guarantor

                                       30

<PAGE>


or such  Subsidiary  than  would  be  obtainable  in a  comparable  arm's-length
transaction with a Person not an Affiliate.

10.2. MERGER, CONSOLIDATION, ETC.

                  Neither  Obligor  will,  and neither  Obligor  will permit any
Subsidiary Guarantor to, consolidate with or merge with any other corporation or
convey,  transfer  or  lease  substantially  all  of  its  assets  in  a  single
transaction or series of transactions to any Person unless:

                  (a) in the case of either  Obligor,  the  successor  formed by
         such  consolidation  or the  survivor of such merger or the Person that
         acquires  by  conveyance,  transfer or lease  substantially  all of the
         assets of the Guarantor or the Company (the "OBLIGOR SUCCESSOR"), shall
         be a  solvent  corporation  organized  and  existing  under the laws of
         Canada or any  Province  thereof,  the United  States of America or any
         State  thereof  (including  the  District  of  Columbia),  and,  if the
         Guarantor  or the  Company,  as the  case  may be,  is not the  Obligor
         Successor,  (i) the Obligor Successor shall have executed and delivered
         to each  holder  of any Notes its  assumption  of the due and  punctual
         performance  and  observance of each covenant and condition of (x) this
         Agreement,  the Notes and the other  Financing  Documents  to which the
         Company is a party,  in the case of the Company and (y) this Agreement,
         the Guarantees and the other Financing Documents to which the Guarantor
         is a party,  in the case of the Guarantor and (ii) the Guarantor or the
         Company,  as the case may be, shall have caused to be delivered to each
         holder of any Notes an opinion  of  nationally  recognized  independent
         counsel in the appropriate  jurisdiction,  or other independent counsel
         reasonably satisfactory to the Required Holders, to the effect that all
         agreements or instruments  effecting such assumption are enforceable in
         accordance with their terms and comply with the terms hereof; and

                  (b) in the case of any  Subsidiary  Guarantor,  the  successor
         formed by such  consolidation  or the  survivor  of such  merger or the
         Person that acquires by conveyance, transfer or lease substantially all
         of the assets of such Subsidiary Guarantor (the "GUARANTOR SUCCESSOR"),
         shall be (1)  either  Obligor,  such  Subsidiary  Guarantor  or another
         Subsidiary Guarantor,  (2) a solvent corporation organized and existing
         under the laws of Canada or any Province thereof,  the United States of
         America or any State  thereof  (including  the District of Columbia) or
         the jurisdiction of organization of such Subsidiary Guarantor,  and (i)
         such  Guarantor  Successor  shall have  executed and  delivered to each
         holder of any Notes its assumption of the due and punctual  performance
         and  observance  of  each  covenant  and  condition  of the  Subsidiary
         Guarantee  and (ii) the  Obligors  shall have caused to be delivered to
         each  holder  of  any  Notes  an  opinion  of   nationally

                                       31

<PAGE>


         recognized  independent  counsel in the  appropriate  jurisdiction,  or
         other  independent  counsel  reasonably  satisfactory  to the  Required
         Holders,  to the effect that all  agreements or  instruments  effecting
         such  assumption  are  enforceable  in accordance  with their terms and
         comply  with the terms  hereof  or (3) any other  Person so long as the
         transfer of all of the assets of such  Subsidiary  Guarantor would have
         otherwise  been  permitted  by  Sections  10.8(ii)  and  (iii) and such
         transaction  is treated as a  Disposition  of all of the assets of such
         Subsidiary Guarantor for purposes of Sections 10.8(ii) and (iii); and

                  (c) in the case of any such transaction, (i) immediately after
         giving effect to such transaction, no Default or Event of Default shall
         have  occurred  and be  continuing  and (ii) the  Obligors  shall  have
         demonstrated  to the reasonable  satisfaction  of the Required  Holders
         that all actions  necessary  to preserve  and  maintain the Lien of the
         Security  Documents and the Lien arising in connection  with the Credit
         Agreement in each case on the Collateral have been taken.

No such  conveyance,  transfer  or lease of  substantially  all of the assets of
either  Obligor shall have the effect of releasing such Obligor or any successor
corporation that shall  theretofore have become such in the manner prescribed in
this Section 10.2 from its liability under (x) this Agreement,  the Notes or the
other  Financing  Documents to which the Company is a party,  in the case of the
Company or (y) this Agreement,  the Guarantees or the other Financing  Documents
to which the Guarantor is a party, in the case of the Guarantor.

10.3. LIENS.

                  The Guarantor will not, and will not permit any Subsidiary to,
create,  assume,  incur or suffer to exist any Lien upon or with  respect to any
property or assets, whether now owned or hereafter acquired, of the Guarantor or
any Subsidiary, excluding from the operation of this Section the following Liens
(each a "PERMITTED LIEN" and together, the "PERMITTED LIENS"):

                  (a)  Liens  securing  Indebtedness  of  the  Guarantor  or any
         Subsidiary outstanding on the date hereof as specified in Schedule 5.15
         (to the  extent  such  Lien is not  otherwise  permitted  by any  other
         subsections of this Section 10.3);

                  (b) Liens incurred and pledges and deposits made in connection
         with workers' compensation,  unemployment  insurance,  old-age pensions
         and similar legislation (other than ERISA);

                  (c) Liens securing the performance of bids,  tenders,  leases,
         contracts  (other  than  for the  repayment  of  borrowed  money),  and
         statutory obligations of like nature, incurred as an incident to and in
         the ordinary course of business;

                                       32

<PAGE>


                  (d)  statutory  Liens of landlords,  undetermined  or inchoate
         Liens  and   other   Liens   imposed   by  law,   such  as   carriers',
         warehousemens',   mechanics',  construction  and  materialmen's  Liens,
         incurred in good faith in the ordinary course of business PROVIDED that
         the  aggregate  amount of any  carriers',  warehousemens',  mechanics',
         construction  or  materialmens'  Liens  shall  at  no  time  exceed  an
         aggregate amount of U.S.$1,000,000  (or the equivalent  thereof,  as of
         any  date of  determination,  in any  other  currency)  and the  amount
         thereof shall be paid when such amount shall become due;

                  (e) Liens  securing  the  payment  of taxes,  assessments  and
         governmental charges or levies, either (i) not delinquent or (ii) being
         contested in good faith by appropriate proceedings;

                  (f) permits,  right-of-way,  zoning  restrictions,  easements,
         licenses,  or  reservations or restrictions on the use of real property
         or minor irregularities or minor title defects incidental thereto which
         do not in the  aggregate  materially  detract  from  the  value  of the
         property  or  assets of the  Guarantor  or any of its  Subsidiaries  or
         materially impair the operation of the business of the Guarantor or any
         of its Subsidiaries;

                  (g) Liens  arising out of the leasing of personal  property by
         the  Guarantor or any of its  Subsidiaries  in the  ordinary  course of
         business up to an amount not exceeding in the aggregate U.S.$15,000,000
         (or the equivalent  thereof,  as of any date of  determination,  in any
         other currency) for the Guarantor and its Subsidiaries;

                  (h) Liens,  subordinate in priority to the Liens created under
         the Security Documents, incurred in the ordinary course of business for
         the purposes of securing the payment of any purchase  price  balance or
         the  refinancing of any purchase price balances not greater than in the
         aggregate U.S.$25,000,000 (or the equivalent thereof, as of any date of
         determination, in any other currency) of any assets (other than current
         assets) acquired by the Guarantor or any of its  Subsidiaries  PROVIDED
         that any such Liens are restricted to the assets so acquired;

                  (i)  reservations,   conditions,  limitations  and  exceptions
         contained in or implied by statute in the original disposition from the
         Crown  and  grants  made by the  Crown  of  interests  so  reserved  or
         accepted;

                  (j) security  given in the ordinary  course of business by the
         Guarantor  or  any of  its  Subsidiaries  to a  public  utility  or any
         municipality  or  governmental  or public  authority in connection with
         operations of the Guarantor or any of its  Subsidiaries  (other than in
         connection  with  borrowed  money)  securing not more

                                       33

<PAGE>


         than an aggregate  amount equal to  U.S.$1,000,000  (or the  equivalent
         thereof, as of any date of determination, in any other currency);

                  (k) Liens granted  pursuant to the Security  Documents and any
         additional or further  security  granted to the Collateral Agent by the
         Obligors or any  Subsidiary  Guarantor or any future  Subsidiary of the
         Guarantor,  and Liens arising in connection  with the Credit  Agreement
         (PROVIDED  that and for so long as the  Intercreditor  Agreement  is in
         full force and effect);

                  (l)      Liens in respect of Permitted Loans; or

                  (m) Liens in addition to those  described in  Subsections  (a)
         through  (l)  above  securing  Indebtedness  of  the  Guarantor  or any
         Subsidiary,  PROVIDED that, upon the incurrence thereof and immediately
         after giving effect thereto,  the sum (without  duplication) of (i) the
         aggregate  unpaid principal amount of Indebtedness of the Guarantor and
         any  Subsidiary  secured  by  Liens  (other  than  Liens  permitted  by
         Subsections  (a)  through  (l) of this  Section  10.3)  PLUS  (ii)  the
         aggregate  unpaid  principal amount of Indebtedness of all Subsidiaries
         (other than  Indebtedness  permitted  by Section  10.7(a)  through (d))
         shall not exceed 10% of Consolidated Total Assets.

10.4. CONSOLIDATED NET WORTH.

                  The  Guarantor  will not  permit  as of the end of any  fiscal
quarter of the Guarantor  Consolidated  Net Worth to be less than the sum of (i)
U.S.$70,000,000  PLUS (ii) an amount equal to the sum of 50% of Consolidated Net
Earnings for each completed  fiscal year of the Guarantor  ending after the date
of Closing (but only if the  Consolidated Net Earnings for such fiscal year is a
positive  number)  PLUS (iii) one  hundred  percent  (100%) of the  consolidated
cumulative  proceeds  from  the  first  occurring  (x)  equity  offering  of the
Guarantor or any Subsidiary including,  without limitation,  securities offering
and (y) equity  injection in any form made into the Guarantor or any  Subsidiary
in either case the aggregate proceeds of which exceed U.S.$10,000,000.

10.5. LEVERAGE RATIO.

                  The   Guarantor   will  not  at  any  time  permit  the  Total
Debt/EBITDA Ratio to exceed 3.5 to 1.0.

10.6. FIXED CHARGE COVERAGE RATIO.

                  The Guarantor will not, as at the end of any fiscal quarter of
the  Guarantor,  permit the Fixed Charge  Coverage  Ratio for the period of four
fiscal quarters of the

                                       34

<PAGE>


Guarantor  ending on the last day of such fiscal quarter, to be less than 1.25
to 1.0.

10.7. SUBSIDIARY INDEBTEDNESS.

                  The Guarantor will not permit any  Subsidiary  (other than the
Company) to create,  assume,  incur,  guarantee  or otherwise  become  liable in
respect of any Indebtedness, excluding from the operation of this Section:

                  (a) Indebtedness  outstanding on the date hereof and specified
         in  Schedule  5.15 and any  extension,  renewal or  refunding  thereof,
         PROVIDED  that the principal  amount  thereof  outstanding  immediately
         before  giving  effect to such  extension,  renewal or refunding is not
         increased;

                  (b)  Indebtedness  of a Person  outstanding  at the time  such
         Person becomes a Subsidiary (and not incurred in anticipation  thereof)
         and any  extension,  renewal or refunding  thereof,  PROVIDED  that the
         principal amount thereof  outstanding  immediately before giving effect
         to such extension, renewal or refunding is not increased;

                  (c)      Indebtedness of any Subsidiary Guarantor incurred
         after the date of Closing;

                  (d)      Indebtedness owing to the Guarantor, the Company or
         any Subsidiary Guarantor; and

                  (e)  Indebtedness in addition to that described in Subsections
         (a) through (d) above,  PROVIDED that, upon the incurrence  thereof and
         immediately after giving effect thereto, the sum (without  duplication)
         of (i) the aggregate  unpaid  principal  amount of  Indebtedness of the
         Guarantor  and all  Subsidiaries  secured  by Liens  (other  than Liens
         permitted  by  Section  10.3(a)  through  (l)) PLUS (ii) the  aggregate
         unpaid principal amount of Indebtedness of all Subsidiaries (other than
         Indebtedness  permitted by Subsections  (a) through (d) of this Section
         10.7) shall not exceed 10% of Consolidated Total Assets.

10.8. DISPOSITION OF ASSETS.

                  The Guarantor will not, and will not permit any Subsidiary to,
directly  or  indirectly,   sell,  lease,   transfer  or  otherwise  dispose  of
(collectively  a  "DISPOSITION")  any of its properties or assets unless,  after
giving effect to such proposed  Disposition,  (i) no Default or Event of Default
shall have  occurred and be  continuing,  (ii) the  aggregate  book value of all
assets that were the subject of a  Disposition  during the period  commencing on
the first day of the then current fiscal year of the Guarantor and ending on the
date of such

                                       35

<PAGE>


proposed   Disposition  (the   "DISPOSITION   DATE")  does  not  exceed  10%  of
Consolidated  Total  Assets as at the end of the  fiscal  year of the  Guarantor
ended  immediately  prior to the  Disposition  Date and (iii) the aggregate book
value of all assets  that were the  subject of a  Disposition  during the period
commencing  on the date of the Closing and ending on the  Disposition  Date does
not exceed 25% of  Consolidated  Total Assets as of the end of such  immediately
preceding  fiscal year.  Any  Disposition  of shares of stock of any  Subsidiary
shall, for purposes of this Section,  be valued at an amount that bears the same
proportion  to the total assets of such  Subsidiary as the number of such shares
bears to the total number of shares of stock of such Subsidiary. Notwithstanding
the foregoing,  the following Dispositions shall not be taken into account under
this Section 10.8:

                  (a)      any Disposition pursuant to a transaction consummated
         in accordance with Section 10.2;

                  (b)  any  Disposition  of  inventory,   equipment,   fixtures,
         supplies or materials  made in the ordinary  course of business at fair
         value;

                  (c)  any   Disposition  by  a  Subsidiary   Guarantor  to  the
         Guarantor, the Company or another Subsidiary Guarantor, or by any other
         Subsidiary to the Guarantor, the Company or another Subsidiary; and

                  (d) any  Disposition  by the Guarantor or a Subsidiary the net
         proceeds  of  which  are  applied   within  365  days  of  the  related
         Disposition   Date  to  the   acquisition  by  the  Guarantor  or  such
         Subsidiary, as the case may be, of assets of a similar nature and of at
         least  equivalent  value to the  assets  which are the  subject of such
         Disposition.

10.9. CALL OPTIONS.

                  The  Guarantor  will not make,  or permit  the  making of, any
change  or  modification  to the call  option  provisions  in the  Shareholders'
Agreements without the prior written consent of the Required Holders.

11. EVENTS OF DEFAULT.

                  An  "EVENT OF  DEFAULT"  shall  exist if any of the  following
conditions or events shall occur and be continuing:

                  (a) default  shall be made in the payment of any  principal or
         Make-Whole  Amount,  if any, on any Note when the same  becomes due and
         payable,

                                       36

<PAGE>


         whether at maturity or at a date fixed for prepayment or by declaration
         or otherwise; or

                  (b) default  shall be made in the  payment of any  interest on
         any Note,  any amounts due  pursuant to Section 13 or any other  amount
         due under any other Financing Document for more than five Business Days
         after the same becomes due and payable; or

                  (c) default shall be made by either Obligor in the performance
         of or  compliance  with  (i) any  term  contained  in  Section  10.2 or
         Sections  10.4 to 10.8,  inclusive  or (ii) any  other  term  contained
         herein or in any other Financing Document (other than those referred to
         in paragraphs  (a) and (b) of this Section 11) and (in the case of this
         clause  (ii) only and to the  extent  that such  default  is capable of
         being remedied and during the 10 Business Day period  referred to below
         such Obligor is  proceeding  actively and  diligently  in good faith to
         remedy such default to the  satisfaction of the Required  Holders) such
         default is not  remedied  within 10 Business  Days after the earlier of
         (x) a Responsible  Officer  obtaining  actual knowledge of such default
         and (y) an Obligor  receiving  written  notice of such default from any
         holder of a Note (any such written notice to be identified as a "notice
         of default"  and to refer  specifically  to this  paragraph  (c)(ii) of
         Section 11); or

                  (d) any  representation  or warranty  made in writing by or on
         behalf of either Obligor or any Subsidiary  Guarantor or by any officer
         of the Guarantor or the General Partner or any Subsidiary  Guarantor in
         this  Agreement,  any  Subsidiary  Guarantee  or  any  other  Financing
         Document in any writing  furnished in connection with the  transactions
         contemplated  hereby  proves to have  been  false or  incorrect  in any
         material respect on the date as of which made; or

                  (e) (i) any  Event of  Default  under  and as  defined  in the
         Credit Agreement shall have occurred and be continuing,  or (ii) either
         Obligor or any  Subsidiary  is in default (as principal or as guarantor
         or other  surety)  in the  payment  of any  principal  of or premium or
         make-whole  amount or interest on any Indebtedness  that is outstanding
         in an aggregate  principal  amount of at least  U.S.$5,000,000  (or the
         equivalent  thereof,  as of any  date of  determination,  in any  other
         currency) beyond any period of grace provided with respect thereto,  or
         (iii) either Obligor or any Subsidiary is in default in the performance
         of or compliance  with any term of any evidence of any  Indebtedness in
         an aggregate  outstanding  principal amount of at least  U.S.$5,000,000
         (or the equivalent  thereof,  as of any date of  determination,  in any
         other  currency)  or of any  mortgage,  indenture  or  other  agreement
         relating thereto or any other condition exists, and as a consequence of
         such default or condition  such  Indebtedness  has become,  or has been
         declared,  due and  payable  before its stated  maturity  or before its
         regularly  scheduled dates of payment,  or (iv) as a

