Exhibit 10.37a



                                CDN $200,000,000
                    EXTENDIBLE REVOLVING/TERM CREDIT FACILITY





                                CREDIT AGREEMENT



                                     AMONG:

                         KEYSPAN ENERGY DEVELOPMENT CO.
                                  (as Borrower)

                                     - and -



                        THE FINANCIAL INSTITUTIONS LISTED
                              ON SCHEDULE A HERETO
                                  (as Lenders)

                                     - and -



                              ROYAL BANK OF CANADA
                            (as Administrative Agent)

                                  July 29, 1999

<PAGE>






                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                    ARTICLE 1
                                 INTERPRETATION
<S>                                                                                                            <C>
1.1         Definitions...........................................................................................2
1.2         Headings.............................................................................................28
1.3         Number; Persons......................................................................................28
1.4         Accounting Principles................................................................................28
1.5         Reference to Agreements and Enactments...............................................................29
1.6         Per Annum Calculations...............................................................................29
1.7         Certain Matters Related to Ratings Explained.........................................................29
1.8         Schedules............................................................................................31
1.9         Reliance by Borrower.................................................................................32

                                    ARTICLE 2
                               THE CREDIT FACILITY

2.1         The Credit Facility..................................................................................32
2.2         Types of Availments..................................................................................32
2.3         Purpose..............................................................................................32
2.4         Extension of Revolving Period........................................................................33
2.5         Minimum Drawdowns/Conversions/Rollovers..............................................................37
2.6         LIBOR Loan Availability..............................................................................37
2.7         Notice Periods for Drawdowns, Conversions and Rollovers..............................................38
2.8         Conversion Option....................................................................................38
2.9         LIBOR Loan Rollovers; Selection of LIBOR Interest Periods............................................38
2.10        Rollovers and Conversions not Repayments.............................................................39
2.11        Administrative Agent's Obligations with Respect to Canadian Prime Rate
              Loans, U.S. Base Rate Loans and LIBOR Loans........................................................39
2.12        Lenders' and Administrative Agent's Obligations with Respect to Canadian
              Prime Rate Loans, U.S. Base Rate Loans and LIBOR Loans.............................................39
2.13        Irrevocability.......................................................................................39
2.14        Optional Cancellation or Reduction of Credit Facility................................................40
2.15        Optional Repayment...................................................................................40
2.16        Mandatory Repayment..................................................................................41
2.17        Currency Excess......................................................................................41

                                    ARTICLE 3
                        CONDITIONS PRECEDENT TO DRAWDOWNS

3.1         Conditions for First Drawdown........................................................................42
3.2         Subsequent Drawdowns.................................................................................45
3.3         Waiver...............................................................................................45

                                    ARTICLE 4
                              EVIDENCE OF DRAWDOWNS

4.1         Account of Record....................................................................................45

                                    ARTICLE 5
                          PAYMENTS OF INTEREST AND FEES

5.1         Interest on Canadian Prime Rate Loans................................................................45
5.2         Interest on U.S. Base Rate Loans.....................................................................46
5.3         Interest on LIBOR Loans..............................................................................46
5.4         Interest Act (Canada)................................................................................46
5.5         Nominal Rates; No Deemed Reinvestment................................................................47
5.6         Commitment Fees......................................................................................47
5.7         Administrative Agent's Fees..........................................................................47
5.8         Interest on Overdue Amounts..........................................................................47
5.9         Waiver...............................................................................................48
5.10        Maximum Rate Permitted by Law........................................................................48
5.11        Determinations Prima Facie Evidence..................................................................48

                                    ARTICLE 6
                              BANKERS' ACCEPTANCES

6.1         Bankers' Acceptances.................................................................................48
6.2         Fees.................................................................................................49
6.3         Form and Execution of Bankers' Acceptances...........................................................49
6.4         Delivery of Powers of Attorney Respecting Bankers' Acceptances.......................................50
6.5         Mechanics of Issuance................................................................................50
6.6         Rollover, Conversion or Payment on Maturity..........................................................52
6.7         Restriction on Rollovers and Conversions.............................................................53
6.8         Rollovers of Bankers' Acceptances....................................................................53
6.9         Conversion into Bankers' Acceptances.................................................................53
6.10        Conversion from Bankers' Acceptances.................................................................54
6.11        BA Equivalent Loans..................................................................................54
6.12        Adjustment of Fees...................................................................................54
6.13        Waiver; No Days of Grace.............................................................................55

                                    ARTICLE 7
                        PLACE AND APPLICATION OF PAYMENTS

7.1         Place of Payment of Principal, Interest and Fees; Payments to Administrative
              Agent..............................................................................................55
7.2         Designated Accounts of the Lenders...................................................................56
7.3         Funds................................................................................................56
7.4         Application of Payments..............................................................................56
7.5         Set-Off..............................................................................................56

                                    ARTICLE 8
                         REPRESENTATIONS AND WARRANTIES

8.1         Representations and Warranties.......................................................................57
8.2         Deemed Repetition....................................................................................63
8.3         Other Documents......................................................................................64
8.4         Effective Time of Repetition.........................................................................64
8.5         Nature of Representations and Warranties.............................................................64

                                    ARTICLE 9
                                GENERAL COVENANTS

9.1         Affirmative Covenants of the Borrower................................................................64
9.2         Negative Covenants of the Borrower...................................................................69
9.3         Administrative Agent May Perform Covenants...........................................................72

                                   ARTICLE 10
                       EVENTS OF DEFAULT AND ACCELERATION

10.1        Events of Default....................................................................................72
10.2        Acceleration.........................................................................................77
10.3        Conversion on Default................................................................................77
10.4        Remedies Cumulative and Waivers......................................................................78
10.5        Termination of Lenders' Obligations..................................................................78
10.6        Application and Sharing of Payments Following Acceleration...........................................78

                                   ARTICLE 11
                             CHANGE OF CIRCUMSTANCES

11.1        Market Disruption Respecting LIBOR Loans.............................................................79
11.2        Market Disruption Respecting Bankers' Acceptances....................................................80
11.3        Change in Law........................................................................................81
11.4        Prepayment of Portion................................................................................82
11.5        Illegality...........................................................................................83

                                   ARTICLE 12
                       COSTS, EXPENSES AND INDEMNIFICATION

12.1        Costs and Expenses...................................................................................83
12.2        General Indemnity....................................................................................84
12.3        Environmental Indemnity..............................................................................85
12.4        Judgment Currency....................................................................................86

                                   ARTICLE 13
               THE AGENT AND ADMINISTRATION OF THE CREDIT FACILITY

13.1        Authorization and Action.............................................................................87
13.2        Procedure for Making Loans...........................................................................88
13.3        Remittance of Payments...............................................................................90
13.4        Redistribution of Payment............................................................................90
13.5        Duties and Obligations...............................................................................91
13.6        Payment, Delivery and Prompt Notice to the Lenders...................................................93
13.7        Administrative Agent's and Lenders' Authorities......................................................93
13.8        Lender Credit Decision...............................................................................93
13.9        Indemnification of Administrative Agent..............................................................94
13.10       Successor Administrative Agent.......................................................................94
13.11       Taking and Enforcement of Remedies...................................................................94
13.12       Reliance Upon Administrative Agent...................................................................94
13.13       No Liability of Administrative Agent.................................................................94
13.14       Article for Benefit of Administrative Agents and Lenders.............................................94

                                   ARTICLE 14
                                     GENERAL

14.1        Exchange and Confidentiality of Information..........................................................94
14.2        Nature of Obligation under this Agreement............................................................94
14.3        Notices..............................................................................................94
14.4        Governing Law........................................................................................94
14.5        Benefit of the Agreement.............................................................................94
14.6        Assignment...........................................................................................94
14.7        Participations.......................................................................................94
14.8        Severability.........................................................................................94
14.9        Whole Agreement......................................................................................94
14.10       Amendments and Waivers...............................................................................94
14.11       Payments Free and Clear of Taxes.....................................................................94
14.12       Further Assurances...................................................................................94
14.13       No Merger............................................................................................94
14.14       Attornment...........................................................................................94
14.15       Time of the Essence..................................................................................94
14.16       Conflict.............................................................................................94
14.17       Counterparts.........................................................................................94
</TABLE>



<PAGE>




                                    SCHEDULES

Schedule A               -          Lenders and Commitments
Schedule B               -          Assignment Agreement
Schedule C               -          Compliance Certificate
Schedule D               -          Conversion Notice
Schedule E               -          Drawdown Notice
Schedule F               -          Guarantee
Schedule G               -          Power of Attorney
Schedule H               -          Repayment Notice
Schedule I               -          Request for an Offer of Extension
Schedule J               -          Rollover Notice
Schedule K               -          Subordination Agreement
Schedule L               -          Opinion of Borrower's Counsel
Schedule M               -          Opinion of Guarantor's Counsel
Schedule N               -          Subsidiaries




<PAGE>






         THIS CREDIT AGREEMENT dated as of the 29th day of July, 1999.

AMONG:

                   KEYSPAN  ENERGY  DEVELOPMENT  CO., a Nova  Scotia  unlimited
                   liability   company   (hereinafter   referred   to  as   the
                   "Borrower")

                                                            OF THE FIRST PART

                                     - and -

                  ROYAL BANK OF CANADA and those other financial institutions
                  named on Schedule A annexed hereto, together with such other
                  financial institutions as become parties hereto from time to
                  time as lenders (hereinafter sometimes collectively referred
                  to as the "Lenders" and sometimes individually referred to as
                  a "Lender")

                                                            OF THE SECOND PART

                                     - and -

                  ROYAL BANK OF CANADA, a Canadian chartered bank, as agent of
                  the Lenders hereunder (hereinafter referred to as the
                  "Administrative Agent")

                                                            OF THE THIRD PART

         WHEREAS the Borrower has requested the Lenders to make available the
Credit Facility to repay the Existing RBC Facility and for general corporate
purposes of the Borrower;

         AND WHEREAS the Lenders have agreed to provide the Credit Facility to
the Borrower on the terms and conditions herein set forth;

         AND WHEREAS the Lenders wish the Administrative Agent to act on their
behalf with regard to certain matters associated with the Credit Facility;

         NOW THEREFORE in consideration of the covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby conclusively acknowledged by each of the parties
hereto, the parties hereto covenant and agree as follows:

                                   ARTICLE 1
                                 INTERPRETATION

1.1      Definitions

         In this Agreement, unless something in the subject matter or context is
inconsistent therewith:


"Acceleration Notice" means a written notice delivered by the Administrative
Agent to the Borrower pursuant to Section 10.2 declaring all Obligations of the
Borrower outstanding hereunder to be due and payable.


"Additional Compensation" has the meaning set out in Section 11.3.


"Adjustment Time" means the time of occurrence of the last event necessary
(being either the delivery of an Acceleration Notice or the occurrence of a
Termination Event) to ensure that all Obligations of the Borrower hereunder are
thereafter due and payable, and such time shall conclusively be:

(a)  in the case  where  such  last  event is the  delivery  of an  Acceleration
     Notice, the time of delivery for such Acceleration Notice; and

(b)  in the case where such last event is the occurrence of a Termination Event,
     the time of occurrence of such Termination Event determined pursuant to the
     provisions of this Agreement.


"Administrative Agent" means Royal Bank of Canada when acting in its capacity as
administrative agent hereunder, and includes any successor administrative agent
appointed pursuant to Section 13.10.


"Administrative Agent's Account for Payments" means:

(a)      for all payments in Canadian Dollars, the following account maintained
         by the Administrative Agent at its Toronto main branch, to which
         payments and transfers are to be effected as follows:

                           Royal Bank of Canada
                           Toronto, Ontario
                           Swift Address: ROYCCAT2
                           Account Number:  00002-266-760-8

                           RBC Loans Syndication
                           Toronto, Ontario
                           Reference: KeySpan Energy Development Co.

(b)      for all payments in US Dollars, the following account maintained by the
         Administrative Agent at its Toronto main branch, to which payments and
         transfers are to be effected as follows:

                           Royal Bank of Canada
                           Chase Manhattan, New York
                           Swift Address:  ROYCCAT2
                           Account Number:  00002-408-919-9

                           RBC Loans Syndication
                           Toronto, Ontario
                           Reference:  KeySpan Energy Development Co.

or such other places or accounts in Canada as may be stipulated by the
Administrative Agent from time to time and notified in writing to the Borrower
and the Lenders.


"Administrative Agent's Branch" means the Global Syndications - Canada office of
the Administrative Agent located at 12th Floor, South Tower, Royal Bank Plaza,
200 Bay Street, Toronto, Ontario or such other office or branch in Canada as the
Administrative Agent may from time to time designate by notice to the Borrower
and the Lenders.


"Advance" means an advance of funds made by the Lenders or by any one or more of
them to the Borrower, but does not include a Conversion or Rollover.


"Affected Loan" has the meaning set out in Section 11.4.


"Affiliate" has the meaning set forth in the Business Corporations Act
(Alberta).


"Agreement" means this agreement, as amended, modified, supplemented or restated
from time to time in accordance with the provisions hereof.

"Applicable BA Fee Rate" means, with respect to Bankers' Acceptances accepted by
a Lender, a rate per annum equal to the rate set out on the following table
(determined at the date of issuance of such Bankers' Acceptances but subject to
adjustment in accordance with Section 6.12) determined by the applicable rating
level assigned by Moody's and S&P to the senior unsecured long term debt of the
Guarantor from time to time during the term of such Bankers' Acceptance;
provided that (i) if at any time the rating so assigned by one of such agencies
differs from the rating assigned by the other agency by one level, then the
Applicable BA Fee Rate shall be determined with reference to the higher assigned
rating, and (ii) if at any time the rating so assigned by one of such agencies
differs from the rating assigned by the other agency by two or more levels (for
example, A1 by Moody's and BBB+ by S&P), then the Applicable BA Fee Rate shall
be the average of the rates corresponding to those levels (to use the foregoing
example, 57.5 bp). If the senior unsecured long term debt of the Guarantor is
not rated by both Moody's and S&P, the pricing shown in the column headed "Level
5" will apply. Each change in the Applicable BA Fee Rate shall be effective as
of the date of any change in such ratings:
<TABLE>
<CAPTION>
----------------------------- ----------------- ---------------- ----------------- ----------------- ----------------
<S>                             <C>             <C>                 <C>               <C>               <C>
                                  Level 1           Level 2          Level 3           Level 4           Level 5

Moody's/S&P                         A1/             A2 and            Baa1/            Baa2 and           Lower
                                   A+ and             A3/              BBB+             Baa3/             than
                                   higher          A and A-                            BBB and          Baa3/BBB-
                                                                                         BBB-            or not
                                                                                                          rated
----------------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Applicable BA Fee Rate            50.0 bp           55.0 bp           65.0 bp          75.0 bp          100.0 bp
----------------------------- ----------------- ----------------- ---------------- ----------------- ----------------
</TABLE>



"Applicable Commitment Fee Rate" means , at any time, a rate per annum equal to
the rate set out on the following table under the applicable rating level
assigned by Moody's and S&P to the senior unsecured long term debt of the
Guarantor at the time; provided that (i) if at the time the rating so assigned
by one of such agencies differs from the rating assigned by the other agency by
one level, then the Applicable Commitment Fee Rate shall be determined with
reference to the higher assigned rating, and (ii) if at any time the rating so
assigned by one of such agencies differs from the rating assigned by the other
agency by two or more levels (for example, A1 by Moody's and BBB+ by S&P), then
the Applicable Commitment Fee Rate shall be the average of the rates
corresponding to those levels (to use the foregoing example, 12.5 bp). If the
senior unsecured long term debt of the Guarantor is not rated by both Moody's
and S&P, the pricing shown in the column headed "Level 5" will apply. Each
change in the Applicable Commitment Fee Rate shall be effective as of the date
of any change in such ratings:
<TABLE>
<CAPTION>
----------------------------- ----------------- ---------------- ----------------- ----------------- ----------------
                                  Level 1           Level 2          Level 3           Level 4           Level 5
<S>                              <C>              <C>               <C>              <C>               <C>
Moody's/S&P                         A1/             A2 and            Baa1/            Baa2 and           Lower
                                   A+ and             A3/              BBB+             Baa3/             than
                                   higher          A and A-                            BBB and          Baa3/BBB-
                                                                                         BBB-            or not
                                                                                                          rated
----------------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Applicable   Commitment  Fee      11.0 bp           12.5 bp           14.0 bp          16.0 bp           20.0 bp
Rate
----------------------------- ----------------- ----------------- ---------------- ----------------- ----------------
</TABLE>

"Applicable Law" means , with respect to any Person, property, transaction or
event, all applicable provisions of laws, statutes, regulations, rules,
guidelines, by-laws, treaties, orders, policies, judgments, decrees and official
directives of any Governmental Authority or any Person acting under any
Governmental Authority.


"Applicable LIBOR Margin" means, with respect to LIBOR Loans outstanding at any
time, a rate per 360 day period equal to the rate set out on the following
table, determined by the applicable rating category assigned by Moody's and S&P
to the senior unsecured long term debt of the Guarantor from time to time during
the Interest Period applicable to such LIBOR Loan; provided that: (i) if at any
time the rating so assigned by one of such agencies differs from the rating
assigned by the other agency by one level, then the Applicable LIBOR Margin
shall be determined with reference to the higher assigned rating, and (ii) if at
any time the rating so assigned by one of such agencies differs from the rating
assigned by the other agency by two or more levels (for example, A1 by Moody's
and BBB+ by S&P), then the Applicable LIBOR Margin shall be the average of the
rates corresponding to those levels (to use the foregoing example, 57.5 bp). If
the senior unsecured long term debt of the Guarantor is not rated by both
Moody's and S&P, the pricing shown in the column headed "Level 5" will apply.
Each change in the Applicable LIBOR Margin shall be effective as of the date of
any change in such ratings:
<TABLE>
<CAPTION>
----------------------------- ----------------- ---------------- ----------------- ----------------- ----------------
                                  Level 1           Level 2          Level 3           Level 4           Level 5
<S>                              <C>              <C>               <C>              <C>               <C>
Moody's/S&P                         A1/             A2 and            Baa1/            Baa2 and           Lower
                                   A+ and             A3/              BBB+             Baa3/             than
                                   higher          A and A-                            BBB and          Baa3/BBB-
                                                                                         BBB-            or not
                                                                                                          rated
----------------------------- ----------------- ----------------- ---------------- ----------------- ----------------
Applicable LIBOR Margin           50.0 bp           55.0 bp           65.0 bp          75.0 bp          100.0 bp
----------------------------- ----------------- ----------------- ---------------- ----------------- ----------------
</TABLE>


"Applicable Margin" means the rate per annum described as the Applicable LIBOR
Margin, the Applicable Prime Rate Margin or the Applicable USBR Margin
applicable to LIBOR Loans, Canadian Prime Rate Loans and U.S. Base Rate Loans,
respectively. Changes in Applicable Margin shall apply as at the effective dates
of such changes to Canadian Prime Rate Loans, U.S. Base Rate Loans and LIBOR
Loans outstanding on such dates.


"Applicable Prime Rate Margin" means, with respect to Canadian Prime Rate Loans
outstanding at any time, zero percent per annum, unless Moody's assigns a rating
lower than Baa3 and S&P assigns a rating lower than BBB- to the senior unsecured
long term debt of the Guarantor, or the senior unsecured long term debt of the
Guarantor is not rated by both of such agencies, in which case the Applicable
Prime Rate Margin shall be 25 bps per annum.


"Applicable USBR Margin" means, with respect to U.S. Base Rate Loans outstanding
at any time, zero percent per annum, unless Moody's assigns a rating lower than
Baa3 and S&P assigns a rating lower than BBB- to the senior unsecured long term
debt of the Guarantor, or the senior unsecured long term debt of the Guarantor
is not rated by both of such agencies, in which case the Applicable USBR Margin
shall be 25 bps per annum.


"Assignment Agreement" means an assignment agreement substantially in the form
of Schedule B annexed hereto, with such amendments thereto as may be reasonably
required by the Administrative Agent from time to time.


"BA Equivalent Loan" means, in relation to a Drawdown of, Conversion into or
Rollover of, Bankers' Acceptances, an Advance in Canadian Dollars made by a
Non-Acceptance Lender as part of such Loan.


"Bankers' Acceptance" means either a depository bill, as defined by the
Depository Bills and Notes Act (Canada), or a blank non-interest bearing bill of
exchange, as defined by the Bills of Exchange Act (Canada), in either case drawn
by the Borrower and accepted by a Lender as a bankers' acceptance, as evidenced
by the Lender's endorsement thereof at the request of the Borrower pursuant to
this Agreement.


"Banking Day" means, in respect of a LIBOR Loan, a day on which banks generally
are open for business in Calgary, Alberta, Toronto, Ontario, New York, New York
and London, England and, in respect of a U.S. Base Rate Loan, a day on which
banks generally are open for business in Calgary, Alberta, Toronto, Ontario and
New York, New York, and for all other purposes means a day on which banks
generally are open for business in Calgary, Alberta and Toronto, Ontario, but
does not in any event include a Saturday or a Sunday.


"basis point" or "bp" means one one-hundredth of a percent.


"Borrower"  means  KeySpan  Energy  Development  Co.,  a Nova  Scotia  unlimited
liability  company,  and any  successor  thereto  permitted  pursuant to Section
9.2(i).


"Borrower's Counsel" means the firm of Macleod Dixon, or such other firm of
legal counsel as the Borrower may from time to time designate.


"Canadian  Dollars"  and "Cdn.  $" and "Cdn.  Dollars"  mean the lawful money of
Canada.


"Canadian Prime Rate" means, for any day, the greater of:

(a)      the rate of interest per annum, expressed on the basis of a year of 365
         days, established and publicly announced by the Administrative Agent
         from time to time as its reference rate of interest then in effect for
         the determination of interest rates on commercial loans made by the
         Administrative Agent in Canadian Dollars in Canada; and

(b)      the rate of interest per annum, expressed on the basis of a year of 365
         days, equal to the average annual yield rate for one month Canadian
         Dollar bankers' acceptances, which rate is shown on the display
         referred to as the "CDOR Page" (or any display substituted therefor) of
         Reuters Monitor Money Rates Service at 10:00 a.m. (Toronto time) on
         such day or, if such day is not a Banking Day on the immediately
         preceding Banking Day, plus 0.50% per annum;

provided that if both such rates are equal or if such one month bankers'
acceptance rate is unavailable for any reason on any date of determination, then
the "Canadian Prime Rate" shall be the rate specified in paragraph (a) above.


"Canadian Prime Rate Loan" means an Advance in, or Conversion into, Canadian
Dollars made by the Lenders to the Borrower with respect to which the Borrower
has specified, or a provision hereof requires, that interest is to be calculated
by reference to the Canadian Prime Rate.


"CDOR Rate" means, on any day:

(a)  for  Bankers'  Acceptances  which have a term to  maturity  of 1, 2, 3 or 6
     months, the annual rate of interest determined by the Administrative  Agent
     which is equal to the  average of the yield rates per annum  applicable  to
     Canadian Dollar bankers'  acceptances having identical issue and comparable
     maturity  dates as the  Bankers'  Acceptances  proposed to be issued by the
     Borrower,  displayed  and  identified  as such on the  "CDOR  Page" (or any
     display  substituted  therefor) of Reuter  Monitor  Money Rates  Service at
     approximately  10:00 a.m. (Toronto time) on such day, or if such day is not
     a Banking Day, then on the immediately  preceding  Banking Day (as adjusted
     by the Administrative  Agent after 10:00 a.m. (Toronto time) to reflect any
     error in a posted rate of interest or in the posted  average annual rate of
     interest);  provided,  however,  if such  rates do not  appear on such CDOR
     Page,  then the  "CDOR  Rate"  shall be the  discount  rate  applicable  to
     Canadian Dollar bankers'  acceptances having identical issue and comparable
     maturity  dates  and in a  comparable  amount  to the  Bankers'  Acceptance
     proposed to be issued by the Borrower quoted by the Administrative Agent as
     of 10:00  a.m.  (Toronto  time) on such day for the  purchase  of  bankers'
     acceptances  accepted by the Administrative  Agent, or if such day is not a
     Banking Day, then on the immediately preceding Banking Day; and

(b)      for Bankers' Acceptances which do not have a term to maturity of 1, 2,
         3 or 6 months, the discount rate applicable to Canadian Dollar bankers'
         acceptances having identical issue and comparable maturity dates and in
         a comparable amount to the Bankers' Acceptance proposed to be issued by
         the Borrower quoted by the Administrative Agent as of 10:00 a.m.
         (Toronto time) on such day for bankers acceptances accepted by the
         Administrative Agent, or if such day is not a Banking Day, then on the
         immediately preceding Banking Day.

Each determination of the CDOR Rate may be computed using any reasonable
averaging and attribution method.


"Commitment" means each Lender's obligation hereunder to make Loans available to
(including accepting Bankers' Acceptances issued by) the Borrower in an
aggregate principal amount in Cdn. Dollars or the Equivalent Amount thereof in
U.S. Dollars or any combination thereof, as applicable, not at any time in
excess of the amount set forth opposite such Lender's name on Schedule A from
time to time, as such Lender's Commitment and such amount may hereafter be
cancelled, reduced or terminated from time to time pursuant to this Agreement.


"Compliance Certificate" means a certificate of the Borrower signed on its
behalf by the president or any vice-president of the Borrower, substantially in
the form annexed hereto as Schedule C, to be given to the Administrative Agent
by the Borrower pursuant hereto.


"Consolidated Capitalization" of the Guarantor at any time means, at such time,
without duplication, the aggregate of (i) the Consolidated Debt of the Guarantor
at such time; and (ii) the amount of the other capitalization of the Guarantor
at such time as shown on the consolidated balance sheet of the Guarantor
(including common stock, retained earnings and preferred stock, adjusted for
treasury stock purchased), determined on a consolidated basis in accordance with
generally accepted accounting principles (as approved from time to time by the
American Institute of Chartered Accountants, or any successor institute).


"Consolidated Cash Flow" of the Guarantor for any period means, in respect of
such period, an amount equal to the aggregate of:

(a)      the Consolidated Net Income of the Guarantor for such period; and

(b)      all non-cash expenses (which for greater certainty includes any
         depreciation, depletion and amortization expenses) deducted in the
         computation of Consolidated Net Income of the Guarantor for such
         period;

less:

(c)      all non-cash items increasing  Consolidated Net Income of the Guarantor
         for such period;

determined on a consolidated basis in accordance with generally accepted
accounting principles (as approved from time to time by the American Institute
of Chartered Accountants, or any successor institute).


"Consolidated Cash Flow to Consolidated Interest Expense Ratio" of the Guarantor
means, at any time, the ratio of the Consolidated Cash Flow of the Guarantor for
its then most recently completed four Fiscal Quarters to the Consolidated
Interest Expense of the Guarantor for such four Fiscal Quarters.