                                       37

<PAGE>


         consequence of the occurrence or continuation of any event or condition
         (other  than  the  passage  of  time  or the  right  of the  holder  of
         Indebtedness  to convert  such  Indebtedness  into  equity  interests),
         either Obligor or any  Subsidiary  has become  obligated to purchase or
         repay Indebtedness  before its regular maturity or before its regularly
         scheduled dates of payment in an aggregate outstanding principal amount
         of at least  U.S.$5,000,000 (or the equivalent  thereof, as of any date
         of determination, in any other currency); or

                  (f) either Obligor,  any Subsidiary or the General Partner (i)
         is generally not paying, or admits in writing its inability to pay, its
         debts as they  become  due,  (ii)  files,  or  consents  by  answer  or
         otherwise  to the  filing  against  it of, a  petition  for  relief  or
         reorganization or arrangement or any other petition in bankruptcy,  for
         liquidation  or  to  take  advantage  of  any  bankruptcy,  insolvency,
         reorganization,  moratorium or other  similar law of any  jurisdiction,
         (iii)  makes an  assignment  for the  benefit  of its  creditors,  (iv)
         consents to the appointment of a custodian,  receiver, trustee or other
         officer with  similar  powers with respect to it or with respect to any
         substantial part of its property, (v) is adjudicated as insolvent or to
         be liquidated, or (vi) takes corporate action for the purpose of any of
         the foregoing; or

                  (g)  a  court   or   governmental   authority   of   competent
         jurisdiction  enters an order  appointing,  without  consent  by either
         Obligor, any Subsidiary or the General Partner, a custodian,  receiver,
         trustee or other officer with similar powers with respect to it or with
         respect to any  substantial  part of its property,  or  constituting an
         order for relief or approving a petition  for relief or  reorganization
         or any other  petition  in  bankruptcy  or for  liquidation  or to take
         advantage of any bankruptcy or insolvency law of any  jurisdiction,  or
         ordering the dissolution,  winding-up or liquidation of either Obligor,
         any  Subsidiary or the General  Partner,  or any such petition shall be
         filed against either Obligor, any Subsidiary or the General Partner and
         such petition shall not be dismissed within 60 days; or

                  (h) an  application  or an  order  is  made,  proceedings  are
         commenced,  or an  application  to a court or other steps are taken for
         the winding up,  liquidation,  dissolution or  administration of either
         Obligor  or  any  Subsidiary,  or a  receiver,  receiver  and  manager,
         administrative  receiver or similar  officer is appointed to all or any
         of the assets and undertakings of either Obligor or any Subsidiary, and
         such appointment continues undischarged for 30 days; or

                  (i) a final  judgment  or  judgments  for the payment of money
         aggregating in excess of U.S.$5,000,000 (or the equivalent  thereof, as
         of any date of  determination,  in any  other  currency)  are  rendered
         against one or more of the  Obligors and their  Subsidiaries  and which
         judgments  are  not,  within  60  days  after

                                       38

<PAGE>


         entry thereof, bonded,  discharged or stayed pending appeal, or are not
         discharged within 60 days after the expiration of such stay; or

                  (j) if (i) any Plan shall fail to satisfy the minimum  funding
         standards  of ERISA or the Code for any plan year or part  thereof or a
         waiver of such  standards or extension  of any  amortization  period is
         sought or  granted  under  section  412 of the  Code,  (ii) a notice of
         intent to terminate any Plan shall have been or is reasonably  expected
         to be filed with the PBGC or the PBGC shall have instituted proceedings
         under  ERISA  section  4042  to  terminate  or  appoint  a  trustee  to
         administer  any Plan or the PBGC shall have notified  either Obligor or
         any  ERISA  Affiliate  that a Plan  may  become a  subject  of any such
         proceedings,   (iii)  the   aggregate   "amount  of  unfunded   benefit
         liabilities" (within the meaning of section 4001(a)(18) of ERISA) under
         all Plans,  determined  in  accordance  with  Title IV of ERISA,  shall
         exceed U.S.$5,000,000, (iv) either Obligor or any ERISA Affiliate shall
         have incurred or is reasonably expected to incur any liability pursuant
         to Title I or IV of ERISA or the  penalty or excise tax  provisions  of
         the Code relating to employee  benefit plans, (v) either Obligor or any
         ERISA Affiliate  withdraws from any Multiemployer  Plan, or (vi) either
         Obligor or any Subsidiary  establishes  or amends any employee  welfare
         benefit plan that provides post-employment welfare benefits in a manner
         that would  increase the liability of either  Obligor or any Subsidiary
         thereunder;  and any such  event or events  described  in  clauses  (i)
         through (vi) above, either individually or together with any other such
         event or  events,  could  reasonably  be  expected  to have a  Material
         Adverse Effect; or

                  (k) any Subsidiary  Guarantee  shall cease to be in full force
         and effect or any  Subsidiary  Guarantor or any Person acting on behalf
         of any Subsidiary  Guarantor  shall contest in any manner the validity,
         binding nature or enforceability of any Subsidiary Guarantee; or

                  (l) any  Guarantee  shall cease to be in full force and effect
         or the Guarantor or any Person acting on behalf of the Guarantor  shall
         contest in any manner the validity, binding nature or enforceability of
         any Guarantee; or

                  (m) either  Obligor  shall have  failed  within 30 days of the
         giving of a Call  Option  Triggering  Event  Notice to have  caused the
         Subsidiary to which such Call Option Triggering Event Notice relates to
         become a Subsidiary Guarantor.

As used in  Section  11(j),  the terms  "EMPLOYEE  BENEFIT  PLAN" and  "EMPLOYEE
WELFARE BENEFIT PLAN" shall have the respective  meanings assigned to such terms
in Section 3 of ERISA.

12.      REMEDIES ON DEFAULT, ETC.

                                       39

<PAGE>


12.1. ACCELERATION.

                  (a)  If an  Event  of  Default  with  respect  to  an  Obligor
described  in  paragraph  (f),  (g) or (h) of Section 11 (other than an Event of
Default  described in clause (i) of paragraph (f) or described in clause (vi) of
paragraph (f) by virtue of the fact that such clause  encompasses  clause (i) of
paragraph (f)) has occurred,  all the Notes then outstanding shall automatically
become immediately due and payable.

                  (b)  If  any  other  Event  of  Default  has  occurred  and is
continuing,  the Required Holders may at any time at their option,  by notice or
notices to the Company, declare all the Notes then outstanding to be immediately
due and payable.

                  (c) If any Event of Default  described in paragraph (a) or (b)
of Section 11 has occurred and is continuing,  any holder or holders of Notes at
the time  outstanding  affected by such Event of Default may at any time, at its
or their option, by notice or notices to the Company, declare all the Notes held
by it or them to be immediately due and payable.

                  Upon any Notes  becoming  due and payable  under this  Section
12.1, whether automatically or by declaration,  such Notes will forthwith mature
and the entire unpaid principal  amount of such Notes,  plus (x) all accrued and
unpaid interest thereon and (y) the applicable  Make-Whole  Amount determined in
respect of such  principal  amount (to the full extent  permitted by  applicable
law),  shall all be immediately due and payable,  in each and every case without
presentment,  demand, protest or further notice, all of which are hereby waived.
The Obligors  acknowledge,  and the parties hereto agree,  that each holder of a
Note has the right to maintain its  investment in the Notes free from  repayment
by the  Obligors  (except  as  herein  specifically  provided  for) and that the
provision  for payment of a  Make-Whole  Amount by the Company in the event that
the Notes are prepaid or are accelerated as a result of an Event of Default,  is
intended to provide  compensation  for the  deprivation of such right under such
circumstances.

12.2. OTHER REMEDIES.

                  If any  Default  or  Event  of  Default  has  occurred  and is
continuing,  and  irrespective  of whether  any Notes  have  become or have been
declared  immediately due and payable under Section 12.1, the holder of any Note
at the time  outstanding  may  proceed to protect and enforce the rights of such
holder  by an action at law,  suit in  equity or other  appropriate  proceeding,
whether for the specific performance of any agreement contained herein or in any
Note  or in  any  other  Financing  Document,  or for an  injunction  against  a
violation  of any of the terms  hereof or thereof,  or in aid of the exercise of
any power granted hereby or thereby or by law or otherwise.

12.3. RESCISSION.

                                       40

<PAGE>


                  At any time prior to the date which is 90 days after any Notes
have been  declared due and payable  pursuant to paragraph (b) or (c) of Section
12.1, the Required  Holders,  by written notice to the Company,  may rescind and
annul any such  declaration  and its  consequences if (a) the Obligors have paid
all overdue  interest on the Notes, all principal of and Make-Whole  Amount,  if
any, on any Notes that are due and  payable and are unpaid  other than by reason
of such  declaration,  and all interest on such overdue principal and Make-Whole
Amount,  if any,  and (to the extent  permitted by  applicable  law) any overdue
interest in respect of the Notes, at the Default Rate, (b) all Events of Default
and Defaults,  other than  non-payment of amounts that have become due solely by
reason of such  declaration,  have been cured or have been  waived  pursuant  to
Section 19, and (c) no  judgment  or decree has been  entered for the payment of
any monies due pursuant  hereto or to the Notes.  No  rescission  and  annulment
under this Section 12.3 will extend to or affect any subsequent Event of Default
or Default or impair any right consequent thereon.

12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC.

                  No course of dealing and no delay on the part of any holder of
any Note in  exercising  any right,  power or remedy  shall  operate as a waiver
thereof or otherwise  prejudice  such holder's  rights,  powers or remedies.  No
right, power or remedy conferred on any holder of a Note by this Agreement,  any
Note or any other  Financing  Document  shall be  exclusive  of any other right,
power or remedy  referred to herein or therein or now or hereafter  available at
law, in equity, by statute or otherwise. Without limiting the obligations of the
Obligors  under  Section 17, the Obligors will pay to the holder of each Note on
demand  such  further  amount  as shall be  sufficient  to cover  all  costs and
expenses of such holder  incurred in any  enforcement  or collection  under this
Section 12, including, without limitation,  reasonable attorneys' fees, expenses
and disbursements.

13. TAX INDEMNIFICATION.

                  (a) Any and all payments  under this  Agreement,  the Notes or
the  Guarantees to or for the account of any holder of a Note shall be made free
and clear of, and without  deduction  or  withholding  for or on account of, any
Tax,  except to the extent such  deduction or withholding is required by law. If
any Tax is required by law to be deducted or withheld  from any such payments by
the Guarantor or the Company,  the Guarantor or the Company, as the case may be,
will  make  such  deductions  or  withholding  and  pay to the  relevant  taxing
authority the full amount deducted or withheld before  penalties  attach thereto
or  interest  accrues  thereon.  In the  event of the  imposition  by or for the
account of any Applicable  Taxing Authority or of any Governmental  Authority of
any  jurisdiction  in which  either  Obligor  resides  for tax  purposes  or any
jurisdiction  from or through  which  either  Obligor  is making any  payment in
respect of any Note or any Guarantee,  other than any Governmental  Authority of
or in the  United  States of  America or any  political  subdivision  thereof or
therein,  of any Tax upon or with respect to any

                                       41

<PAGE>


payments  in respect of any Note or any  Guarantee,  whether by  withholding  or
otherwise,  the Obligor  making such payment hereby agrees to pay forthwith from
time to time in connection with each payment on the Notes or the Guarantees,  as
the case may be, to each  holder of a Note such  amounts as shall be required so
that  every  payment  received  by such  holder in  respect of the Notes and the
Guarantees  and every payment  received by such holder under this Agreement will
not,  after such  withholding or deduction or other payment for or on account of
such Tax and any interest or penalties relating thereto, be less than the amount
due and  payable to such  holder in respect of such Note or  Guarantee  or under
this  Agreement  before the  assessment  of such Tax;  PROVIDED,  however,  that
neither  Obligor shall be obliged to pay such amounts to any holder of a Note in
respect of Taxes to the extent such Taxes  exceed the Taxes that would have been
payable:

                           (i) had such  holder  not been a  resident  of Canada
                  within the meaning of the INCOME TAX ACT  (Canada) or not used
                  or held such Note in the course of  carrying  on a business in
                  Canada within the meaning of the INCOME TAX ACT (Canada); or

                           (ii)  had such  holder  not had any  connection  with
                  Canada or any territory or political subdivision thereof other
                  than  the  mere  holding  of a  Note  with  the  benefit  of a
                  Guarantee and the Subsidiary  Guarantee (or the receipt of any
                  payments in respect thereof) or activities  incidental thereto
                  (including enforcement thereof); or

                           (iii) had such holder not dealt with the Company on a
                  non-arm's  length basis  (within the meaning of the INCOME TAX
                  ACT (Canada)) in connection with any such payment; or

                           (iv) but for the  delay  or  failure  by such  holder
                  (following a written request by an Obligor) in the filing with
                  an appropriate  Governmental  Authority or otherwise of forms,
                  certificates,  documents,  applications  or  other  reasonably
                  required evidence (collectively "FORMS"), that are required to
                  be filed by such holder to avoid or reduce such Taxes and that
                  in the case of any of the  foregoing  would not  result in any
                  confidential  or  proprietary  income tax  return  information
                  being revealed,  either directly or indirectly,  to any Person
                  and such delay or failure could have been lawfully  avoided by
                  such holder, PROVIDED that such holder shall be deemed to have
                  satisfied the  requirements  of this clause (iv) upon the good
                  faith  completion  and  submission  of  such  Forms  as may be
                  specified in a written  request of an Obligor no later than 45
                  days after  receipt  by such  holder of such  written  request
                  (PROVIDED,  that if such Forms are Forms required  pursuant to
                  the laws of any  jurisdiction  other than the United States of
                  America or any  political  subdivision  thereof,  such written
                  request shall be

                                       42

<PAGE>

                  accompanied  by such  Forms  in  English  or  with an  English
                  translation thereof).

                  (b)  Within 60 days  after the date of any  payment  by either
Obligor of any Tax in respect of any payment under the Notes,  the Guarantees or
this  Section  13,  such  Obligor  shall  furnish  to each  holder of a Note the
original  tax  receipt  for the  payment  of such Tax (or if such  original  tax
receipt is not  available,  a duly  certified copy of the original tax receipt),
together with such other  documentary  evidence with respect to such payments as
may be reasonably requested from time to time by any holder of a Note.

                  (c)  The obligations of the Obligors under this Section 13
shall survive the transfer or payment of any Note.

                  (d) If an  Obligor  has made a payment to or on account of any
holder of a Note pursuant to Subsection (a) above and such holder is entitled to
a refund of the Tax to which such payment is attributable  from the Governmental
Authority  to which  the  payment  of the Tax was made  and such  refund  can be
obtained by filing one or more Forms,  then (i) such  holder  shall,  as soon as
practicable  after receiving a written  request  therefor from an Obligor (which
request  shall specify in  reasonable  detail the Forms to be filed),  file such
Forms and (ii) upon  receipt  of such  refund,  if any,  promptly  pay over such
refund to such Obligor.

14. GUARANTEE, ETC.

14.1. GUARANTEE.

                  The Guarantor hereby  guarantees to each holder of any Note or
Notes at any time outstanding and to the Collateral Agent (a) the prompt payment
in full, in Dollars, when due (whether at stated maturity,  by acceleration,  by
mandatory  or  optional  prepayment  or  otherwise)  of  the  principal  of  and
Make-Whole  Amount  (if any)  and  interest  on the  Notes  (including,  without
limitation,  interest on any overdue  principal,  Make-Whole  Amount and, to the
extent  permitted by applicable  law, on any overdue  interest and on payment of
additional  amounts  described in Section 13) and all other amounts from time to
time owing by the Company under this  Agreement and under the Notes  (including,
without limitation,  costs,  expenses and taxes), and (b) the prompt performance
and observance by the Company of all covenants, agreements and conditions on its
part to be performed and observed hereunder, in each case strictly in accordance
with the terms  thereof  (such  payments  and  other  obligations  being  herein
collectively called the "GUARANTEED OBLIGATIONS").  The Guarantor hereby further
agrees that if the Company shall default in the payment or performance of any of
the Guaranteed  Obligations,  the Guarantor will (x) promptly pay or perform the
same,  without  any  demand  or notice  whatsoever,  and that in the case of any
extension  of time of payment or renewal of any of the  Guaranteed

                                       43

<PAGE>


Obligations,  the  same  will be  promptly  paid in full  when due  (whether  at
extended  maturity,  by  acceleration,  by mandatory or optional  prepayment  or
otherwise) in accordance with the terms of such extension or renewal and (y) pay
to the  holder of any Note  such  amounts,  to the  extent  lawful,  as shall be
sufficient to pay the costs and expenses of collection or of otherwise enforcing
any of such holder's rights under this Agreement, including, without limitation,
reasonable counsel fees.

                  All  obligations of the Guarantor  under this Section 14 shall
survive the transfer of any Note,  and any  obligations  of the Guarantor  under
this Section 14 with respect to which the  underlying  obligation of the Company
is expressly stated to survive payment of any Note shall also survive payment of
such Note.