"Consolidated Debt" of the Guarantor at any time means, at such time, all
obligations, liabilities and indebtedness of the Guarantor which would, in
accordance with generally accepted accounting principles (as approved from time
to time by the American Institute of Chartered Accountants, or any successor
institute), be classified upon a consolidated balance sheet of the Guarantor as
liabilities of the Guarantor and, whether or not so classified, shall include
(without duplication, on a consolidated basis):

(a)  indebtedness of the Guarantor for borrowed money;

(b)  all liabilities of the Guarantor  represented by a note, bond, debenture or
     other evidence of debt;

(c)  obligations  of the  Guarantor  arising  pursuant  to  bankers'  acceptance
     facilities or commercial paper programs, or letters of credit or letters of
     guarantee,  or indemnities  issued in connection  therewith,  to the extent
     such letters of credit or letters of  guarantee  are  non-trade  letters of
     credit or letters of guarantee;

(d)  obligations of the Guarantor under guarantees, indemnities, assurances, and
     other  contingent  obligations  relating to the  indebtedness  of any other
     person and all other obligations incurred for the purpose of, or having the
     effect of,  providing  financial  assistance to another person,  including,
     without  limitation,  endorsements  of bills of  exchange  (other  than for
     collection or deposit in the ordinary course of business);

(e)  all net obligations of the Guarantor under all interest hedging agreements,
     currency hedging agreements and commodity agreements;

(f)  all  obligations of the Guarantor  created or arising under any conditional
     sales  agreement or other title retention  agreement,  or under any capital
     lease or other  lease  financing,  or issued  or  assumed  as the  deferred
     purchase price of property or services, notwithstanding that the rights and
     remedies  of the  seller or lessor  under  such  agreement  in the event of
     default are limited to  repossession  or sale of the property  which is the
     subject of such agreement;

(g)  all obligations  secured by a charge on any of the assets of the Guarantor;
     and

(h)  the  aggregate  amount at which any shares in the capital of the  Guarantor
     which are retractable at the option of the holder may be retracted,  if all
     conditions precedent for such retraction have been satisfied.


"Consolidated Debt to Consolidated Capitalization Ratio" of the Guarantor means,
at any time, the ratio of the Consolidated Debt of the Guarantor as at the end
of its then most recently completed Fiscal Quarter to the Consolidated
Capitalization of the Guarantor as at the end of such Fiscal Quarter.


"Consolidated Interest Expense" of the Guarantor for any period means, for such
period, without duplication, interest charges of the Guarantor without deduction
for interest income, determined on a consolidated basis in accordance with
generally accepted accounting principles (as approved from time to time by the
American Institute of Chartered Accountants, or any successor institute), as the
same would be set forth or reflected in a consolidated statement of income of
the Guarantor and, in any event, whether or not set forth, shall include:

(a)  all  interest  accrued or payable  in  respect  of such  period  (including
     imputed interest with respect to capitalized lease obligations);

(b)  all fees  (including  standby letter of credit,  guarantee,  commitment and
     bankers'  acceptance fees) accrued or payable in respect of such period and
     which relate to any indebtedness or credit facility, prorated (as required)
     over such period;

(c)  any  difference  between the face amount and the  discount  proceeds of any
     bankers'  acceptances,  commercial paper and other obligations  issued at a
     discount, prorated (as required) over such period;

(d)  the  aggregate of all purchase  discounts  relating to the sale of accounts
     receivable in connection with any asset securitization program; and

(e)  all net amounts charged or credited to interest  expense under any interest
     hedging agreements in respect of such period.


"Consolidated Net Income" of the Guarantor for any period means the net income
(loss) of the Guarantor for such period, determined on a consolidated basis in
accordance with generally accepted accounting principles (as approved from time
to time by the American Institute of Chartered Accountants, or any successor
institute); provided, however, that there shall be excluded therefrom (i)
after-tax gains or losses from asset sales or abandonments, or reserves relating
thereto, (ii)after-tax items classified as extraordinary or non-recurring gains
or losses, (iii) the net income of any person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Subsidiary of the
Guarantor or is merged or consolidated with the Guarantor or any Subsidiary of
the Guarantor, (iv) the net income (but not loss) of any Subsidiary, to the
extent that the declaration of Distributions by that Subsidiary of that income
is restricted by a contract, operation of law or otherwise, (v) the net income
of any person, other than a Subsidiary, except to the extent of cash
Distributions paid to the Guarantor or any of the Subsidiaries by such person,
(vi) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of Consolidated Net Income, (vii)
income or loss attributable to discontinued operations (including, without
limitation, operations disposed of or closed during the period, whether or not
the operations were classified as discontinued), (viii) in the case of a
successor to the Guarantor by consolidation or merger or as a transferee of the
Guarantor's assets, any earnings of the successor corporation prior to the
consolidation, merger or transfer of assets, (ix) the cumulative effect of
changes in accounting principles in the year of adoption of such changes, and
(x) the tax effect of any of the terms described in clauses (iii) through (ix)
above.


"Conversion" means a conversion or deemed conversion of one type of Loan into
another type of Loan pursuant to the provisions hereof.


"Conversion Date" means the date specified by the Borrower as being the date on
which the Borrower has elected to convert, or this Agreement requires the
conversion of, one type of Loan into another type of Loan, which shall be a
Banking Day.


"Conversion Notice" means a notice substantially in the form annexed hereto as
Schedule D to be given to the Administrative Agent by the Borrower pursuant
hereto.


"Credit Facility" means the credit facility established by the Lenders in favour
of the Borrower pursuant to this Agreement.


"Debt" means, with respect to any Person at any time, all obligations,
liabilities and indebtedness of such Person at such time which would, in
accordance with generally accepted accounting principles, be classified upon a
consolidated statement of financial position of such Person as liabilities of
that Person and, whether or not so classified, shall include (without
duplication):

(a)  indebtedness, contingent or otherwise, of such Person for borrowed money;

(b)  all other liabilities of such Person represented by a note, bond, debenture
     or other evidence of debt;

(c)  obligations  of  such  Person  arising  pursuant  to  bankers'   acceptance
     facilities,  commercial paper programs,  or letters of credit or letters of
     guarantee,  or indemnities  issued in connection  therewith,  to the extent
     such letters of credit or letters of  guarantee  are  non-trade  letters of
     credit or letters of guarantee; and

(d)      obligations of such Person under guarantees, indemnities, assurances,
         legally binding comfort letters or other contingent obligations
         relating to the indebtedness of any other Person and all other
         obligations incurred for the purpose of or having the effect of
         providing financial assistance to another Person, including, without
         limitation, endorsements of bills of exchange (other than for
         collection or deposit in the ordinary course of business).


"Default" means any event or condition which, with the giving of notice, lapse
of time or upon a declaration or determination being made (or any combination
thereof), would constitute an Event of Default.


"Discount Proceeds" mean:

(a)     in the case of Bankers' Acceptances which are purchased by a Lender ,
         the net cash proceeds to the Borrower from the sale of such Bankers'
         Acceptances at the applicable Discount Rate, before deduction or
         payment of the fees to be paid to the Lenders under Section 6.2; and

(b)     in the case of Bankers' Acceptances not purchased by a Lender, the net
         cash proceeds to the Borrower from the sale of such Bankers'
         Acceptances, before deduction or payment of fees to be paid to the
         Lenders under Section 6.2.


"Discount Rate" means:

(a)     with respect to an issue of Bankers' Acceptances accepted by a Lender
         that is a bank under Schedule I of the Bank Act (Canada), the CDOR
         Rate; and

(b)  with respect to an issue of Bankers'  Acceptances accepted by a Lender that
     is a bank under  Schedule II to the Bank Act  (Canada),  the lesser of: (i)
     the rate set out in clause (a) above plus one-tenth of one percent (1/10%);
     and (ii) the annual rate,  expressed as a percentage,  as being the average
     discount rate for bankers' acceptances having a comparable face value and a
     comparable issue and maturity date to the face value and issue and maturity
     date of such issue of  Bankers'  Acceptances,  expressed  on the basis of a
     year of 365 days,  quoted by at least one,  but not more than two,  Lenders
     which are banks under  Schedule II of the Bank Act (Canada),  as designated
     by the  Administrative  Agent in  consultation  with the Borrower,  for the
     purchase by such Lenders of Bankers'  Acceptances  accepted by them,  at or
     about  10:00  a.m.  (Toronto  time) on the  date of issue of such  Bankers'
     Acceptances.


"Distribution" means with respect to any Person:

(a)     the declaration, payment or setting aside for payment of any dividend
         or other distribution on or in respect of any shares or other capital
         or income interests in such Person;

(b)     the redemption, retraction, purchase, retirement or other acquisition,
         in whole or in part, of any shares or other capital or income interests
         in such Person or any securities, instruments or contractual rights
         capable of being converted into, exchanged or exercised for shares or
         other capital or income interests in such Person, including, without
         limitation, options, warrants, conversion or exchange privileges and
         similar rights;

(c)  the making of any loan or advance or any other  provision  of credit to any
     holder of any securities of such Person;

(d)     the payment of any principal, interest, fees or other amounts on or in
         respect of any loans, advances or other debt owing at any time by any
         holder of any securities of such Person, Affiliates of such Person or
         holders of any securities of Affiliates of such Person.


"Documents" mean this Agreement, the Guarantee, the Subordination Agreement and
all certificates, notices and other documents delivered or to be delivered to
the Administrative Agent or the Lenders, or both, in relation to the Credit
Facility pursuant hereto or thereto and, when used in relation to any Person,
the term "Documents" shall mean and refer to the Documents executed and
delivered by such Person, or to which such person is otherwise a party.


"Drawdown" means:

(a)  an Advance by a Revolving  Lender of a Canadian Prime Rate Loan,  U.S. Base
     Rate  Loan  or  LIBOR  Loan,  other  than  as a  result  of a  Rollover  or
     Conversion; or

(b)  the issue by a Revolving Lender of Bankers' Acceptances (or the making of a
     BA Equivalent Loan in lieu thereof), other than as a result of a Conversion
     or Rollover.


"Drawdown Date" means the date on which a Drawdown is made by the Borrower
pursuant to the provisions hereof, which shall be a Banking Day.


"Drawdown Notice" means a notice substantially in the form annexed hereto as
Schedule E to be given to the Administrative Agent by the Borrower pursuant
hereto.


"Effective Date" means July 29th, 1999.


"Environmental Claims" means any and all administrative, regulatory or judicial
actions, suits, demands, claims, liens, notices of non-compliance or violation,
investigations, inspections, inquiries or proceedings relating in any way to any
Environmental Laws or to any permit issued under any such Environmental Laws
including, without limitation:

(a)  any claim by a Governmental Authority for enforcement,  clean-up,  removal,
     response,   remedial   or  other   actions  or  damages   pursuant  to  any
     Environmental Laws; and

(b)  any claim by a Person seeking damages, contribution,  indemnification, cost
     recovery,  compensation  or  injunctive or other relief  resulting  from or
     relating to Hazardous Materials,  including any Release thereof, or arising
     from alleged injury or threat of injury to human health or safety  (arising
     from environmental matters) or the environment.


"Environmental Laws" mean all applicable federal, provincial, state, regional,
municipal or local laws with respect to the environment or environmental or
public health and safety matters contained in statutes, regulations, rules,
ordinances, orders, judgments, approvals, notices, permits or policies,
guidelines or directives having the force of law.


"Environmental Orders" includes all applicable orders, directives, judgments,
decisions or the like rendered by any Governmental Authority or court of
competent jurisdiction pursuant to Environmental Laws or Environmental Permits.


"Environmental Permits" includes all permits, certificates, approvals,
registrations, licences or other instruments issued by any Governmental
Authority and relating to or required for the Borrower or its Subsidiaries to
carry on their businesses, activities and operations in compliance with all
Environmental Laws and Environmental Orders.


"Equivalent Amount" means, on any date, the equivalent amount in Canadian
Dollars or United States Dollars, as the case may be, after giving effect to a
conversion of a specified amount of United States Dollars to Canadian Dollars or
of Canadian Dollars to United States Dollars, as the case may be, at the noon
spot rate of exchange for Canadian interbank transactions established by the
Bank of Canada for the day in question, or, if such rate is for any reason
unavailable, at the spot rate quoted for wholesale transactions by the
Administrative Agent at approximately noon (Toronto time) on that date in
accordance with its normal practice.


"Event of Default" has the meaning set out in Section 10.1.


"Existing RBC Facility" means the demand revolving credit facility in the
maximum amount of Cdn. $101,500,000 established by Royal Bank of Canada in
favour of the Borrower pursuant to a letter loan agreement dated April 1, 1999.


"Extending Lender" has the meaning set out in Section 2.4(c)(ii).


"Federal Funds Rate" means, for any day, the rate of interest per annum
(expressed as a percentage) equal to the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Board (including any such successor, the
"H.15(519)") for such day opposite the caption "Federal Funds (Effective)"; or
if on any relevant day the appropriate rate per annum for such day is not yet
published in H.15(519), the rate for such day will be the arithmetic mean of the
rates per annum (expressed as a percentage) for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York time) on that day
by each of three major brokers of Federal funds transactions in New York City,
selected by the Administrative Agent in its sole discretion.


"Federal Reserve Board" or "Federal" means the Board of Governors of the Federal
Reserve System of the United States of America or any successor thereof.


"Fiscal Quarter" means a period of three consecutive months, ending on a Quarter
End.


"Fiscal Year" means the fiscal year as adopted by the Borrower from time to time
and which is currently the one year period commencing on January 1 of each year
and ending on December 31 of such year.


"GCRL" means Gulf Canada Resources Limited, a corporation existing under the
laws of Canada.


"GCRL/KEDC Agreements" mean, collectively:

(a)  the Partnership Agreement;

(b)  the  Unanimous  Shareholder  Agreement  respecting  GMSFL among Gulf Canada
     Resources  Limited,  the Borrower and GMSFL,  made  effective  December 18,
     1998;

(c)  the  Unanimous  Shareholder  Agreement  respecting  GMSL among Gulf  Canada
     Resources Limited, the Borrower and GMSL, made effective December 18, 1998;

(d)  the  Agreement of Purchase and Sale between Gulf Canada  Resources  Limited
     and the Borrower, dated as of December 1, 1998;

(e)  the Share Purchase and Sale Agreement between Gulf Canada Resources Limited
     and the Borrower, dated as of December 1, 1998;

(f)  the Partnership Contribution Agreement among Gulf Canada Resources Limited,
     the Borrower and the Partnership, dated as of December 1, 1998;

(g)  the GMSFL Contribution  Agreement between Gulf Canada Resources Limited and
     GMSFL, dated as of December 1, 1998;

(h)  the Loan Agreement between GMSFL and the Borrower, dated December 18, 1998;
     and

(i)  the Loan Agreement between the Partnership and the Borrower, dated December
     18, 1998.


"GMSFL" means GMS Facilities Limited, a corporation existing under the laws of
the Province of Alberta.


"GMSL" means Gulf Midstream Services Limited, a corporation existing under the
laws of the Province of Alberta.


"Governmental Authority" means:

(a)  any government, parliament or legislature, any regulatory or administrative
     authority,   agency,  commission  or  board  (including  any  board  having
     jurisdiction in respect of public utilities) and any other statute, rule or
     regulation making entity having jurisdiction in the relevant circumstances;

(b)  any  person  acting  under  authority  of any of the  foregoing  or under a
     statute, rule or regulation thereof; and

(c)  any judicial,  administrative  or arbitral  court,  authority,  tribunal or
     commission having jurisdiction in the relevant circumstances.


"Guarantee" means the guarantee to be provided by the Guarantor to the
Administrative Agent for and on behalf of the Lenders, substantially in the form
of Schedule F annexed hereto.


"Guarantor" means KeySpan Corporation, a corporation existing under the laws of
the State of New York whose common shares are listed and posted for trading on
the New York Stock Exchange.


"Guarantor's Counsel" means Dickstein Shapiro Morin & Oshinsky, LLP.


"Hazardous Materials" mean any substance or mixture of substances which, if
released into the environment, would likely cause, immediately or at some future
time, harm or degradation to the environment or to human health or safety, and
includes any substance defined as or determined to be a pollutant, contaminant,
waste, hazardous waste, hazardous chemical, hazardous substance, toxic substance
or dangerous good under any Environmental Law.


"Interest Determination Date" means, with respect to LIBOR Loans, the date which
is two (2) Banking Days prior to the first day of the Interest Period applicable
to such LIBOR Loans.


"Interest Payment Date" means:

(a)  with respect to each Canadian  Prime Rate Loan and U.S. Base Rate Loan, the
     last Banking Day of each calendar month; and

(b)  with respect to each LIBOR Loan, the last day of each  applicable  Interest
     Period  and,  if any  Interest  Period  is longer  than 3 months,  the last
     Banking Day of each 3 month period during such Interest Period; and

(c)  with respect to each BA Equivalent  Loan,  the last day of each  applicable
     Interest Period;


provided that, in any case, the Maturity Date or, if applicable, any earlier
date on which the Credit Facility is fully cancelled or permanently reduced in
full, shall be an Interest Payment Date with respect to all Loans then
outstanding thereunder.


"Interest Period" means:

(a)  with respect to each Canadian  Prime Rate Loan and U.S. Base Rate Loan, the
     period  commencing on the applicable  Drawdown Date or Conversion  Date, as
     the case may be,  and  terminating  on the date  selected  by the  Borrower
     hereunder for the  Conversion of such Loan into another type of Loan or for
     the repayment of such Loan;

(b)  with respect to each Bankers'  Acceptance (and BA Equivalent  Loans in lieu
     thereof),  the period  selected by the  Borrower  and being of 1, 2, 3 or 6
     months'  duration,  subject  to market  availability,  (or,  subject to the
     agreement of the Lenders,  a longer or shorter  period)  commencing  on the
     Drawdown Date,  Rollover Date or Conversion  Date, as  applicable,  of such
     Loan; and

(c)  with  respect to each LIBOR Loan,  the period  selected by the Borrower and
     being  of 1,  2,  3,  6,  9 or  12  months'  duration,  subject  to  market
     availability,  (or,  subject to the  agreement of the Lenders,  a longer or
     shorter  period)  commencing  on  the  Drawdown  Date,   Rollover  Date  or
     Conversion Date, as applicable, of such Loan;


provided that in any case:

(d)  the last day of each  Interest  Period  shall be also the  first day of the
     next Interest  Period,  whether with respect to the same or another type of
     Loan;

(e)  if the last day of an Interest  Period  selected  by the  Borrower is not a
     Banking Day, then the Borrower shall be deemed to have selected an Interest
     Period,  the last day of which is the Banking Day next  following  the last
     day of the Interest Period selected unless such next following  Banking Day
     falls in the next  calendar  month,  in which event the  Borrower  shall be
     deemed to have  selected an Interest  Period,  the last day of which is the
     Banking Day next preceding the last day of the Interest  Period selected by
     the Borrower; and

(f)  the last day of all  Interest  Periods for Loans under the Credit  Facility
     with respect to a Commitment  shall expire on or prior to the Maturity Date
     in respect of such Commitment.


"Investment" means, with respect to any Person:

(a)  any  purchase or other  acquisition  of shares or other  securities  of any
     Person;

(b)  any  loan,   advance,   extension  of  credit,   guarantee  (but  excluding
     performance guarantees in respect of non-financial obligations),  indemnity
     or other form of financial  assistance to or for the benefit of any Person;
     and

(c)  any capital contribution to any other Person.


"KS Finance"  means KS Midstream  Finance Co., a corporation  existing under the
laws of the Province of Nova Scotia.


"KS Finance Loan" means the term loan and all other indebtedness and liabilities
of the Borrower outstanding pursuant to the term loan agreement entered into
between Royal Bank of Canada and the Borrower dated as of December 17, 1998 (the
"Term Loan Agreement"), which Term Loan Agreement was assigned and transferred
by Royal Bank of Canada to KS Finance by way of an Assignment and Assumption
Agreement entered into among Royal Bank of Canada, as assignor, the Borrower,
and KS Finance, as assignee, dated April 27, 1999;


"Lenders" means each of the financial institutions named on Schedule A hereto as
a Lender which has executed this Agreement or, as a permitted assignee, an
Assignment Agreement substantially in the form of Schedule B, and includes Royal
Bank of Canada in its capacity as a Lender, but excluding any such financial
institution, the Commitment of which has been reduced to zero, and excluding the
Administrative Agent in its capacity as the Administrative Agent.


"Lenders' Counsel" means the firm of Stikeman, Elliott, or such other firm of
legal counsel as the Administrative Agent may from time to time designate.


"Lender's Proportion" means, at any time and from time to time with respect to
each Lender, the proportion that the amount of such Lender's Outstanding
Principal at such time bears to the amount of the total Outstanding Principal of
all Lenders at such time, and in the event that there is no Outstanding
Principal at such time, "Lender's Proportion" shall mean the proportion that the
amount of such Lender's Commitment at such time bears to the amount of the Total
Commitment at such time.


"LIBOR Loan" means an Advance in, or Conversion into, United States Dollars made
by the Lenders to the Borrower with respect to which the Borrower has specified
that interest is to be calculated by reference to the LIBOR Rate, and includes
each Rollover in respect thereof.


"LIBOR Rate" means, with respect to any Interest Period applicable to a LIBOR
Loan, the interest rate per annum determined by the Administrative Agent, based
on a 360 day year, rounded upwards if necessary to the nearest whole multiple of
one-sixteenth of one percent (1/16%), as the average of the offered quotations
appearing on page 3750 of the Telerate screen (or if such screen is not
available or does not quote a rate of interest per annum for the LIBOR Interest
Period selected, any successor service used for the purposes of displaying the
rates at which US Dollar deposits are offered for deposit in the London
eurodollar interbank market) at approximately 11:00 a.m. London, England time,
two (2) Banking Days prior to the Drawdown Date, Conversion Date or a Rollover
Date, as the case may be, for such Interest Period; provided that, if such page
of Telerate screen 3750 or any successor service is unavailable or does not
quote a rate of interest per annum for the LIBOR Interest Period selected, then
"LIBOR Rate" shall mean, with respect to any Interest Period applicable to a
LIBOR Loan, the interest rate per annum determined by the Administrative Agent,
based on a 360 day year, rounded upwards if necessary to the nearest whole
multiple of one-sixteenth of one percent (1/16%), as the average of the offered
quotations appearing on the "LIBOR01 Page" (or any display substituted therefor)
of Reuters Monitor Money Rates Service (or if such LIBOR01 Page is not
available, any successor service used for the purposes of displaying the rates
at which US Dollar deposits are offered for deposit in the London eurodollar
interbank market) at approximately 11:00 a.m. London, England time two (2)
Banking Days prior to the Drawdown Date, Conversion Date or a Rollover Date, as
the case may be, for such Interest Period; provided further, that, if Telerate
screen 3750 or its successor and such page of Reuters Monitor Money Rates
Service or its successor are unavailable, then "LIBOR Rate" shall mean, with
respect to any Interest Period applicable to a LIBOR Loan, the interest rate per
annum at which the Administrative Agent will offer deposits of comparable term
and amount to prime banks in the London inter-bank market at approximately 11:00
a.m. London, England time two (2) Banking Days prior to the Drawdown Date,
Conversion Date or a Rollover Date, as the case may be, for the Interest Period
and in an amount comparable to the amount of the LIBOR Loan. Each determination
of LIBOR Rate may be computed using any reasonable averaging and attribution
method.


"Loan" means a Canadian Prime Rate Loan, a U.S. Base Rate Loan, a LIBOR Loan, a
Bankers' Acceptance or a BA Equivalent Loan outstanding hereunder.


"Majority Lenders" means:

(a)  during the  continuance  of a Default or an Event of Default when there are
     outstanding Obligations, those Lenders which are owed, in the aggregate, at
     least 66 2/3% of all Outstanding Principal; and

(b)  at any other time,  those  Lenders,  the  Commitments  of which are, in the
     aggregate, at least 66 2/3% of the Commitments of all Lenders hereunder.


"Material Adverse Effect" means, with respect to any Person, a material adverse
effect on:

(a)  its business,  condition  (financial or otherwise),  operations,  assets or
     properties,  taken as a whole; provided that a Material Adverse Effect with
     respect to the Borrower  shall occur under this paragraph (a) only if there
     has been a Material  Adverse  Effect on the Borrower  and its  Subsidiaries
     taken as a whole;

(b)  the validity or enforceability of any of the Documents in respect of it;

(c)  the ability of it to perform its obligations  under any of the Documents to
     which it is a party;

(d)  the rights or remedies of the Lenders  under any of the  Documents to which
     such Person is a party; or

(e)  the ability of the Borrower or the Guarantor to pay any amounts  payable by
     it under the Documents to which it is a party.


"Maturity Date" means, with respect to a Commitment, the date that is the third
anniversary of the Term Date in respect of such Commitment.


"Moody's" means Moody's Investors Services, Inc., and its successors.


"Non-Acceptance Discount Rate" means, for any day, the simple average of the
Discount Rate in paragraph (a) of the definition of Discount Rate and paragraph
(b) of such definition.


"Non-Acceptance Lender" means a Lender other than a Canadian chartered bank.


"Non-Extending Lender" has the meaning set out in Section 2.4(c)(ii).


"Non-Recourse Assets" means the Borrower's proportion (determined in accordance
with generally accepted accounting principles) of assets owned directly or
indirectly by the Borrower which (a) represent a specific Project, whether alone
or in association with others, (b) debt is owed to one or more Non-Recourse
Creditors, which debt was incurred for the purpose of financing the costs of
such Project, and (c) neither the Borrower nor the Guarantor nor any Subsidiary
is liable or has issued a guarantee, either directly or indirectly, in respect
of debts and liabilities related to such assets; provided that, upon the debts
or liabilities to such creditors in respect of such debt being repaid, such
assets shall then cease to be Non-Recourse Assets.


"Non-Recourse Creditor" means a creditor whose recourse is limited to
Non-Recourse Assets, to the exclusion of any and all other recourse, whether
directly or indirectly, by way of guarantees or otherwise, against the Borrower,
the Guarantor or any Subsidiary or any of their other properties.


"Non-Recourse Debt" means debt incurred by the Borrower and/or its Subsidiaries
for the purpose of financing the costs of one or more Projects and due or
otherwise owing to Non-Recourse Creditors and which shall not exceed, in the
aggregate, at any time, Cdn. $50,000,000 (or the Equivalent Amount thereof).


"Non-Revolving Lender" means a Lender whose Commitment is in the Term Period.


"Obligations" mean, at any time and from time to time, all of the obligations,
indebtedness and liabilities (present or future, absolute or contingent, matured
or not) of the Borrower to the Lenders or the Administrative Agent under,
pursuant to or relating to, the Documents or the Credit Facility, and whether
the same are from time to time reduced and thereafter increased or entirely
extinguished and thereafter incurred again, and including all outstanding
obligations, interest, fees, commissions, indemnity amounts, legal and other
costs, charges and expenses payable by the Borrower under this Agreement.