14.2. OBLIGATIONS UNCONDITIONAL.

                  (a)  The  obligations  of the  Guarantor  under  Section  14.1
constitute a present and continuing  guaranty of payment and not  collectibility
and are  absolute and  unconditional,  irrespective  of the value,  genuineness,
validity,  regularity or  enforceability of the obligations of the Company under
this  Agreement,  the Notes or any other  agreement  or  instrument  referred to
herein  or  therein,  or any  substitution,  release  or  exchange  of any other
guarantee  of or security  for any of the  Guaranteed  Obligations,  and, to the
fullest  extent   permitted  by  applicable  law,   irrespective  of  any  other
circumstance  whatsoever  which might otherwise  constitute a legal or equitable
discharge  or  defense  of a surety or  guarantor,  it being the  intent of this
Section 14.2 that the  obligations of the Guarantor  hereunder shall be absolute
and  unconditional,  under  any  and all  circumstances.  Without  limiting  the
generality of the foregoing, it is agreed that the occurrence of any one or more
of the  following  shall not  alter or impair  the  liability  of the  Guarantor
hereunder which shall remain absolute and unconditional as described above:

                  (1) any  amendment or  modification  of any  provision of this
         Agreement or any of the Notes or any  assignment  or transfer  thereof,
         including  without  limitation  the renewal or extension of the time of
         payment of any of the Notes or the  granting of time in respect of such
         payment thereof,  or of any furnishing or acceptance of security or any
         additional  guarantee  or any release of any  security or  guarantee so
         furnished  or accepted for any of the Notes  (including  any release of
         Collateral pursuant to Section 9.9(b));

                  (2)  any  waiver,  consent,   extension,   granting  of  time,
         forbearance, indulgence or other action or inaction under or in respect
         of this Agreement or the Notes,  or any exercise or non-exercise of any
         right, remedy or power in respect hereof or thereof;

                                       44

<PAGE>


                  (3) any bankruptcy, receivership,  insolvency, reorganization,
         arrangement,   readjustment,   composition,   liquidation   or  similar
         proceedings  with  respect to the  Company  or any other  Person or the
         properties or creditors of any of them;

                  (4) the  occurrence of any Default or Event of Default  under,
         or any invalidity or any unenforceability of, or any misrepresentation,
         irregularity or other defect in, this Agreement, the Notes or any other
         agreement;

                  (5)  any  transfer  of any  assets  to or  from  the  Company,
         including without  limitation any transfer or purported transfer to the
         Company from any Person, any invalidity, illegality of, or inability to
         enforce, any such transfer or purported transfer,  any consolidation or
         merger  of the  Company  with or into any  Person,  any  change  in the
         ownership of any shares of capital stock of the Company,  or any change
         whatsoever in the objects, capital structure,  constitution or business
         of the Company;

                  (6) any default,  failure or delay,  willful or otherwise,  on
         the part of the Company or any other  Person to perform or comply with,
         or the impossibility or illegality of performance by the Company or any
         other  Person  of, any term of this  Agreement,  the Notes or any other
         agreement;

                  (7) any suit or other  action  brought by, or any  judgment in
         favor of, any  beneficiaries  or creditors of, the Company or any other
         Person for any reason whatsoever, including without limitation any suit
         or action in any way attacking or involving any issue,  matter or thing
         in respect of this Agreement, the Notes or any other agreement;

                  (8) any lack or limitation  of status or of power,  incapacity
         or disability of the Company or any trustee or agent thereof; or

                  (9) any other thing, event, happening, matter, circumstance or
         condition whatsoever, not in any way limited to the foregoing.

                  (b) The Guarantor  hereby  unconditionally  waives  diligence,
presentment,  demand of  payment,  protest and all  notices  whatsoever  and any
requirement that any holder of a Note exhaust any right, power or remedy against
the  Company  under  this  Agreement  or the  Notes or any  other  agreement  or
instrument  referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.

                                       45

<PAGE>


                  (c) In the event that the Guarantor  shall at any time pay any
amount on  account of the  Guaranteed  Obligations  or take any other  action in
performance of its obligations  hereunder,  the Guarantor shall not exercise any
subrogation  or other  rights  hereunder or the Notes and the  Guarantor  hereby
waives all rights it may have to exercise any such  subrogation or other rights,
and all other  remedies that it may have against the Company,  in respect of any
payment made hereunder  unless and until the Guaranteed  Obligations  shall have
been  indefeasibly paid in full. If any amount shall be paid to the Guarantor on
account of any such  subrogation  rights or other  remedy,  notwithstanding  the
waiver  thereof,  such amount  shall be received in trust for the benefit of the
holders of the Notes and shall  forthwith be paid to such holders to be credited
and applied upon the Guaranteed  Obligations,  whether matured or unmatured,  in
accordance  with the terms  hereof.  The Guarantor  agrees that its  obligations
under this  Section 14 shall be  automatically  reinstated  if and to the extent
that for any reason any payment  (including  payment in full) by or on behalf of
the Company is rescinded or must be otherwise  restored by any holder of a Note,
whether  as a result of any  proceedings  in  bankruptcy  or  reorganization  or
otherwise, all as though such amount had not been paid.

                  The guarantee in this Section 14 is a continuing guarantee and
shall apply to the Guaranteed  Obligations whenever arising. Each default in the
payment or performance of any of the Guaranteed Obligations shall give rise to a
separate claim and cause of action  hereunder,  and separate claims or suits may
be made and brought, as the case may be, hereunder as each such default occurs.

                  If an event permitting the acceleration of the maturity of the
principal amount of the Notes shall at any time have occurred and be continuing,
and such  acceleration  (and the effect thereof on the  Guaranteed  Obligations)
shall at such time be prevented by reason of the pendency against the Company or
any other Person of a case or proceeding  under a bankruptcy or insolvency  law,
the Guarantor  agrees that, for purposes of its  obligations  under this Section
14, the  maturity of the  principal  amount of the Notes shall be deemed to have
been  accelerated  (with a corresponding  effect on the Guaranteed  Obligations)
with the same effect as if the holders had  accelerated  the same in  accordance
with the terms of this  Agreement,  and the Guarantor  shall  forthwith pay such
principal amount,  any interest thereon,  any Make-Whole  Amount,  and any other
amounts guaranteed hereunder without further notice or demand.

14.3. GUARANTEES ENDORSED ON THE NOTES.

                  Each Note  shall  have  endorsed  thereon a  Guarantee  of the
Guarantor in the form of Exhibit 1-A.

15. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

                                       46

<PAGE>

15.1. REGISTRATION OF NOTES.

                  The Company  shall keep at its  principal  executive  office a
register for the  registration  and registration of transfers of Notes. The name
and address of each holder of one or more Notes,  each transfer  thereof and the
name and address of each  transferee of one or more Notes shall be registered in
such register. Prior to due presentment for registration of transfer, the Person
in whose name any Note shall be  registered  shall be deemed and  treated as the
owner and holder thereof for all purposes  hereof,  and neither Obligor shall be
affected by any notice or knowledge to the  contrary.  The Company shall give to
any holder of a Note that is an  Institutional  Investor  promptly  upon request
therefor,  a  complete  and  correct  copy of the  names  and  addresses  of all
registered holders of Notes.

15.2. TRANSFER AND EXCHANGE OF NOTES.

                  Upon surrender of any Note at the principal  executive  office
of the Company for  registration  of transfer or exchange  (and in the case of a
surrender  for  registration  of transfer,  duly  endorsed or  accompanied  by a
written  instrument of transfer duly executed by the  registered  holder of such
Note or his attorney duly  authorized in writing and  accompanied by the address
for notices of each transferee of such Note or part thereof),  the Company shall
execute and deliver, at the Company's expense (except as provided below), one or
more new Notes (as requested by the holder thereof) in exchange therefor,  in an
aggregate  principal  amount  equal  to  the  unpaid  principal  amount  of  the
surrendered  Note.  Each such new Note shall be  payable to such  Person as such
holder may request and shall be substantially in the form of Exhibit 1 and shall
have the Guarantee of the Guarantor  endorsed thereon.  Each such new Note shall
be dated and bear interest from the date to which  interest shall have been paid
on the surrendered Note or dated the date of the surrendered Note if no interest
shall  have  been  paid  thereon.  The  Company  may  require  payment  of a sum
sufficient to cover any stamp tax or  governmental  charge imposed in respect of
any such transfer of Notes.  Notes shall not be transferred in  denominations of
less than U.S.$100,000, PROVIDED that if necessary to enable the registration of
transfer  by a holder  of its  entire  holding  of  Notes,  one Note may be in a
denomination of less than U.S.$100,000.  Any transferee,  by its acceptance of a
Note  registered  in its name (or the name of its  nominee),  shall be deemed to
have made the representation set forth in Section 6.2.

15.3. REPLACEMENT OF NOTES.

                  Upon   receipt   by  the   Company  of   evidence   reasonably
satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation of any Note (which evidence shall be, in the case of an Institutional
Investor,  notice from such  Institutional  Investor of such  ownership and such
loss, theft, destruction or mutilation), and

                                       47
<PAGE>


                  (a) in the case of loss,  theft or  destruction,  of indemnity
         reasonably satisfactory to it (PROVIDED that if the holder of such Note
         is, or is a nominee for, an original  Purchaser or another  holder of a
         Note with a minimum net worth of at least  U.S.$10,000,000 in excess of
         the  outstanding  principal  amount of such  Note,  such  Person's  own
         unsecured  agreement of indemnity shall be deemed to be  satisfactory),
         or

                  (b)      in the case of mutilation, upon surrender and
         cancellation thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost,  stolen,  destroyed or mutilated  Note if no interest shall have been paid
thereon, and having the Guarantee of the Guarantor endorsed thereon.

16. PAYMENTS ON NOTES.

16.1. PLACE OF PAYMENT.

                  Subject to Section  16.2,  payments of  principal,  Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be made
in New  York,  New  York  at the  principal  office  of  Bank  One,  NA in  such
jurisdiction.  The Company may at any time,  by notice to each holder of a Note,
change the place of payment of the Notes so long as such place of payment  shall
be either  the  principal  office of the  Company  in such  jurisdiction  or the
principal office of a bank or trust company in New York, New York.

16.2. HOME OFFICE PAYMENT.

                  So long as any  Purchaser  or any  nominee  of such  Purchaser
shall be the  holder of any Note,  and  notwithstanding  anything  contained  in
Section  16.1 or in such Note to the  contrary,  the  Company  will pay all sums
becoming due on such Note for principal, Make-Whole Amount, if any, and interest
by the  method  and  at the  address  specified  for  such  purpose  below  such
Purchaser's name in Schedule A, or by such other method or at such other address
as such  Purchaser  shall  have from time to time  specified  to the  Company in
writing for such purpose,  without the presentation or surrender of such Note or
the making of any  notation  thereon,  except that upon  written  request of the
Company  made  concurrently  with  or  reasonably   promptly  after  payment  or
prepayment in full of any Note,  such  Purchaser  shall  surrender such Note for
cancellation,  reasonably promptly after any such request, to the Company at its
principal  executive office or at the place of payment most recently  designated
by the Company pursuant to Section 16.1. Prior to any sale or other  disposition
of any  Note  held by any  Purchaser  or any  nominee  of such  Purchaser,  such
Purchaser will, at its election,  either endorse thereon the amount of principal
paid  thereon

                                       48

<PAGE>


and the last date to which interest has been paid thereon or surrender such Note
to the Company in exchange for a new Note or Notes pursuant to Section 15.2. The
Company  will afford the  benefits  of this  Section  16.2 to any  Institutional
Investor that is the direct or indirect  transferee of any Note purchased by any
Purchaser under this Agreement and that has made the same agreement  relating to
such Note as the Purchasers have made in this Section 16.2.

17.  EXPENSES,  ETC.

17.1. TRANSACTION EXPENSES.

                  Whether  or  not  the  transactions  contemplated  hereby  are
consummated,  the Obligors will pay all costs and expenses (including reasonable
attorneys' fees of a special counsel and, if reasonably required, local or other
counsel)  incurred  by the  Purchasers,  each  other  holder  of a Note  and the
Collateral  Agent in connection with such  transactions,  with the perfection of
the Liens in and on the Collateral  contemplated  by the Security  Documents and
with any amendments,  waivers or consents under or in respect of this Agreement,
the Notes or the  other  Financing  Documents  (whether  or not such  amendment,
waiver or consent becomes effective),  including,  without  limitation:  (a) the
costs and expenses incurred in enforcing or defending (or determining whether or
how to enforce or defend)  any  rights  under this  Agreement,  the Notes or the
other  Financing  Documents  or in  responding  to any  subpoena  or other legal
process  or  informal  investigative  demand  issued  in  connection  with  this
Agreement,  the Notes or the other Financing Documents,  or by reason of being a
holder of any Note,  and all  reasonable  expenses  incurred by each holder of a
Note and the Collateral  Agent incurred in connection  with the  preservation of
any Lien or realization on or pursuit of remedies with respect to any Collateral
following the occurrence  and during the  continuance of any Default or Event of
Default,  and  (b)  the  costs  and  expenses,  including  reasonable  financial
advisors' fees,  incurred in connection with the insolvency or bankruptcy of the
Guarantor,  the Company or any Subsidiary or in connection  with any work-out or
restructuring  of the  transactions  contemplated  hereby and by the Notes.  The
Obligors will pay, and will save each  Purchaser and each other holder of a Note
harmless from,  all claims in respect of any fees,  costs or expenses if any, of
brokers  and  finders  (other than those  retained  by such  Purchaser  or other
holder).

17.2. TAXES.

                  The Obligors will pay all stamp,  documentary or similar taxes
which may be payable in respect of the execution and delivery of this Agreement,
any of the Notes or any other  Financing  Documents or of any  amendment  of, or
waiver or consent under or with respect to, this Agreement,  any of the Notes or
any other  Financing  Documents  and will save  each  holder of a Note  harmless
against any loss or liability  resulting from  nonpayment

                                       49

<PAGE>


or delay in payment of any such tax  required  to be paid by the  Company or the
Guarantor hereunder.

17.3. SURVIVAL.

                  The  obligations  of the  Obligors  under this Section 17 will
survive  the  payment or transfer of any Note,  the  enforcement,  amendment  or
waiver of any  provision  of this  Agreement,  the Notes or the other  Financing
Documents,   and  the   termination   of  this   Agreement.

18.   SURVIVAL  OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

                  All representations and warranties contained herein and in the
other  Financing  Documents  shall  survive the  execution  and delivery of this
Agreement,  the Notes and the other  Financing  Documents,  and the  purchase or
transfer by each Purchaser of any Note or portion  thereof or interest  therein,
and may be relied upon by any  subsequent  holder of a Note,  regardless  of any
investigation  made at any time by or on  behalf of any  Purchaser  or any other
holder  of a  Note.  All  statements  contained  in  any  certificate  or  other
instrument  delivered  by or on  behalf  of  either  Obligor  pursuant  to  this
Agreement or any other Financing  Document shall be deemed  representations  and
warranties  of such  Obligor  under this  Agreement.  Subject  to the  preceding
sentence, this Agreement,  the Notes or any other Financing Documents embody the
entire agreement and  understanding  between the Purchasers and the Obligors and
supersede all prior agreements and understandings relating to the subject matter
hereof.

19. AMENDMENT AND WAIVER.

19.1. REQUIREMENTS.

                  This  Agreement  and  the  Notes  may  be  amended,   and  the
observance  of  any  term  hereof  or  of  the  Notes  may  be  waived   (either
retroactively or prospectively), with (and only with) the written consent of the
Obligors and the Required Holders, except that (a) no amendment or waiver of any
of the provisions of Section 1, 2, 3, 4, 5, 6 or 23 hereof,  or any defined term
(as it is used therein),  will be effective as to any Purchaser unless consented
to by such  Purchaser  in  writing,  and (b) no such  amendment  or waiver  may,
without the written  consent of the holder of each Note at the time  outstanding
affected  thereby,  (i)  subject to the  provisions  of Section 12  relating  to
acceleration  or  rescission,  change  the amount or time of any  prepayment  or
payment  of  principal  of, or reduce  the rate or change the time of payment or
method of  computation  of interest or of the  Make-Whole  Amount on, the Notes,
(ii) change the  percentage of the principal  amount of the Notes the holders of
which are required to consent to any such  amendment  or waiver,  or (iii) amend
any of Sections 8, 11(a), 11(b), 12, 13, 14, 19, 22 or 25.

                                       50

<PAGE>


19.2. SOLICITATION OF HOLDERS OF NOTES.

                  (a) SOLICITATION. The Obligors will provide each holder of the
Notes  (irrespective  of the amount of Notes  then owned by it) with  sufficient
information,  sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and  considered  decision with respect to
any proposed  amendment,  waiver or consent in respect of any of the  provisions
hereof or of the Notes or of any other  Financing  Document.  The Obligors  will
deliver executed or true and correct copies of each amendment, waiver or consent
effected  pursuant  to the  provisions  of this  Section  19 to each  holder  of
outstanding  Notes  promptly  following  the date on which  it is  executed  and
delivered by, or receives the consent or approval of, the  requisite  holders of
Notes.

                  (b) PAYMENT.  Neither  Obligor will directly or indirectly pay
or  cause  to be  paid  any  remuneration,  whether  by way of  supplemental  or
additional interest,  fee or otherwise,  or grant any security, to any holder of
Notes as  consideration  for or as an  inducement  to the  entering  into by any
holder of Notes of any waiver or  amendment  of any of the terms and  provisions
hereof or any other Financing  Document unless such remuneration is concurrently
paid, or security is concurrently  granted,  on the same terms,  ratably to each
holder of Notes then  outstanding  even if such  holder did not  consent to such
waiver or amendment.

19.3. BINDING EFFECT, ETC.

                  Any  amendment  or waiver  consented  to as  provided  in this
Section 19 applies  equally to all holders of Notes and is binding upon them and
upon each  future  holder of any Note and upon the  Obligors  without  regard to
whether such Note has been marked to indicate such amendment or waiver.  No such
amendment  or  waiver  will  extend  to  or  affect  any  obligation,  covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right  consequent  thereon.  No course of dealing between either Obligor and
the holder of any Note or the  Collateral  Agent nor any delay in exercising any
rights  hereunder or under any Note or under any other Financing  Document shall
operate as a waiver of any  rights of any holder of such Note or the  Collateral
Agent. As used herein,  the term "THIS  AGREEMENT" and references  thereto shall
mean this  Agreement  as it may from time to time be  amended  or  supplemented.