"Offer of Extension" means a written offer by the Administrative Agent on behalf
of all or some of the Revolving Lenders to the Borrower to extend the then
current Revolving Period in respect of the Commitments of such Revolving Lenders
to a date not more than 364 days from acceptance by the Borrower of such offer
of extension, and setting forth the terms and conditions on which such extension
may be accepted by the Borrower.


"Officer's Certificate" means a certificate or notice (other than a Compliance
Certificate) signed by any one of the president, a vice-president, treasurer,
controller or the corporate secretary of the Borrower.


"Outstanding Principal" means, at any time, the aggregate of:

(a)  the principal amount of all outstanding Canadian Prime Rate Loans;

(b)  the Equivalent  Amount in Canadian  Dollars of the principal  amount of all
     outstanding U.S. Base Rate Loans and LIBOR Loans; and

(c)  the amounts payable at maturity of all outstanding Bankers' Acceptances and
     BA Equivalent Loans.


"Partnership" means the general partnership known as the Gulf Midstream Services
Partnership, formed effective December 1, 1998, the partners of which are which
Gulf Canada Resources Limited, the Borrower and GMSL.


"Partnership Agreement" means the General Partnership Agreement of the
Partnership among Gulf Canada Resources Limited, the Borrower and GMSL dated
December 1, 1998.


"Partnership Parties" mean, collectively, the Partnership, GMSFL and GMSL, and a
reference to Partnership Parties shall be a reference to each of them.


"Permitted Dispositions" mean:

(a)  dispositions  of inventory in the ordinary  course of the Borrower's or the
     relevant Subsidiary's business;

(b)  dispositions of tangible  equipment which has become worn out,  obsolete or
     unserviceable in the conduct of the Borrower's or the relevant Subsidiary's
     business;

(c)  any abandonment,  surrender or similar  disposition  where desirable in the
     ordinary course of the Borrower's or the relevant Subsidiary's business;

(d)  dispositions which are Permitted Encumbrances; and

(e)  dispositions  made with the prior  written  consent  of the  Administrative
     Agent.


"Permitted Encumbrances" mean:

(a)  liens (including  deposits) for taxes,  assessments or governmental charges
     (including liens securing  assessments  under workers'  compensation  laws,
     unemployment  insurance or similar social security  legislation)  which are
     not due and  delinquent,  or the  validity  of which  the  Borrower  or the
     relevant  Subsidiary  shall be contesting in good faith and with respect to
     which there is no potential of forfeiture  of any property  interest of the
     Borrower;

(b)  the excess of the  amount,  if any,  of any taxes,  rates,  assessments  or
     governmental  charges or levies for which final  assessments  have not been
     received  over and above the amount of such taxes,  rates,  assessments  or
     governmental charges or levies as set out in the applicable filings made by
     the Borrower or the relevant Subsidiary;

(c)  easements, rights of way, servitudes and other surface rights and interests
     in land (including surface rights for railways, sewers, drains, gas and oil
     pipelines,  gas and water mains,  electric light and power and telephone or
     telegraph or cable television  conduits,  poles, wires and cables) which do
     not in the  aggregate  materially  impair  the use and  benefit of the land
     subject thereto;

(d)  all rights  reserved to or vested in any municipal,  governmental  or other
     public authority by the terms of any lease,  licence,  franchise,  grant or
     permit held by the Borrower or the  relevant  Subsidiary  by any  statutory
     provision to effect a termination  of any such lease,  licence,  franchise,
     grant or permit or to require annual or periodic payments as a condition of
     the continuance  thereof or to distrain  against or to obtain a lien on any
     property or assets of the Borrower or the relevant  Subsidiary in the event
     of failure to make such annual or other period payments;

(e)  liens,  privileges  or other  charges  imposed or  permitted by law such as
     statutory  liens and  deemed  trusts,  carriers'  liens,  builders'  liens,
     warehousemen's  liens,  mechanics'  liens,  materialmen's  liens  and other
     liens,  privileges  or other  charges of a similar  nature  which relate to
     obligations which are not due and delinquent or if due and delinquent,  the
     validity  of  which  is being  contested  at the time in good  faith by the
     Borrower or the  relevant  Subsidiary,  and if such  contestation  will not
     involve  potential  forfeiture  of any of its  assets  or any part  thereof
     having a book value in excess of Cdn. $5,000,000;

(f)  undetermined  or  inchoate  liens  arising  in the  ordinary  course of and
     incidental  to  construction,  maintenance  or  current  operations  of the
     Borrower or the relevant  Subsidiary which relate to obligations  which are
     not due and  delinquent,  or the  validity  of which  the  Borrower  or the
     relevant Subsidiary shall be contesting in good faith;

(g)  the lien of any judgment rendered,  or claim filed, against the Borrower or
     the relevant Subsidiary which the Borrower or the relevant Subsidiary shall
     be  contesting  in good faith and liens  resulting  from a deposit of cash,
     security  or  appeal  bond to  secure  the  costs of  on-going  litigation;
     provided that the execution or  enforcement  of any such lien,  judgment or
     claim is effectively  stayed or appropriate  security in respect thereof is
     posted  with the  Administrative  Agent  as the  Administrative  Agent  may
     reasonably require;

(h)  the lien or any right of distress reserved in or exercisable under any real
     property lease for rent or otherwise to effect compliance with the terms of
     such lease in respect of which the rent or other obligations are not at the
     time overdue,  or if overdue,  the validity of which are being contested at
     the time in good faith;

(i)  Security Interests  (including cash deposits) in favour of a public utility
     or any municipality or governmental or other public authority when required
     by  such  utility,   municipality  or  authority  in  connection  with  the
     operations of the Borrower or the relevant  Subsidiary,  to the extent such
     Security Interests do not have a Material Adverse Effect on the Borrower or
     any of its Subsidiaries;

(j)  Security  Interests  (including cash deposits)  securing the performance of
     bids,  tenders,   leases,  contracts  (other  than  for  the  repayment  of
     indebtedness),  statutory  obligations,  appeal bonds and performance bonds
     and other obligations of like nature,  incurred as incidental to and in the
     ordinary  course of business of the Borrower or the relevant  Subsidiary if
     all such Security  Interests neither singularly nor in the aggregate secure
     obligations in excess of Cdn. $5,000,000;

(k)  Security  Interests  created by the Borrower or any of its  Subsidiaries to
     finance  the  acquisition  (by  purchase  or  lease),  construction  and/or
     development  of  Non-Recourse  Assets,  provided  that  (i)  such  Security
     Interests are solely in relation to Non-Recourse Debt and are restricted to
     the  Non-Recourse  Assets,  and  (ii)  the  obligations,  indebtedness  and
     liabilities  secured by all such Security  Interests do not exceed,  in the
     aggregate,  at any time Cdn. $50,000,000 in respect of the Borrower and its
     Subsidiaries collectively;

(l)  Security Interests in favour of the Lenders, or the Administrative Agent on
     behalf of the Lenders;

(m)  Security Interests  consented to in writing by the Lenders such consent not
     to be unreasonably withheld; and

(n)  any extension,  renewal or replacement (or successive extensions,  renewals
     or replacements),  as a whole or in part, of any Security Interest referred
     to in the preceding paragraphs (a) to (l) inclusive of this definition,  so
     long as any  such  extension,  renewal  or  replacement  of  such  Security
     Interest is limited to all or any part of the same  property  that  secured
     the Security Interest  extended,  renewed or replaced (plus improvements on
     such property) and the principal  amount of the  indebtedness or obligation
     secured thereby is not increased;

provided that nothing in this definition shall cause, or result in, the Loans
and other Obligations hereunder to be subordinated in priority to any such
Permitted Encumbrance.


"Permitted Indebtedness" means:

(a)  the KS  Finance  Loan  and  any  existing  Debt  created  by the  GCRL/KEDC
     Agreements;

(b)  Debt  incurred in the  ordinary  course of business to trade  creditors  or
     other  Persons  providing  services to the  Borrower,  in  accordance  with
     customary trade terms;

(c)  Debt which is secured by a Permitted Encumbrance; and

(d)  the Obligations.


"Person" means a natural person, partnership, corporation, joint stock company,
trust, unincorporated association, joint venture or other entity or Governmental
Authority, and pronouns have a similar or extended meaning.


"Power of Attorney" means the power of attorney substantially in the form of
Schedule G.


"Project" means the acquisition (by purchase or lease), construction and/or
development of previously undeveloped or newly acquired assets capable of
generating sufficient cash flow, on the basis of reasonable initial assumptions,
to cover the operating costs and debt service required to finance the
undertaking relating to such assets over a period of time which is less than the
projected economic life of the assets, and includes any commercial operation for
which such assets were so acquired, constructed or developed.

"Quarter End" means March 31, June 30, September 30 or December 31 in each year.


"Release" means any release, spill, emission, leak, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration into the environment
including, without limitation, the movement of Hazardous Materials through
ambient air, soil, surface water, ground water, wetlands, land or sub-surface
strata.


"Repayment Notice" means a notice substantially in the form annexed hereto as
Schedule H to be given to the Administrative Agent by the Borrower pursuant
hereto.


"Request for an Offer of Extension" means a written request by the Borrower to
the Revolving Lenders requesting the Revolving Lenders to issue an Offer of
Extension in respect of the Commitments of those Lenders, in the form attached
as Schedule I.


"Revolving Lender" means a Lender whose Commitment is in the Revolving Period.


"Revolving Period" means the period commencing on the Effective Date and ending
at 5:00 p.m. (Toronto time) on the date that is 364 days after the Effective
Date, as such period may, from time to time, be extended pursuant to Section 2.4
in respect of the Commitments of Revolving Lenders.


"Rollover" means:

(a)  with  respect to any LIBOR Loan,  the  continuation  of all or a portion of
     such Loan (subject to the  provisions  hereof) for an  additional  Interest
     Period  subsequent  to  the  initial  or  any  subsequent  Interest  Period
     applicable thereto; and

(b)  with respect to Bankers'  Acceptances (or BA Equivalent  Loans made in lieu
     thereof),  the issuance of new Bankers' Acceptances or the making of new BA
     Equivalent  Loans (subject to the  provisions  hereof) in respect of all or
     any portion of Bankers'  Acceptances  (or BA Equivalent  Loans made in lieu
     thereof) maturing at the end of the Interest Period applicable thereto, all
     in accordance with ARTICLE 6 hereof.


"Rollover Date" means the date of commencement of a new Interest Period
applicable to a Loan.


"Rollover Notice" means a notice substantially in the form annexed hereto as
Schedule J to be given to the Administrative Agent by the Borrower pursuant
hereto.


"S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill, Inc., and
its successors.


"Security Interest" means mortgages, charges, pledges, hypothecs, assignments by
way of security, conditional sales or other title retentions, security created
under the Bank Act (Canada), liens, encumbrances, security interests or other
interests in property, howsoever created or arising, whether fixed or floating,
perfected or not, which secure payment or performance of an obligation and,
including, in any event, rights of set-off created for the purpose of securing
(directly or indirectly) the repayment of borrowed money, and capital leases and
any other lease financing.


"Subordinated Debt" means all indebtedness fully subordinated to the Obligations
by way of subordination or other agreements satisfactory to the Administrative
Agent in its sole discretion.


"Subordination Agreement" means the subordination and postponement agreement to
be entered into among the Borrower, the Administrative Agent on behalf of the
Lenders and KS Finance, substantially in the form annexed hereto as Schedule K.


"Subsidiary" means:

(a)  any  corporation  of which at least a majority  of the  outstanding  shares
     having by the terms  thereof  ordinary  voting power to elect a majority of
     the board of directors of such corporation (irrespective of whether, at the
     time,  shares of any other class or classes of such corporation  might have
     voting  power by reason of the  happening  of any  contingency,  unless the
     contingency  has occurred and then only for as long as it continues) is, at
     the time, directly or indirectly  beneficially owned by the Borrower or one
     or  more  of its  Subsidiaries  or by the  Borrower  and one or more of its
     Subsidiaries; and

(b)  any  partnership  of which at least a majority  of the  outstanding  income
     interests  or capital  interests  are at the time  directly  or  indirectly
     beneficially owned by the Borrower or one or more of its Subsidiaries or by
     the Borrower and one or more of its Subsidiaries;

and "Subsidiary" shall, when used with reference to the Borrower, be deemed to
include the Partnership, GMSFL and GMSL.


"Taxes" mean all taxes, levies, imposts, stamp taxes, duties, fees, deductions,
withholdings, charges, compulsory loans or restrictions or conditions resulting
in a charge which are imposed, levied, collected, withheld or assessed by any
country or political subdivision or taxing authority thereof now or at any time
in the future, together with interest thereon and penalties, charges or other
amounts with respect thereto, if any (but excluding any taxes, franchise taxes,
levies, imposts or charges imposed, levied or assessed in respect of or applied
on the overall net income or capital of the Lender) and "Tax" and "Taxation"
shall be construed accordingly.


"Term Date" means, in respect of a Commitment, the day following the last day of
the Revolving Period in respect of such Commitment.


"Term Period" means, with respect to a Commitment, the period commencing on the
Term Date with respect to such Commitment and ending on the Maturity Date with
respect to such Commitment.


"Termination Event" means an automatic acceleration of the repayment of the
Obligations outstanding hereunder without any notice being required thereunder
from the Administrative Agent or any Lender, as the case may be, pursuant to
Section 10.1(r), resulting from an Event of Default in Sections 10.1(e) or
10.1(f).


"Total Commitment" means the aggregate of the Commitments of each of the
Lenders, as hereafter cancelled, reduced or terminated from time to time
pursuant to this Agreement.


"United States  Dollars",  "U.S. $" and "U.S.  Dollars" mean the lawful money of
the United States of America.


"U.S. Base Rate" means, for any day, the greater of:

(a)  the rate of  interest  per annum,  expressed  on the basis of a year of 365
     days,  established and publicly announced by the Administrative  Agent from
     time to time as its  reference  rate of  interest  then in  effect  for the
     determination   of  interest   rates  on  commercial   loans  made  by  the
     Administrative Agent in United States Dollars in Canada; and

(b)  the rate of  interest  per annum,  expressed  on the basis of a year of 365
     days, for such day or, if such day is not a Banking Day, on the immediately
     preceding  Banking Day,  equal to the sum of the Federal  Funds Rate,  plus
     0.50% per annum;


provided that if both such rates are equal or if such Federal Funds Rate is
unavailable for any reason on the date of determination, then the "U.S. Base
Rate" shall be the rate specified in paragraph (a) above.


"U.S.  Base Rate Loan" means an Advance in, or  Conversion  into,  United States
Dollars made by the Lenders to the  Borrower  with respect to which the Borrower
has specified, or a provision hereof requires, that interest is to be calculated
by reference to the U.S. Base Rate.


"Year 2000 Compliance" means a product is compliant if the product, when used in
accordance with its associated documentation, is capable of processing,
providing, and/or receiving data without material error relating to date data
which represents or references different centuries or more than one century,
provided all other products used with the product properly exchange similarly
accurate date data with the product. "Year 2000 Compliant" shall have a
corresponding meaning.

1.2      Headings

         The division of this Agreement into Articles and Sections and the
insertion of headings are for convenience of reference only and shall not affect
the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement supplemental hereto. Unless something in the subject
matter or context is inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.

1.3      Number; Persons

         Words importing the singular number only shall include the plural and
vice versa, words importing the masculine gender shall include the feminine and
neuter genders and vice versa.

1.4      Accounting Principles

         Wherever in this Agreement reference is made to generally accepted
accounting principles, such reference shall be deemed to be to the
recommendations at the relevant time of the Canadian Institute of Chartered
Accountants, or any successor institute, applicable on a consolidated basis
(unless otherwise specifically provided or contemplated herein to be applicable
on an unconsolidated basis) as at the date on which such calculation is made or
required to be made in accordance with generally accepted accounting principles.
Where the character or amount of any asset or liability or item of revenue or
expense or amount of equity is required to be determined, or any consolidation
or other accounting computation is required to be made for the purpose of this
Agreement or any other Document, such determination or calculation shall, to the
extent applicable and except as otherwise specified herein or as otherwise
agreed in writing by the parties, be made in accordance with generally accepted
accounting principles applied on a consistent basis.

1.5      Reference to Agreements and Enactments

         Reference herein to any agreement, instrument, licence or other
document shall be deemed to include reference to such agreement, instrument,
licence or other document as the same may from time to time be amended,
modified, supplemented or restated in accordance with the provisions of this
Agreement; and reference herein to any enactment shall be deemed to include
reference to such enactment as re-enacted, amended or extended from time to time
and to any successor enactment.

1.6      Per Annum Calculations

         Unless otherwise stated, wherever in this Agreement reference is made
to a rate "per annum" or a similar expression is used, such rate shall be
calculated on the basis of calendar year of 365 days or 366 days, as the case
may be.

1.7      Certain Matters Related to Ratings Explained
         For the purposes hereof:

(a)  the  senior  unsecured  long  term  debt  of  the  Guarantor  shall  not be
     considered  to be "not rated" (or to like effect) by either  Moody's or S&P
     (each, a "Rating  Agency") by reason of such Rating Agency ceasing to carry
     on the  business of  providing  ratings of the long term debt of  corporate
     borrowers based on creditworthiness  assessments. If only one of the Rating
     Agencies ceases  carrying on the business of providing  ratings of the long
     term debt of corporate  borrowers  based on  creditworthiness  assessments,
     then for  purposes of  determining  "Applicable  BA Fee Rate",  "Applicable
     LIBOR Margin", "Applicable Prime Rate Margin", "Applicable USBR Margin" and
     "Applicable Commitment Fee Rate" (collectively, the "Pricing Definitions"),
     the rating of the other Rating Agency only shall be utilized;

(b)  if both of the Rating  Agencies cease carrying on the business of providing
     ratings   of  the  long  term  debt  of   corporate   borrowers   based  on
     creditworthiness assessments, then:

     (i)  the Borrower and the Lenders  shall attempt in good faith for a period
          of 30 days  thereafter  to determine  substitute  definitions  for, or
          amendments to, the Pricing  Definitions,  which may include attempting
          to agree on some other entity  (which may include a debt rating agency
          or a nationally  recognized  securities  dealer) (a "Substitute Rating
          Entity") to assign a rating to the senior  unsecured long term debt of
          the Guarantor as contemplated  in the following  paragraph (ii) and to
          agree, if necessary,  on the ratings of such Substitute  Rating Entity
          which most  closely  correspond  to those in the  Pricing  Definitions
          ("Equivalent Ratings"); and

     (ii) if by the end of such 30 day period the  Borrower and the Lenders have
          not agreed upon  substitute  definitions  for, or  amendments  to, the
          Pricing  Definitions  pursuant to the  preceding  paragraph  (i), then
          during a period of 60 days  thereafter,  the  Borrower and the Lenders
          shall, if such has not already been accomplished,  continue to attempt
          in  good  faith  to  agree  on a  Substitute  Rating  Entity  and,  if
          applicable,  Equivalent Ratings and, if a Substitute Rating Entity has
          been  agreed  on,  the  Borrower  shall  attempt  to  obtain  from the
          Substitute Rating Entity a rating ("Substitute Rating") for the senior
          unsecured long term debt of the Guarantor;

                  it being agreed that:

     (iii)during the 30 day and 60 day  periods  contemplated  in the  preceding
          paragraphs  (i) and (ii), or such part thereof which elapses before an
          alternate  approach is finally  established  as  contemplated  in such
          paragraphs  (i) and (ii),  the rates  applicable  from time to time in
          accordance  with the  Pricing  Definitions  and  based  on the  rating
          applicable  to the senior  unsecured  long term debt of the  Guarantor
          immediately before the commencement of the 30 day period  contemplated
          in the preceding paragraph (i) shall apply;

     (iv) if a Substitute Rating Entity and, if applicable,  Equivalent  Ratings
          have been agreed on and the Substitute Rating Entity has established a
          Substitute  Rating  for the  senior  unsecured  long  term debt of the
          Guarantor  by  or  before  the   expiration   of  the  60  day  period
          contemplated  in the  preceding  paragraph  (ii),  then  thereupon and
          thereafter  the same  shall  apply and,  if  applicable,  the  Pricing
          Definitions  shall be deemed to have been amended to  incorporate  the
          Equivalent  Ratings in place of the ratings referred to in the Pricing
          Definitions; provided the Substitute Rating shall be subject to review
          by the Substitute  Rating Entity from time to time (but not more often
          than  once in any 12  month  period)  at the  request  of  either  the
          Guarantor  or the  Administrative  Agent given in writing to the other
          (any such review to determine  whether the  Substitute  Rating  should
          change to another  rating  category or, if  applicable,  an Equivalent
          Rating for the senior  unsecured  long term debt of the Guarantor) and
          if any such review results in a change in the Substitute Rating,  then
          thereupon and thereafter (subject to further reviews as aforesaid) the
          same shall apply; and

     (v)  if  an  alternate  approach  has  not  been  finally   established  as
          contemplated  in  the  preceding   paragraphs  (i)  and  (ii)  by  the
          expiration of the 60 day period referred to in the preceding paragraph
          (ii),  then the rates  applicable from time to time in accordance with
          the  Pricing  Definitions  and based on the rating  applicable  to the
          senior  unsecured long term debt of the Guarantor  immediately  before
          the  commencement  of the 30 day period  contemplated in the preceding
          paragraph (i) shall continue to apply;

(c)      a rating assigned by a Rating Agency (or, as applicable, Substitute
         Rating Entity) shall be, as applicable, considered to be "lower" than
         another rating assigned by such Rating Agency (or, as applicable,
         Substitute Rating Entity) or by the other Rating Agency if it denotes a
         poorer creditworthiness assessment (for instance, "B" is lower than
         "A");

(d)      the rating categories and ratings of any Rating Agency or Substitute
         Rating Entity referred to herein shall include any equivalent rating
         category or rating of such Rating Agency or Substitute Rating Entity
         which replaces the same; and

(e)      any reference in this Agreement to the long term debt of the Guarantor
         (or to like effect) for rating purposes shall be deemed to be a
         reference to the senior unsecured long term debt of the Guarantor.

1.8      Schedules

         The following are the Schedules annexed hereto and incorporated by
reference and deemed to be part hereof:

                  Schedule A          -     Lenders and Commitments
                  Schedule B          -     Assignment Agreement
                  Schedule C          -     Compliance Certificate
                  Schedule D          -     Conversion Notice
                  Schedule E          -     Drawdown Notice
                  Schedule F          -     Guarantee
                  Schedule G          -     Power of Attorney
                  Schedule H          -     Repayment Notice
                  Schedule I          -     Request for an Offer of Extension
                  Schedule J          -     Rollover Notice
                  Schedule K          -     Subordination Agreement
                  Schedule L          -     Opinion of Borrower's Counsel
                  Schedule M          -     Opinion of Guarantor's Counsel
                  Schedule N          -     Subsidiaries

1.9      Reliance by Borrower

         The Borrower shall be entitled to rely upon any certificate, notice or
other document (including any facsimile) or other advice, statement or
instruction provided to it by the Administrative Agent pursuant to this
Agreement, and the Borrower shall be entitled to deal with the Administrative
Agent with respect to all matters under this Agreement which the Administrative
Agent is authorized to deal with, without obligation whatsoever to satisfy
itself as to the authority of the Administrative Agent to act on behalf of the
Lenders and without liability whatsoever to the Lenders for relying upon any
certificate, notice or other document or other advice, statement or instruction
provided to it by the Administrative Agent, notwithstanding any lack of
authority of the Administrative Agent to provide the same.

                                   ARTICLE 2
                               THE CREDIT FACILITY
                               -------------------

2.1      The Credit Facility

         Subject to the terms and conditions of this Agreement, the Lenders
hereby severally establish, in favour of the Borrower, an extendible revolving
term credit facility (the "Credit Facility") up to a maximum of Cdn.
$200,000,000 (or the Equivalent Amount of U.S. $) pursuant to which each
Revolving Lender severally agrees to make Drawdowns to the Borrower rateably,
according to the proportion that such Revolving Lender's Commitment is to the
aggregate of all Revolving Lenders' Commitments, in an aggregate amount not to
exceed the amount set forth opposite such Lender's name as its Commitment on
Schedule A hereto. The Outstanding Principal under the Credit Facility shall not
exceed the Total Commitment. Subject thereto, the Outstanding Principal in
respect of the Loans by the Revolving Lenders may revolve during the Revolving
Period.

2.2      Types of Availments

         The Borrower may, in Canadian Dollars, make Drawdowns, Conversions and
Rollovers under the Credit Facility of Canadian Prime Rate Loans and Bankers'
Acceptances (including BA Equivalent Loans) and may, in United States Dollars,
make Drawdowns, Conversions and Rollovers under the Credit Facility of U.S. Base
Rate Loans and LIBOR Loans. The Borrower shall have the option, subject to the
terms and conditions hereof, to determine which types of Loans shall be drawn
down and in which combinations or proportions.

2.3      Purpose

         The Credit Facility is being made available to repay amounts
outstanding under the Existing RBC Facility and for the general corporate
purposes of the Borrower; provided that neither the Credit Facility nor any
Loans shall, without the prior written approval of all of the Lenders, be used
to acquire the securities of any other Person except as permitted pursuant to
Section 9.2(f). Notwithstanding anything contained herein to the contrary the
Borrower shall not utilize proceeds of one or more Loans to, or to provide funds
to any Subsidiary to, finance an offer to acquire (which shall include an offer
to purchase securities, solicitation of an offer to sell securities, an
acceptance of an offer to sell securities, whether or not the offer to sell was
solicited, or any combination of the foregoing) outstanding securities of any
Person (the "Target") which constitutes a "take-over bid" pursuant to applicable
securities legislation, (a "Take-over"), unless the board of directors or like
body of the Target, or the holders of all of the securities of the Target has or
have approved, accepted, or recommended to security holders acceptance of, the
Take-over.

2.4      Extension of Revolving Period

     (a)  Request for an Offer of  Extension - The  Borrower  may, at its option
          and from time to time (but not more  than once in a Fiscal  Year),  by
          delivering to the Administrative  Agent at the Administrative  Agent's
          Branch an  executed  Request  for an Offer of  Extension,  request the
          Revolving  Lenders to issue an Offer of  Extension  to extend the then
          current  Revolving  Period  with  respect  to the  Commitments  of the
          Revolving Lenders to a date not more than 364 days from the acceptance
          of such Offer of Extension by the Borrower; provided that such request
          may not be made more than 90 days or less than 60 days before the then
          current  Term Date in  respect  of the  Commitments  of the  Revolving
          Lenders.

     (b)  Delivery  of Request  and  Response  Thereto - Upon  receipt  from the
          Borrower  of an  executed  Request  for an  Offer  of  Extension,  the
          Administrative  Agent shall forthwith deliver to each Revolving Lender
          a copy of such request,  and each  Revolving  Lender shall,  within 30
          days after the date the  Administrative  Agent  receives  such request
          from the Borrower,  advise the  Administrative  Agent in writing as to
          whether  such  Revolving  Lender will offer to extend the then current
          Revolving  Period in respect of its  Commitment  and, if so, upon what
          terms and  conditions;  provided  that, if any such  Revolving  Lender
          shall fail to so advise the  Administrative  Agent  within such 30 day
          period,  then such Revolving Lender shall be deemed to have denied the
          Request for an Offer of Extension. The Administrative Agent shall only
          deliver an Offer of Extension pursuant to this Section 2.4(b) with the
          agreement  of all of the  Revolving  Lenders,  including as to the new
          terms and conditions, if any, pertaining thereto. The determination of
          each  Revolving  Lender as to whether  or not to extend the  Revolving
          Period  shall  be made by  each  such  Revolving  Lender  in its  sole
          discretion.

     (c)  Administrative  Agent's Response to the Borrower - Within 5 days after
          the expiry of the  aforementioned  30 day period,  the  Administrative
          Agent shall either:

          (i)  deliver to the Borrower (with a copy to each Revolving Lender) an
               Offer of Extension on behalf of all Revolving Lenders executed by
               the  Administrative  Agent  and  specifying  the  new  terms  and
               conditions,  if any,  upon which the  extension of the  Revolving
               Period is offered; or

          (ii) notify the  Borrower  that the Request for an Offer of  Extension
               has not received the  agreement of all of the  Revolving  Lenders
               and has therefore been denied;  provided that if such Request for
               an Offer of Extension  has been  denied,  but  Revolving  Lenders
               having Commitments which, in aggregate, represent 66 2/3% or more
               of all outstanding Commitments of all Revolving Lenders (each, an
               "Extending  Lender")  are  in  agreement  as  to  the  terms  and
               conditions  (which may be the existing terms and conditions) upon
               which they would be prepared to issue an Offer of Extension  (the
               "Extension  Terms"),  then the  Administrative  Agent  shall also
               advise the Borrower of:

               (A)  the  Extension  Terms  and  issue an Offer of  Extension  on
                    behalf of the Extending Lenders upon the Extension Terms;

               (B)  which Revolving  Lenders are not in agreement with extending
                    the   Commitments   of  the  Revolving   Lenders   (each,  a
                    "Non-Extending Lender"); and

               (C)  the amount of each  Non-Extending  Lender's  Commitment  and
                    Outstanding  Principal in respect of such  Commitment  as at
                    such date.

         The failure of the Administrative Agent within the aforementioned 5 day
         period to deliver an Offer of Extension, as provided above, shall be
         deemed to be notification by the Administrative Agent to the Borrower
         that the Revolving Lenders have denied the Request for an Offer of
         Extension.

(d)  Extension  of the  Revolving  Period  by  All  Revolving  Lenders  - If the
     Administrative Agent has delivered to the Borrower an Offer of Extension by
     all Revolving Lenders, such Offer of Extension shall be open for acceptance
     by the  Borrower  until the  Banking  Day  immediately  preceding  the then
     current  Term Date with  respect to the  Revolving  Lenders.  Upon  written
     notice  by  the  Borrower  to  the  Administrative   Agent  accepting  such
     outstanding  Offer of Extension  and  agreeing to the terms and  conditions
     specified therein, (i) the Revolving Period for all Revolving Lenders shall
     be extended  to the date which is 364 days (or such  lesser  number of days
     requested by the Borrower) from the date of such  acceptance,  and (ii) the
     terms  and  conditions  specified  in such  Offer  of  Extension  shall  be
     immediately effective.

(e)  Extension of Revolving Period by Extending  Lenders Only - If a Request for
     an Offer of Extension has been denied or deemed denied  pursuant to Section
     2.4(c),  but Revolving  Lenders  having  Commitments  which,  in aggregate,
     represent 66 2/3% or more of all  outstanding  Commitments of all Revolving
     Lenders have  indicated to the  Administrative  Agent their  willingness to
     issue an Offer of Extension on the Extension  Terms and the  Administrative
     Agent has issued the Offer of Extension on the Extension Terms on behalf of
     such Lenders,  then,  prior to the then current Term Date and provided that
     the Borrower has accepted an Offer of Extension on the Extension Terms:

     (i)  the Borrower may require any  Non-Extending  Lender in respect of such
          Request  for an  Offer  of  Extension  to  assign  all of its  rights,
          benefits  and  interests  under  the  Documents   (collectively,   the
          "Assigned Interests") to:

          (A)  any Extending  Lenders in respect of such Request for an Offer of
               Extension  which have agreed to increase  their  Commitments  and
               purchase Assigned Interests; and

          (B)  to  the  extent  the  Assigned  Interests  are  not  assigned  to
               Extending   Lenders  in  accordance  with  paragraph  (A)  above,
               financial institutions selected by the Borrower and acceptable to
               the Administrative Agent, acting reasonably.

          The Borrower shall provide the Administrative Agent and each Extending
          Lender with 5 days prior written notice of its desire to proceed under
          this Section  2.4(e),  and the Extending  Lenders shall be entitled to
          purchase such of the Assigned Interests as they may request (pro rata,
          in proportion to the  Commitments of the Extending  Lenders wishing to
          purchase Assigned  Interests) by written notice to the  Administrative
          Agent and the  Borrower  within such 5 day period  before any Assigned
          Interests may be assigned to third party financial institutions.  Such
          assignments  shall  be  effective  upon  execution  of  an  Assignment
          Agreement, and upon:

          (C)  payment to the  relevant  Non-Extending  Lender  (in  immediately
               available  funds) by the relevant  assignee of an amount equal to
               the Outstanding  Principal of that Non-Extending  Lender together
               with all other amounts payable  hereunder by the Borrower to such
               Non-Extending Lender;

          (D)  payment by the relevant assignee to the Administrative Agent (for
               the  Administrative  Agent's  own  account) of the  transfer  fee
               contemplated in Section 14.6; and

          (E)  provision  satisfactory  to  such  Non-Extending  Lender  (acting
               reasonably) being made for payment at maturity of the face amount
               of   outstanding    Bankers'   Acceptances   accepted   by   such
               Non-Extending Lender and any costs, losses,  premiums or expenses
               incurred   by  such   Non-Extending   Lender  by  reason  of  the
               liquidation or redeployment of deposits or other funds in respect
               of LIBOR Loans outstanding hereunder.

          Upon such assignment and transfer, the Non-Extending Lender shall have
          no further  right,  interest,  benefit or obligation  hereunder to the
          extent of the  Assigned  Interests  assigned by that  Lender,  and the
          assignee  thereof  shall  succeed to the position of such Lender as if
          the assignee was an original  Lender  hereunder in the place and stead
          of such Non-Extending Lender, subject to the Extension Terms; and

     (ii) to the extent  that the  Borrower  has not  caused  any  Non-Extending
          Lenders in respect of such Request for an Offer of Extension to assign
          their respective rights and interests to one or more Extending Lenders
          and/or  other  financial  institutions  as provided in  paragraph  (i)
          above, the Borrower may,  notwithstanding any other provisions hereof,
          repay to such Non-Extending  Lender all Outstanding  Principal of each
          such  Non-Extending  Lender,  together  with all other  amounts  owing
          hereunder to such Non-Extending  Lender,  without making corresponding
          repayment to the Extending Lenders,  and make provisions  satisfactory
          to the relevant Non-Extending Lender (acting reasonably) for:

          (A)  payment  at  maturity  of the  face  amount  of  all  outstanding
               Bankers' Acceptances accepted by such Non-Extending Lender; and

          (B)  payment of any costs,  losses,  premiums or expenses  incurred by
               such  Non-Extending  Lender  by  reason  of  the  liquidation  or
               re-deployment  of  deposits  or other  funds in  respect of LIBOR
               Loans outstanding hereunder.

          Upon such payments and provisions being made, each such  Non-Extending
          Lender shall cease to be a Lender and each such Non-Extending Lender's
          Commitment  shall  be  terminated  and the  Total  Commitment  reduced
          accordingly.

(f)  Non-Revolving  Lenders - A  Non-Extending  Lender whose  Commitment was not
     assigned in accordance with Section  2.4(e)(i) or repaid in accordance with
     Section  2.4(e)(ii)  shall, at the end of the then current Revolving Period
     applicable   to  such   Non-Extending   Lender's   Commitment,   become   a
     Non-Revolving Lender, and:

     (i)  the  undrawn   Commitment  of  the   Non-Revolving   Lender  shall  be
          automatically cancelled;

     (ii) the Total  Commitment  shall  thereupon be deemed to be reduced by the
          amount of such undrawn Commitment; and

     (iii)the  Non-Revolving   Lender's  Commitment  shall  thereupon  become  a
          non-revolving  term  facility,  maturing  on the  Maturity  Date  with
          respect to such Commitment.

     From  and  after  the  Term  Date  in  respect  of  the   Commitment  of  a
     Non-Revolving  Lender,  the  Borrower  shall not be  entitled to effect any
     Loans by way of Drawdowns in respect of that Commitment, but shall continue
     to be entitled to receive Conversions pursuant to Section 2.8 and Rollovers
     pursuant to Sections 2.9 and 6.8, in either case in respect of  Outstanding
     Principal owed to the Non-Revolving Lender.

(g)      Further Extensions of the Revolving Period - This Section 2.4 shall
         apply from time to time to facilitate successive extensions and
         requests for extension of the Revolving Period. The Borrower shall not
         be entitled to request any action or give any notice under this Section
         2.4 if at that time there exists a Default or an Event of Default.

2.5      Minimum Drawdowns/Conversions/Rollovers

         Each Drawdown, Conversion or Rollover of the following types of Loans
shall be in the following amounts indicated:

(a)  Canadian Prime Rate Loans in minimum principal  amounts of Cdn.  $5,000,000
     and Drawdowns in excess thereof in integral multiples of Cdn. $1,000,000;

(b)  Bankers' Acceptances or BA Equivalent Loans in minimum aggregate amounts of
     Cdn.  $5,000,000  at maturity and  Drawdowns in excess  thereof in integral
     multiples of Cdn. $100,000 at maturity;

(c)  U.S. Base Rate Loans in minimum  principal  amounts of U.S.  $5,000,000 and
     Drawdowns in excess thereof in integral multiples of U.S. $1,000,000; and

(d)  LIBOR Loans in minimum principal  amounts of U.S.  $5,000,000 and Drawdowns
     in excess thereof in integral multiples of U.S. $1,000,000.

2.6      LIBOR Loan Availability

         Drawdowns of, Conversions into and Rollovers of requested LIBOR Loans
may only be made upon the Administrative Agent's prior favourable determination
with respect to the matters referred to in Section 11.1.

2.7      Notice Periods for Drawdowns, Conversions and Rollovers

         Subject to the provisions hereof, the Borrower may make a Drawdown,
Conversion or Rollover under the Credit Facility by delivering a Drawdown
Notice, Conversion Notice or Rollover Notice, as the case may be (executed in
accordance with the definition of Officer's Certificate), with respect to a
specified type of Loan to the Administrative Agent not later than:

     (a)  9:00 a.m. (Calgary time) 3 Banking Days prior to the proposed Drawdown
          Date,  Conversion  Date or Rollover  Date, as the case may be, for the
          Drawdown of, Conversion into or Rollover of LIBOR Loans;

     (b)  9:00 a.m.  (Calgary time) 1 Banking Day prior to the proposed Drawdown
          Date,  Conversion  Date or Rollover  Date, as the case may be, for the
          Drawdown of, Conversion into or Rollover of Bankers' Acceptances or BA
          Equivalent Loans; and

     (c)  9:00 a.m.  (Calgary time) 1 Banking Day prior to the proposed Drawdown
          Date or  Conversion  Date,  as the case may be, for the Drawdown of or
          Conversions  into  Canadian  Prime Rate Loans  and/or  U.S.  Base Rate
          Loans.

2.8      Conversion Option

         Subject to the provisions of this Agreement, the Borrower may convert
(at the Equivalent Amount on the date of the Conversion Notice) the whole or any
part of any type of Loan under the Credit Facility into any other type of Loan
under the Credit Facility by giving the Administrative Agent a Conversion Notice
in accordance herewith; provided that:

     (a)  Conversions of LIBOR Loans and Bankers'  Acceptances  may only be made
          on the last day of the Interest Period applicable thereof;

     (b)  the  Borrower  may not  convert  a  portion  only of the  whole  of an
          outstanding  Loan unless both the  unconverted  portion and  converted
          portion of such Loan are equal to or exceed,  in the relevant currency
          of each such portion,  the minimum  amounts  required for Drawdowns of
          Loans of the same type as that portion (as set forth in Section  2.5);
          and

     (c)  in respect of Conversions  of a Loan  denominated in one currency to a
          Loan denominated in another  currency,  the Borrower shall at the time
          of the Conversion repay the Loan or portion thereof being converted in
          the currency in which it was denominated.

2.9      LIBOR Loan Rollovers; Selection of LIBOR Interest Periods

         The Borrower may, at or before 9:00 a.m. (Calgary time) 3 Banking Days
prior to the expiration of each Interest Period of each LIBOR Loan, elect to
continue all or a portion of a LIBOR Loan for an additional Interest Period by
delivery of a Rollover Notice to the Administrative Agent selecting the new
Interest Period which shall commence on and include the last day of such prior
Interest Period; provided that a portion of a LIBOR Loan may be continued only
if the portion which is to remain outstanding is equal to or exceeds the minimum
amount required hereunder for Drawdowns of LIBOR Loans, as set forth in Section
2.5. If the Borrower fails to deliver a Rollover Notice to the Administrative
Agent as provided in this Section 2.9, or a Conversion Notice and/or Repayment
Notice, the Borrower shall be deemed to have given a Conversion Notice to the
Administrative Agent electing to convert the entire amount of the maturing LIBOR
Loan into a U.S. Base Rate Loan.

2.10     Rollovers and Conversions not Repayments

         Any amount converted shall be a Loan of the type converted to upon such
Conversion taking place, and any amount rolled over shall continue to be the
same type of Loan under the Credit Facility as before the Rollover, but such
Conversion or Rollover (to the extent of the amount converted or rolled over)
shall not of itself constitute a repayment or a fresh utilization of any part of
the amount available under the Credit Facility.

2.11     Administrative  Agent's  Obligations  with  Respect to Canadian  Prime
         Rate Loans, U.S. Base Rate Loans and LIBOR Loans

     Upon receipt of a Drawdown  Notice,  Rollover  Notice or Conversion  Notice
with respect to a Canadian  Prime Rate Loan,  U.S. Base Rate Loan or LIBOR Loan,
the  Administrative  Agent shall  forthwith  notify the Lenders of the requested
type of Loan, the proposed Drawdown Date, Rollover Date or Conversion Date, each
Lender's required share in respect of such Loan and, if applicable,  the account
of the Administrative Agent to which such Lender's Advance is to be credited.

2.12     Lenders' and  Administrative  Agent's  Obligations with Respect to
         Canadian Prime Rate Loans, U.S. Base Rate Loans and LIBOR Loans

     Each  Revolving  Lender  shall,  for same day  value on the  Drawdown  Date
specified by the Borrower in a Drawdown  Notice with respect to a Canadian Prime
Rate Loan,  a U.S.  Base Rate Loan or a LIBOR  Loan,  credit the  Administrative
Agent's  account  specified  in the  Administrative  Agent's  notice given under
Section 2.11 with such Lender's  rateable amount of each such requested Loan and
for same day value. On the same date, the Administrative  Agent shall pay to the
Borrower  the full  amount of the amounts so  credited  in  accordance  with any
payment instructions set forth in the applicable Drawdown Notice.

2.13     Irrevocability

         A Drawdown Notice, Rollover Notice or Conversion Notice given or deemed
to be given by the Borrower hereunder shall be irrevocable and, subject to any
options the Lenders may have hereunder in regard thereto and the Borrower's
rights hereunder in regard thereto, shall oblige the Borrower to take the action
contemplated on the date specified therein.

2.14     Optional Cancellation or Reduction of Credit Facility

         The Borrower may, at any time, upon giving at least 5 Banking Days
prior written notice to the Administrative Agent, cancel in full or, from time
to time, permanently reduce in part the unutilized portion of the Credit
Facility; provided, however, that any such reduction shall be in a minimum
amount of Cdn. $10,000,000, or the Equivalent Amount in U.S. Dollars, and
reductions in excess thereof shall be in increments of Cdn. $1,000,000 and
integral multiples thereof, or the Equivalent Amount in U.S. Dollars. If the
Credit Facility is so reduced, the Commitments of each of the Revolving Lenders
in respect of the Credit Facility shall be reduced pro rata in the same
proportion that the amount of the reduction in the Credit Facility bears to the
aggregate amount of the Commitments of the Revolving Lenders in effect
immediately prior to such reduction.

2.15     Optional Repayment

         The Borrower may at any time and from time to time repay without
penalty to the Administrative Agent for the account of the Lenders, the whole or
any part of any Loan together with accrued interest thereon (provided that if
such repayment is not made on an Interest Payment Date in the case of Canadian
Prime Rate Loans and U.S. Base Rate Loans, accrued interest on such Loans shall
be paid on the next Interest Payment Date applicable to the Loan being repaid)
to the date of such repayment provided that:

     (a)  the Borrower  shall give a Repayment  Notice  (executed in  accordance
          with the definition of Officer's  Certificate)  to the  Administrative
          Agent not later than:

          (i)  9:00 a.m.  (Calgary time) 2 Banking Days prior to the date of the
               proposed repayment, for LIBOR Loans; and

          (ii) 9:00 a.m.  (Calgary  time) 1 Banking Day prior to the date of the
               proposed repayment, for Canadian Prime Rate Loans, U.S. Base Rate
               Loans and Bankers' Acceptances;

     (b)  repayments pursuant to this Section 2.15 may only be made on a Banking
          Day;

     (c)  each such repayment shall be in the minimum amount  required  pursuant
          to  Section  2.5 for  Drawdowns  of the  type of Loan  proposed  to be
          repaid; and

     (d)  the  Borrower  may not repay a  portion  only of an  outstanding  Loan
          unless the  unpaid  portion is equal to or  exceeds,  in the  relevant
          currency,  the  minimum  amount  required  pursuant to Section 2.5 for
          Drawdowns of the type of Loan proposed to be repaid.

If any LIBOR Loan is repaid on other than the last day of the applicable
Interest Period, the Borrower shall, within 3 Banking Days after notice is given
by the Administrative Agent, pay to the Administrative Agent for the account of
the Lenders all costs, losses, premiums and expenses incurred by the Lenders by
reason of the liquidation or re-deployment of deposits or other funds or for any
other reason whatsoever resulting from the repayment of such LIBOR Loan or any
part thereof on other than the last day of the applicable Interest Period. If
pursuant to the provisions of this Section 2.15 or any other provision hereof
the Borrower becomes obliged to pay such costs, losses or expenses, each Lender
shall use reasonable efforts to minimize such costs, losses and expenses. Any
Lender, upon becoming entitled to be paid such costs, losses and expenses, shall
deliver to the Borrower and the Administrative Agent a certificate of the Lender
certifying as to such amounts and, in the absence of manifest error, such
certificate shall be conclusive and binding for all purposes. In the event the
Borrower wishes to repay Bankers' Acceptances on a date other than their
maturity dates, the Borrower shall so notify the Administrative Agent, and
deposit with the Administrative Agent the aggregate face amount thereof, and
such Bankers' Acceptances shall not thereafter be deemed to be outstanding as
Bankers' Acceptances hereunder.

2.16     Mandatory Repayment

         The Borrower covenants and agrees to repay or otherwise reduce the
Outstanding Principal with the effect and requirement that all Outstanding
Principal shall be repaid on or before the Maturity Date applicable to a
Commitment. Amounts so repaid during the Term Period applicable to a Commitment
may not be reborrowed and shall automatically reduce such Commitment and the
Total Commitment by the amount repaid. For greater certainty, the Conversion and
Rollover options available to the Borrower pursuant to Sections 2.8, 2.9 and
6.8, respectively, shall continue to be available to the Borrower for the
duration of the Term Periods in respect of the applicable outstanding Loans by
the Non-Revolving Lenders. On and after the Term Date applicable to a
Commitment, the Borrower shall not be entitled to effect any Drawdowns in
respect of that Commitment. All Loans shall be repaid in the currency in which
such Loans are outstanding as at the date of such repayment. For the purposes of
calculating the amount of any principal repayments to be made in U.S. Dollars,
such amount shall be calculated at the Equivalent Amount thereof at the date of
such payment.

2.17     Currency Excess

(a)  If, on the first  Banking Day of any month (a "Currency  Test  Date"),  the
     aggregate  Outstanding  Principal of the outstanding Loans under the Credit
     Facility  exceeds the maximum amount of the Credit  Facility (the amount of
     such excess is herein called the "Currency Excess"), then the Borrower will
     repay an amount of Canadian Prime Rate Loans or U.S. Base Rate Loans,  or a
     combination of the foregoing,  outstanding under the Credit Facility within
     15 days after written notice has been given by the Administrative  Agent to
     the Borrower to repay such Currency Excess,  such that, except as otherwise
     contemplated in Section 2.17(b),  the Equivalent Amount in Canadian Dollars
     of the  payments  is,  in the  aggregate,  at least  equal to the  Currency
     Excess.

(b)  In lieu of repaying  Loans  pursuant to Section  2.17(a),  the Borrower may
     place  an  amount  equal  to  the  Currency  Excess  on  deposit  with  the
     Administrative Agent in an interest-bearing  account in the Borrower's name
     with interest at the interest rates of the Administrative  Agent prevailing
     from  time to time for  deposits  similar  in  amount  and  duration,  such
     interest  to be for the  account of the  Borrower,  to be  assigned  to the
     Administrative  Agent on behalf of the  applicable  Lenders  by  instrument
     satisfactory  to the  Administrative  Agent and to be applied  to  maturing
     Bankers'  Acceptances  or LIBOR  Loans  as  payments  are  made  thereunder
     (converted if necessary at the exchange rate for determining the Equivalent
     Amount on the date of such application). The Administrative Agent is hereby
     irrevocably  directed by the  Borrower to apply any such sums on deposit to
     maturing Loans as provided in the preceding sentence.

(c)  In lieu of providing funds for the Currency Excess,  as provided in Section
     2.17(a) or 2.17(b),  the  Borrower  may,  within the said period of 15 days
     after notice has been given by the Administrative  Agent to the Borrower to
     repay  such  Currency  Excess,  provide  to  the  Administrative  Agent  an
     irrevocable  standby  letter of credit in an amount  equal to the  Currency
     Excess and for a term which  expires not sooner than 10 Banking  Days after
     the date of maturity of the relevant  Bankers'  Acceptances or LIBOR Loans,
     as the case may be;  such  letter of credit  shall be issued by a financial
     institution  acceptable to the Administrative  Agent in its sole discretion
     and shall be on terms and conditions acceptable to the Administrative Agent
     in its sole discretion.  The Administrative  Agent is hereby authorized and
     directed to draw upon such  letter of credit and apply the  proceeds of the
     same to Bankers' Acceptances or LIBOR Loans as they mature.

(d)  The  Borrower may do any  combination  of the  foregoing  to eliminate  the
     Currency Excess.  Upon the Currency Excess being eliminated as aforesaid or
     by virtue of subsequent  changes in the exchange rate for  determining  the
     Equivalent Amount,  such funds on deposit,  together with interest thereon,
     shall be  returned to the  Borrower,  and such  letters of credit  shall be
     cancelled or reduced in amount, as appropriate.

                                   ARTICLE 3
                        CONDITIONS PRECEDENT TO DRAWDOWNS
                        ---------------------------------

3.1      Conditions for First Drawdown

         On or before the first Drawdown hereunder, the following conditions
shall be satisfied by the Borrower:

(a)  the  Administrative  Agent shall have received the following  documents and
     payments,  all of which are to be satisfactory to the Administrative  Agent
     and Lenders' Counsel as to form and substance,  and due  authorization  and
     execution:

     (i)  a duly executed copy of this Agreement;

     (ii) the Guarantee, duly executed and delivered by the Guarantor;

     (iii)a proper and timely  Drawdown  Notice,  completed and duly executed by
          the Borrower;

     (iv) (A) certified  copies of the constating  documents and by-laws of each
          of the Borrower and the Guarantor, (B) the resolutions of the board of
          directors of the Borrower  authorizing  the Documents to which it is a
          party and the transactions  described therein, (C) a certificate as to
          the incumbency of the officers of the Borrower  signing this Agreement
          and any other  Documents to which it is a party,  (D)  certificates of
          status,  compliance or like  certificates  with respect to each of the
          Borrower  and the  Guarantor  issued by the  appropriate  Governmental
          Authority of the jurisdiction of its incorporation;

     (v)  the  Subordination  Agreement,  duly executed and delivered by each of
          the indicated parties thereto;

     (vi) Powers of Attorney,  duly  executed  and  delivered by the Borrower in
          favour of each Lender;

     (vii)an opinion of  Borrower's  Counsel dated the date of such Drawdown and
          substantially in the form of Schedule L attached hereto;

     (viii) an opinion of  Guarantor's  Counsel  dated the date of such Drawdown
          and substantially in the form of Schedule M attached hereto;

     (ix) an opinion of Lenders' Counsel dated the date of such Drawdown in form
          and substance satisfactory to the Administrative Agent;

     (x)  evidence  satisfactory to the Administrative Agent, acting reasonably,
          of the insurance required to be maintained pursuant to Section 9.1(g);

     (xi) payment of all fees  required to be paid by the Borrower in connection
          with the Credit Facility; and

     (xii)all such other agreements,  certificates,  declarations,  opinions and
          other documents as are required to confirm or establish the completion
          or satisfaction of the foregoing;

(b)  the  representations and warranties set forth in Section 8.1 of this Credit
     Agreement shall be true and accurate in all material  respects on and as of
     the date of the  requested  first  Drawdown,  and the  Borrower  shall have
     delivered  to the  Administrative  Agent an Officer's  Certificate  to that
     effect on the first Drawdown Date;

(c)  there shall not have occurred on or before the date of the requested  first
     Drawdown hereunder any event or circumstance which has, or has a reasonable
     likelihood  of resulting  in, a Material  Adverse  Effect in respect of the
     Borrower or the  Guarantor,  and the Borrower  shall have  delivered to the
     Administrative  Agent an Officer's  Certificate to that effect on the first
     Drawdown Date;

(d)  the  Lenders,  Lenders'  Counsel  and the  Administrative  Agent shall have
     completed, to their satisfaction, a due diligence review in respect of each
     of the Borrower and the Guarantor;

(e)      all amounts outstanding under the Existing RBC Facility shall have been
         paid in full and the Existing RBC Facility shall have been cancelled or
         arrangements satisfactory to Royal Bank of Canada shall have been made
         to do so concurrently with and using proceeds from the first Drawdown;

(f)      all registrations, filings or recordings necessary or desirable in
         connection with the Documents, if any, shall have been made in such
         jurisdictions as the Administrative Agent may require;

(g)      there shall not have occurred any event which would constitute Default
         or an Event of Default, and the Drawdown shall not result in the
         occurrence of any such Default or Event of Default;

(h)      all steps, actions and proceedings necessary to be taken or completed
         on the part of the Borrower and the Guarantor to enable them to observe
         and perform their covenants and obligations and under each of the
         Documents to which they are a party shall have been taken or completed
         to the satisfaction of the Administrative Agent and the Lenders'
         Counsel, each acting reasonably;

(i)      there shall not have occurred, developed or come into effect or
         existence any event, action, state, condition or major financial
         occurrence of national or international consequence or any law,
         judgment, order, inquiry or other occurrence of any nature whatsoever
         which, in the opinion of the Administrative Agent, materially adversely
         affects, or may materially adversely affect, or has resulted in, or may
         result in, a material adverse change in, the financial, banking
         (including syndication markets) or capital markets in Canada or the
         United States of America; and

(j)      the first Drawdown shall have been made on or before July 29th, 1999.