19.4. NOTES HELD BY OBLIGORS, ETC.

                  Solely for the purpose of  determining  whether the holders of
the  requisite  percentage  of the  aggregate  principal  amount  of Notes  then
outstanding  approved or  consented  to any  amendment,  waiver or consent to be
given under this Agreement or the Notes or any other Financing Document, or have
directed  the taking of any action  provided  herein or in the Notes to be taken
upon the  direction of the holders of a specified  percentage

                                       51

<PAGE>


of the aggregate  principal amount of Notes then outstanding,  Notes directly or
indirectly  owned by either  Obligor or any Affiliate of either Obligor shall be
deemed not to be outstanding.

20. NOTICES.

                  All notices and communications provided for hereunder shall be
in  writing  and sent (a) by  telecopy  if the  sender  on the same day  sends a
confirming  copy of such  notice  by a  recognized  overnight  delivery  service
(charges  prepaid),  or (b) by a recognized  overnight  delivery  service  (with
charges prepaid). Any such notice must be sent:

                  (i) if to any Purchaser or its nominee,  to such  Purchaser or
         nominee at the address specified for such communications in Schedule A,
         or at such  other  address  as such  Purchaser  or  nominee  shall have
         specified to the Company in writing,

                  (ii) if to any other  holder of any  Note,  to such  holder at
         such address as such other  holder shall have  specified to the Company
         in writing,

                  (iii) if to the Collateral  Agent,  to its address as provided
         in the Intercreditor Agreement,

                  (iv) if to the  Company,  to the  Company at its  address  set
         forth at the  beginning  hereof to the  attention of Doug Cooke,  or at
         such other address as the Company shall have specified to the holder of
         each Note in writing, or

                  (iv) if to the Guarantor,  to the Guarantor at its address set
         forth at the  beginning  hereof to the  attention of Doug Cooke,  or at
         such other address as the Guarantor  shall have specified to the holder
         of each Note in writing.

Notices under this Section 20 will be deemed given only when actually received.

21. REPRODUCTION OF DOCUMENTS.

                  This  Agreement,   the  other  Financing   Documents  and  all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications that may hereafter be executed,  (b) documents received by any
Purchaser and the Collateral Agent at the Closing (except the Notes themselves),
and (c) financial statements,  certificates and other information  previously or
hereafter furnished to any Purchaser and the Collateral Agent, may be reproduced
by such Purchaser and the  Collateral  Agent by any  photographic,  photostatic,
microfilm,  microcard,  miniature photographic or other similar process and such
Purchaser  and the  Collateral  Agent  may  destroy  any  original  document  so
reproduced.  The

                                       52

<PAGE>


Obligors agree and stipulate  that, to the extent  permitted by applicable  law,
any such reproduction  shall be admissible in evidence as the original itself in
any  judicial or  administrative  proceeding  (whether or not the original is in
existence and whether or not such reproduction was made by such Purchaser or the
Collateral  Agent  in the  regular  course  of  business)  and any  enlargement,
facsimile  or  further  reproduction  of such  reproduction  shall  likewise  be
admissible  in  evidence.  This  Section 21 shall not prohibit an Obligor or any
other holder of Notes from  contesting any such  reproduction to the same extent
that it could contest the  original,  or from  contesting  the admission of such
reproductions based on the inaccuracy of any such reproduction.

22. CONFIDENTIAL INFORMATION.

                  For  the   purposes   of  this   Section   22,   "CONFIDENTIAL
INFORMATION"  means  information  delivered to any  Purchaser by or on behalf of
either   Obligor  or  any  Subsidiary  in  connection   with  the   transactions
contemplated  by or otherwise  pursuant to this Agreement that is proprietary in
nature and that was clearly marked or labeled or otherwise adequately identified
when  received  by such  Purchaser  as being  confidential  information  of such
Obligor or such Subsidiary, PROVIDED that such term does not include information
that (a) was publicly known or otherwise  known to such  Purchaser  prior to the
time of such disclosure,  (b) subsequently becomes publicly known through no act
or omission by such Purchaser or any person acting on such  Purchaser's  behalf,
(c) otherwise  becomes known to such Purchaser other than through  disclosure by
an Obligor or any Subsidiary or (d) constitutes  financial  statements delivered
to such Purchaser under Section 7.1 that are otherwise publicly available.  Each
Purchaser will maintain the confidentiality of such Confidential  Information in
accordance  with  procedures  adopted by such Purchaser in good faith to protect
confidential information of third parties delivered to such Purchaser,  PROVIDED
that such Purchaser may deliver or disclose Confidential Information to (i) such
Purchaser's directors, officers, employees, agents, attorneys and affiliates (to
the extent  such  disclosure  reasonably  relates to the  administration  of the
investment  represented  by  such  Purchaser's  Notes),  (ii)  such  Purchaser's
financial advisors and other professional advisors who agree (for the benefit of
the Company) to hold confidential the Confidential Information  substantially in
accordance  with the terms of this  Section  22,  (iii) any other  holder of any
Note, (iv) any Institutional Investor to which such Purchaser sells or offers to
sell such Note or any part thereof or any participation  therein (if such Person
has agreed in writing prior to its receipt of such  Confidential  Information to
be bound by the  provisions  of this Section 22), (v) any Person from which such
Purchaser  offers to  purchase  any  security  of an Obligor (if such Person has
agreed in writing prior to its receipt of such  Confidential  Information  to be
bound  by the  provisions  of this  Section  22),  (vi)  any  federal  or  state
regulatory authority having jurisdiction over such Purchaser, (vii) the National
Association  of  Insurance  Commissioners  or any similar  organization,  or any
nationally  recognized  rating agency that requires access to information  about
such Purchaser's  investment  portfolio or (viii) any other Person to which such
delivery or disclosure may be necessary or appropriate

                                       53

<PAGE>


(w) to effect  compliance with any law, rule,  regulation or order applicable to
such Purchaser,  (x) in response to any subpoena or other legal process,  (y) to
the  extent  reasonably  required  of such  Purchaser,  in  connection  with any
litigation to which such  Purchaser is a party or (z) if an Event of Default has
occurred  and is  continuing,  to  the  extent  such  Purchaser  may  reasonably
determine  such delivery and  disclosure to be necessary or  appropriate  in the
enforcement  or for  the  protection  of the  rights  and  remedies  under  such
Purchaser's Notes or this Agreement. Each holder of a Note, by its acceptance of
a Note,  will be deemed to have  agreed to be bound by and to be entitled to the
benefits  of this  Section  22 as though it were a party to this  Agreement.  On
reasonable  request by an Obligor in connection  with the delivery to any holder
of a Note of  information  required to be  delivered  to such holder  under this
Agreement or  requested  by such holder  (other than a holder that is a party to
this  Agreement or its nominee),  such holder will enter into an agreement  with
the Obligors  embodying the provisions of this Section 22.

23.  SUBSTITUTION  OF PURCHASER.

                  Each  Purchaser  shall have the right to substitute any one of
such  Purchaser's  Affiliates  (provided  such Affiliate is resident in the same
jurisdiction  as  such  Purchaser)  as the  purchaser  of the  Notes  that  such
Purchaser has agreed to purchase  hereunder,  by written  notice to the Company,
which notice shall be signed by both such  Purchaser and such  Affiliate,  shall
contain  such  Affiliate's  agreement  to be bound by this  Agreement  and shall
contain a  confirmation  by such Affiliate of the accuracy with respect to it of
the  representations  set forth in Section 6. Upon receipt of such  notice,  any
reference to such  Purchaser in this  Agreement  (other than in this Section 23)
shall be deemed to refer to such  Affiliate in lieu of such original  Purchaser.
In the event that such Affiliate is so substituted as a purchaser  hereunder and
such Affiliate  thereafter transfers to such original Purchaser all of the Notes
then held by such  Affiliate,  upon  receipt  by the  Company  of notice of such
transfer,  any reference to such  Affiliate as a "Purchaser"  in this  Agreement
(other  than in this  Section  23)  shall no  longer  be deemed to refer to such
Affiliate,  but  shall  refer to such  original  Purchaser,  and  such  original
Purchaser  shall  again have all the rights of an  original  holder of the Notes
under this Agreement.

24. JURISDICTION AND PROCESS.

EACH OF THE GUARANTOR AND THE COMPANY AGREES THAT ANY LEGAL ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE GUARANTEES OR ANY
OTHER  DOCUMENT  EXECUTED  IN  CONNECTION  HEREWITH,  OR  ANY  LEGAL  ACTION  OR
PROCEEDING  TO EXECUTE OR OTHERWISE  ENFORCE ANY JUDGMENT  OBTAINED  AGAINST THE
COMPANY OR THE GUARANTOR,  AS THE CASE MAY BE, FOR BREACH HEREOF OR THEREOF,  OR
AGAINST ANY OF ITS PROPERTIES,  MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW

                                       54

<PAGE>


YORK OR THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK
BY ANY PURCHASER OR ON ANY  PURCHASER'S  BEHALF OR BY OR ON BEHALF OF ANY HOLDER
OF A NOTE, AS ANY PURCHASER OR SUCH HOLDER MAY ELECT,  AND EACH OF THE GUARANTOR
AND  THE  COMPANY  HEREBY  IRREVOCABLY  AND   UNCONDITIONALLY   SUBMITS  TO  THE
NON-EXCLUSIVE  JURISDICTION OF SUCH COURTS FOR PURPOSES OF ANY SUCH LEGAL ACTION
OR PROCEEDING. EACH OF THE GUARANTOR AND THE COMPANY HEREBY IRREVOCABLY APPOINTS
AND DESIGNATES CT CORPORATION  SYSTEM,  WHOSE ADDRESS IS 111 EIGHTH AVENUE,  NEW
YORK, NY 10011,  OR ANY OTHER PERSON HAVING AND  MAINTAINING A PLACE OF BUSINESS
IN THE  STATE  OF NEW YORK  WHOM THE  COMPANY  MAY FROM  TIME TO TIME  HEREAFTER
DESIGNATE  (HAVING  GIVEN 30 DAYS' NOTICE  THEREOF TO EACH HOLDER OF A NOTE THEN
OUTSTANDING),  AS THE DULY  AUTHORIZED  AGENT FOR ACCEPTANCE OF SERVICE OF LEGAL
PROCESS OF THE GUARANTOR AND THE COMPANY.  EACH OF THE GUARANTOR AND THE COMPANY
HEREBY AGREES THAT SERVICE OF PROCESS IN ANY SUCH  PROCEEDING MAY BE EFFECTED BY
SERVING  NOTICE  UPON CT  CORPORATION  OR ANY SUCH  OTHER  PERSON AND BY MAILING
NOTICE OF SUCH SERVICE BY  REGISTERED  OR CERTIFIED  MAIL (OR ANY  SUBSTANTIALLY
SIMILAR  FORM OF MAIL),  POSTAGE  PREPAID,  TO IT AT ITS  ADDRESS  SPECIFIED  IN
SECTION  20 OR AT SUCH OTHER  ADDRESS OF WHICH EACH  HOLDER OF A NOTE SHALL HAVE
BEEN  NOTIFIED  PURSUANT  THERETO.  IN ADDITION,  EACH OF THE  GUARANTOR AND THE
COMPANY HEREBY  IRREVOCABLY  WAIVES TO THE FULLEST EXTENT  PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING  ARISING OUT OF OR RELATING TO THIS  AGREEMENT,  THE NOTES,
THE GUARANTEES OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION  HEREWITH BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR THE UNITED STATES  DISTRICT COURT FOR THE
SOUTHERN  DISTRICT  OF NEW YORK,  AND ANY CLAIM  THAT ANY SUCH  SUIT,  ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT  FORUM.

25. OBLIGATION TO MAKE PAYMENTS IN U.S. DOLLARS.

                  All payments made by the Obligors  under this  Agreement,  the
Notes or the  Guarantees,  as the case may be, shall be in U.S.  Dollars and the
obligations  of the  Obligors to make  payments in U.S.  Dollars of any of their
obligations  under  this  Agreement,  the Notes or the  Guarantees  shall not be
discharged or satisfied by any tender, or any recovery pursuant to any judgment,
which is expressed in or converted  into any currency  other than U.S.  Dollars,
except to the extent such tender or recovery  shall result in the actual receipt
by

                                       55

<PAGE>


the  holder  of any Note of the full  amount  of U.S.  Dollars  expressed  to be
payable in respect of any such  obligations.  The  obligation of the Obligors to
make  payments  in  U.S.  Dollars  as  aforesaid  shall  be  enforceable  as  an
alternative  or  additional  cause of action for the purpose of recovery in U.S.
Dollars of the amount,  if any, by which such actual receipt shall fall short of
the full amount of U.S.  Dollars  expressed to be payable in respect of any such
obligations,  and shall not be affected by judgment being obtained for any other
sums due under this Agreement,  the Notes or the Guarantees.

26. MISCELLANEOUS.

26.1. SUCCESSORS AND ASSIGNS.

                  All covenants and other agreements contained in this Agreement
by or on behalf of any of the  parties  hereto  bind and inure to the benefit of
their respective  successors and assigns  (including,  without  limitation,  any
subsequent holder of a Note) whether so expressed or not.

26.2.  PAYMENTS DUE ON NON-BUSINESS DAYS.

                  Anything in this Agreement or the Notes or any other Financing
Document  to the  contrary  notwithstanding,  any  payment  of  principal  of or
Make-whole  Amount or  interest  on any Note that is due on a date  other than a
Business Day shall be made on the next succeeding Business Day without including
the additional days elapsed in the  computation of the interest  payable on such
next succeeding Business Day.

26.3. SEVERABILITY.

                  Any  provision  of  this   Agreement  that  is  prohibited  or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability  without  invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction  shall (to the full  extent  permitted  by law) not  invalidate  or
render   unenforceable   such  provision  in  any  other   jurisdiction.

26.4. CONSTRUCTION.

                  Each  covenant  contained  herein shall be  construed  (absent
express  provision to the contrary) as being  independent of each other covenant
contained  herein,  so that  compliance  with any one covenant shall not (absent
such an express  contrary  provision)  be deemed to excuse  compliance  with any
other covenant.  Where any provision  herein refers to action to be taken by any
Person, or which such Person is prohibited from taking,  such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

                                       56

<PAGE>


26.5.  STATEMENT OF INTEREST RATE.

                  For purposes of any  legislation  respecting  the statement of
interest rates,  the yearly rate for a 365- or 366-day year, as the case may be,
that can be stated to be equivalent to the rate  specified in the Notes as being
"computed on the basis of a 360-day year of twelve 30-day months" is the rate so
specified,  calculated  and payable on a semi-annual  basis;  and the use of the
term "360-day year of twelve 30-day months" is for matters of calculation of the
semi-annual  interest  payments  in  respect of the Notes and does not alter the
yearly rate described above.

26.6. COUNTERPARTS.

                  This Agreement may be executed in any number of  counterparts,
each of which shall be an original but all of which  together  shall  constitute
one instrument.  Each counterpart may consist of a number of copies hereof, each
signed by less than all,  but  together  signed by all, of the  parties  hereto.

26.7. GOVERNING LAW.

                  This  Agreement  shall be construed and enforced in accordance
with,  and the rights of the parties  shall be governed by, the law of the State
of New York  excluding  choice-of-law  principles  of the law of such State that
would  require the  application  of the laws of a  jurisdiction  other than such
State.

                                    * * * * *

                                       57

<PAGE>



                  If you are in agreement  with the  foregoing,  please sign the
form of agreement on the  accompanying  counterpart of this Agreement and return
it to the Company,  whereupon  the  foregoing  shall become a binding  agreement
between you and the Company and the Guarantor.

                            Very truly yours,

                            FIRSTSERVICE CORPORATION


                            By ______________________________________________
                               Title:


                            FIRSTSERVICE DELAWARE, LP

                            By:      FirstService GP Inc.
                                     its General Partner


                            By ______________________________________________
                               Title:


                                       58

<PAGE>



The foregoing is hereby
agreed to as of the
date thereof.


HARTFORD LIFE INSURANCE COMPANY


By: _________________________________
      Name:
      Title:


<PAGE>


The foregoing is hereby
agreed to as of the
date thereof.


MEDICA HEALTH PLAN


By: _________________________________
      Name:
      Title:


                                       2

<PAGE>


The foregoing is hereby
agreed to as of the
date thereof.


THE PRUDENTIAL INSURANCE COMPANY OF AMERICA


By: _________________________________
      Name:
      Title:


                                       3

<PAGE>


The foregoing is hereby
agreed to as of the
date thereof.


By:  PPM America, Inc. as attorney in fact, on behalf of
JACKSON NATIONAL LIFE INSURANCE COMPANY OF NEW YORK


By: _________________________________
      Name:
      Title:


                                       4

<PAGE>


The foregoing is hereby
agreed to as of the
date thereof.


By:  PPM America, Inc. as attorney in fact, on behalf of
JACKSON NATIONAL LIFE INSURANCE COMPANY


By: _________________________________
      Name:
      Title:



                                       5

<PAGE>


The foregoing is hereby
agreed to as of the
date thereof.


PACIFIC LIFE INSURANCE COMPANY


By: _________________________________
      Name:
      Title:


By: _________________________________
      Name:
      Title:


                                       6

<PAGE>


                                                          SCHEDULE A

                       INFORMATION RELATING TO PURCHASERS

                                                          Principal Amount of
Name and Address of Purchaser                             Notes to be Purchased
- -----------------------------                             ----------------------

PACIFIC LIFE INSURANCE COMPANY                            $5,000,000
                                                          $5,000,000
                                                          $5,000,000

(All securities to be registered in the name of MAC & CO.)