3.2      Subsequent Drawdowns

         On or before each Drawdown, Conversion or Rollover hereunder subsequent
to the first Drawdown, the following conditions shall be satisfied by the
Borrower:

(a)  the  Administrative  Agent shall have received a proper and timely Drawdown
     Notice, completed and duly executed by the Borrower;

(b)      the representations and warranties set forth in Section 8.1 of this
         Credit Agreement shall be true and accurate in all material respects on
         and as of the date of the requested Drawdown, Conversion or Rollover;
         and

(c)      no event shall have occurred which would constitute a Default or an
         Event of Default, and the Drawdown shall not result in the occurrence
         of any such Default or Event of Default.

3.3      Waiver

         The conditions set forth in Sections 3.1 and 3.2 are inserted for the
sole benefit of the Lenders and the Administrative Agent and may be waived by
the Lenders, in whole or in part (with or without terms or conditions), without
prejudicing the right of the Lenders or Administrative Agent at any time to
assert such conditions in respect of any subsequent Drawdown.

                                   ARTICLE 4
                              EVIDENCE OF DRAWDOWNS
                              ---------------------

4.1      Account of Record

         The Administrative Agent shall open and maintain books of account
evidencing all Loans and all other amounts owing by the Borrower to the Lenders
hereunder. The Administrative Agent shall enter in the foregoing accounts
details of all amounts from time to time owing, paid or repaid by the Borrower
hereunder. The information entered in the foregoing accounts shall, absent
manifest error, constitute prima facie evidence of the obligations of the
Borrower to the Lenders hereunder with respect to all Loans and all other
amounts owing by the Borrower to the Lenders hereunder. After a request by the
Borrower, the Administrative Agent shall promptly advise the Borrower of such
entries made in the Administrative Agent's books of account.

                                   ARTICLE 5
                          PAYMENTS OF INTEREST AND FEES
                          -----------------------------

5.1      Interest on Canadian Prime Rate Loans

         The Borrower shall pay interest on each Canadian Prime Rate Loan during
each Interest Period applicable thereto in Canadian Dollars at a rate per annum,
calculated on the basis of a 365 day year, equal to the Canadian Prime Rate in
effect from time to time during such Interest Period plus the Applicable Prime
Rate Margin. Such interest shall accrue daily and shall be payable in arrears on
each Interest Payment Date for such Loan for the period from and including the
Drawdown Date or the preceding Conversion Date or Interest Payment Date, as the
case may be, for such Loan to and including the day preceding such Interest
Payment Date and shall be calculated on the principal amount of the Canadian
Prime Rate Loan outstanding during such period and on the basis of the actual
number of days elapsed in a year of 365 days. Changes in the Canadian Prime Rate
or the Applicable Prime Rate Margin shall cause an immediate adjustment of the
interest rate applicable to such Loan without the necessity of any notice to the
Borrower.

5.2      Interest on U.S. Base Rate Loans

         The Borrower shall pay interest on each U.S. Base Rate Loan during each
Interest Period applicable thereto in United States Dollars at a rate per annum,
calculated on the basis of a 365 day year, equal to the U.S. Base Rate in effect
from time to time during such Interest Period plus the Applicable USBR Margin.
Such interest shall accrue daily and shall be payable in arrears on each
Interest Payment Date for such Loan for the period from and including the
Drawdown Date or the preceding Conversion Date or Interest Payment Date, as the
case may be, for such Loan to and including the day preceding such Interest
Payment Date and shall be calculated on the principal amount of the U.S. Base
Rate Loan outstanding during such period and on the basis of the actual number
of days elapsed in a year of 365 days. Changes in the U.S. Base Rate or the
Applicable USBR Margin shall cause an immediate adjustment of the interest rate
applicable to such Loan without the necessity of any notice to the Borrower.

5.3      Interest on LIBOR Loans

         The Borrower shall pay interest on each LIBOR Loan during each Interest
Period applicable thereto in United States Dollars at a rate per annum,
calculated on the basis of a 360 day year, equal to the LIBOR Rate with respect
to such Interest Period plus the Applicable LIBOR Margin. Such interest shall
accrue daily and shall be payable in arrears on each Interest Payment Date for
such Loan for the period from and including the Drawdown Date or the preceding
Rollover Date, Conversion Date or Interest Payment Date, as the case may be, for
such Loan to and including the day preceding such Interest Payment Date and
shall be calculated on the principal amount of the LIBOR Loan outstanding during
such period and on the basis of the actual number of days elapsed in a year of
360 days. Changes in the LIBOR Rate or the Applicable LIBOR Margin shall cause
an immediate adjustment of the interest rate applicable to such Loan without the
necessity of any notice to the Borrower.

5.4      Interest Act (Canada)

         The Borrower hereby acknowledges that certain of the rates of interest
applicable to the Obligations may be computed on the basis of a year of 360 days
or 365 days, as the case may be, and paid for the actual number of days elapsed.
For purposes of the Interest Act (Canada), whenever any interest is calculated
using a rate based on a year of 360 days or 365 days, as the case may be, such
rate determined pursuant to such calculation, when expressed as an annual rate,
is equivalent to (i) the applicable rate based on a year of 360 days or 365
days, as the case maybe, (ii) multiplied by the actual number of days in the
calendar year in which the period for such interest is payable (or compounded)
ends; and (iii) divided by 360 or 365, as the case may be.

5.5      Nominal Rates; No Deemed Reinvestment

         The principle of deemed reinvestment of interest shall not apply to any
interest calculation under this Agreement; all interest payments to be made
hereunder shall be paid without allowance or deduction for deemed reinvestment
or otherwise, before and after maturity, default and judgment. The rates of
interest specified in this Agreement are intended to be nominal rates and not
effective rates. Interest calculated hereunder shall be calculated using the
nominal rate method and not the effective rate method of calculation.

5.6      Commitment Fees

         During the Revolving Period in respect of the Commitments of the
Revolving Lenders, the Borrower covenants and agrees to pay to the
Administrative Agent, on behalf of the Revolving Lenders, commitment fees in
Canadian Dollars payable quarterly in arrears on the Banking Day prior to the
last Banking Day of each Fiscal Quarter, in an amount equal to the Applicable
Commitment Fee Rate on each day in the calculation period, calculated on the
amount by which the Total Commitment on such day is in excess of the Outstanding
Principal on such day. The commitment fees shall be computed from the Effective
Date and shall be calculated on a daily basis and based on a year of 365 days.
Changes in the Applicable Commitment Fee Rate shall be immediately effective,
without the necessity of any notice to the Borrower.

5.7      Administrative Agent's Fees

         The Borrower shall pay to the Administrative Agent, for its own
account, on execution of this Agreement and on the anniversary thereof in each
subsequent calendar year until the Credit Facility have been fully cancelled and
all Obligations hereunder have been paid in full, an annual agency fee in the
amount agreed to in writing by the Borrower and the Administrative Agent, and
such fees shall, for the purposes of this Agreement, be deemed to be an amount
payable pursuant to this Agreement.

5.8      Interest on Overdue Amounts

         Notwithstanding any other provision hereof, in the event that any
amount due hereunder (including, without limitation, any interest payment) is
not paid when due (whether by acceleration or otherwise), the Borrower shall pay
interest on such unpaid amount (including, without limitation, interest on
interest), to the fullest extent permitted by Applicable Law, from the date that
such amount is due until the date that such amount is paid in full (but
excluding the date of such payment if the payment is received for value at the
required place of payment on the date of such payment), and such interest shall
accrue daily, be calculated and compounded monthly and be payable on demand,
after as well as before maturity, default and judgment, at a rate per annum that
is equal to:

(a)  in respect of amounts  due in  Canadian  Dollars,  1.00% per annum plus the
     Canadian Prime Rate; or

(b)  in respect of amounts due in United  States  Dollars,  1.00% per annum plus
     the U.S. Base Rate.

5.9      Waiver

         To the extent permitted by Applicable Law, the covenant of the Borrower
to pay interest at the rates provided herein shall not merge in any judgment
relating to any obligation of the Borrower to the Lenders or the Administrative
Agent and any provision of the Interest Act (Canada) and Judgment Interest Act
(Alberta) which restricts any rate of interest set forth herein shall be
inapplicable to this Agreement and is hereby waived by the Borrower.

5.10     Maximum Rate Permitted by Law

         No interest or fee to be paid hereunder shall be paid at a rate
exceeding the maximum rate permitted by Applicable Law. In the event that such
interest or fee exceeds such maximum rate, such interest or fees shall be
reduced or refunded, as the case may be, so as to be payable at the highest rate
recoverable under Applicable Law.

5.11     Determinations Prima Facie Evidence

         In the event of any dispute, disagreement or adjudication involving the
determination of the Canadian Prime Rate, the U.S. Base Rate, the CDOR Rate, the
LIBOR Rate, the Applicable Margins, the Applicable BA Fee Rate or the Applicable
Commitment Fee Rate, the certificate of the Administrative Agent as to such rate
shall constitute prima facie evidence thereof for the purposes of this
Agreement.

                                   ARTICLE 6
                              BANKERS' ACCEPTANCES
                              --------------------

6.1      Bankers' Acceptances

         The Borrower may give the Administrative Agent notice that Bankers'
Acceptances will be required under the Credit Facility pursuant to a Drawdown,
Rollover or Conversion and, if it does not elect in any such notice to market
any such Bankers' Acceptances itself, it will be deemed to have elected to have
the Lenders purchase such Bankers' Acceptances as provided for herein.

6.2      Fees

         Upon the acceptance by a Lender of a Bankers' Acceptance, the Borrower
shall pay to the Administrative Agent for the account of such Lender a fee in
Canadian Dollars equal to the Applicable BA Fee Rate, calculated on the
principal amount at maturity of such Bankers' Acceptance and for the period of
time from and including the date of acceptance to but excluding the maturity
date of such Bankers' Acceptance and calculated on the basis of the actual
number of days elapsed in a year of 365 days.

6.3      Form and Execution of Bankers' Acceptances

         The following provisions shall apply to each Bankers' Acceptance
hereunder:

(a)  the face  amount at  maturity  of each draft  drawn by the  Borrower  to be
     accepted  as a Bankers'  Acceptance  shall be Cdn.  $100,000  and  integral
     multiples  thereof,  subject to the minimum  aggregate  amount set forth in
     Section 2.5(b);

(b)  the term to maturity of each draft drawn by the  Borrower to be accepted as
     a Bankers'  Acceptance shall,  subject to market availability as determined
     by the  Administrative  Agent, be 1, 2, 3 or 6 months (or such other longer
     or shorter term as agreed by the  Lenders),  as selected by the Borrower in
     the relevant  Drawdown Notice , Rollover Notice or Conversion  Notice,  and
     each Bankers' Acceptance shall be payable and mature on the last day of the
     Interest Period selected by the Borrower for such Bankers' Acceptance;

(c)  each draft drawn by the Borrower and presented  for  acceptance by a Lender
     shall be drawn on the  standard  form of such Lender in effect at the time;
     provided however,  that the Administrative Agent may require the Lenders to
     use a generic form of Bankers'  Acceptance,  in a form satisfactory to each
     Lender,  acting reasonably,  provided by the Administrative  Agent for such
     purpose in place of the Lenders' own forms; and

(d)  subject to Section  6.4(a),  Bankers'  Acceptances  shall be signed by duly
     authorized officers of the Borrower or, in the alternative,  the signatures
     of such officers may be  mechanically  reproduced in facsimile  thereon and
     Bankers'  Acceptances bearing such facsimile signatures shall be binding on
     the Borrower as if they had been  manually  executed and  delivered by such
     officers on behalf of the Borrower;  notwithstanding  that any Person whose
     manual or facsimile  signature  appears on any Bankers'  Acceptance  may no
     longer be an authorized  signatory for the Borrower on the date of issuance
     of a Bankers'  Acceptance,  such signature shall  nevertheless be valid and
     sufficient  for all purposes as if such  authority had remained in force at
     the time of such issuance and any such Bankers' Acceptance shall be binding
     on the Borrower.

6.4      Delivery of Powers of Attorney Respecting Bankers' Acceptances

(a)  As a condition  precedent to each Lender's  obligation  to accept  Bankers'
     Acceptances  hereunder,  the Borrower shall have delivered to such Lender a
     Power of Attorney  enabling  such  Lender to execute  and deliver  Bankers'
     Acceptances for and on behalf of the Borrower.

(b)  It is the intention of the parties that all Bankers'  Acceptances  accepted
     by the  Lenders  under  this  Agreement  shall be  issued  in the form of a
     "depository  bill" (as that term is  defined  in the  Depository  Bills and
     Notes Act (Canada) (the "DBNA")), be deposited with The Canadian Depository
     for   Securities   Limited  and  be  made  payable  to  "CDS  &  Co.".  The
     Administrative  Agent and the Lenders shall effect the following  practices
     and  procedures  and,  subject to the  approval  of the  Majority  Lenders,
     establish  and  notify  the  Borrower  and the  Lenders  of any  additional
     procedures,   consistent   with  the  terms  of  this   Agreement  and  the
     requirements  of the DBNA, as are reasonably  necessary to accomplish  such
     intention:

     (i)  each Bankers'  Acceptance accepted and purchased by a Lender hereunder
          shall have marked  prominently  and legibly on its face and within its
          text, at or before the time of issue,  the words "This is a depository
          bill subject to the Depository Bills and Notes Act";

     (ii) any reference to  authentication  of such Bankers'  Acceptance will be
          removed; and

     (iii)such  Bankers'   Acceptance   shall  not  be  marked  with  any  words
          prohibiting  negotiation,  transfer  or  assignment  of  it  or  of an
          interest in it.

6.5      Mechanics of Issuance

(a)  Upon receipt by the Administrative  Agent of a Drawdown Notice,  Conversion
     Notice or Rollover  Notice from the  Borrower  requesting  the  issuance of
     Bankers'  Acceptances,  the Administrative  Agent shall promptly notify the
     Lenders  thereof  and advise each  Lender of the  aggregate  face amount of
     Bankers'  Acceptances to be accepted by such Lender,  the date of issue and
     the Interest Period for such Loan. The  apportionment  among the Lenders of
     the face  amounts of  Bankers'  Acceptances  to be  accepted by each Lender
     shall  be  determined  by the  Administrative  Agent  by  reference  and in
     proportion  to the  respective  Commitments  of each  Lender  and  shall be
     forthwith provided to the Borrower;  provided that, when such apportionment
     cannot be evenly made,  the  Administrative  Agent shall round  allocations
     amongst such Lenders  consistent  with the  Administrative  Agent's  normal
     money market practices.

(b)  On each  Drawdown  Date,  Rollover Date or  Conversion  Date  involving the
     issuance  of Bankers'  Acceptances  where the  Borrower  has not elected to
     market such Bankers' Acceptances itself:

     (i)  at or about 9:00 a.m. (Calgary time) on such date, the  Administrative
          Agent shall determine the Discount Rate;

     (ii) the  Administrative  Agent  shall  promptly  notify each Lender of the
          Discount Rate applicable to the Bankers' Acceptances to be accepted by
          such Lender as part of such issue;

     (iii)each  Lender  shall  complete  and  accept,  in  accordance  with  the
          Drawdown Notice, Conversion Notice or Rollover Notice delivered by the
          Borrower and advised by the  Administrative  Agent, in connection with
          such  issue,  its share of Bankers'  Acceptances  to be issued on such
          date and shall purchase such Bankers'  Acceptances for its own account
          at a purchase  price which  reflects the Discount  Rate  applicable to
          such Lender; and

     (iv) in the case of a Drawdown:

          (A)  each Revolving  Lender shall,  for same day value on the Drawdown
               Date, remit in immediately  available funds the Discount Proceeds
               (less the  acceptance  fees  payable to such  Lender  pursuant to
               Section 6.2) of the Bankers'  Acceptances  purchased by it to the
               Administrative Agent for the account of the Borrower; and

          (B)  the  Administrative  Agent shall make such funds available to the
               Borrower for same day value on such date.

(c)      On each such Drawdown Date, Rollover Date or Conversion Date involving
         the issuance of Bankers' Acceptances where the Borrower has elected to
         market such Bankers' Acceptances itself:

     (i)  the  Administrative  Agent  shall  advise  each  Lender as to whom the
          Bankers'  Acceptances  shall be delivered and the Discount Proceeds to
          be  received  by  such  Lender  against   delivery  of  such  Bankers'
          Acceptances;

     (ii) each Lender shall complete and accept, in accordance with the Drawdown
          Notice, Conversion Notice or Rollover Notice delivered by the Borrower
          and  advised by the  Administrative  Agent,  in  connection  with such
          issue, its share of Bankers' Acceptances to be issued on such date and
          shall  deliver such  Bankers'  Acceptances  to the  purchaser  thereof
          against delivery to such Lender of the Discount Proceeds therefor; and

     (iii) in the case of a Drawdown:

          (A)  each Revolving  Lender shall,  for same day value on the Drawdown
               Date, remit in immediately  available funds the Discount Proceeds
               (less the  acceptance  fees  payable to such  Lender  pursuant to
               Section 6.2) of the Bankers' Acceptances received by it (but only
               to the extent of such  receipt) to the  Administrative  Agent for
               the account of the Borrower; and

          (B)  the  Administrative  Agent shall make such funds available to the
               Borrower for same day value on such date.

(d)      Each Lender may at any time and from time to time hold, sell,
         rediscount or otherwise dispose of any or all Bankers' Acceptances
         accepted and purchased by it for its own account.

6.6      Rollover, Conversion or Payment on Maturity

         In anticipation of the maturity of Bankers' Acceptances, the Borrower
shall, subject to and in accordance with the requirements hereof, do one or a
combination of the following with respect to the aggregate face amount at
maturity of all such Bankers' Acceptances:

(a)  (i) deliver to the Administrative Agent a Rollover Notice that the Borrower
     intends to draw and present for  acceptance  on the  maturity  date for the
     maturing  Bankers'  Acceptances,  new Bankers'  Acceptances in an aggregate
     face  amount  up  to  the  aggregate   amount  of  the  maturing   Bankers'
     Acceptances; and

     (ii) on the  maturity  date  for the  maturing  Bankers'  Acceptances,  the
          Administrative  Agent shall  receive and retain for the account of the
          Lenders an  additional  amount  equal to the  difference  between  the
          aggregate  face amount of the maturing  Bankers'  Acceptances  and the
          Discount  Proceeds  of  such  new  Bankers'  Acceptances  (net  of the
          acceptance  fees  payable to such Lender  pursuant to Section  6.2) as
          described in Section 6.8;

(b)  (i) deliver to the  Administrative  Agent a Conversion  Notice requesting a
     Conversion of the maturing  Bankers'  Acceptances  on the maturity date for
     the maturing Bankers' Acceptances to another type of Loan; and

     (ii) on the maturity date for the maturing Bankers' Acceptances, pay to the
          Administrative Agent for the account of the Lenders an amount equal to
          the  difference,  if any,  between  the  aggregate  face amount of the
          maturing  Bankers'  Acceptances and the amount of the Loans into which
          Conversion is requested; or

(c)      on the maturity date of the maturing Bankers' Acceptances, pay to the
         Administrative Agent for the Lenders an amount equal to the aggregate
         face amount of such Bankers' Acceptances.

If the Borrower fails to so notify the Administrative Agent or make such
payments on maturity, the Administrative Agent shall effect a Conversion into a
Canadian Prime Rate Loan of the entire amount of such maturing Bankers'
Acceptances as if a Conversion Notice had been given by the Borrower to the
Administrative Agent to that effect.

6.7      Restriction on Rollovers and Conversions

         Except to the extent that the contrary is expressly provided herein,
Conversions and Rollovers of Bankers' Acceptances may only occur on the maturity
date thereof.

6.8      Rollovers of Bankers' Acceptances

         The Borrower may, at or before 9:00 a.m. (Calgary time) 1 Banking Day
prior to the expiration of each Interest Period of each Bankers' Acceptance,
elect to Rollover all or a portion of the Bankers' Acceptances (including BA
Equivalent Loans) maturing at the expiration of such Interest Period, for an
additional Interest Period by delivery of a Rollover Notice to the
Administrative Agent selecting the new Interest Period which shall commence on
and include the last day of such prior Interest Period; provided that a portion
of a Bankers' Acceptance may be continued only if the portion which is to remain
outstanding is equal to or exceeds the minimum amount required hereunder for
Drawdowns of Bankers' Acceptances, as set forth in Section 2.5. If the Borrower
fails to deliver a Rollover Notice to the Administrative Agent as provided in
this Section 6.8, and does not deliver a Conversion and/or Repayment Notice, the
Borrower shall be deemed to have given a Conversion Notice to the Administrative
Agent electing to convert the entire amount of the maturing Bankers' Acceptance
into a Canadian Prime Rate Loan. In order to satisfy the continuing liability of
the Borrower to a Lender for the face amount of maturing Bankers' Acceptances
accepted by such Lender, the Lender shall receive and retain for its own account
the Discount Proceeds of new Bankers' Acceptances issued on a Rollover, and the
Borrower shall on the maturity date of the Bankers' Acceptances being rolled
over pay to the Administrative Agent for the account of the Lender an amount
equal to the difference between the aggregate face amount of the maturing
Bankers' Acceptances and the Discount Proceeds of such new Bankers' Acceptances,
together with the acceptance fee to which the Lender is entitled pursuant to
Section 6.2.

6.9      Conversion into Bankers' Acceptances

         In respect of Conversions into Bankers' Acceptances, in order to
satisfy the continuing liability of the Borrower to the Lenders for the amount
of the converted Loan, each Lender shall receive and retain for its own account
the Discount Proceeds of the Bankers' Acceptances issued upon such Conversion,
and the Borrower shall on the Conversion Date pay to the Administrative Agent
for the account of the Lenders an amount equal to the difference between the
principal amount of the converted Loan and the Discount Proceeds of such
Bankers' Acceptances issued on such Conversion, together with the acceptance
fees to which the Lenders are entitled pursuant to Section 6.2.

6.10     Conversion from Bankers' Acceptances

         In order to satisfy the continuing liability of the Borrower to the
Lenders for an amount equal to the aggregate face amount of the maturing
Bankers' Acceptances converted to another type of Loan, the Administrative Agent
shall record the obligation of the Borrower to the Lenders as a Loan of the type
into which such continuing liability has been converted.

6.11     BA Equivalent Loans

         Notwithstanding the foregoing provisions of this Article 6, a
Non-Acceptance Lender shall, in lieu of accepting Bankers' Acceptances, make a
BA Equivalent Loan. The amount of each BA Equivalent Loan shall be equal to the
Discount Proceeds which would be realized from a hypothetical sale of those
Bankers' Acceptances which such Lender would otherwise be required to accept and
purchase as part of such a Drawdown, Conversion or Rollover of Bankers'
Acceptances. To determine the amount of such Discount Proceeds, the hypothetical
sale shall be deemed to take place at the Non-Acceptance Discount Rate for such
Loan. Any BA Equivalent Loan shall be made on the relevant Drawdown Date,
Rollover Date or Conversion Date, as the case may be, and shall remain
outstanding for the term of the relevant Drawdown, Conversion or Rollover of
Bankers' Acceptances. Concurrently with the making of a BA Equivalent Loan, a
Non-Acceptance Lender shall be entitled to deduct therefrom an amount equal to
the acceptance fee which such Lender would otherwise be entitled to receive
pursuant to Section 6.2 as part of such Loan if such Loan was a Bankers'
Acceptance, based on the amount payable on the maturity date of such BA
Equivalent Loan. Upon the maturity date for such Bankers' Acceptances, the
Borrower shall pay to each Non-Acceptance Lender the amount of its BA Equivalent
Loan plus interest calculated at the applicable Non-Acceptance Discount Rate
(not compounded). All references in this Agreement to "Loans" or "Bankers'
Acceptances" shall, unless otherwise provided for herein or unless the context
otherwise requires, be deemed to include BA Equivalent Loans made by a
Non-Acceptance Lender as part of a Drawdown of, or Conversion of, or Rollover
of, Bankers' Acceptances.

6.12     Adjustment of Fees

         All fees payable under Section 6.2 shall be calculated by the
Administrative Agent and payable by the Borrower initially on the assumption
that the ratings assigned by Moody's and/or by S&P or, as applicable under
Section 1.7, a Substitute Rating Entity (or, as applicable, the circumstance of
Moody's and/or S&P or, as applicable, such Substitute Rating Entity not
assigning any rating) to the long term debt of the Guarantor at the time of
issuance of the applicable Bankers' Acceptances will be maintained during the
term thereof. In the event that such rating by Moody's and/or S&P or, as
applicable under Section 1.7, a Substitute Rating Entity (or, as applicable, the
circumstance of Moody's and/or S&P or, as applicable, such Substitute Rating
Entity not assigning a rating to the long term debt of the Guarantor) is changed
such as to change the Applicable BA Fee Rate during the term of any outstanding
Bankers' Acceptances, the Administrative Agent shall recalculate the amount of
such fees on the basis of the Applicable BA Fee Rate applicable to the period
before such rating change, and the Applicable BA Fee Rate applicable to the
period on and after such rating change, and advise the Borrower and the Lenders
of the amount of the underpayment or overpayment (if any). In the case of an
underpayment, the Borrower shall forthwith pay to the Administrative Agent on
behalf of the Lenders the amount of such underpayment and in the case of an
overpayment, the amount thereof shall be credited against amounts in respect of
interest accruing hereunder.

6.13     Waiver; No Days of Grace

         To the maximum extent permitted by law, the Borrower waives presentment
for payment and any defence to payment which might otherwise exist if for any
reason a Bankers' Acceptance is, at the maturity thereof, held by a Lender as
holder in its own right and the Borrowers shall not claim any days of grace for
the payment at maturity of any Bankers' Acceptance.