  (1)    All payments by wire transfer
         of immediately available funds to:

         Federal Reserve Bank of Boston
         ABA #0110-012304/BOS SAFE DEP
         DDA 125261
         Attn:  MBS Income CC: 1253
         A/C Name:  Pacific Life General Account/PLCF1810132
         Re:  [Security Description & PPN]

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:


<PAGE>


         Mellon Trust
         Attn:  Pacific Life Accounting Team
         One Mellon Bank Center -- Room 0930
         Pittsburgh, PA 15258-0001
         Fax:  (412)236-7529

         With a copy to:

         Pacific Life Insurance Company
         Attn:  Securities Administration -- Cash Team
         700 Newport Center Drive
         Newport Beach, CA 92660-6397
         Fax:  949-640-4013

  (3)    Original notes delivered to:

         Mellon Securities Trust Company
         120 Broadway, 13th Floor
         New York, NY 10271
         Attn: Robert Ferraro  (212-374-1918)
         A/C Name:  Pacific Life General Acct
         A/C #: PLC F1810132

  (4)    All other communications:

         Pacific Life Insurance Company
         Attn:  Securities Department
         700 Newport Center Drive
         Newport Beach, CA 92660-6397
         Fax:  949-219-5406

  (5)    Tax Identification Number:  97-1079000


<PAGE>



                                                        Principal Amount of
Name and Address of Purchaser                           Notes to be Purchased
- -----------------------------                           ------------------------
JACKSON NATIONAL LIFE INSURANCE                         $32,500,000
COMPANY

  (1)    All payments by wire transfer
         of immediately available funds to:

         The Bank of New York
         ABA #021-000-018
         BNF Account #: IOC566
         FBO: Jackson National Life
         Ref: [CUSIP/PPN, Description and P&I Breakdown]

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         Jackson National Life Insurance Company
         c/o The Bank of New York
         Attn: P& I Department
         P.O. Box 19266
         Newark, NJ 07195
         Tel:  (212) 437-3054
         Fax:  (212) 437-6466

         With a copy to:

         Jackson National Life Insurance Company
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Investment Accounting -- Mark Stewart
         Tel:  (312) 338-5832
         Fax:  (312) 236-5224

  (3)    Original notes delivered to:

         The Bank of New York
         Special Processing -- Window A
         One Wall Street, 3rd Floor
         New York, NY 10286
         Ref:  JNL -- JNL 241 / Non-Insul., A/C 187241

  (4)    All other communications:



<PAGE>

         PPM America
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Private Placements -- Nicole Kidder
         Tel:  (312) 634-2516
         Fax:  (312) 634-0054

         With a copy to:

         Jackson National Life Insurance Company
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Investment Accounting -- Mark Stewart
         Tel:  (312) 338-5832
         Fax:  (312) 236-5224

  (5)    Tax Identification Number:  38-1659835



<PAGE>



                                                        Principal Amount of
Name and Address of Purchaser                           Notes to be Purchased
- -----------------------------                           -----------------------

JACKSON NATIONAL LIFE INSURANCE                         $2,500,000
COMPANY OF NEW YORK

  (1)    All payments by wire transfer
         of immediately available funds to:

         The Bank of New York
         ABA #021-000-018
         BNF Account #: IOC566
         FBO: Jackson National Life
         Ref: [CUSIP/PPN, Description and P&I Breakdown]

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         Jackson National Life Insurance Company
         c/o The Bank of New York
         Attn: P& I Department
         P.O. Box 19266
         Newark, NJ 07195
         Tel:  (212) 437-3054
         Fax:  (212) 437-6466

         With a copy to:

         Jackson National Life Insurance Company
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Investment Accounting -- Mark Stewart
         Tel:  (312) 338-5832
         Fax:  (312) 236-5224

  (3)    Original notes delivered to:

         The Bank of New York
         Special Processing -- Window A
         One Wall Street, 3rd Floor
         New York, NY 10286
         Ref:  JNL - JNLNY Gen. Account., A/C 187271

  (4)    All other communications:


<PAGE>

         PPM America
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Private Placements -- Nicole Kidder
         Tel:  (312) 634-2516
         Fax:  (312) 634-0054

         With a copy to:

         Jackson National Life Insurance Company
         225 West Wacker Drive, Suite 1200
         Chicago, IL 60606-1228
         Attn:  Investment Accounting -- Mark Stewart
         Tel:  (312) 338-5832
         Fax:  (312) 236-5224

  (5)    Tax Identification Number:  13-3873709


<PAGE>



                                                       Principal Amount of
Name and Address of Purchaser                          Notes to be Purchased
- -----------------------------                          ------------------------

HARTFORD LIFE INSURANCE COMPANY                        $3,100,000


  (1)    All payments by wire transfer
         of immediately available funds to:

         Chase Manhattan Bank
         4 New York Plaza
         New York, NY 10004
         Bank ABA No. 021000021
         Chase NYC/Cust
         A/C #900-9-000200 for F/C/T G 08965 CRD (domestic issues)
         Attn:  Prin $[_____]  Int $[_____]

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         Hartford Investment Management Company
         c/o Portfolio Support
         P.O. Box 1744
         Hartford, CT 06144-1744
         Fax:  (860) 297-8875/8876

  (3)    All other communications:

         Prudential Private Placement Investors, Inc.
         Four Gateway Center, 7th Floor
         100 Mulberry Street
         Newark, NJ 07102
         Attn:  Institutional Asset Management
         Tel:  (973) 802-8608
         Fax:  (973) 802-7045

  (4)    Tax Identification Number:  06-0974148



<PAGE>



                                                       Principal Amount of
Name and Address of Purchaser                          Notes to be Purchased
- -----------------------------                          ------------------------

MEDICA HEALTH PLAN                                     $1,500,000

  (1)    All payments by wire transfer
         of immediately available funds to:

         Federal Reserve Bank of Boston
         Boston, MA
         ABA #011001234
         DDA #125261
         For: Allina Medica Health Plan / AHHF5002082
         Attn:  MSB Income-Cost Center 1253

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         Prudential Private Placement Investors, Inc.
         Four Gateway Center, 7th Floor
         100 Mulberry Street
         Newark, NJ 07102
         Attn:  Institutional Asset Management
         Tel:  (973) 802-8608
         Fax:  (973) 802-7045

  (3)    All other communications:

         Prudential Private Placement Investors, Inc.
         Four Gateway Center, 7th Floor
         100 Mulberry Street
         Newark, NJ 07102
         Attn:  Institutional Asset Management
         Tel:  (973) 802-8608
         Fax:  (973) 802-7045

(4)      Tax Identification Number:  41-1242261



<PAGE>


                                                        Principal Amount of
Name and Address of Purchaser                           Notes to be Purchased
- -----------------------------                           -----------------------

THE PRUDENTIAL LIFE INSURANCE                           $40,400,000
COMPANY OF AMERICA                                      $5,000,000

  (1)    All payments by wire transfer
         of immediately available funds to:

         The Bank of New York
         New York, NY
         ABA No. 021-000-018
         A/C #:   890-0304-391 (for $40,400,000 Note)
                  890-0304-944 (for $5,000,000 Note)

         with  sufficient  information to identify the source
         and application of such funds,  including  issuer,
         PPN #,  interest  rate,  maturity  and whether payment
         is of principal, premium, or interest

  (2)    All  notices  of  payments  and  written
         confirmations  of  such  wire transfers:

         The Prudential Insurance Company of America
         c/o Investment Operations Group
         Gateway Center Two, 10th Floor
         100 Mulberry Street
         Newark, NJ 07102
         Attn:  Manager, Billings and Collections
         Fax:  (973) 802-8764

  (3)    All other communications:

         The Prudential Insurance Company of America
         c/o Prudential Capital Group
         1114 Avenue of the Americas, 30th Floor
         New York, NY 10036
         Attn:  Managing Director
         Fax:  212-626-2077

  (4)    Recipient of telephonic pre-payment notices

         Manager, Trade Management Group
         Tel:  (973) 802-6009
         Fax:  (973) 802-9425

(5)      Tax Identification Number:  22-1211670


<PAGE>


                                                                      SCHEDULE B
                                                                      ----------


                                  DEFINED TERMS
                                  -------------

                  As used  herein,  the  following  terms  have  the  respective
meanings set forth below or set forth in the Section hereof following such term:

                  "AFFECTED NOTE"  is defined in Section 8.3.

                  "AFFILIATE"  means,  at any  time,  and  with  respect  to any
Person,  (a) any other Person that at such time directly or  indirectly  through
one or more  intermediaries  Controls,  or is Controlled  by, or is under common
Control with, such first Person, or (b) any other Person  beneficially owning or
holding,  directly or  indirectly,  10% or more of any class of voting or equity
interests  of such  Person or any  corporation  of which the  Guarantor  and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or  more  of any  class  of  voting  or  equity  interests.  As used in this
definition, "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the  direction  of the  management  and policies of a Person,
whether  through the ownership of voting  securities,  by contract or otherwise.
Unless the context otherwise  clearly requires,  any reference to an "Affiliate"
is a reference to an Affiliate of the Guarantor.

                  "APPLICABLE TAXING AUTHORITY" is defined in Section 5.9(b).

                  "BUSINESS DAY" means (a) for the purposes of Section 8.8 only,
any day other than a Saturday,  a Sunday or a day on which  commercial  banks in
New York City are required or authorized to be closed,  and (b) for the purposes
of any other  provision  of this  Agreement,  any day other than a  Saturday,  a
Sunday or a day on which commercial banks in New York City or Toronto,  Ontario,
Canada are required or authorized to be closed.

                  "CANADIAN DOLLAR" or "C$" means lawful money of Canada.

                  "CALL OPTION TRIGGERING EVENT" means, in respect of a
Subsidiary:

                  (a)      the  61st  day  following  the  commencement  of  any
         actions or  proceedings  against such  Subsidiary or against any of the
         property  thereof before any court,  governmental  agency or arbitrator
         which, if determined  adversely,  may have a material adverse effect on
         the financial  condition or operations  of such  Subsidiary  unless the
         Guarantor   shall  have  satisfied  the  Required   Holders  that  such
         Subsidiary  shall not be  materially  and  adversely  affected  by such
         action or proceeding or the consequences arising therefrom; or

                  (b)      the 31st day following the receipt by such
         Subsidiary of any Violation  Notice which,  if the same were  enforced,
         may have a  material  adverse

                                       2

<PAGE>


         effect on the financial  condition or  operations  of such  Subsidiary,
         unless the Guarantor  shall have  satisfied  the Required  Holders that
         such Subsidiary shall not be materially and adversely  affected by such
         Violation Notice or the consequences arising therefrom; or

                  (c)      the earnings before  interest,  taxes,  depreciation
         and  amortization  (calculated  in a  manner  consistent  with  EBITDA,
         including  as  regards  the  addition  of  minority  interest  share of
         earnings) of such Subsidiary for any period of four consecutive  fiscal
         quarters (the "Relevant Four Quarter Period") is at least 50% less than
         such  Subsidiary's  earnings before interest,  taxes,  depreciation and
         amortization  (calculated in a manner  consistent  with EBITDA) for the
         period of four consecutive  fiscal quarters ending immediately prior to
         the commencement of the Relevant Four Quarter Period (an "EARNINGS CALL
         OPTION TRIGGERING EVENT").

                  "CALL OPTION  TRIGGERING  EVENT NOTICE" means a written notice
from the Collateral  Agent (acting at the direction of the Required  Holders) or
the  Required  Holders  to either  Obligor  requiring  such  Obligor  to cause a
Subsidiary  in  respect  of which a Call  Option  Triggering  Event  shall  have
occurred to become a Subsidiary  Guarantor,  PROVIDED that the Required  Holders
will not be  entitled to deliver  (or cause the  Collateral  Agent to deliver) a
Call Option Triggering Event Notice following the occurrence of an Earnings Call
Option Triggering Event unless the Total Debt/EBITDA Ratio at such time is equal
to or greater than 3.25 to 1.

                  "CAPITAL  LEASE" means,  at any time, a lease with respect to
which the lessee is required  concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with U.S. GAAP.

                  "CASH AMOUNTS" means that portion of the consideration payable
in cash in respect of any purchase of shares by the Guarantor or any  Subsidiary
in the capital  stock of any  Subsidiary  pursuant  to the  exercise of any call
option right in favor of the  Guarantor or any  Subsidiary,  as the case may be,
under the terms of any Shareholders Agreement in respect of such Subsidiary.

                  "CLOSING" is defined in Section 3.

                  "CODE"  means  the U.S.  Internal  Revenue  Code of  1986,  as
amended from time to time, and the rules and regulations  promulgated thereunder
from time to time.

                  "COLLATERAL"  means the all of the properties of the Guarantor
or any of its Subsidiaries  subject or required to be subject to the Lien of any
of the Security Documents.

                                       3

<PAGE>


                  "COLLATERAL  AGENT"  means CIBC  Mellon  Trust  Company or any
successor thereto under the Intercreditor Agreement.

                  "COMPANY"   means   FirstService   Delaware,   LP,  a  limited
parternship  formed under the laws of Delaware,  or any  successor  thereto that
shall have become such in the manner prescribed in Section 10.2.

                  "CONFIDENTIAL INFORMATION"  is defined in Section 22.

                  "CONSOLIDATED NET EARNINGS" means, with respect to any period,
the  net  earnings  of the  Guarantor  and  its  Subsidiaries  for  such  period
determined  in accordance  with U.S.  GAAP and  excluding (i) any  extraordinary
items and (ii) any equity  interest of the Guarantor in the unremitted  earnings
of any Person that is not a Subsidiary.

                  "CONSOLIDATED  NET  WORTH"  at  any  time  means  the  sum  of
shareholders' equity, preferred stock and minority interest as would be shown in
the consolidated  financial  statements of the Guarantor and its Subsidiaries as
of such time prepared in accordance with U.S. GAAP.

                  "CONSOLIDATED TOTAL ASSETS" at any time means the total assets
of the  Guarantor  and its  Subsidiaries  as would be shown in the  consolidated
financial  statements  of the  Guarantor  and its  Subsidiaries  as of such time
prepared in accordance with U.S. GAAP.

                  "CROWN" means the Crown in Right of Canada or of any Province
or Territory thereof.

                  "CREDIT AGREEMENT" means the Third Amended and Restated Credit
Agreement  dated as of June 21, 2001 between the Obligors,  FirstService  (USA),
Inc., the Subsidiaries of the Guarantor named as Unlimited  Guarantors  therein,
the Banks named on the execution pages thereto and the various parties acting as
agents thereunder.

                  "CREDIT  FACILITY"  means the Credit  Agreement  and any other
indenture,  mortgage,  deed of trust, loan,  purchase or credit agreement or any
other  agreement  pursuant to which debt for borrowed money shall be incurred or
any note, bond, debenture or other instrument evidencing any such debt.

                  "DEFAULT"  means an  event  or  condition  the  occurrence  or
existence  of which  would,  with the  lapse of time or the  giving of notice or
both, become an Event of Default.

                  "DEFAULT RATE" means that rate of interest that is the greater
of (i) 2.00% per annum  above the rate of  interest  stated in clause (a) of the
first  paragraph  of the Notes or

                                       4

<PAGE>


(ii) 2.00% over the rate of interest  publicly  announced by Bank One, NA in New
York, New York as its "base" or "prime" rate.

                  "DIRECT  SECURITY"  means each of (x) a Subsidiary  Guarantee,
(y) a General Security  Agreement or Security  Agreement,  a Pledge Agreement or
Stock Pledge  Agreement,  an  Assignment  of Material  Contracts,  an Assignment
Agreement  (Call  Option  Rights) and a Minority  Shareholders'  Acknowledgement
Agreement  (Call Option  Rights),  in the case of each of the  documents in this
clause (y) in substantially  the form of the equivalent  Security  Documents set
forth in  Schedule  5.21 and  delivered  on the date of the Closing and (z) each
other document  constituting Direct Security delivered to the Banks from time to
time after the Closing pursuant to the Credit Agreement.

                  "DOLLAR" or "U.S.$" means lawful money of the United States
of America.

                  "EBITDA" means, for any period,  Consolidated Net Earnings for
such  period  plus  the  following  to  the  extent   deducted  in   determining
Consolidated Net Earnings: depreciation,  amortization, interest expense, income
taxes, loss from discontinued operations,  any non-cash and non-recurring gains,
losses,  or charges  of the  Guarantor  and its  Subsidiaries  and the  minority
interest share of earnings as stated on the consolidated financial statements of
the Guarantor and its Subsidiaries,  but excluding any net income, gain, or loss
during such period from any change in accounting  principles,  any extraordinary
items, any prior period adjustments, or gains (or losses) on asset dispositions.

                  "EARNINGS CALL OPTION  TRIGGERING  EVENT" is defined in clause
(c) of the definition of "Call Option Triggering Event".

                  "ENVIRONMENTAL LAWS" means any and all Federal,  state, local,
and foreign statutes, laws, regulations,  ordinances,  rules, judgments, orders,
decrees,  permits,  concessions,  grants,  franchises,  licenses,  agreements or
governmental  restrictions  relating  to  pollution  and the  protection  of the
environment or the release of any materials into the environment,  including but
not limited to those related to hazardous  substances  or wastes,  air emissions
and discharges to waste or public systems.

                  "ERISA" means the Employee  Retirement  Income Security Act of
1974, as amended from time to time,  and the rules and  regulations  promulgated
thereunder from time to time in effect.

                  "ERISA  AFFILIATE" means any trade or business (whether or not
incorporated)  that is treated as a single employer together with either Obligor
under section 414 of the Code.

                  "EVENT OF DEFAULT" is defined in Section 11.