                                   ARTICLE 7
                        PLACE AND APPLICATION OF PAYMENTS
                        ---------------------------------

7.1      Place of Payment of Principal, Interest and Fees; Payments to
         Administrative Agent

         All payments of principal, interest, fees and other amounts to be made
by the Borrower to the Administrative Agent and the Lenders pursuant to this
Agreement shall be made for value on the day such amount is due and, if such day
is not a Banking Day, on the Banking Day next following, and:

(a)      in the case of amounts payable in Canadian Dollars, all such payments
         shall be made by deposit or transfer thereof to the Administrative
         Agent's Account for Payments designated by the Administrative Agent for
         such purpose; and

(b)      in the case of amounts payable in United States Dollars, all such
         payments shall be made by deposit or transfer thereof the
         Administrative Agent's Account for Payments designated by the
         Administrative Agent for such purpose;

or, in either case, at such other place as the Borrower and the Administrative
Agent may from time to time agree.

7.2      Designated Accounts of the Lenders

         All payments of principal, interest, fees or other amounts to be made
by the Administrative Agent to the Lenders pursuant to this Agreement shall be
made for value on the day required hereunder, so long as the Administrative
Agent receives funds from the Borrower for value on such day. If such funds are
not so received from the Borrower, or if the day on which the Administrative
Agent receives such funds is not a Banking Day, then such payments shall be made
on the Banking Day next following, by deposit or transfer thereof at the time
specified herein to the account of each Lender designated by such Lender to the
Administrative Agent for such purpose, or to such other place or account as the
Lenders may from time to time notify the Administrative Agent.

7.3      Funds

         Each amount advanced, disbursed or paid hereunder shall be advanced,
disbursed or paid, as the case may be, in such form of funds as may from time to
time be customarily used for Canadian Dollars in Calgary, Alberta and Toronto,
Ontario or for United States Dollars in New York, New York in the settlement of
banking transactions similar to the banking transactions required to give effect
to the provisions of this Agreement on the day such advance, disbursement or
payment is to be made.

7.4      Application of Payments

         Except as otherwise agreed by all of the Lenders, all payments made by
the Borrower to the Administrative Agent and the Lenders prior to delivery of an
Acceleration Notice, shall be applied in the following order:

(a)  to amounts due hereunder as fees (other than Bankers' Acceptance fees);

(b)  to amounts due hereunder as costs and expenses,  including  amounts payable
     pursuant to indemnities;

(c)  to amounts due hereunder as default interest;

(d)  to amounts due hereunder as Bankers' Acceptance fees;

(e)  to amounts due hereunder as interest; and

(f)  to amounts due hereunder as principal.

7.5      Set-Off

(a)  The  Obligations  shall  be  paid  by the  Borrower  without  any  set-off,
     withholding or deduction whatsoever.

(b)  In addition to any rights now or hereafter granted under Applicable Law and
     not by way of  limitation  of any such rights,  upon the  occurrence  of an
     Event of Default  which remains  unremedied  (whether or not the Loans have
     been accelerated hereunder), the Administrative Agent and each Lender shall
     have the right (and are hereby  authorized by the Borrower) at any time and
     from time to time to combine all or any of the Borrower's accounts with the
     Administrative Agent or such Lender, as the case may be, and to set off and
     to appropriate and to apply any and all deposits (general or special,  term
     or  demand)  including,  but not  limited  to,  indebtedness  evidenced  by
     certificates  of  deposit  whether  matured  or  unmatured,  and any  other
     indebtedness  at any time held by the  Borrower  or owing by such Lender or
     the  Administrative  Agent,  as the case may be,  to or for the  credit  or
     account of the  Borrower,  against  and  towards  the  satisfaction  of any
     Obligations,  and  may do so  notwithstanding  that  the  balances  of such
     accounts and the liabilities are expressed in different currencies, and the
     Administrative  Agent and each Lender are hereby  authorized  to effect any
     necessary currency  conversions at the noon spot rate of exchange announced
     by the Bank of Canada on the Banking Day before the day of conversion.

(c)  The  Administrative  Agent or the  applicable  Lender,  as the case may be,
     shall notify the Borrower of any such set-off within a reasonable period of
     time thereafter,  although the  Administrative  Agent or the Lender, as the
     case may be,  shall not be liable to the  Borrower  for its  failure  to so
     notify.

                                   ARTICLE 8
                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

8.1      Representations and Warranties

         The Borrower represents and warrants as follows to the Administrative
Agent and to each of the Lenders and acknowledges and confirms that the
Administrative Agent and each of the Lenders is relying upon such
representations and warranties without independent inquiry in entering into this
Agreement and making the Credit Facility available to the Borrower:

     (a)  Corporate Status - The Borrower is an unlimited liability company duly
          organized and validly existing under the laws of Nova Scotia, and each
          of its  Subsidiaries  (except the  Partnership) is a corporation  duly
          organized  and  validly  existing  under the laws of their  respective
          jurisdictions   of   incorporation.   The  Partnership  is  a  general
          partnership duly formed, organized and validly existing under the laws
          of the Province of Alberta.  The Borrower and each of its Subsidiaries
          has  all  necessary  power,   capacity  and  authority  (corporate  or
          partnership,  as  applicable) to own, lease and operate its respective
          properties  and  assets  and  carry on its  respective  businesses  as
          presently  carried  on  and  each  is  duly  licensed,  registered  or
          qualified  in all  jurisdictions  where the  character of its property
          owned or leased or the nature of the activities  conducted by it makes
          such licensing, registration or qualification necessary or desirable.

     (b)  Corporate Authority - The Borrower has full corporate power,  capacity
          and authority to enter into this  Agreement and the Documents to which
          it is a party and to do all acts and  execute  and  deliver  all other
          documents as are required hereunder or thereunder to be done, observed
          or performed by it in accordance with their respective terms.

     (c)  Valid  Authorization - The Borrower has taken all necessary  corporate
          action to  authorize  the  creation,  execution,  delivery of, and the
          performance  of, its respective  obligations  under this Agreement and
          the  other  Documents  to which it is a party in  accordance  with the
          respective  terms of this Agreement and each of the other Documents to
          which it is a party.

     (d)  Validity and  Enforceability - This Agreement  constitutes,  and, when
          executed and delivered,  each of the other  Documents to which it is a
          party will  constitute,  valid and legally binding  obligations of the
          Borrower,  all  enforceable  against the Borrower in  accordance  with
          their  respective  terms,  subject  only  to  applicable   bankruptcy,
          insolvency  and  other  laws  of  general  application   limiting  the
          enforceability  of  creditors'   rights  generally,   and  to  general
          principles of equity,  including the fact that specific performance is
          an equitable remedy available only in the discretion of the court.

     (e)  No Conflict - Neither the execution and delivery of this  Agreement or
          any other  Document,  nor compliance  with the terms and conditions of
          any of them:

          (i)  has resulted,  or will result,  in a violation of the  constating
               documents  of the  Borrower  or  any  resolutions  passed  by the
               directors or  shareholders  of the Borrower or any Applicable Law
               (including any financial assistance prohibitions);

          (ii) has  resulted,  or will result,  in a breach of, or  constitute a
               default under, any loan agreement,  indenture,  trust deed or any
               other  material  agreement,  document or  instrument to which the
               Borrower or any  Subsidiary is a party or by which any of them is
               bound, including, without limitation, the GCRL/KEDC Agreements;

          (iii)requires  any approval or consent of any  Governmental  Authority
               having jurisdiction, except such as has already been obtained; or

          (iv) has resulted or will result in the creation of or the  obligation
               to create any Security  Interest on, against or in respect of any
               of the  property,  assets or  undertaking  of the Borrower or any
               Subsidiary.

     (f)  Ownership  of Borrower - All of the issued and  outstanding  shares in
          the  capital of the  Borrower  are  beneficially  owned,  directly  or
          indirectly, by the Guarantor.

     (g)  Title - As of the Effective Date, no Person has any agreement or right
          to  acquire  any  of  the  assets  of  the  Borrower  or  any  of  its
          Subsidiaries  or any interest  therein other than pursuant to sales or
          leases of assets in the  ordinary  course of business,  and  Permitted
          Encumbrances.  As of the Effective  Date, the Borrower and each of its
          Subsidiaries (i) have good, valid and marketable title to all of their
          property   and   assets,   unencumbered   excepting   only   Permitted
          Encumbrances,  (ii) own,  lease or have the lawful right to use all of
          the assets necessary for the conduct of their  respective  businesses,
          and (iii) have not received any notice of a potential  defect in their
          title  to any of  their  assets  which,  if  substantiated,  would  be
          reasonably likely to have a Material Adverse Effect on the Borrower.

     (h)  Business of Borrower - As of the  Effective  Date,  the only  business
          carried  on  by  the  Borrower  is  the  holding  of  its  partnership
          interests, shares and loans in, of and to the Partnership Parties.

     (i)  Work Orders - As of the Effective Date,  there are no outstanding work
          orders relating to any property or assets owned, leased or used by the
          Borrower  or  any  of  its  Subsidiaries   from  or  required  by  any
          Governmental  Authority,  nor does the  Borrower  have  notice  of any
          possible, impending or future work order.

     (j)  Expropriation - As of the Effective Date, no part of any real property
          owned,  leased or used by the Borrower or any of its Subsidiaries,  or
          any  building  or  fixture   located   thereon,   has  been  taken  or
          expropriated  by any  Governmental  Authority,  no  written  notice or
          proceeding in respect of an expropriation has been given or commenced,
          and the  Borrower  is not aware of any intent or  proposal to give any
          such notice or commence any such proceedings.

     (k)  Non-Default  - No  Default  or Event of  Default  has  occurred  or is
          continuing.

     (l)  Year-end  Financial  Condition  of the  Borrower  and the  Partnership
          Parties - The audited financial statements of each of the Borrower and
          the  Partnership  Parties as at and for the period ended  December 31,
          1998 present fairly, in all material respects, the financial condition
          of the Borrower and the Partnership Parties,  respectively, as at such
          date and the  results of the  operations  thereof  for the Fiscal Year
          then ending,  all in accordance  with  generally  accepted  accounting
          principles in Canada consistently applied.

     (m)  Contingent  Obligations - Except as created  pursuant to the Documents
          or  otherwise  permitted  hereunder  or consented to in writing by the
          Administrative  Agent, neither the Borrower nor any of the Partnership
          Parties has incurred or permitted to remain  outstanding  any material
          contingent obligation.

     (n)  Debt - The Borrower has no indebtedness  for borrowed money except the
          amount of $100,511,840  plus interest  accrued thereon since April 27,
          1999 owing to KS Finance  pursuant to the KS Finance  Loan,  and other
          indebtedness  permitted  hereunder  or  consented to in writing by the
          Administrative Agent.

     (o)  No  Change  -  Except  as  has  been   previously   disclosed  to  the
          Administrative  Agent by written notice  delivered in accordance  with
          the provisions of this Agreement:

          (i)  no change in the Borrower's  financial condition (as disclosed or
               reflected  in the  Borrower's  most recent  financial  statements
               delivered to the  Administrative  Agent) has  occurred  which has
               had, or which would  reasonably  be expected to have,  a Material
               Adverse Effect in respect of the Borrower; and

          (ii) no change in the  Partnership  Parties'  financial  condition (as
               disclosed or reflected in the  Partnership  Parties'  most recent
               financial statements  delivered to the Administrative  Agent) has
               occurred which has had, or which would  reasonably be expected to
               have, a Material Adverse Effect in respect of the Borrower.

     (p)  Litigation  -  Except  as  has  been   previously   disclosed  to  the
          Administrative  Agent by written notice  delivered in accordance  with
          the  provisions of this Agreement or as set forth on Schedule 1 to the
          Guarantee,  there are no actions,  suits or proceedings pending or, to
          the  knowledge of the  Borrower,  threatened  against or affecting the
          Borrower  or  any  of  its  Subsidiaries,  or  against  any  of  their
          respective  property  or  any of  their  respective  undertakings  and
          assets, at law, in equity or before any arbitrator or before or by any
          Governmental  Authority  having  jurisdiction in the  circumstances in
          respect of which there is a reasonable  possibility of a determination
          adverse  to  the  Borrower  or any of  its  Subsidiaries  which  would
          reasonably  be  expected  to have a  Material  Adverse  Effect  on the
          Borrower.

     (q)  Compliance - The Borrower and its  Subsidiaries  and their  respective
          businesses and operations are in compliance  with all Applicable  Laws
          (including,  without limitation,  all applicable  Environmental Laws),
          their  respective  constating  documents  and  by-laws,  all  material
          agreements or  instruments to which any of them is a party or by which
          any of their  respective  property  or assets  are  bound  (including,
          without  limitation,  the  GCRL/KEDC  Agreements),  and  any  employee
          benefit  plans,  except to the extent  that  non-compliance  would not
          reasonably  be  expected  to have a  Material  Adverse  Effect  on the
          Borrower.  There exists no  outstanding  disputes  regarding  any such
          material agreements or instruments.

     (r)  Authorizations - All authorizations,  approvals,  consents,  licences,
          exemptions,   filings,   registrations,    notarizations   and   other
          requirements  of  any  Governmental  Authority  or  any  other  Person
          reasonably  necessary to, or required in connection with the execution
          and delivery by the Borrower of, and  performance  of its  obligations
          under, this Agreement and each of the Documents to which it is a party
          and to conduct the  respective  businesses of the Borrower and each of
          its  Subsidiaries are in good standing and in full force and effect at
          the date of this  Agreement,  except to the extent that the failure to
          have or  maintain  the same in full force and effect  would not,  when
          taken in the  aggregate,  reasonably  be  expected  to have a Material
          Adverse Effect on the Borrower.

     (s)  Remittances  - All of  the  remittances  required  to be  made  by the
          Borrower and its Subsidiaries to the federal, provincial and municipal
          governments have been made and are currently up to date, and there are
          no outstanding arrears,  except where and to the extent the failure to
          remit or delay in remitting  would not,  when taken in the  aggregate,
          reasonably  be  expected  to have a  Material  Adverse  Effect  on the
          Borrower.

     (t)  Operational Documents - Each budget,  financial forecast,  projection,
          report,  plan and  other  document  containing  information  as to the
          businesses,  affairs,  financial condition,  property or assets of the
          Borrower or any of its Subsidiaries:

          (i)  prepared  or  approved  by  the  Borrower  and  delivered  to the
               Administrative  Agent  hereunder  by or on behalf of the Borrower
               has  been  prepared  by  the  Borrower  in  good  faith  and on a
               reasonable basis;

          (ii) if not prepared or approved by the Borrower,  then insofar as the
               Borrower is aware and to the best of the  Borrower's  information
               and  belief,  has been  prepared by or on behalf of the issuer of
               such document in good faith and on a reasonable basis.

     (u)  Books and Records - All books and records of the Borrower and, insofar
          as the Borrower is aware and to the best of the Borrower's information
          and belief, its Subsidiaries have been fully,  properly and accurately
          kept  and  completed  and  there  are  no  material   inaccuracies  or
          discrepancies  of any kind contained or reflected  therein,  except as
          previously  disclosed to the Administrative Agent by written notice in
          accordance with the provisions of this Agreement.

     (v)  Subsidiaries - Schedule N attached hereto sets forth the names of each
          of the Borrower's Subsidiaries as of the Effective Date, the ownership
          of their  respective  share  capital or  partnership  interests by the
          Borrower  therein  and the  percentage  of the  outstanding  shares or
          partnership  interests of each such Subsidiary  which are beneficially
          owned  (directly or  indirectly)  by the Borrower  (and the details of
          such  ownership).  The  Borrower has no other  Subsidiaries  as of the
          Effective Date.

     (w)  Environmental  Laws - To the best of the  knowledge  and belief of the
          Borrower,  the  Borrower and its  Subsidiaries  comply in all material
          respects, and the businesses, activities and operations of same comply
          in all material respects,  with all Environmental Laws,  Environmental
          Permits and Environmental Orders;  further, the Borrower does not know
          of any facts which result in or  constitute or are likely to give rise
          to non-compliance with any Environmental Laws,  Environmental  Permits
          or  Environmental  Orders,  which  non-compliance  would reasonably be
          expected to have a Material Adverse Effect on the Borrower.

     (x)  Environmental Permits - To the best of the knowledge and belief of the
          Borrower,   the  Borrower  and  its  Subsidiaries  have  obtained  all
          Environmental Permits which are required to the date hereof in respect
          of   their   businesses,   activities,   operations,   processes   and
          undertakings;  all such  Environmental  Permits  are valid and in full
          force  and  effect,  and no  material  violations  thereof  have  been
          experienced,  noted or recorded which are continuing and no proceeding
          is  pending  and,  to the  best of the  knowledge  and  belief  of the
          Borrower,  no  proceedings  have  been  or  are  being  taken  by  any
          Governmental   Authority   to  remove  or   invalidate   any  of  such
          Environmental  Permits,  the  removal or  invalidation  of which would
          reasonably  be  expected  to have a  Material  Adverse  Effect  on the
          Borrower.

     (y)  Hazardous  Materials - To the best of the  knowledge and belief of the
          Borrower,  the  businesses,  activities and operations of the Borrower
          and its  Subsidiaries  which have  generated,  manufactured,  refined,
          treated, transported, stored, handled, disposed, transferred, produced
          or processed  Hazardous  Materials  have done so in  compliance in all
          respects  with  all  Environmental  Laws,  Environmental  Permits  and
          Environmental  Orders  except to the extent such  failure to so comply
          does  not or would  not  reasonably  be  expected  to have a  Material
          Adverse Effect on the Borrower.

     (z)  Notices  re  Environmental  Matters - As of the  Effective  Date,  the
          Borrower has not received written notice under any Environmental Laws,
          Environmental  Regulations,  Environmental  Permits  or  Environmental
          Orders,  and as of the Effective Date, except as previously  disclosed
          to the Administrative  Agent in writing, the Borrower has no knowledge
          of any facts  which  could give rise to any  notice of  non-compliance
          with any Environmental Laws,  Environmental  Permits and Environmental
          Orders,  which  non-compliance  would reasonably be expected to have a
          Material Adverse Effect on the Borrower, or any notice that any one or
          more of the Borrower and its Subsidiaries is a potentially responsible
          party for a federal,  provincial,  state, regional, municipal or local
          clean-up,  or  corrective  action  which if not complied  with,  would
          reasonably  be  expected  to have a  Material  Adverse  Effect  on the
          Borrower.

     (aa) Convictions  - Neither the Borrower nor any of its  Subsidiaries  have
          been convicted of an offence for non-compliance with any Environmental
          Laws,  Environmental  Permits or Environmental Orders or been fined or
          otherwise  sentenced or settled such  prosecution  short of conviction
          except as otherwise advised in writing to the Administrative Agent, or
          except to the  extent any of the  foregoing  would not  reasonably  be
          expected to have a Material Adverse Effect on the Borrower.

     (bb) Maintenance  of Documents  and Records - To the best of the  knowledge
          and belief of the  Borrower,  the Borrower and its  Subsidiaries  have
          maintained  all material  environmental  and  operating  documents and
          records  in  the  manner  and  for  the  time   periods   required  by
          Environmental Laws, Environmental Permits and Environmental Orders.

     (cc) Taxes - The Borrower and each of its  Subsidiaries has duly filed on a
          timely  basis all tax  returns  required to be filed and have paid all
          Taxes which are due and  payable,  and have paid all  assessments  and
          reassessments and all other Taxes, governmental charges,  governmental
          royalties,  penalties,  interest and fines claimed against them, other
          than  those  which  are  being  contested  by them in  good  faith  by
          appropriate  proceedings.  The Borrower  and each of its  Subsidiaries
          have made adequate provision for, and all required instalment payments
          have been made in respect of, Taxes payable for the current period for
          which  returns  are  not  yet  required  to be  filed.  There  are  no
          agreements,  waivers or other arrangements  providing for an extension
          of time with  respect  to the  filing of any tax return by them or the
          payment of any Taxes.  There are no actions or proceedings being taken
          by Revenue  Canada,  Taxation or any provincial or municipal  taxation
          authority to enforce the payment of any Taxes by them other than those
          which  are  being  contested  by  them in good  faith  by  appropriate
          proceedings where such  contestation  would not reasonably be expected
          to have a Material Adverse Effect on the Borrower.

8.2      Deemed Repetition

         On the date of any Drawdown, Conversion and Rollover made by the
Borrower pursuant hereto:

(a)  each of the  representations  and  warranties  contained  in Section 8.1 or
     referred to in Section 8.3 shall be deemed to be repeated; and

(b)      the Borrower shall be deemed to have represented to the Administrative
         Agent and the Lenders that, except as has otherwise been notified to
         the Administrative Agent in writing and has been waived by the Majority
         Lenders in writing, no event has occurred and remains outstanding which
         would constitute a Default or an Event of Default, nor will any such
         event occur as a result of any such Drawdown, Conversion or Rollover.

8.3      Other Documents

         All representations, warranties and statements contained in any
Compliance Certificate delivered hereunder and all representations, warranties
and statements of the Borrower, any of its Subsidiaries, or the Guarantor
certified to be true in any other certificate, notice or other document
delivered hereunder shall constitute representations and warranties made by the
Borrower to the Administrative Agent and the Lenders under this Agreement.

8.4      Effective Time of Repetition

         All representations and warranties, when repeated or deemed to be
repeated hereunder, shall be construed with reference to the facts and
circumstances existing at the time of repetition, unless they are stated herein
to be made as at the date hereof.

8.5      Nature of Representations and Warranties

         The representations and warranties set out in this Agreement or deemed
to be made pursuant hereto shall survive the execution and delivery of this
Agreement and the making of each Drawdown, Conversion or Rollover,
notwithstanding any investigations or examinations which may be made by the
Administrative Agent, the Lenders or Lenders' Counsel. Such representations and
warranties shall survive until this Agreement has been terminated, provided that
claims for breaches of representations and warranties relating to environmental
matters shall survive the termination of this Agreement.

                                   ARTICLE 9
                                GENERAL COVENANTS
                                -----------------

9.1      Affirmative Covenants of the Borrower

         So long as any Obligation is outstanding or any of the Credit Facility
is available hereunder, the Borrower covenants and agrees with each of the
Lenders and the Administrative Agent that:

(a)  Payment and  Performance - The Borrower  shall duly and  punctually pay the
     principal of all Loans, all interest thereon and all fees and other amounts
     required  to be paid by the  Borrower  hereunder  or under any of the other
     Documents  in the  manner  specified  hereunder  or under  any of the other
     Documents, and the Borrower shall maintain,  perform and observe all of its
     obligations  under this  Agreement and under any other Document to which it
     is a party and shall duly and punctually pay its other indebtedness.

(b)  Corporate  Existence  and Conduct of Business - Subject to Section  9.2(i),
     the Borrower shall,  and shall use reasonable  commercial  efforts to cause
     each  of its  Subsidiaries  to,  maintain  their  respective  corporate  or
     partnership  existences  in good  standing  and do or  cause to be done all
     things necessary to keep in full force and effect all material  properties,
     rights, franchises, licences and qualifications to carry on business in any
     jurisdiction  in which  it or they  carry on a  material  business,  and it
     shall,  and shall use  reasonable  commercial  efforts to cause each of its
     Subsidiaries to, make all repairs,  renewals,  replacements,  additions and
     improvements  to all of its or their  respective  material  properties  and
     assets,  and manage their affairs and conduct their respective  businesses,
     activities  and  operations in a manner  consistent  with prudent  business
     management  practice,  and in a manner such as to ensure that the  Borrower
     and each of its  Subsidiaries  are able to meet their  obligations  as they
     come due.

(c)  Compliance with Laws - The Borrower shall do or cause to be done, and shall
     use reasonable  commercial  efforts to cause each of its Subsidiaries to do
     or cause to be done,  all acts  necessary  or  desirable to comply with all
     Applicable  Laws,  and to  preserve  and keep in full  force and effect all
     franchises,  licences,  rights,  privileges and permits necessary to enable
     the  Borrower  and each of its  Subsidiaries  to operate and conduct  their
     respective  businesses in accordance with standard industry practice except
     to the extent  such  failure to comply or to preserve or keep in full force
     and effect  would not  reasonably  be expected  to have a Material  Adverse
     Effect on the Borrower.

(d)  Material  Litigation - The Borrower  shall  promptly give written notice to
     the Administrative Agent of any litigation, proceeding or dispute affecting
     the Borrower or any of its  Subsidiaries  if (i) the amount of the claim or
     the potential exposure to the Borrower or its Subsidiaries, or any of them,
     exceeds Cdn.  $10,000,000,  or (ii) the result would reasonably be expected
     to have a Material Adverse Effect on the Borrower.  The Borrower shall from
     time to time furnish to the Administrative Agent all reasonable information
     requested by the  Administrative  Agent  concerning  the status of any such
     litigation, proceeding or dispute.

(e)  Financial  Statements and Other  Information - The Borrower shall keep, and
     shall use reasonable  commercial  efforts to cause each of its Subsidiaries
     to keep,  proper and adequate books of record and account in which full and
     correct  entries  shall  be  made  in  respect  of the  business,  affairs,
     financial  condition,  property  and assets of the Borrower and each of its
     Subsidiaries,   and  shall  deliver  to  the  Administrative   Agent,  with
     sufficient copies for each of the Lenders:

     (i)  as soon as available and, in any event,  within 120 days after the end
          of each of their Fiscal Years,  copies of the audited annual financial
          statements of the Borrower and each of its Subsidiaries  consisting of
          at least a balance  sheet,  a statement  of income and a statement  of
          cash flows for each such year,  together with the notes  thereto,  all
          prepared in accordance  with Canadian  generally  accepted  accounting
          principles  consistently  applied,  together  with  a  report  of  the
          Borrower's auditors thereon;

     (ii) as soon as available and, in any event within 60 days after the end of
          each of their first,  second and third Fiscal  Quarters and within 120
          days after the end of their fourth Fiscal  Quarters,  of each of their
          Fiscal  Years,  copies  of  the  unaudited   unconsolidated  quarterly
          financial statements of the Borrower and each of its Subsidiaries,  in
          each case  consisting  of at least a balance  sheet,  a  statement  of
          income  and a  statement  of cash flows for each such  period,  all in
          reasonable  detail and stating in comparative form the figures for the
          corresponding  date  and  period  in the  previous  Fiscal  Year,  all
          prepared in accordance  with Canadian  generally  accepted  accounting
          principles consistently applied, and certified by the Borrower's chief
          financial officer;

     (iii)as soon as available and, in any event,  within 120 days after the end
          of each of its Fiscal Years, copies of unaudited unconsolidated annual
          financial statements for the Borrower and each of its Subsidiaries, in
          each case  consisting  of at least a balance  sheet,  a  statement  of
          income  and a  statement  of cash  flows  for each  such  period,  all
          prepared in reasonable  detail in accordance  with generally  accepted
          accounting  principles  consistently  applied,  and  certified  by the
          Borrower's chief financial officer;

     (iv) concurrently  with  furnishing  the financial  statements  pursuant to
          Sections  9.1(e)(i),   9.1(e)(ii),   and  9.1(e)(iii),   a  Compliance
          Certificate  stating  that the  Borrower  is not in default  under the
          terms and conditions of this Agreement and that no Default or Event of
          Default has occurred and is continuing (or, if applicable,  specifying
          those defaults or events notified in accordance with Section  9.1(h));
          and

     (v)  at the request of the  Administrative  Agent, such other  information,
          reports,  certificates,  projections  of income and cash flow or other
          matters  affecting  the  businesses,  affairs,  operations,  financial
          condition,  property or assets of the Borrower and its Subsidiaries as
          the Administrative  Agent may reasonably  request  including,  without
          limitation, a summary of any environmental reports prepared in respect
          of the assets of the Borrower and the Partnership  Parties,  or any of
          them.

(f)  Inspection - At any reasonable  time and from time to time upon  reasonable
     prior notice,  the Borrower  shall permit the  Administrative  Agent or any
     representative  thereof (at the reasonable  expense of the Borrower) or any
     Lender or any  representative  thereof  to examine  and make  copies of and
     abstracts  from the records and books of account of the  Borrower or any of
     its  Subsidiaries  and to visit and inspect the premises and  properties of
     the  Borrower or any of its  Subsidiaries  (in each case at the risk of the
     Borrower except to the extent of the wilful  misconduct or gross negligence
     of the Lender or Administrative Agent) and to discuss the affairs, finances
     and  accounts of the  Borrower or any of its  Subsidiaries  with any of the
     officers of the Borrower or any of its Subsidiaries.

(g)  Insurance  -  The  Borrower  shall  maintain,   and  shall  use  reasonable
     commercial efforts to cause each of its Subsidiaries to maintain, all-risks
     property insurance in connection with their assets and businesses and other
     types of insurance, including business interruption insurance and liability
     insurance  with  respect to claims for personal  injury,  death or property
     damage,  with  respect  to the  operation  of  their  businesses,  all with
     responsible and reputable insurance companies in such amounts and with such
     deductibles as are customary and consistent with good industry  practice in
     the case of businesses  of  established  reputation  engaged in the same or
     similar businesses.

(h)  Notice of Default - The Borrower shall deliver to the Administrative Agent,
     forthwith  upon  becoming  aware  of the  occurrence  of a  Default  or the
     occurrence  of an Event of  Default  or of a  default  by any  party to the
     GCRL/KEDC Agreements,  an Officer's  Certificate  describing in detail such
     Default,  Event of Default or default  and  specifying  the steps,  if any,
     being taken to cure or remedy the same.

(i)  Payment of Taxes - The Borrower shall, and shall use reasonable  commercial
     efforts  to cause  each of its  Subsidiaries  to,  from time to time pay or
     cause to be paid all rents, taxes,  rates, levies or assessments,  ordinary
     or  extraordinary,  governmental  fees or dues,  and to make and  remit all
     withholdings, lawfully levied, assessed or imposed upon the Borrower or its
     Subsidiaries or any of the assets of the Borrower or its  Subsidiaries,  as
     and when the same  become due and  payable,  except when and so long as the
     validity of any such rents, taxes, rates, levies,  assessments,  fees, dues
     or  withholdings  is in good faith being  contested  by the Borrower or its
     Subsidiaries  by appropriate  proceeding and provided that there shall have
     been established  adequate  reserves therefor (in accordance with generally
     accepted accounting  principles) and such contestation would not reasonably
     be expected to have a Material Adverse Effect on the Borrower.

(j)  Priority of  Obligations - The Borrower  shall take all such actions as may
     be  required  to ensure  that the  Obligations  shall at all times  rank in
     priority to all other present and future Debt of the  Borrower,  except for
     Permitted  Indebtedness  (other  than the KS Finance  Loan),  and except as
     provided for in Section 9.2(d).

(k)  Disposition  of Assets - The  Borrower  shall,  and  shall  use  reasonable
     commercial efforts to cause each of its Subsidiaries to, sell or dispose of
     any assets  disposed of by it only on an arm's length basis for fair market
     value to a limit of Cdn. $10,000,000 per annum.

(l)  Protect and Defend Title - The  Borrower  shall,  and shall use  reasonable
     commercial efforts to cause each of its Subsidiaries to, maintain,  protect
     and  defend all  right,  interest,  estate and title in and to all of their
     respective properties and assets.

(m)  Notice of Material  Adverse Effect - The Borrower shall promptly notify the
     Administrative  Agent of any event,  circumstance or condition that has had
     or is reasonably likely to have a Material Adverse Effect in respect of the
     Borrower.

(n)  Payment of Preferred  Claims - The Borrower shall,  and shall cause each of
     its Subsidiaries to, from time to time, pay or cause to be paid all amounts
     related to taxes,  wages,  workers'  compensation  obligations,  government
     royalties or pension fund obligations and any other amount which may result
     in a lien, charge or similar encumbrance against the assets of the Borrower
     or such  Subsidiary  arising  under  statute or  regulation,  except to the
     extent and for so long as the Borrower or any  Subsidiary  shall contest in
     good  faith  its  obligation  to do so,  and such  contestation  would  not
     reasonably be expected to have a Material Adverse Effect on the Borrower.

(o)  Ownership - The Borrower shall at all times maintain direct, registered and
     beneficial  ownership of at least 50% of the ownership interests in each of
     the Partnership  Parties,  and shall not sell or otherwise  transfer any of
     its  interests  in any of  the  Partnership  Parties.  The  Borrower  shall
     continue to be a wholly owned  (directly or  indirectly)  subsidiary of the
     Guarantor.

(p)  Compliance with Environmental  Matters - Without limiting the generality of
     Section  9.1(c),  the Borrower shall,  and shall use reasonable  commercial
     efforts to cause each of its  Subsidiaries and any other party acting under
     their  direction to,  conduct their business and operations so as to comply
     at all  times  with  all  Environmental  Laws,  Environmental  Permits  and
     Environmental  Orders  if the  consequence  of a failure  to  comply  would
     reasonably be expected,  either alone or in conjunction with any other such
     continuing  non-compliances,  to  have a  Material  Adverse  Effect  on the
     Borrower.

(q)  Notice re  Environmental  Matters - If the Borrower  shall or becomes aware
     that any of its Subsidiaries shall:

     (i)  receive or give any notice that a violation of any Environmental  Law,
          Environmental  Permit  or  Environmental  Order  has or may have  been
          committed or is about to be committed by the same,  if such  violation
          would  reasonably be expected to have a Material Adverse Effect on the
          Borrower;

     (ii) receive  any notice  that a  complaint,  proceeding  or order has been
          filed or is about to be filed against the same alleging a violation of
          any Environmental Law, Environmental Permit or Environmental Order, if
          such violation would reasonably be expected to have a Material Adverse
          Effect on the Borrower; or

     (iii)receive any notice requiring the Borrower or any of its  Subsidiaries,
          as the case may be, to take any action in connection  with the Release
          of  Hazardous  Materials  into the  environment  or alleging  that the
          Borrower, or any of its Subsidiaries, may be liable or responsible for
          costs  associated  with a  response  to or to  clean-up  a Release  of
          Hazardous  Materials  into  the  environment  or  any  damages  caused
          thereby,  if such action or liability would  reasonably be expected to
          have a Material Adverse Effect on the Borrower;

     the Borrower shall promptly provide the Administrative Agent with a copy of
     such notice and shall, and shall use reasonable commercial efforts to cause
     each of its Subsidiaries to, furnish to the Administrative Agent details of
     any action  taken or  proposed  to be taken in respect of such  notice and,
     from  time  to  time,   all   reasonable   information   requested  by  the
     Administrative Agent relating to the same.

(r)      Notice of Guarantor's Rating Change - The Borrower shall promptly
         notify the Administrative Agent of any change in the senior unsecured
         long term debt rating of the Guarantor (or any failure to rate such
         debt) by Moody's or S&P (or if applicable, a Substitute Rating Entity
         under Section 1.7).

(s)      Year 2000 Compliance - The Borrower shall, as part of its Year 2000
         Compliance program, take all reasonable commercial efforts to ensure
         that its material mission-critical computer systems and programs are
         Year 2000 Compliant as soon as practicable and, in any event, before
         December 31, 1999.

9.2      Negative Covenants of the Borrower

         So long as any Obligation is outstanding or any of the Credit Facility
is available hereunder, the Borrower covenants and agrees with each of the
Lenders and the Administrative Agent that:

(a)      Change of Business - The Borrower shall not, and shall not permit any
         Subsidiary to, change in any material respect the nature of its
         business or operations or conduct businesses or operations which are
         materially different from the businesses and operations carried on by
         the Borrower and its Subsidiaries on the date hereof.

(b)      Restrictions - The Borrower shall not, nor shall it permit any of its
         Subsidiaries to without the prior written consent of the Lenders, such
         consent not to be unreasonably withheld: (i) create, issue, incur,
         assume or permit to exist any Security Interests on any of their
         respective property, undertakings or assets, other than Permitted
         Encumbrances, nor (ii) grant or become subject to any guarantee,
         indemnity or other form of financial assistance to or in favour of any
         Person, other than Permitted Indebtedness.

(c)      Limitation on Dispositions - The Borrower shall not, and shall not
         permit any of its Subsidiaries to, sell, transfer, convey, lease or
         otherwise dispose of any of its or their respective properties and
         assets, except in accordance with the provisions of paragraph 9.1(k)
         hereof, and except for Permitted Dispositions, and notwithstanding
         anything to the contrary herein contained, the Borrower shall not
         dispose of any of its partnership interests, shares and loans in, of
         and to the Partnership Parties.

(d)      Limitation on Debt - The Borrower shall not, nor shall it permit any of
         its Subsidiaries to without the prior written consent of the Lenders,
         such consent not to be unreasonably withheld: (i) have or incur any
         Non-Recourse Debt which exceeds, in the aggregate, in respect of the
         Borrower and its Subsidiaries collectively, Cdn $50,000,000; nor (ii)
         have or incur any Debt (other than Non-Recourse Debt as permitted in
         (i) above), or enter into any contracts or commitments, in excess of
         Cdn. $25,000,000, other than Permitted Indebtedness.

(e)      Limitation on Distributions - The Borrower shall not make any
         Distribution, excepting only (i) payments made on the Subordinated
         Indebtedness with the prior written consent of the Administrative
         Agent; and (ii) reasonable interest payments on Subordinated Debt, only
         when and so long as there is no Default or Event of Default outstanding
         and then only to the extent that the unconsolidated cash flow of the
         Borrower is, and after such payment will continue to be, sufficient to
         meet all of the obligations of the Borrower.

(f)  Investments  - The  Borrower  and  its  Subsidiaries  shall  not  make  any
     Investment,  other than loans or capital  contributions  to the Partnership
     Parties pursuant to and as required by the Partnership  Agreement,  and the
     unanimous shareholders' agreements governing the other Partnership Parties,
     and without restricting the generality of the foregoing, the Borrower shall
     not  create or  acquire  any new  Subsidiaries  or issue any  shares or any
     securities,  instruments or contractual  rights capable of being  converted
     into,  exchanged  or exercised  for shares in the capital of the  Borrower;
     provided however,  that the Borrower or its Subsidiaries may acquire shares
     or securities  of a Person as a means of acquiring the property,  assets or
     undertaking  of such Person and provided  further that the Debt incurred in
     respect of such  acquisition  is subject to, and does not cause the Debt of
     the Borrower and its Subsidiaries to exceed, the limitation on Debt set out
     in Section 9.2(d).

(g)      GCRL/KEDC Agreements - The Borrower shall not:

     (i)  agree to any material revision, alteration,  modification,  amendment,
          change, extension,  renewal,  replacement or substitution of or under,
          or  terminate,  forfeit,  surrender  or cancel any one or more of, the
          GCRL/KEDC Agreements;

     (ii) waive  any  material  failure  of any  party  to any of the  GCRL/KEDC
          Agreements to perform its obligations thereunder or release such party
          from  its  obligations  to  perform  and  comply  with the  terms  and
          provisions of the GCRL/KEDC Agreements;

     (iii)suffer  of  permit  anything  allowing   termination  of  any  of  the
          GCRL/KEDC Agreements;

     (iv) assign or consent to any  assignment  or further  assignment of any of
          the GCRL/KEDC Agreements; or

     (v)  give any notice of default, or exercise any right or remedy under, any
          of the GCRL/KEDC  Agreements  except upon prior written  notice to the
          Administrative Agent.

(h)      Non-Arm's Length Transactions - The Borrower shall not, nor shall it
         permit any Subsidiary to, enter into any contract whatsoever one with
         the other or another or an Affiliate for the sale, purchase, lease or
         other dealing in any property, other than at a consideration which
         equals the fair market value of such property or other than at a fair
         market rental as regards leased property.

     (i)  Certain  Fundamental  Changes - The Borrower  shall not, and shall not
          permit any of its  Subsidiaries  to, enter into or  participate in any
          consolidation, amalgamation/merger, or similar transaction which would
          result in:

     (i)  the  reorganization  (other than a reorganization of share capital not
          involving a  consolidation,  amalgamation or merger of the Borrower as
          herein provided) of the Borrower or any of its Subsidiaries;

     (ii) the  consolidation,  amalgamation  or merger of the Borrower or any of
          its Subsidiaries with any other Person; or

     (iii)the  transfer  of all or any  material  part  of the  undertaking  and
          assets of the  Borrower  and its  Subsidiaries  to  another  Person in
          connection  with any  reorganization,  consolidation,  amalgamation or
          merger;

     if such action would result in a Material Adverse Effect on the Borrower or
     any of its Subsidiaries, or adversely affect the validity or enforceability
     of the Guarantee in any manner.

9.3      Administrative Agent May Perform Covenants

         If the Borrower fails to perform any covenants on its part herein
contained, subject to any consents or notice or cure periods required by Section
10.1, the Administrative Agent may give notice to the Borrower of such failure
and if, within 10 days after such notice, such covenant remains unperformed, the
Administrative Agent may, in its discretion but need not, perform any such
covenant capable of being performed by the Administrative Agent and if the
covenant requires the payment or expenditure of money, the Administrative Agent
may, upon having received approval of all Lenders, make such payments or
expenditure and all sums so expended shall be forthwith payable by the Borrower
to the Administrative Agent on behalf of the Lenders and shall bear interest at
the applicable interest rate provided in Section 5.8 for amounts due in Canadian
Dollars or United States Dollars, as the case may be. No such performance,
payment or expenditure by the Administrative Agent shall be deemed to relieve
the Borrower of any default hereunder or under the other Documents.

                                   ARTICLE 10
                       EVENTS OF DEFAULT AND ACCELERATION
                       ----------------------------------

10.1     Events of Default

         The occurrence of any one or more of the following events (each such
event being herein referred to as an "Event of Default") shall constitute a
default under this Agreement:

     (a)  if the  Borrower  defaults in payment of any Loan  hereunder  when the
          same becomes due and payable;

     (b)  if the Borrower defaults in payment of:

          (i)  any interest (including, if applicable,  default interest) on any
               Loan;

          (ii) any fee with respect to a Bankers' Acceptance;

          (iii)any other amount not  specifically  referred to above  payable by
               the Borrower hereunder;

          in any case for a period of 3 Banking  Days after the same becomes due
          and payable;

(c)      if the Borrower or the Guarantor fails to observe or perform any
         covenant or obligation herein or in any Document to which it is a party
         (including, without limitation, such a failure by the Guarantor to
         observe or perform any covenant or obligation under the Guarantee) on
         its part to be observed or performed (other than a covenant or
         obligation whose breach or default in performance is specifically dealt
         with elsewhere in this Section 10.1) and:

          (i)  such breach or default is not capable of being remedied; or

          (ii) if such  breach or default is  capable of being  remedied,  after
               notice has been given by the Administrative Agent to the Borrower
               specifying  such breach or default and  requiring the Borrower or
               the  Guarantor  to put an end to the same,  the  Borrower  or the
               Guarantor  shall fail to remedy such  breach or default  within a
               period of 20 Banking Days after the giving of notice,  unless the
               Administrative  Agent (having regard to the subject matter of the
               default),  at the  direction  of the  Majority  Lenders  in their
               respective  sole  discretions,  shall  have  agreed  to a  longer
               period, and in such event, within such longer period;

(d)      if:

          (i)  any  representation  or  warranty  made by the  Borrower  in this
               Agreement  or  in  any  other  Document,   certificate  or  other
               instrument to which it is a party; or

          (ii) if any  representation  or warranty  made by the Guarantor in the
               Guarantee  or  in  any  other  Document,   certificate  or  other
               instrument to which it is a party;

     shall prove to have been incorrect or misleading in any material respect on
     and as of the date made;

(e)      if the Borrower, any Subsidiary or the Guarantor:

(i)  (A)  institutes  proceedings  to be  adjudicated  bankrupt or  insolvent or
     consents to the filing of a bankruptcy or insolvency proceeding against it;
     or

     (B)  files a petition or answer or consent seeking liquidation, winding-up,
          reorganization,   readjustment,  arrangement,  protection,  relief  or
          composition of it or its debts or similar relief;

     under the Companies Creditors' Arrangement Act (Canada), the Bankruptcy and
     Insolvency Act (Canada),  or any other  bankruptcy or insolvency law or any
     other  similar  Applicable  Law in Canada,  the United States of America or
     elsewhere,  including  any  plan of  compromise  or  arrangement  or  other
     corporate proceedings involving or affecting its creditors,  or consents to
     the filing of any such petition or proceedings;

     (ii) consents  to the  appointment  of a  receiver,  trustee or assignee in
          bankruptcy or insolvency of any part of its property  which is, in the
          opinion of the Administrative  Agent, material to the Borrower and its
          Subsidiaries  taken as a whole,  or to the Guarantor,  as the case may
          be;

     (iii)makes a general  assignment  for the benefit of  creditors  or becomes
          insolvent or generally not able to pay its debts as they become due or
          admits in writing its  inability  to pay its debts  generally  as they
          become due; or

(iv) takes any corporate action to authorize any of the above;

(f)  if a court having jurisdiction enters or grants a decree or order:

     (i)  adjudging  the  Borrower,  any of its  Subsidiaries  or the  Guarantor
          bankrupt or  insolvent,  or  approving  as  properly  filed a petition
          seeking   liquidation,   winding-up,   reorganization,   readjustment,
          arrangement,  composition,  protection, relief or composition of it or
          its debts or similar relief of the Borrower,  or any Subsidiary or the
          Guarantor under the Companies Creditors' Arrangement Act (Canada), the
          Bankruptcy  and Insolvency  Act (Canada),  or any other  bankruptcy or
          insolvency  law or any other  similar  Applicable  Law in Canada,  the
          United  States  of  America  or  elsewhere,   including  any  plan  of
          compromise or arrangement or other corporate  proceedings involving or
          affecting its creditors; or

     (ii) appointing a receiver, trustee or assignee in bankruptcy or insolvency
          of any  part  of  their  property  which  is,  in the  opinion  of the
          Administrative  Agent,  material to the Borrower and its  Subsidiaries
          taken as a whole, or to the Guarantor, as the case may be;

     and any such decree or order remains in force  undischarged or unstayed for
     a period of 20 Banking Days or more;

(g)      if the Borrower fails to make any payment on or in respect of any Debt
         of the Borrower when the same becomes due and beyond any period of
         grace provided with respect thereto, where the amount in default
         (including pursuant to any demand or acceleration) exceeds Cdn.
         $10,000,000 or the Equivalent Amount thereof in the aggregate, and such
         failure is not remedied within 10 Banking Days of the occurrence of the
         failure to make such payment;

(h)      if any Subsidiary fails to make any payment on or in respect of any
         Debt of such Subsidiary when the same becomes due and beyond any period
         of grace provided with respect thereto, where the amount in default
         (including pursuant to any demand or acceleration) exceeds Cdn.
         $20,000,000 or the Equivalent Amount thereof in the aggregate and such
         failure is not remedied within 10 Banking Days of the occurrence of the
         failure to make such payment;

(i)      if the Guarantor fails to make any payment on or in respect of any Debt
         of the Guarantor when the same becomes due and beyond any period of
         grace provided with respect thereto, where the amount in default
         (including pursuant to any demand or acceleration) exceeds U.S.
         $50,000,000 or the Equivalent Amount thereof in the aggregate and such
         failure is not remedied within 10 Banking Days of the occurrence of the
         failure to make such payment;

(j)      if a judgment, writ, execution, attachment or order is rendered against
         the Borrower for the payment of money in excess of Cdn. $10,000,000 or
         the Equivalent Amount thereof which is unsatisfied and which has not
         been discharged within a period of 15 days after being so rendered, or
         stayed pending appeal within the applicable appeal period;

(k)      if a judgment, writ, execution, attachment or order is rendered against
         any Subsidiary for the payment of money in excess of Cdn. $20,000,000
         or the Equivalent Amount thereof which is unsatisfied and which has not
         been discharged within a period of 15 days after being so rendered, or
         stayed pending appeal within the applicable appeal period;

(l)      if a judgment, writ, execution, attachment or order is rendered against
         the Guarantor for the payment of money in excess of U.S. $50,000,000 or
         the Equivalent Amount thereof which is unsatisfied and which has not
         been discharged within a period of 15 days after being so rendered, or
         stayed pending appeal within the applicable appeal period;

(m)      if a secured party, lien holder or other encumbrancer takes possession
         of any portion of the property of the Borrower, any Subsidiary or the
         Guarantor which is, in the opinion of the Administrative Agent,
         material to the Borrower and its Subsidiaries taken as a whole, or to
         the Guarantor, as the case may be, or if a distress or any similar
         process is levied and enforced against any such material property and
         remains unsatisfied or unstayed for a period of 15 days;

(n)      if this Agreement or the Guarantee or the Subordination Agreement or
         any material provision thereof shall at any time for any reason cease
         to be in full force and effect, be declared to be void or voidable or
         shall be repudiated or claimed to be ineffective, or the validity or
         enforceability thereof shall at any time be contested by, the Borrower,
         any of its Subsidiaries, or the Guarantor, or if any of them shall deny
         that it has any or any further liability or obligation thereunder, or
         at any time it shall be unlawful or impossible for any of them to
         perform any of the obligations under such Document;

(o)      if the Borrower, any Subsidiary or the Guarantor shall cease or
         threaten to cease to carry on all or any material part of its business
         as now conducted, or shall make a sale of all or substantially all of
         its assets except in compliance herewith;

(p)  if the  Guarantor  ceases to have 100% direct or indirect  ownership of the
     Borrower;

(q)      if a Material Adverse Effect in respect of the Guarantor occurs;

(r)      if the Guarantor has, at the end of any Fiscal Quarter during which its
         senior unsecured long term debt was, at any time, not rated at least A3
         by Moody's or at least A- by S&P:

     (i)  a Consolidated  Debt to Consolidated  Capitalization  Ratio of greater
          than 0.65:1; or

     (ii) a Consolidated  Cash Flow to  Consolidated  Interest  Expense Ratio of
          less than 2.25:1; or

(s)      if:

(i)               the Guarantor's senior unsecured long term debt is no longer
                  rated by Moody's or a Substitute Rating Entity in substitution
                  for Moody's and is also no longer rated by S&P or a Substitute
                  Rating Entity in substitution for S&P; or

(ii)              (A) the Guarantor's senior unsecured long term debt is no
                  longer rated by Moody's or a Substitute Rating Entity for
                  Moody's, or the Guarantor's senior unsecured long term debt
                  rating by Moody's is lower than Baa3 (or the Guarantor's
                  rating for its senior unsecured long term debt by a Substitute
                  Rating Entity for Moody's is lower than the Equivalent Rating
                  to Baa3 by Moody's of such Substitute Rating Entity); and

               (B)  the Guarantor's senior unsecured long term debt is no longer
                    rated by S&P or a Substitute  Rating  Entity for S&P, or the
                    Guarantor's senior unsecured long term debt rating by S&P is
                    lower  than BBB- (or the  Guarantor's  rating for its senior
                    unsecured  long term debt by a Substitute  Rating Entity for
                    S&P is lower  than the  Equivalent  Rating to BBB- by S&P of
                    such Substitute Rating Entity);

     notwithstanding  that this  Agreement  provides  for  margins and fee rates
     below such rating levels;

10.2     Acceleration

         If any Event of Default shall occur:

     (a)  the  entire  principal  amount of all Loans then  outstanding  and all
          accrued and unpaid interest thereon;

     (b)  an  amount  equal to the  face  amount  at  maturity  of all  Bankers'
          Acceptances which are unmatured;

     (c)  all  other  obligations   outstanding  hereunder,   including  without
          limitation,  all costs, losses,  premiums and expenses incurred by the
          Lenders by reason of the liquidation or  re-deployment  of deposits or
          other  funds or for any other  reason  whatsoever  resulting  from the
          repayment of LIBOR Loans or BA  Equivalent  Loans or any parts thereof
          on other than the last day of the applicable Interest Period;


shall, at the option of the Administrative Agent in accordance with Section
13.11 or upon the request of the Majority Lenders, become immediately due and
payable upon written notice to that effect from the Administrative Agent to the
Borrower and the Commitment of each Lender shall terminate, all without any
other notice and without presentment, protest, demand, notice of dishonour or
any other demand whatsoever (all of which are hereby expressly waived by the
Borrower); provided that upon the occurrence of an Event of Default specified in
Sections 10.1(e) or 10.1(f), the Commitment of each Lender shall terminate and
all amounts specified in Sections 10.2(a), 10.2(b), and 10.2(c) shall
automatically become due and payable, in each case without any requirement that
notice be given to the Borrower. In any such event and if the Borrower does not
immediately pay all such amounts, either the Lenders or the Administrative Agent
on their behalf may, in their discretion, exercise any right or recourse and/or
proceed by any action, suit, remedy or proceeding against the Borrower
authorized or permitted by law for the recovery of the Obligations and proceed
to exercise any and all rights hereunder and under the other Documents, and no
such remedy for the enforcement of the rights of the Lenders shall be exclusive
of or dependent on any other remedy but any one or more of such remedies may
from time to time be exercised independently or in combination.

10.3     Conversion on Default

         Upon the occurrence of an Event of Default, the Administrative Agent on
behalf of the Lenders may convert, at the Equivalent Amount, a U.S. Base Rate
Loan or LIBOR Loan at any time to a Canadian Prime Rate Loan. Interest shall
accrue on each such Canadian Prime Rate Loan at the Canadian Prime Rate with
interest on all overdue interest at the same rate, such interest to be
calculated daily and payable on demand.