                                       5

<PAGE>


                  "FINANCIAL   CONTRACT   OBLIGATIONS"  means  all  obligations,
present and future, direct or indirect, contingent or absolute, of the Guarantor
or its  Subsidiaries  in respect of (in each case as  determined on a "marked to
market" basis on the date of determining the amount thereof):

                  (i) a currency or interest rate swap agreement;

                  (ii) a swap, future, forward or other  foreign  exchange
                       agreement;

                  (iii) a forward rate  agreement;

                  (iv) any derivative,  combination  or option in respect of, or
                       agreement  similar to, an agreement or contract referred
                       to in the foregoing clause (i), (ii) or (iii);

                  (v) any master agreement in respect of any agreement or
                      contract  referred to in the foregoing  clause (i), (ii)
                      or (iii);  or (vi) a Guaranty of the liabilities under an
                      agreement or contract  referred to in the foregoing clause
                      (i), (ii) or (iii).

                  "FINANCING  DOCUMENTS"  means this Agreement,  the Notes,  the
Guarantees, each Subsidiary Guarantee and each Security Document.


                  "FIXED CHARGE COVERAGE RATIO" means, in respect of any period,
the  quotient  obtained by dividing  (a) the amount (as  numerator)  obtained by
subtracting (i) capital  expenditures  (other than acquisition  expenditures) of
the  Guarantor and its  Subsidiaries  for such period and (ii) cash income taxes
paid by the Guarantor and its Subsidiaries  during such period from (iii) EBITDA
for such period,  by (b) the sum (as  denominator)  of (i)  interest  expense on
Total Debt for such period,  (ii)  scheduled  principal  repayments  and capital
lease principal  payments of the Guarantor and its  Subsidiaries for such period
and (iii)  dividends  paid by the Guarantor  during such period.  In calculating
such interest  expense,  there shall be included the total of all items properly
classified as interest  expense for the Guarantor and its  Subsidiaries for such
period determined in accordance with U.S. GAAP on a consolidated basis.

                  "GENERAL  PARTNER"  means  FirstService  GP Inc.,  as  general
partner of the Company, and its successors and assigns.

                  "GOVERNMENTAL AUTHORITY"  means

                  (a)      the government of

                                       6

<PAGE>


                           (i)      Canada,  the United  States of America or
                 any Province,  State or other  political  subdivision  of
                 either thereof, or

                           (ii) any other  jurisdiction  in which either Obligor
                 or any Subsidiary conducts all or any part of its business,  or
                 which  asserts  jurisdiction  over  any  properties  of  either
                 Obligor or any Subsidiary, or

                 (b) any entity exercising  executive,  legislative,  judicial,
                 regulatory or  administrative  functions of, or pertaining to,
                 any such government.

                  "GUARANTEE" is defined in Section 1.1.

                  "GUARANTOR"   means   FirstService   Corporation,   a  company
incorporated  under the laws of Ontario,  Canada,  or any successor thereto that
shall have become such in the manner prescribed in Section 10.2.

                  "GUARANTY" means,  with respect to any Person,  any obligation
(except  the  endorsement  in the  ordinary  course of  business  of  negotiable
instruments for deposit or collection) of such Person  guaranteeing or in effect
guaranteeing any indebtedness,  dividend or other obligation of any other Person
in any manner,  whether directly or indirectly,  including (without  limitation)
obligations  incurred  through an agreement,  contingent  or otherwise,  by such
Person:

                  (a)      to purchase such indebtedness or obligation or any
property constituting security therefor;

                  (b) to advance or supply funds (i) for the purchase or payment
of such  indebtedness or obligation,  or (ii) to maintain any working capital or
other balance  sheet  condition or any income  statement  condition of any other
Person or  otherwise  to advance or make  available  funds for the  purchase  or
payment of such indebtedness or obligation;

                  (c) to lease properties or to purchase  properties or services
primarily  for the  purpose  of  assuring  the  owner  of such  indebtedness  or
obligation  of  the  ability  of  any  other  Person  to  make  payment  of  the
indebtedness or obligation; or

                  (d)  otherwise  to assure  the owner of such  indebtedness  or
obligation against loss in respect thereof.

In any computation of the indebtedness or other liabilities of the obligor under
any Guaranty, the indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

                  "HAZARDOUS  MATERIAL" means any and all  pollutants,  toxic or
hazardous  wastes or any other  substances that might pose a hazard to health or
safety,  the removal of

                                       7

<PAGE>


which may be  required or the  generation,  manufacture,  refining,  production,
processing,  treatment,  storage,  handling,   transportation,   transfer,  use,
disposal,  release,  discharge,  spillage, seepage, or filtration of which is or
shall be restricted,  prohibited or penalized by any applicable law  (including,
without   limitation,   asbestos,   urea   formaldehyde   foam   insulation  and
polychlorinated biphenyls).

                  "HOLDER" means,  with respect to any Note, the Person in whose
name such Note is registered in the register  maintained by the Company pursuant
to Section 15.1.

                  "INDEBTEDNESS" with respect to any Person means, at any time,
without duplication,

                  (a)      its liabilities for borrowed money;

                  (b)  its  liabilities  for  the  deferred  purchase  price  of
                  property acquired by such Person  (excluding  accounts payable
                  arising in the ordinary  course of business but  including all
                  liabilities  created or arising under any conditional  sale or
                  other  title  retention  agreement  with  respect  to any such
                  property);

                  (c)  all  liabilities   appearing  on  its  balance  sheet  in
                  accordance with U.S. GAAP in respect of Capital Leases;

                  (d) all  liabilities  for borrowed  money  secured by any Lien
                  with respect to any property owned by such Person  (whether or
                  not it  has  assumed  or  otherwise  become  liable  for  such
                  liabilities);

                  (e) Financial Contract Obligations of such Person;

                  (f) all liabilities of such Person with respect to vendor-
                  take-back financing arrangements; and

                  (g) any Guaranty of such Person with respect to liabilities of
         another  Person a type  described  in any of clauses  (a)  through  (f)
         hereof.

Indebtedness  of any Person shall include all  obligations of such Person of the
character described in clauses (a) through (g) to the extent such Person remains
legally liable in respect  thereof  notwithstanding  that any such obligation is
deemed to be extinguished under U.S. GAAP.

                  "INSTITUTIONAL  ACCREDITED INVESTOR" means an "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.

                  "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a
Note,  (b) any holder of a Note holding more than 5% of the aggregate  principal
amount of the

                                       8

<PAGE>


Notes  then  outstanding,  and (c) any bank,  trust  company,  savings  and loan
association  or other  financial  institution,  any pension plan, any investment
company,  any  insurance  company,  any broker or dealer,  or any other  similar
financial institution or entity, regardless of legal form.

                  "INTERCREDITOR  AGREEMENT" means the  Intercreditor  Agreement
dated as of the date hereof among the Obligors,  FirstService  (USA),  Inc., the
Subsidiaries  of the  Guarantor  named  as  Unlimited  Guarantors  therein,  the
Purchasers, the Collateral Agent, the Banks named on the execution pages thereto
and The Toronto-Dominion Bank, as Bank Collateral Agent.

                  "LIEN"  means with  respect to the  property  or assets of any
Person,  a mortgage,  pledge,  hypothecation,  encumbrance,  lien  (statutory or
other), charge or other security interest of any kind in or with respect to such
property or assets (including, without limitation, any conditional sale or other
title  retention  agreement,  and any financing lease under which such Person is
lessee having substantially the same economic effect as any of the foregoing).

                  "MAKE-WHOLE AMOUNT" is defined in Section 8.8.

                  "MATERIAL"   means  material  in  relation  to  the  business,
operations,  affairs, financial condition, assets or properties of the Guarantor
and its Subsidiaries taken as a whole.

                  "MATERIAL  ADVERSE EFFECT" means a material  adverse effect on
(a) the business, operations, affairs, financial condition, assets or properties
of the Guarantor and its  Subsidiaries  taken as a whole,  or (b) the ability of
the Company or the Guarantor to perform its  obligations  under this  Agreement,
the Notes or any other  Financing  Document  to which the Company is a party (in
the  case of the  Company)  or  this  Agreement,  the  Guarantees  or any  other
Financing  Document  to  which  the  Guarantor  is a party  (in the  case of the
Guarantor),  or (c) the validity or enforceability of this Agreement, the Notes,
the Guarantees or any other Financing Documents.

                  "MEMORANDUM" is defined in Section 5.3.

                  "MULTIEMPLOYER  PLAN" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).

                  "NON  WHOLLY-OWNED   SUBSIDIARY"   means,  at  any  time,  any
Subsidiary of the Guarantor which is not a Wholly-Owned Subsidiary.

                  "NORMALIZING ADJUSTMENTS" is defined in the definition of
"Total Debt/EBITDA Ratio.

                                       9

<PAGE>

                  "NOTES" is defined in Section 1.

                  "OFFICER'S  CERTIFICATE"  means  a  certificate  of  a  Senior
Financial  Officer or of any other officer of the  Guarantor,  or of the General
Partner, as applicable,  whose responsibilities  extend to the subject matter of
such certificate.

                  "PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.

                  "PERMITTED LIENS" is defined in Section 10.3.

                  "PERMITTED  LOANS" means advances and accounts  between one or
more  of  the  Guarantor  and  any  of  its  Subsidiaries,  which  shall  be  on
commercially  reasonable  terms,  PROVIDED  that any such  advance or account is
secured by means of a security  agreement in form and substance  satisfactory to
the Collateral  Agent, is assigned to the Collateral Agent and forms part of the
Collateral.

                  "PERSON"  means  an  individual,   partnership,   corporation,
limited liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.

                  "PLAN" means an "employee benefit plan" (as defined in section
3(3) of ERISA)  subject to Section  412 of the Code or Title IV of ERISA that is
or, within the preceding five years, has been  established or maintained,  or to
which  contributions  are or, within the preceding five years, have been made or
required to be made, by either Obligor or any ERISA Affiliate or with respect to
which either Obligor or any ERISA Affiliate may have any liability.

                  "PROPERTY"   or   "PROPERTIES"    means,    unless   otherwise
specifically  limited,  real or  personal  property  of any  kind,  tangible  or
intangible, choate or inchoate.

                  "PTE" means a Prohibited Transaction Exemption issued by the
Department of Labor.

                  "PURCHASER" is defined in the first paragraph of this
Agreement.

                  "QPAM EXEMPTION" means Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor.

                  "REQUIRED  HOLDERS"  means,  at any  time,  the  holders  of a
majority in principal amount of the Notes at the time outstanding  (exclusive of
Notes then owned by either Obligor or any of their respective Affiliates).

                                       10
<PAGE>

                  "RESPONSIBLE  OFFICER" means any Senior Financial  Officer and
any other officer of the Guarantor or of the General Partner with responsibility
for the administration of the relevant portion of this agreement.

                  "SECURED PARTIES" means the holders from time to time of Notes
and the Collateral Agent, as agent for such holders.

                  "SECURITIES ACT" means the U.S. Securities Act of 1933, as
amended from time to time.

                  "SECURITY  DOCUMENTS"  means the Security  Documents listed in
Schedule 5.21, and the applicable  Direct  Security  delivered or required to be
delivered after the date of the Closing.

                  "SENIOR FINANCIAL OFFICER" means the Secretary or Treasurer of
the General Partner or the Senior  Vice-President and Chief Financial Officer of
the Guarantor,  or any other person holding an equivalent  position from time to
time.

                  "SHAREHOLDERS  AGREEMENTS" means all agreements that create in
favor of the Guarantor or any Subsidiary  call option rights with respect to any
minority interest in any Subsidiary.

                  "SUBSIDIARY"   means,  as  to  any  Person,  any  corporation,
association or other business  entity in which such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries  owns sufficient
equity or voting interests to enable it or them (as a group) ordinarily,  in the
absence of  contingencies,  to elect a majority  of the  directors  (or  Persons
performing  similar  functions)  of such entity,  and any  partnership  or joint
venture if more than a 50%  interest in the profits or capital  thereof is owned
by such Person or one or more of its Subsidiaries or such Person and one or more
of its  Subsidiaries  (unless  such  partnership  or joint  venture can and does
ordinarily take major business actions without the prior approval of such Person
or one or  more of its  Subsidiaries).  Unless  the  context  otherwise  clearly
requires,  any reference to a "Subsidiary" is a reference to a Subsidiary of the
Guarantor.

                  "SUBSIDIARY  GUARANTEE"  means  a  guarantee  of a  Subsidiary
Guarantor of the  obligations of the Company under this Agreement and the Notes,
substantially in the form of Exhibit 4.10.

                  "SUBSIDIARY  GUARANTOR"  means (a) as of the Closing Date, all
Wholly-Owned   Subsidiaries   identified  as  such  on  Schedule  5.4,  and  (b)
thereafter,  the Persons  referred to in clause (a) and each other  Person which
from time to time (i)  executes  and delivers a  counterpart  of the  Subsidiary
Guarantee  (or  otherwise  enters  into a  Subsidiary

                                       11

<PAGE>


Guarantee) and the other applicable Direct Security and (ii) delivers an opinion
of internationally  recognized independent counsel, or other independent counsel
reasonably  satisfactory  to the Required  Holders,  covering the  execution and
enforceability  of such  Subsidiary  Guarantee and such other  matters  incident
thereto in relation to such Subsidiary  Guarantee and such Subsidiary  Guarantor
as are covered in the opinion  required to be  delivered  on the date of Closing
under Section 4.4(a) of this Agreement.

                  "TAX" is defined in Section 5.9(b).

                  "TAX EVENT"  means any  amendment  to, or change in, after the
date of the Closing,  the laws,  regulations or published tax rulings (including
tax treaties and  regulations  with respect to such  treaties) of any Applicable
Taxing Authority, or any amendment to or change after the date of the Closing in
the  official  administration,  interpretation  or  application  of  such  laws,
regulations, or rulings.

                  "TOTAL  DEBT"  at  any  time  means  all  Indebtedness  of the
Guarantor and its  Subsidiaries at such time determined on a consolidated  basis
in accordance  with U.S.  GAAP after  deduction of  cash-on-hand,  plus the Cash
Amount at such time.

                  "TOTAL  DEBT/EBITDA  RATIO" at any time means the ratio of (x)
Total Debt as at the end of the fiscal quarter most recently ended to (y) EBITDA
for the period of the four  consecutive  fiscal  quarters of the Guarantor  most
recently  ended, so as to include all Persons which became  Subsidiaries  during
the  relevant  period,  with EBITDA from the  acquisition  of such Persons to be
included in the  calculations  by using the  trailing  12 month  EBITDA for such
Persons,  and so as to exclude the EBITDA of any former  Subsidiary  that ceased
being a Subsidiary  at any time during the  previous  four fiscal  quarters.  In
addition,  for purposes of this  definition,  EBITDA  shall  include a full year
impact of the cost  savings  in  respect  of any  Subsidiary  which has become a
Subsidiary during the period,  if such savings are readily  identifiable and can
be immediately  implemented  (such as the  elimination of salaries for redundant
employees and elimination of various administrative functions which will, in the
reasonable opinion of the Guarantor,  become unnecessary or otherwise  performed
more  cost-effectively)  (such  cost  savings  being  collectively  "Normalizing
Adjustments"); provided that adjustments shall only be made if the Guarantor has
provided to the Canadian Agent (under and as defined in the Credit Agreement) to
the extent the Credit  Agreement  remains in full force and effect,  and, to the
extent the Credit Agreement is no longer in full force and effect to the holders
of Notes details of such Normalizing Adjustments following the completion of the
acquisition of such Subsidiary,  and (ii) (x) to the extent the Credit Agreement
remains in full force and effect,  the  Canadian  Agent shall not have  provided
written  notice to the  Guarantor  within 15 Business Days of the receipt by the
Canadian  Agent  (pursuant to the Credit  Agreement)  of written  notice of such
Normalizing  Adjustments  that the Majority Lenders (under and as defined in the
Credit  Agreement) do not consent to the Normalizing  Adjustments and (y) to the
extent the Credit Agreement is no longer in full force and effect,  the Required
Holders  shall  not

                                       12

<PAGE>


have provided  written  notice to the  Guarantor  within 15 Business Days of the
receipt  by  the  holders  of  Notes  of  written  notice  of  such  Normalizing
Adjustments  that  the  Required  Holders  do not  consent  to  the  Normalizing
Adjustments.

                  "UNDERTAKING SUBSIDIARY" means (a) as of the Closing Date, all
Non  Wholly-Owned  Subsidiaries  identified  as such on  Schedule  5.4,  and (b)
thereafter,  the  Persons  referred  to in clause (a)  (except to the extent any
thereof has become a Subsidiary Guarantor) and each other Person which from time
to time (i) executes and delivers an Undertaking  to Secure or otherwise  enters
into an  Undertaking  to Secure and (ii) delivers an opinion of  internationally
recognized   independent   counsel,  or  other  independent  counsel  reasonably
satisfactory to the Required Holders,  covering the execution and enforceability
of such  Undertaking  to Secure  and such  other  matters  incident  thereto  in
relation to such Undertaking to Secure and such Non  Wholly-Owned  Subsidiary as
are covered in the opinion required to be delivered on the date of Closing under
Section 4.4(a) of this Agreement.

                  "UNDERTAKING  TO SECURE" means an  Undertaking to Secure to be
provided by each  Undertaking  Subsidiary,  substantially in the form of Exhibit
4.11.

                  "U.S.  GAAP" means generally  accepted  accounting
principles as in effect from time to time in the United States of America.

                  "VIOLATION NOTICE" means any notice received by the Guarantor,
the Company or any Subsidiary from any governmental or regulatory body or agency
under any Environmental  Law that the Guarantor,  the Company or such Subsidiary
is in non-compliance with the requirements of any Environmental Law.

                  "WHOLLY-OWNED  SUBSIDIARY"  means, at any time, any Subsidiary
one hundred  percent (100%) of all of the equity  interests  (except  directors'
qualifying shares) and voting interests of which are owned by any one or more of
the Guarantor and the Guarantor's other Wholly-Owned Subsidiaries at such time.


                                       13

<PAGE>


                                                                       EXHIBIT 1


                                 [FORM OF NOTE]


                            FIRSTSERVICE DELAWARE, LP

                  8.06% GUARANTEED SENIOR SECURED NOTE DUE 2011

No. [_____]                                                               [Date]
U.S.$[_______]                                                   PPN 33763@ AA 4

                  FOR VALUE RECEIVED, the undersigned, FIRSTSERVICE DELAWARE, LP
(herein called the "Company"), a limited partnership organized under the laws of
Delaware, hereby promises to pay to [             ], or registered  assigns, the
principal sum of [         ] DOLLARS (or so much  thereof as shall not have been
prepaid) on June 29, 2011,  with  interest  (computed  on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance  thereof at the rate  of
8.06% per annum from the date hereof, payable semiannually, on  the 29th  day of
June and December in  each  year,  commencing  with  the June or  December  next
succeeding the date hereof, until the principal hereof shall have become due and
payable,  and  (b) to  the extent  permitted  by  law, on  any  overdue  payment
(including any overdue prepayment) of principal, any overdue payment of interest
and any overdue payment of any  Make-Whole  Amount  (as defined  in the Note and
Guarantee Agreement referred  to below),  payable semiannually as aforesaid (or,
at the option of the registered  holder hereof,  on demand), at a rate per annum
from time to time equal to the greater of (i) 10.06% or (ii) 2.00% over the rate
of  interest publicly  announced  by Bank One, NA from time to time in New York,
New York as its "base" or "prime" rate.

                  Payments  of  principal  of,  interest  on and any  Make-Whole
Amount  with  respect to this Note are to be made in lawful  money of the United
States of America at the principal  office of Bank One, NA in New York, New York
or at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note and Guarantee Agreement referred
to below.

                  This  Note is one of a series  of  Guaranteed  Senior  Secured
Notes  (herein  called the "Notes")  issued  pursuant to the Note and  Guarantee
Agreement dated as of June 21, 2001 (as from time to time amended, the "Note and
Guarantee  Agreement"),  between  the  Company,  FirstService  Corporation  (the
"Guarantor") and the respective  Purchasers named therein and is entitled to the
benefits  thereof.  Each holder of this Note will be deemed,  by its  acceptance
hereof, to have agreed to the confidentiality provisions set forth in Section 22
of the Note and  Guarantee  Agreement  and to have made the  representation  set
forth in Section 6.2 of the Note and Guarantee Agreement.


<PAGE>


                  Payment of the principal of, and  Make-Whole  Amount,  if any,
and interest on this Note has been  guaranteed  by the  Guarantor in  accordance
with the terms of the Note and Guarantee Agreement.

                  This Note is secured by, and  entitled to the benefits of, the
Security Documents referred to in the Note and Guarantee Agreement.

                  This Note is a  registered  Note and,  as provided in the Note
and  Guarantee  Agreement,  upon  surrender  of this  Note for  registration  of
transfer, duly endorsed, or accompanied by a written instrument of transfer duly
executed,  by the  registered  holder  hereof  or such  holder's  attorney  duly
authorized in writing, a new Note for a like principal amount will be issued to,
and  registered in the name of, the  transferee.  Prior to due  presentment  for
registration  of  transfer,  the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving  payment and
for all other  purposes,  and the Company  will not be affected by any notice to
the contrary.

                  The Company will make required prepayments of principal on the
dates and in the amounts  specified in the Note and  Guarantee  Agreement.  This
Note is also  subject to optional  prepayment,  in whole or from time to time in
part,  at the  times  and on the  terms  specified  in the  Note  and  Guarantee
Agreement, but not otherwise.

                  If an Event of Default,  as defined in the Note and  Guarantee
Agreement,  occurs and is continuing, the principal of this Note may be declared
or otherwise  become due and payable in the manner,  at the price (including any
applicable  Make-Whole  Amount)  and with the  effect  provided  in the Note and
Guarantee Agreement.

                  This Note shall be construed and enforced in  accordance  with
the laws of the State of New York.

                            FIRSTSERVICE DELAWARE, LP

                            By:      FirstService GP Inc.
                                     its General Partner


                            By  _______________________________________
                                Title:


                                       2

<PAGE>


                                                                    EXHIBIT 1-A


                                FORM OF GUARANTEE

                  For value received, the undersigned hereby unconditionally and
irrevocably  guarantees to the holder of the foregoing Note the due and punctual
payment of the principal  of,  Make-Whole  Amount,  if any, and interest on said
Note, as more fully provided in the Note and Guarantee  Agreement referred to in
said Note.

                                      FIRSTSERVICE CORPORATION


                                      By___________________________
                                        Title:

<PAGE>


                                                                 EXHIBIT 4.4(a)




                            Matters To Be Covered In
                       OPINIONS OF COUNSEL TO THE OBLIGORS


<PAGE>


                                                                  EXHIBIT 4.4(b)





                       FORM OF OPINION OF SPECIAL COUNSEL
                                TO THE PURCHASERS


<PAGE>


                                                                   EXHIBIT 4.10

                         [FORM OF SUBSIDIARY GUARANTEE]


                  GUARANTEE dated as of [ ], in favor of each person who is from
time to time a  holder  of one or more  of any of the  8.06%  Guaranteed  Senior
Secured Notes due 2011 (together  with all notes  delivered in  substitution  or
exchange  thereof,  the  "NOTES"),  issued  by  FirstService  Delaware,  LP (the
"ISSUER") in an aggregate principal amount of  U.S.$100,000,000  pursuant to the
Note and Guarantee Agreement dated as of June 21, 2001 (as amended,  modified or
supplemented  from time to time, the "NOTE AND GUARANTEE  AGREEMENT")  among the
Issuer,  FirstService  Corporation  (the  "PARENT  GUARANTOR")  and  each of the
Purchasers listed in Schedule A to the Note and Guarantee Agreement.


                  Section 1. DEFINITIONS.  Except as otherwise provided herein,
terms defined in the Note and Guarantee  Agreement are used herein as defined
therein.

                  Section 2.  THE GUARANTEE.


                  2.01 THE GUARANTEE.  The Issuer will use the proceeds from the
sale of the Notes to repay  indebtedness and for general  corporate  purposes of
the group of Persons comprised of the Parent Guarantor and its Subsidiaries, and
the undersigned (individually,  a "SUBSIDIARY GUARANTOR," and collectively,  the
"SUBSIDIARY  GUARANTORS")  are  Subsidiaries of the Parent  Guarantor.  For such
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged,  each Subsidiary Guarantor hereby jointly and severally guarantees
to each holder of a Note (each,  a "HOLDER") the prompt payment in full when due
(whether  at  stated  maturity,  by  acceleration,  by  optional  prepayment  or
otherwise) of the principal of, Make-Whole Amounts (if any), and interest on the
Notes  (including,  without  limitation,  interest  on  any  overdue  principal,
Make-Whole Amount and, to the extent permitted by applicable law, on any overdue
interest)  and all other amounts from time to time owing by the Issuer under the
Note and Guarantee  Agreement,  the Notes and the other  Financing  Documents to
which it is a party (including,  without limitation,  costs, expenses and taxes)
(such   obligations   being   herein   collectively   called   the   "GUARANTEED
OBLIGATIONS").  Each  Subsidiary  Guarantor  hereby  further  agrees that if the
Issuer  shall  default  in  the  payment   (whether  at  stated   maturity,   by
acceleration,  by optional  prepayment or  otherwise)  of any of the  Guaranteed
Obligations,  such Subsidiary  Guarantor will (x) promptly pay the same, without
any demand or notice  whatsoever,  and that in the case of any extension of time
of payment or renewal  of any of the  Guaranteed  Obligations,  the same will be
promptly paid in full when due (whether at extended  maturity,  by acceleration,
by  optional  prepayment  or  otherwise)  in  accordance  with the terms of such
extension  or renewal  and (y) pay to any  holder  such  amounts,  to the extent
lawful,  as shall be sufficient to pay the  reasonable  out-of-pocket  costs and
expenses of  collection or of otherwise  enforcing  any of such holder's  rights
under the Note and  Guarantee  Agreement,  the  Notes  and the  other  Financing
Documents, including, without limitation, reasonable counsel fees.


                  All  obligations  of  each  Subsidiary  Guarantor  under  this
Section 2.01 shall survive the transfer of any Note.


                  2.02  OBLIGATIONS  UNCONDITIONAL.  (a) The obligations of each
Subsidiary

                                       1

<PAGE>


Guarantor  under Section 2.01  constitute a present and  continuing  guaranty of
payment and not collectibility and are absolute and unconditional,  irrespective
of  the  value,  genuineness,  validity,  regularity  or  enforceability  of the
obligations of the Issuer under the Note and Guarantee Agreement, the Notes, any
other  Financing  Document  to  which it is a party or any  other  agreement  or
instrument  referred  to herein or  therein,  or any  substitution,  release  or
exchange  of any  other  guarantee  of or  security  for  any of the  Guaranteed
Obligations  (including the Lien granted  pursuant to the Security  Documents on
and over the  Collateral),  and, to the fullest  extent  permitted by applicable
law,  irrespective of any other  circumstance  whatsoever  which might otherwise
constitute a legal or equitable  discharge or defense of a surety or  guarantor,
it being the intent of this Section 2.02 that the obligations of each Subsidiary
Guarantor  hereunder  shall be  absolute  and  unconditional,  under any and all
circumstances.  Without  limiting the generality of the foregoing,  it is agreed
that the  occurrence  of any one or more of the  following  shall  not  alter or
impair the liability of any Subsidiary  Guarantor  hereunder  which shall remain
absolute and unconditional as described above:


                  (1) any amendment or modification of any provision of the Note
         and Guarantee Agreement, the Notes, any other Financing Document or any
         assignment  or  transfer  thereof,  including  without  limitation  the
         renewal  or  extension  of the  time of  payment  of the  Notes  or the
         granting  of  time  in  respect  of  such  payment  thereof,  or of any
         furnishing or acceptance of security or any additional guarantee or any
         release of any security or guarantee (including any addition or release
         of the  Parent  Guarantor  or any other  Subsidiary  Guarantor,  or the
         release of the Lien granted  pursuant to the Security  Documents on and
         over the Collateral) so furnished or accepted for the Notes;


                  (2)  any  waiver,  consent,   extension,   granting  of  time,
         forbearance, indulgence or other action or inaction under or in respect
         of the Note and Guarantee  Agreement,  the Notes or any other Financing
         Document, or any exercise or non-exercise of any right, remedy or power
         in respect hereof or thereof;


                  (3) any bankruptcy, receivership,  insolvency, reorganization,
         arrangement,   readjustment,   composition,   liquidation   or  similar
         proceedings  with  respect  to the  Issuer or any  other  Person or the
         properties or creditors of any of them;


                  (4) the  occurrence of any Default or Event of Default  under,
         or any invalidity or any unenforceability of, or any misrepresentation,
         irregularity or other defect in, the Note and Guarantee Agreement,  the
         Notes, any other Financing Document or any other agreement;


                  (5)  any  transfer  of  any  assets  to or  from  the  Issuer,
         including without  limitation any transfer or purported transfer to the
         Issuer from any Person, any invalidity,  illegality of, or inability to
         enforce, any such transfer or purported transfer,  any consolidation or
         merger  of the  Issuer  with or into  any  Person,  any  change  in the
         ownership of any shares of capital  stock of the Issuer,  or any change
         whatsoever in the objects, capital structure,  constitution or business
         of the Issuer;


                  (6) any default,  failure or delay,  willful or otherwise,  on
         the part of the Issuer or any other  Person to perform or comply  with,
         or the  impossibility or illegality of performance by the Issuer or any
         other  Person of,  any term of the Note and  Guarantee  Agreement,  the
         Notes,

                                       2

<PAGE>


         any other Financing Document or any other agreement;


                  (7) any suit or other  action  brought by, or any  judgment in
         favor of, any  beneficiaries  or creditors  of, the Issuer or any other
         Person for any reason whatsoever, including without limitation any suit
         or action in any way attacking or involving any issue,  matter or thing
         in respect of the Note and Guarantee  Agreement,  the Notes,  any other
         Financing Document or any other agreement;


                  (8) any lack or limitation  of status or of power,  incapacity
         or disability of the Issuer or any trustee or agent thereof; or


                  (9) any other thing, event, happening, matter, circumstance or
         condition whatsoever, not in any way limited to the foregoing.


                  (b) Each Subsidiary  Guarantor hereby  unconditionally  waives
diligence,  presentment,  demand of payment,  protest and all notices whatsoever
and any requirement that any holder proceed against or exhaust any right,  power
or remedy against the Issuer under the Note and Guarantee Agreement,  the Notes,
any other Financing  Document or any other  agreement or instrument  referred to
herein or therein,  or against any other  Subsidiary  Guarantor,  or against any
other  Person  under  any  other  guarantee  of,  or  security  for,  any of the
Guaranteed  Obligations  (including  the Lien  granted  pursuant to the Security
Documents on and over the Collateral).


                  (c) In the event that any  Subsidiary  Guarantor  shall at any
time pay any amount on account of the  Guaranteed  Obligations or take any other
action in performance of its obligations  hereunder,  such Subsidiary  Guarantor
shall not exercise any subrogation or other rights  hereunder,  under the Notes,
the Note and  Guarantee  Agreement  or any  other  Financing  Document  and such
Subsidiary  Guarantor  hereby waives all rights it may have to exercise any such
subrogation or other rights, and all other remedies that it may have against the
Issuer, in respect of any payment made hereunder unless and until the Guaranteed
Obligations  shall have been paid in full.  If any  amount  shall be paid to any
Subsidiary  Guarantor on account of any such subrogation rights or other remedy,
notwithstanding  the waiver thereof,  such amount shall be received in trust for
the  benefit of the  holders  and shall  forthwith  be paid to the holders to be
credited  and  applied  upon the  Guaranteed  Obligations,  whether  matured  or
unmatured, in accordance with the terms hereof. Each Subsidiary Guarantor agrees
that its obligations  under this Guarantee shall be automatically  reinstated if
and to the extent that for any reason any payment (including payment in full) by
or on  behalf of the  Issuer,  the  Parent  Guarantor  or any  other  Subsidiary
Guarantor is rescinded or must be otherwise restored by any holder, whether as a
result of any proceedings in bankruptcy or reorganization  or otherwise,  all as
though such amount had not been paid.


                  The guarantee in this Section 2 is a continuing  guarantee and
shall apply to the Guaranteed  Obligations whenever arising. Each default in the
payment or performance of any of the Guaranteed Obligations shall give rise to a
separate claim and cause of action  hereunder,  and separate claims or suits may
be made and brought, as the case may be, hereunder as each such default occurs.


                  If an event permitting the acceleration of the maturity of the
principal amount of the Notes shall at any time have occurred and be continuing,
and such  acceleration  (and the effect

                                       3

<PAGE>


thereof on the Guaranteed Obligations) shall at such time be prevented by reason
of the pendency  against the Issuer or any other Person of a case or  proceeding
under a bankruptcy or insolvency law, each Subsidiary Guarantor agrees that, for
purposes of this Guarantee and its  obligations  hereunder,  the maturity of the
principal amount of the Notes shall be deemed to have been  accelerated  (with a
corresponding  effect on the Guaranteed  Obligations) with the same effect as if
the holders had  accelerated  the same in accordance  with the terms of the Note
and Guarantee Agreement,  and such Subsidiary Guarantor shall forthwith pay such
principal amount,  any interest thereon,  any Make-Whole  Amount,  and any other
amounts guaranteed hereunder without further notice or demand.


                  The  obligations  of  the  Subsidiary  Guarantors  under  this
Subsidiary   Guarantee  are  secured  by  the  Collateral  of  such   Subsidiary
Guarantors.


                  Section 3.  REPRESENTATIONS AND WARRANTIES. Each Subsidiary
Guarantor represents and warrants to the holders that:


                  3.01  ORGANIZATION;   POWER  AND  AUTHORITY.  Such  Subsidiary
Guarantor is duly  organized,  validly  existing and in good standing  under the
laws of its jurisdiction of  organization,  and is duly qualified and is in good
standing in each  jurisdiction in which such  qualification  is required by law,
other than those  jurisdictions as to which the failure to be so qualified or in
good  standing  could  not,  individually  or in the  aggregate,  reasonably  be
expected to have a Material  Adverse Effect.  Such Subsidiary  Guarantor has the
corporate  or other  requisite  power and  authority to execute and deliver this
Guarantee and to perform the provisions hereof.


                  3.02   AUTHORIZATION,   ETC.  This  Guarantee  has  been  duly
authorized by all necessary action on the part of such Subsidiary Guarantor, and
this  Guarantee  constitutes  a legal,  valid  and  binding  obligation  of such
Subsidiary Guarantor enforceable against such Subsidiary Guarantor in accordance
with its terms,  except as such  enforceability may be limited by (i) applicable
bankruptcy,  insolvency,  reorganization,   moratorium  or  other  similar  laws
affecting  the  enforcement  of  creditors'  rights  generally  and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

                  3.03  COMPLIANCE  WITH  LAWS,  OTHER  INSTRUMENTS,   ETC.  The
execution,  delivery  and  performance  by  such  Subsidiary  Guarantor  of this
Guarantee  will not (i)  contravene,  result in any breach of, or  constitute  a
default under,  or result in the creation of any Lien in respect of any property
of such Subsidiary  Guarantor  under,  any indenture,  mortgage,  deed of trust,
loan, purchase or credit agreement, lease, corporate charter or by-laws or other
organizational  document,  or any other  agreement or  instrument  to which such
Subsidiary  Guarantor is bound or by which such  Subsidiary  Guarantor or any of
its  properties  may be bound or  affected,  (ii)  conflict  with or result in a
breach of any of the terms,  conditions or  provisions  of any order,  judgment,
decree,  or ruling of any court,  arbitrator or  Governmental  Authority  having
jurisdiction  over such  Subsidiary  Guarantor or (iii) violate any provision of
any statute or other rule or regulation of any Governmental Authority applicable
to such Subsidiary Guarantor.