10.4     Remedies Cumulative and Waivers

         For greater certainty, it is expressly understood and agreed that the
rights and remedies of the Lenders and the Administrative Agent hereunder or
under any other Document are cumulative and are in addition to and not in
substitution for any rights or remedies provided by law or by equity; and any
single or partial exercise by the Lenders or by the Administrative Agent of any
right or remedy for a default or breach of any term, covenant, condition or
agreement contained in this Agreement or other Document shall not be deemed to
be a waiver of or to alter, affect or prejudice any other right or remedy or
other rights or remedies to which any one or more of the Lenders and the
Administrative Agent may be lawfully entitled for such default or breach. Any
waiver by, as applicable, the Majority Lenders, the Lenders or the
Administrative Agent of the strict observance, performance or compliance with
any term, covenant, condition or other matter contained herein and any
indulgence granted by, as applicable, the Majority Lenders, the Lenders or the
Administrative Agent shall be effective only in the specific instance and for
the purpose for which it was given and shall be deemed not to be a waiver of any
rights and remedies of the Lenders or the Administrative Agent under this
Agreement or any other Document as a result of any other default or breach
hereunder or thereunder.

10.5     Termination of Lenders' Obligations

         The occurrence of a Default shall relieve the Lenders of all
obligations to provide any further Drawdowns, Rollovers or Conversions
hereunder; provided that the foregoing shall not prevent the Lenders or the
Administrative Agent from disbursing money or effecting any Conversion which, by
the terms hereof, they are entitled to effect, or any Conversion or Rollover
requested by the Borrower and acceptable to the Lenders and the Administrative
Agent.

10.6     Application and Sharing of Payments Following Acceleration

         Except as otherwise agreed to by all of the Lenders in their sole
discretions, any sum received by Administrative Agent subsequent to the
Adjustment Time which the Administrative Agent is obliged to apply in or towards
satisfaction of sums due from the Borrower hereunder shall be applied by the
Administrative Agent rateably among the Lenders and the Administrative Agent in
accordance with amounts owed to the Lenders and the Administrative Agent in
respect of each category of amounts set forth below, each such application to be
made in the following order with the balance remaining after application in
respect of each category to be applied to the next succeeding category:

(a)  Administrative  Agent's Fees:  firstly,  in or towards  payment of any fees
     then due and payable to the Administrative Agent and the Lenders hereunder,
     including, without limitation, those fees referred to in Section 5.7;

(b)  Administrative   Agent's  and  Lenders'  Expenses:   secondly,   among  the
     Administrative Agent and the Lenders in accordance with amounts owed to the
     Administrative  Agent and the Lenders in respect of amounts due and payable
     as and by way of recoverable expenses hereunder,  including amounts payable
     pursuant to indemnities;

(c)  Interest and Fees:  thirdly,  among the Lenders in accordance  with amounts
     owed to the  Lenders in respect of amounts due and payable as and by way of
     interest  pursuant to Sections  5.1, 5.2, and 5.3, fees pursuant to Section
     6.2,  interest on overdue  amounts  pursuant to Section 5.8 and  commitment
     fees pursuant to Section 5.6;

(d)  Other Amounts (other than Loans): fourthly, among the Lenders in accordance
     with  amounts  owed to the  Lenders in respect  of any amount  (other  than
     Loans) then due and payable by the Borrower  hereunder,  other than amounts
     hereinbefore referred to in this Section 10.6; and

(e)  Loans:  fifthly,  in or towards  repayment to the Lenders of the Loans then
     outstanding hereunder.

                                   ARTICLE 11
                             CHANGE OF CIRCUMSTANCES
                             -----------------------

11.1     Market Disruption Respecting LIBOR Loans

         In the event that at any time subsequent to the giving of a Drawdown
Notice, Rollover Notice or Conversion Notice to the Administrative Agent by the
Borrower with regard to any requested LIBOR Loan, but before the date of the
Drawdown, Rollover or Conversion, as the case may be, the Administrative Agent
(acting reasonably) makes a determination in good faith, which shall be
conclusive and binding upon the Borrower, that:

(a)      by reason of circumstances affecting the London interbank market,
         adequate and fair means do not exist for ascertaining the LIBOR Rate
         with respect to, or deposits are not available in sufficient amounts in
         the ordinary course of business at the rate determined hereunder to
         fund, a requested LIBOR Loan during the ensuing Interest Period
         selected;

(b)      the making or continuing of the requested LIBOR Loan by the Lenders has
         been made impracticable by the occurrence of an event which materially
         adversely affects the London interbank market generally; or

(c)      the LIBOR Rate in respect of a LIBOR Loan for the immediately following
         Interest Period does not adequately and fairly reflect the effective
         cost of the Lender's funding such LIBOR Loan for the Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower as soon
as possible after such determination and the Borrower shall, within 1 Banking
Day after receipt of such notice and in replacement of the Drawdown Notice,
Rollover Notice or Conversion Notice, as the case may be, previously given by
the Borrower, give the Administrative Agent a Drawdown Notice or a Conversion
Notice, as the case may be, which specifies the Drawdown of any other type of
Loan or the Conversion of the relevant LIBOR Loan on the last day of the
applicable Interest Period into any other type of Loan which would not be
affected by the notice from the Administrative Agent pursuant to this Section
11.1. In the event the Borrower fails to give, if applicable, a valid
replacement Conversion Notice with respect to the maturing LIBOR Loans which
were the subject of a Rollover Notice, such maturing LIBOR Loans shall be
converted on the last day of the applicable Interest Period into U.S. Base Rate
Loans as if a Conversion Notice had been given to the Administrative Agent by
the Borrower pursuant to the provisions hereof. In the event the Borrower fails
to give, if applicable, a valid replacement Drawdown Notice with respect to a
Drawdown originally requested by way of a LIBOR Loan, then the Borrower shall be
deemed to have requested a Drawdown by way of a U.S. Base Rate Loan in the
amount specified in the original Drawdown Notice and, on the originally
requested Drawdown Date, the Lenders (subject to the other provisions hereof)
shall make available the requested amount by way of a U.S. Base Rate Loan.

11.2     Market Disruption Respecting Bankers' Acceptances

         If the Administrative Agent determines in good faith, which
determination shall be conclusive and binding upon the Borrower, and notifies
the Borrower, that:

(a)  there no longer exists an active market for bankers'  acceptances  accepted
     by the Lenders; or

(b)  the Discount Rate does not accurately reflect the discount rate which would
     be applicable to a sale of Bankers' Acceptances in the market;

then:

(c)      the right of the Borrower to request Bankers' Acceptances from any
         Lender shall be suspended until the Administrative Agent determines
         that the circumstances causing such suspension no longer exist, and so
         notifies the Borrower;

(d)      any outstanding Drawdown Notice requesting a Loan by way of Bankers'
         Acceptances shall be deemed to be a Drawdown Notice requesting a Loan
         by way of Canadian Prime Rate Loans in the amount specified in the
         original Drawdown Notice;

(e)      any outstanding Conversion Notice requesting a Conversion of a
         Borrowing by way of U.S. Base Rate Loans or LIBOR Loans into a Loan by
         way of Bankers' Acceptances shall be deemed to be a Conversion Notice
         requesting a Conversion of such Borrowing into a Loan by way of
         Canadian Prime Rate Loans; and

(f)      any outstanding Rollover Notice requesting a Rollover of a Loan by way
         of Bankers' Acceptances or BA Equivalent Loans shall be deemed to be a
         Conversion Notice requesting a Conversion of such Loans into a Loan by
         way of Canadian Prime Rate Loans.

The Administrative Agent shall promptly notify the Borrower and the Lenders of
any suspension of the Borrower's right to request Bankers' Acceptances and of
any termination of any such suspension.

11.3     Change in Law

         If the adoption of any Applicable Law, or any change therein, or any
change in any existing Applicable Law or in the interpretation or application
thereof by any court or by any Governmental Authority or any other entity
charged with the interpretation or administration thereof, or compliance by a
Lender with any request or direction (whether or not having the force of law) of
any such authority or entity, hereafter:

(a)  subjects  any Lender to, or causes the  withdrawal  or  termination  of any
     previously  granted exemption with respect to, any tax or changes the basis
     of taxation,  or  increases  any  existing  tax, on payments of  principal,
     interest,  fees or other  amounts  payable by the  Borrower  to such Lender
     under this Agreement  (except for taxes based on the capital or overall net
     income of such Lender);

(b)  imposes, modifies or deems applicable any reserve,  liquidity, cash margin,
     capital, deposit insurance, special deposit or similar requirements against
     assets held by, or deposits in or for the account of, or loans by or to, or
     any  other  acquisition  of  funds  by,  or  drafts   (including   Bankers'
     Acceptances) accepted by an office of, any Lender;

(c)  imposes on any Lender or expects  there to be  maintained by any Lender any
     capital adequacy or additional capital requirements in respect of any Loans
     or the Credit  Facility  hereunder,  or any other condition with respect to
     this Agreement; or

(d)  imposes on any Lender any other conditions or requirements relevant to this
     Agreement or the Credit Facility which are adverse to such Lender;

and the result of any of the foregoing shall be to increase the cost to, or
reduce the amount of principal, interest or other amount received or receivable
by, such Lender hereunder or its effective return hereunder in respect of
making, maintaining or funding a Loan under the Credit Facility or cause such
Lender to make any payment or forego any interest, fees or other return
hereunder, such Lender shall determine that amount of money which shall
compensate the Lender for such increase in cost, reduction in principal,
interest or other amount or in effective return, or payments made or amounts
forgone (herein referred to as "Additional Compensation"). Upon a Lender having
determined that it is entitled to Additional Compensation in accordance with the
provisions of this Section 11.3, the Lender shall promptly so notify the
Borrower and the Administrative Agent. The Lender shall provide the Borrower and
the Administrative Agent with a photocopy of the Applicable Law (or, if it is
impracticable to provide a photocopy, a written summary of the same) and a
certificate of a duly authorized officer of such Lender setting forth the
Additional Compensation and the basis of calculation therefor, which shall be
conclusive evidence of such Additional Compensation in the absence of manifest
error. The Borrower shall pay to such Lender within 10 Banking Days of the
giving of such notice such Lender's Additional Compensation. Each of the Lenders
shall be entitled to be paid such Additional Compensation from time to time to
the extent that the provisions of this Section 11.3 are then applicable,
notwithstanding that any Lender has previously been paid any Additional
Compensation. The Lenders shall endeavour to limit the incidence of any such
Additional Compensation, including (without limitation) seeking recovery for the
account of the Borrower by appealing any assessment (providing that the same
shall not be adverse to the interests of the Lenders, in their sole discretion)
at the expense of the Borrower, upon the Borrower's request.

11.4     Prepayment of Portion

         In addition to the other rights and options of the Borrower hereunder
and notwithstanding any contrary provisions hereof, if a Lender gives the notice
provided for in Section 11.3 with respect to any Loan (an "Affected Loan"), the
Borrower may:

(a)  upon 2 Banking  Days  notice to that  effect  given to such  Lender and the
     Administrative  Agent (which notice shall be  irrevocable),  prepay in full
     without penalty such Lender's  Proportion of the Affected Loan  outstanding
     together  with  accrued  and unpaid  interest  on the  principal  amount so
     prepaid up to the date of such prepayment,  such Additional Compensation as
     may be  applicable  to the date of such  payment and all costs,  losses and
     expenses   incurred  by  such  Lender  by  reason  of  the  liquidation  or
     re-deployment of deposits or other funds or for any other reason whatsoever
     resulting  from the  repayment of such Affected Loan or any part thereof on
     other than the last day of the applicable  Interest  Period,  and upon such
     payment being made,  that Lender's  obligations to make such Affected Loans
     to the Borrower under this Agreement shall terminate; or

(b)  provided no Default or Event of Default  has  occurred  and is  continuing,
     treat such Lender as if it were a  Non-Extending  Lender under  Section 2.4
     and exercise the rights and remedies  available to it under  Section 2.4 in
     respect of a Non-Extending Lender for a period of 60 days following receipt
     of a notice pursuant to Section 11.3.

11.5     Illegality

         If the adoption of any Applicable Law, or any change therein, or any
change in any existing Applicable Law, or in the interpretation or application
thereof by any court or by any Governmental Authority or any other entity
charged with the interpretation or administration thereof or compliance by a
Lender with any request or direction (whether or not having the force of law) of
any such authority or entity, now or hereafter makes it unlawful or impossible
for any Lender to make, fund or maintain a Loan under the Credit Facility or to
give effect to its obligations in respect of such a Loan, such Lender may, by
written notice thereof to the Borrower and to the Administrative Agent, declare
its obligations under this Agreement in respect of such Loan to be terminated,
whereupon the same shall forthwith terminate, and the Borrower shall, within the
time required by such law (or at the end of such longer period as such Lender at
its discretion has agreed), either effect a Conversion of such Loan in
accordance with the provisions hereof (if such Conversion would resolve the
unlawfulness or impossibility) or prepay the principal of such Loan together
with accrued interest, such Additional Compensation as may be applicable with
respect to such Loan to the date of such payment and all costs, losses and
expenses incurred by the Lenders by reason of the liquidation or re-deployment
of deposits or other funds or for any other reason whatsoever resulting from the
repayment of such Loan or any part thereof on other than the last day of the
applicable Interest Period. If any such change shall only affect a portion of
such Lender's obligations under this Agreement which is, in the opinion of such
Lender and the Administrative Agent, severable from the remainder of this
Agreement so that the remainder of this Agreement may be continued in full force
and effect without otherwise affecting any of the obligations of the
Administrative Agent, the other Lenders or the Borrower hereunder, such Lender
shall only declare its obligations under that portion so terminated.

                                   ARTICLE 12
                       COSTS, EXPENSES AND INDEMNIFICATION
                       -----------------------------------

12.1     Costs and Expenses

         The Borrower shall pay promptly upon notice from the Administrative
Agent all reasonable costs and expenses of the Lenders and the Administrative
Agent in connection with the Documents and the establishment and initial
syndication of the Credit Facility, including, without limitation, in connection
with preparation, printing, execution and delivery of this Agreement and the
other Documents, whether or not any Drawdown has been made hereunder, and also
including, without limitation, the reasonable fees and out-of-pocket expenses of
Lenders' Counsel with respect thereto and with respect to advising the
Administrative Agent and the Lenders as to their rights and responsibilities
under this Agreement and the other Documents. The Borrower further agrees to
pay, within 30 days of demand by the Administrative Agent, all reasonable costs
and expenses in connection with the preparation or review of waivers, consents
and amendments pertaining to this Agreement, the sale, assignment, transfer or
grant of an interest in a Lender's Commitment under Section 2.4 and in
connection with the establishment of the validity and enforceability of this
Agreement and the preservation or enforcement of rights of the Lenders and the
Administrative Agent under this Agreement and other Documents, including,
without limitation, all reasonable costs and expenses sustained by the Lenders
and the Administrative Agent as a result of any failure by the Borrower to
perform or observe any of its obligations hereunder or in connection with any
action, suit or proceeding (whether or not an Indemnified Party (as referred to
in Section 12.2 or 12.3) is a party or subject thereto), together with interest
thereon from and after such 30th day if such payment is not made by such time.

12.2     General Indemnity

         In addition to any liability of the Borrower to any Lender or the
Administrative Agent under any other provision hereof, the Borrower shall
indemnify each Lender and the Administrative Agent and their respective
Affiliates, directors, officers, agents and employees (collectively, in this
Section 12.2, the "Indemnified Parties") and hold each Indemnified Party
harmless against any losses, claims, costs, damages or liabilities (including,
without limitation, any expense or cost incurred in the liquidation and
re-deployment of funds acquired to fund or maintain any portion of a Loan
(including pursuant to the exercise of any rights under Section 10.3) and
reasonable out-of-pocket expenses and reasonable legal fees on a solicitor and
his own client basis) incurred by the same as a result of or in connection with:

(a)  all third party claims, suits, debts, damages, costs, losses,  liabilities,
     penalties,  obligations,  judgments,  charges,  expenses and  disbursements
     arising in connection with any action,  suit, or proceeding (whether or not
     an Indemnified  Party is a party or subject thereto) relating to the Credit
     Facility or the Documents;

(b)  any cost or expense  incurred by reason of the liquidation or re-deployment
     in whole or in part of deposits  or other  funds  acquired by any Lender to
     fund any Bankers'  Acceptance  or to fund or maintain any Loan, as a result
     of the  Borrower's  failure to complete a Drawdown,  Conversion or Rollover
     after notice  thereof to the  Administrative  Agent or to make any payment,
     repayment or prepayment  on the date required  hereunder or specified by it
     in any notice given hereunder;

(c)  the  Borrower's  failure  to  pay  any  other  amount,   including  without
     limitation any interest or fee, due hereunder on its due date;

(d)  the  Borrower's  repayment or prepayment of a LIBOR Loan  otherwise than on
     the last day of the relevant Interest Period;

(e)  the prepayment of any outstanding Bankers' Acceptance or BA Equivalent Loan
     before the maturity date of such Bankers' Acceptance or BA Equivalent Loan;

(f)  the Borrower's failure to give any notice required to be given by it to the
     Administrative Agent or the Lenders hereunder;

(g)  any  inaccuracy or  incompleteness  of the Borrower's  representations  and
     warranties contained in Section 8.1;

(h)  any  failure of the  Borrower  to observe or fulfil its  obligations  under
     ARTICLE 9;

(i)  any failure of the Borrower to observe or fulfil any other  Obligation  not
     specifically referred to above; or

(j)  the occurrence of any Default or Event of Default;

provided that this Section 12.2 shall not apply to any losses, claims, costs,
damages or liabilities of the Indemnified Parties to the extent that the same
arise by reason of the gross negligence or wilful misconduct of the Indemnified
Party claiming indemnity hereunder. The provisions of this Section 12.2 shall
survive repayment of the Obligations.

12.3     Environmental Indemnity

         The Borrower shall indemnify and hold harmless the Administrative Agent
and the Lenders (including a receiver, receiver-manager or similar Person
appointed under Applicable Law) and its and their respective Affiliates,
officers, directors, employees and agents (collectively, in this Section 12.3,
the "Indemnified Parties"), forthwith on demand by the Administrative Agent,
from and against any and all claims, suits, actions, debts, damages, costs,
losses, liabilities, penalties, obligations, judgments, charges, expenses and
disbursements (including without limitation, all reasonable legal fees and
disbursements on a solicitor and his own client basis) of any nature whatsoever,
suffered or incurred by the Indemnified Parties or any of them with respect to
any Environmental Claims relating to the property of the Borrower or any of its
Subsidiaries arising under any Environmental Laws as a result of the past,
present or future operations of the Borrower or any of its Subsidiaries (or any
predecessor in interest to the Borrower or any of its Subsidiaries) relating to
the property of the Borrower or of its Subsidiaries, or the past, present or
future condition of any part of the property of the Borrower or its
Subsidiaries, whether owned, operated or leased by the Borrower or by any of its
Subsidiaries, or any such predecessor in interest but excluding any
Environmental Claims or liabilities relating thereto to the extent that such
Environmental Claims or liabilities arise by reason of the gross negligence or
wilful misconduct of the Indemnified Party claiming indemnity hereunder. The
provisions of this Section 12.3 shall survive the repayment of the Obligations.

12.4     Judgment Currency

(a)      If, for the purpose of obtaining or enforcing judgment against the
         Borrower in any court in any jurisdiction, it becomes necessary to
         convert into any other currency (such other currency being hereinafter
         in this Section 12.4 referred to as the "Judgment Currency") an amount
         due in Canadian Dollars or United States Dollars under this Agreement
         (including a conversion of United States Dollars to Canadian Dollars),
         the conversion shall be made at the rate of exchange prevailing on the
         Banking Day immediately preceding:

          (i)  the date of actual  payment of the amount due, in the case of any
               proceeding  in the  courts  of any  jurisdiction  that  will give
               effect to such conversion being made on such date; or

          (ii) the date on  which  the  judgment  is  given,  in the case of any
               proceeding in the courts of any other jurisdiction;

         (the date as of which such conversion is made pursuant to this Section
         12.4 being hereinafter in this Section 12.4 referred to as the
         "Judgment Conversion Date").

(b)      If, in the case of any proceeding in the court of any jurisdiction
         referred to in Section 12.4, there is a change in the rate of exchange
         prevailing between the Judgment Conversion Date and the date of actual
         payment of the amount due, the Borrower shall pay such additional
         amount (if any) as may be necessary to ensure that the amount paid in
         the Judgment Currency, when converted at the rate of exchange
         prevailing on the date of payment, will produce the amount of Canadian
         Dollars or United States Dollars, as the case may be, which could have
         been purchased with the amount of Judgment Currency stipulated in the
         judgment or judicial order at the rate of exchange prevailing on the
         Judgment Conversion Date.

(c)      Any amount due from the Borrower under the provisions of Section
         12.4(b) shall be due as a separate debt and shall not be affected by
         judgment being obtained for any other amounts due under or in respect
         of this Agreement.

(d)      The term "rate of exchange" in this Section 12.4 means the noon rate of
         exchange for Canadian interbank transactions in Canadian Dollars or
         United States Dollars, as the case may be, in the Judgment Currency
         published by the Bank of Canada for the day in question, and if such
         rate is not so published by the Bank of Canada, such term shall mean
         the Equivalent Amount of the Judgment Currency.

                                   ARTICLE 13
               THE AGENT AND ADMINISTRATION OF THE CREDIT FACILITY
               ---------------------------------------------------

13.1     Authorization and Action

(a)  Each Lender hereby  irrevocably  designates,  appoints and  authorizes  the
     Administrative Agent to be the agent of that Lender, in its name and on its
     behalf,  to exercise  such rights or powers  granted to the  Administrative
     Agent or the  Lenders  under  this  Agreement  to the  extent  specifically
     provided  herein and on the terms hereof,  together with such powers as are
     reasonably  incidental thereto, and the Administrative Agent hereby accepts
     such appointment and authorization.  Without limiting the generality of the
     foregoing,   each  Lender  hereby  irrevocably  designates,   appoints  and
     authorizes  the  Administrative  Agent,  as agent for and on behalf of that
     Lender,  to  enter  into  each of the  other  Documents  (other  than  this
     Agreement). As to any matters not expressly provided for by this Agreement,
     the  Administrative  Agent shall not be required to exercise any discretion
     or take any action, but, subject to Section 14.10, shall be required to act
     or to refrain  from  acting (and shall be fully  protected  in so acting or
     refraining from acting) upon the  instructions of the Majority  Lenders and
     such  instructions  shall be binding upon all Lenders;  provided,  however,
     that the  Administrative  Agent  shall not be  required  to take any action
     which (i) exposes the  Administrative  Agent to liability in such capacity,
     (ii) could result in the  Administrative  Agent's  incurring  any costs and
     expenses,  without provision being made for indemnity of the Administrative
     Agent by the Lenders against any loss, liability, cost or expense incurred,
     or to be incurred,  (iii) is contrary to this Agreement or Applicable  Law,
     (iv) would  require it to become  registered  to carry on  business  in any
     jurisdiction, or (v) would subject it to taxation. The Administrative Agent
     shall  have no  fiduciary  relationship  with any  Lender,  and no  implied
     covenants, functions, responsibilities,  duties, obligations or liabilities
     on the part of the  Administrative  Agent shall be implied in the Documents
     or otherwise exist against the Administrative Agent.

(b)  Subject to the  provisions  of Section  14.10,  the Lenders  agree that all
     decisions as to actions to be or not to be taken, as to consents or waivers
     to be  given  or not to be  given,  as to  determinations  to be  made  and
     otherwise in connection  with this  Agreement and the  Documents,  shall be
     made upon the  decision  of the  Majority  Lenders  except in  respect of a
     decision  or  determination  where  it is  specifically  provided  in  this
     Agreement  that "all of the  Lenders" or "the  Lenders" or words to similar
     effect, or the  Administrative  Agent alone, is to be responsible for same.
     Each of the Lenders  shall be bound by and agrees to abide by and adopt all
     decisions  made as aforesaid and covenants in all  communications  with the
     Borrower  to act in concert  and to join in the  action,  consent,  waiver,
     determination or other matter decided as aforesaid.

13.2     Procedure for Making Loans

(a)  The  Administrative  Agent shall make Loans  available  to the  Borrower as
     required hereunder by debiting the account of the  Administrative  Agent to
     which each  Lender's  share of such Loans has been  credited in  accordance
     with  Section  2.12 (or causing  such  account to be  debited)  and, in the
     absence of other arrangements agreed to by the Administrative Agent and the
     Borrower in writing,  by  crediting  the account of the Borrower or, at the
     expense of the Borrower,  transferring (or causing to be transferred)  like
     funds in accordance  with the  instructions of the Borrower as set forth in
     the Drawdown Notice,  Rollover Notice or Conversion Notice, as the case may
     be,  in  respect  of  each  Loan;  provided  that  the  obligation  of  the
     Administrative  Agent  hereunder to effect such a transfer shall be limited
     to taking  such steps as are  commercially  reasonable  to  implement  such
     instructions,  which  steps  once taken  shall  constitute  conclusive  and
     binding evidence that such funds were advanced hereunder in accordance with
     the provisions relating thereto,  and the Administrative Agent shall not be
     liable  for any  damages,  claims  or costs  which may be  suffered  by the
     Borrower and occasioned by the failure of such Loan to reach the designated
     destination.

(b)  Unless the  Administrative  Agent has been  notified by a Lender at least 1
     Banking Day prior to the Drawdown Date,  Rollover Date or Conversion  Date,
     as the case may be,  requested  by the  Borrower  that such Lender will not
     make available to the Administrative Agent its Lender's share of such Loan,
     the Administrative  Agent may assume that such Lender has made or will make
     such  portion  of the Loan  available  to the  Administrative  Agent on the
     Drawdown  Date,  Rollover Date or  Conversion  Date, as the case may be, in
     accordance with the provisions hereof and the Administrative Agent may, but
     shall be in no way  obligated to, in reliance  upon such  assumption,  make
     available to the Borrower on such date a  corresponding  amount.  If and to
     the extent such Lender shall not have so made its Lender's  share of a Loan
     available to the  Administrative  Agent,  such Lender  agrees to pay to the
     Administrative  Agent  forthwith on demand such Lender's  share of the Loan
     and all reasonable costs and expenses incurred by the Administrative  Agent
     in  connection   therewith  together  with  interest  thereon  (at  a  rate
     determined by the Administrative Agent in accordance with its usual banking
     practices for similar  advances to financial  institutions of like standing
     to such Lender) for each day from the date such amount is made available to
     the  Borrower  until  the date such  amount  is paid to the  Administrative
     Agent;  provided,  however,  that notwithstanding such obligation,  if such
     Lender  fails to so pay, the Borrower  covenants  and agrees that,  without
     prejudice to any rights the Borrower may have against such Lender, it shall
     repay  such  amount to the  Administrative  