                  3.04 GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or
authorization of, or registration,  filing or declaration with, any Governmental
Authority is required in connection with the execution,  delivery or performance
by such Subsidiary Guarantor of this Guarantee

                                       4

<PAGE>


1including,  without  limitation,  any thereof  required in connection  with the
obtaining of Dollars to make payments  under this  Subsidiary  Guarantee and the
payment of such Dollars to Persons resident in the United States of America.  It
is  not  necessary  to  ensure  the  legality,   validity,   enforceability   or
admissibility  into  evidence  in  [insert  jurisdictions  of  incorporation  of
Subsidiary  Guarantors]  of  this  Subsidiary  Guarantee  that  this  Subsidiary
Guarantee  or any  other  document  be  filed,  recorded  or  enrolled  with any
Governmental  Authority,  or that any such agreement or document be stamped with
any stamp, registration or similar transaction tax.


                  3.05.  SOLVENCY.  Upon the execution and delivery hereof, such
Subsidiary  Guarantor  will be  solvent,  will be able to pay its  debts as they
mature and will have capital sufficient to carry on its business.

                  3.06.  RANKING.  All liabilities of each Subsidiary  Guarantor
under this Subsidiary  Guarantee  constitute  direct,  unconditional and general
obligations  of such  Subsidiary  Guarantor and rank in right of payment  either
pari passu or senior to all other  Indebtedness  of such  Subsidiary  Guarantor,
except for such  Indebtedness  which is preferred  as a result of being  secured
(but then only to the extent of such security).

                  3.07  TAXES.2  No  liability  for  any  tax  (whether  income,
documentary,  sales, stamp,  registration,  issue, capital,  property, excise or
otherwise),  duty, levy,  impost,  fee, charge or withholding  (each a "TAX" and
collectively  "TAXES"),  directly or indirectly,  imposed,  assessed,  levied or
collected by or for the account of any  Governmental  Authority of or in [insert
jurisdictions  of  incorporation  of  Subsidiary  Guarantors]  or any  political
subdivision  thereof or  therein  (an  "APPLICABLE  TAXING  AUTHORITY")  will be
incurred by any Subsidiary  Guarantor or any holder of a Note as a result of the
execution or delivery of this Subsidiary Guarantee and, based on present law, no
deduction or  withholding  in respect of Taxes  imposed by or for the account of
any Applicable  Taxing  Authority is required to be made from any payment by the
Subsidiary  Guarantor  under  this  Subsidiary  Guarantee  except  for any  such
withholding or deduction arising out of the conditions  described in the proviso
to Section 4(a).

                  3.08  OWNERSHIP OF COLLATERAL; SECURITY DOCUMENTS.

                  (a) The  Subsidiary  Guarantors  are the sole  and  beneficial
owners of the  Collateral  which secures this  Subsidiary  Guarantee and no Lien
exists or will exist upon such  Collateral at any time,  except for the security
interest in favor of the Collateral Agent for the benefit of the Secured Parties
created or provided for in the Security  Documents  and except for Liens arising
in connection  with the Credit  Agreement  and any other  Permitted  Liens.  The
provisions of the Security  Documents  are effective to create,  in favor of the
Collateral Agent on behalf of the Secured Parties,  legal, valid and enforceable
Liens on or in all of the Collateral of the Subsidiary Guarantors intended to be
covered thereby, and as of the date of this Subsidiary Guarantee,  all necessary
recordings and filings will have been made in all necessary public offices (such
recordings  and  filings  being  identified  on Schedule 1 hereto) and all other
necessary and

- ------------------
1  The remainder  of  this  Section  is not  necessary in relation to Subsidiary
   Guarantors that are U.S. persons.

2  This section is not necessary in relation to  Subsidiary Guarantors  that are
   U.S. persons.


                                       5

<PAGE>


appropriate  action  will  have  been  taken so that the  Liens  created  by the
Security  Documents will  constitute  perfected  Liens on or in such  Collateral
intended to be covered  thereby,  prior and  superior to all other Liens  (other
than  Liens  arising  in  connection  with the  Credit  Agreement  and any other
Permitted  Liens),  and  all  necessary  consents,  if  any,  to  the  creation,
effectiveness,  priority and perfection of each such Lien have been obtained. No
mortgage or financing statement or other instrument or recordation  covering all
or any part of the  Collateral  of the  Subsidiary  Guarantors is on file in any
recording office,  except such as may have been filed in favor of the Collateral
Agent for the  benefit of the  Secured  Parties and except such as may have been
filed in connection with the Credit Agreement and any other Permitted Liens.

                  (b) The chief place of business  and chief  executive  office
of the Subsidiary  Guarantors,  and the office where the  Subsidiary  Guarantors
keep their  respective  records  concerning  the  respective  Collateral of such
Subsidiary Guarantors, is listed on Schedule 2 hereto.

                  Section 4. TAX INDEMNITY.3 (a) Any and all payments under this
Subsidiary Guarantee to or for the account of any holder of a Note shall be made
free and clear of, and without  deduction or  withholding  for or on account of,
any Tax,  except to the extent such deduction or withholding is required by law.
If any Tax is required by law to be deducted or withheld  from any such payments
by any Subsidiary Guarantor, such Subsidiary Guarantor will make such deductions
or withholding and pay to the relevant taxing authority the full amount deducted
or withheld before penalties attach thereto or interest accrues thereon.  In the
event of the imposition by or for the account of any Applicable Taxing Authority
or of any  Governmental  Authority of any  jurisdiction  in which any Subsidiary
Guarantor  resides for tax purposes or any  jurisdiction  from or through  which
such  Subsidiary  Guarantor is making any payment in respect of this  Subsidiary
Guarantee,  other than any Governmental  Authority of or in the United States of
America or any political subdivision thereof or therein, of any Tax upon or with
respect to any  payments  in respect of this  Subsidiary  Guarantee,  whether by
withholding  or  otherwise,  such  Subsidiary  Guarantor  hereby  agrees  to pay
forthwith from time to time in connection  with each payment on this  Subsidiary
Guarantee  to each  holder of a Note such  amounts as shall be  required so that
every payment  received by such holder in respect of the Notes and every payment
received by such holder under this  Subsidiary  Guarantee  will not,  after such
withholding  or deduction or other payment for or on account of such Tax and any
interest or penalties relating thereto,  be less than the amount due and payable
to such holder in respect of such Note or under this Subsidiary Guarantee before
the assessment of such Tax; PROVIDED,  however,  that such Subsidiary  Guarantor
shall not be obliged  to pay such  amounts to any holder of a Note in respect of
Taxes to the extent such Taxes exceed the Taxes that would have been payable:

                           (i) had such  holder  not been a  resident  of Canada
                  within the meaning of the INCOME TAX ACT  (Canada) or not used
                  or held such Note in the course of  carrying  on a business in
                  Canada within the meaning of the INCOME TAX ACT (Canada); or

                           (ii)  had such  holder  not had any  connection  with
                  Canada or any territory or political subdivision thereof other
                  than  the  mere  holding  of a  Note  with  the


- ---------------
3  This section is not necessary in relation to  Subsidiary Guarantors  that are
   U.S. persons.


                                       6

<PAGE>


                  benefit of a Guarantee and this  Subsidiary  Guarantee (or the
                  receipt of any  payments  in respect  thereof)  or  activities
                  incidental thereto (including enforcement thereof); or

                           (iii) had such  holder not dealt with the Issuer on a
                  non-arm's  length basis  (within the meaning of the INCOME TAX
                  ACT (Canada)) in connection with any such payment; or

                           (iv) but for the  delay  or  failure  by such  holder
                  (following a written request by such Subsidiary  Guarantor) in
                  the  filing  with an  appropriate  Governmental  Authority  or
                  otherwise of forms, certificates,  documents,  applications or
                  other reasonably  required  evidence  (collectively  "FORMS"),
                  that  are  required  to be filed  by such  holder  to avoid or
                  reduce such Taxes and that in the case of any of the foregoing
                  would not result in any confidential or proprietary income tax
                  return   information   being  revealed,   either  directly  or
                  indirectly, to any Person and such delay or failure could have
                  been  lawfully  avoided  by such  holder,  PROVIDED  that such
                  holder shall be deemed to have satisfied the  requirements  of
                  this clause (ii) upon the good faith completion and submission
                  of such Forms as may be specified in a written request of such
                  Subsidiary  Guarantor  no later than 45 days after  receipt by
                  such holder of such  written  request  (PROVIDED  that if such
                  Forms are  required  pursuant to the laws of any  jurisdiction
                  other  than the  United  States of  America  or any  political
                  subdivision thereof, such written request shall be accompanied
                  by such  Forms  in  English  or with  an  English  translation
                  thereof).

                  (b)  Within  60 days  after  the  date of any  payment  by any
Subsidiary  Guarantor  of any Tax in respect of any  payment  under the Notes or
this Section 4, such Subsidiary Guarantor shall furnish to each holder of a Note
the  original  tax receipt for the payment of such Tax (or if such  original tax
receipt is not  available,  a duly  certified copy of the original tax receipt),
together with such other  documentary  evidence with respect to such payments as
may be reasonably requested from time to time by any holder of a Note.

                  (c) The  obligations of the Subsidiary  Guarantors  under
this Section 4 shall survive the transfer or payment of any Note.

                  (d) If any  Subsidiary  Guarantor  has made a payment to or on
account of any holder of a Note pursuant to Subsection (a) above and such holder
is entitled to a refund of the Tax to which such  payment is  attributable  from
the  Governmental  Authority  to which the  payment of the Tax was made and such
refund can be obtained by filing one or more Forms,  then (i) such holder shall,
as soon as  practicable  after  receiving a written  request  therefor from such
Subsidiary Guarantor (which request shall specify in reasonable detail the Forms
to be filed),  file such Forms and (ii) upon  receipt  of such  refund,  if any,
promptly pay over such refund to such Subsidiary Guarantor.

                  Section 5.  MISCELLANEOUS.

                  5.01 AMENDMENTS,  ETC. This Guarantee may be amended,  and the
observance  of  any  term  hereof  may  be  waived  (either   retroactively   or
prospectively),  with (and only  with) the

                                       7

<PAGE>


written consent of the Subsidiary  Guarantors and the Required  Holders,  except
that no such amendment or waiver may, without the written consent of each holder
affected thereby, amend any of Section 2.01, 2.02 or this Section 5.01.

                  5.02  NOTICES.  All notices and  communications  provided  for
hereunder shall be in writing and sent as provided in Section 19 of the Note and
Guarantee  Agreement  (i) if to any holder,  to the address  specified  for such
holder  in the  Note  and  Guarantee  Agreement  and  (ii) if to any  Subsidiary
Guarantor,  to the  address  for  such  Subsidiary  Guarantor  set  forth on the
signature pages hereof.

                  5.03  JURISDICTION  AND PROCESS.4  EACH  SUBSIDIARY  GUARANTOR
AGREES THAT ANY LEGAL  ACTION OR  PROCEEDING  ARISING OUT OF OR RELATING TO THIS
SUBSIDIARY GUARANTEE OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION  HEREWITH,  OR
ANY LEGAL  ACTION OR  PROCEEDING  TO EXECUTE OR  OTHERWISE  ENFORCE ANY JUDGMENT
OBTAINED  AGAINST SUCH  SUBSIDIARY  GUARANTOR FOR BREACH  HEREOF OR THEREOF,  OR
AGAINST ANY OF ITS PROPERTIES,  MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW
YORK OR THE UNITED STATES  DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK
BY OR ON BEHALF OF ANY HOLDER OF A NOTE,  AS SUCH  HOLDER  MAY  ELECT,  AND SUCH
SUBSIDIARY  GUARANTOR  HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY  SUBMITS TO THE
NON-EXCLUSIVE  JURISDICTION OF SUCH COURTS FOR PURPOSES OF ANY SUCH LEGAL ACTION
OR  PROCEEDING.  EACH  SUBSIDIARY  GUARANTOR  HEREBY  IRREVOCABLY  APPOINTS  AND
DESIGNATES CT CORPORATION SYSTEM,  WHOSE ADDRESS IS 111 EIGHTH AVENUE, NEW YORK,
NY 10011,  OR ANY OTHER PERSON HAVING AND MAINTAINING A PLACE OF BUSINESS IN THE
STATE OF NEW YORK WHOM THE SUBSIDIARY  GUARANTOR MAY FROM TIME TO TIME HEREAFTER
DESIGNATE  (HAVING  GIVEN 30 DAYS' NOTICE  THEREOF TO EACH HOLDER OF A NOTE THEN
OUTSTANDING),  AS THE DULY  AUTHORIZED  AGENT FOR ACCEPTANCE OF SERVICE OF LEGAL
PROCESS OF THE SUBSIDIARY  GUARANTOR.  EACH SUBSIDIARY  GUARANTOR  HEREBY AGREES
THAT SERVICE OF PROCESS IN ANY SUCH PROCEEDING MAY BE EFFECTED BY SERVING NOTICE
UPON CT  CORPORATION  OR ANY SUCH OTHER  PERSON  AND BY  MAILING  NOTICE OF SUCH
SERVICE BY REGISTERED OR CERTIFIED  MAIL (OR ANY  SUBSTANTIALLY  SIMILAR FORM OF
MAIL),  POSTAGE  PREPAID,  TO IT AS ITS ADDRESS  SPECIFIED IN SECTION 5.02 OR AT
SUCH  OTHER  ADDRESS OF WHICH  EACH  HOLDER OF A NOTE  SHALL HAVE BEEN  NOTIFIED
PURSUANT  THERETO.  IN ADDITION,  EACH SUBSIDIARY  GUARANTOR HEREBY  IRREVOCABLY
WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING  ARISING
OUT OF OR RELATING TO THIS SUBSIDIARY  GUARANTEE OR ANY OTHER DOCUMENT  EXECUTED
IN  CONNECTION  HEREWITH  BROUGHT  IN THE COURTS OF THE STATE OF NEW YORK OR THE
UNITED  STATES  DISTRICT  COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK,  AND ANY
CLAIM THAT ANY SUCH  SUIT,  ACTION OR  PROCEEDING  BROUGHT IN ANY SUCH COURT HAS
BEEN


- ---------------
4  This section is not necessary in relation to  Subsidiary Guarantors  that are
   U.S. persons.


                                       8

<PAGE>


BROUGHT IN AN INCONVENIENT FORUM.

                  5.04   SUCCESSORS   AND  ASSIGNS.   All  covenants  and  other
agreements  of each  Subsidiary  Guarantor  in this  Guarantee  shall  bind  its
successors  and  assigns and shall inure to the benefit of the holders and their
respective successors and assigns.

                  5.05  SEVERABILITY.  Any provision of this  Guarantee  that is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.

                  5.06  CONSTRUCTION.  Each agreement  contained herein shall be
construed  (absent  express  provision to the contrary) as being  independent of
each other agreement contained herein, so that compliance with any one agreement
shall  not  (absent  such an  express  contrary  provision)  be deemed to excuse
compliance with any other agreement. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking,  such
provision  shall  be  applicable  whether  such  action  is  taken  directly  or
indirectly by such Person.

                  5.07 EXPENSES.  Each Subsidiary Guarantor shall indemnify each
holder on demand in  respect of all  reasonable  costs and  expenses  (including
reasonable legal fees) incurred by it in connection with the enforcement of this
Guarantee  or the  preservation  of the rights of such holder as a result of any
breach by such Subsidiary Guarantor of its obligations hereunder.

                  5.08.   SURVIVAL  OF  REPRESENTATIONS   AND  WARRANTIES.   All
representations and warranties  contained herein shall survive the execution and
delivery  of this  Guarantee,  the Note and  Guarantee  Agreement  and the other
Financing  Documents,  the purchase or transfer by each Purchaser of any Note or
portion  thereof or interest  therein,  and may be relied upon by any subsequent
holder  of a Note,  regardless  of any  investigation  made at any time by or on
behalf of any Purchaser or any other holder of a Note.

                  5.09.  GOVERNING LAW. This  Guarantee  shall be governed by,
and construed and  interpreted  in accordance  with, the law of the State of
New York.

                  5.10. COUNTERPARTS; ADDITIONAL PARTIES.  This Guarantee may be
executed in any number of  counterparts  and by the different  parties hereto on
separate  counterparts,  and each  such  counterpart  shall be  deemed  to be an
original but all such  counterparts  shall together  constitute one and the same
Guarantee. At any time after the date of this Guarantee,  one or more additional
persons or entities may become parties hereto by executing and delivering to the
holders a counterpart  of this  Guarantee.  Immediately  upon such execution and
delivery (and without any further action), each such additional person or entity
will  become  a party  to,  and  will be  bound  by all of the  terms  of,  this
Guarantee.

                                       9

<PAGE>



                  IN WITNESS  WHEREOF,  this Guarantee has been duly executed by
the Subsidiary Guarantors as of the day and year first above written.





                         [NAME OF SUBSIDIARY GUARANTOR]





                        By ______________________________

                            Title:





                        Address:





                         [NAME OF SUBSIDIARY GUARANTOR]





                        By ______________________________

                           Title:





                           Address:


                                       10

<PAGE>


                                   Schedule 1

                             Recordings and Filings









































                                       1

<PAGE>




                                   Schedule 2

                            Chief Place of Business,
                           Chief Executive Office and
                            Office Where Records Kept


<PAGE>


                                                                   EXHIBIT 4.11

                         [FORM OF UNDERTAKING TO SECURE]





</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
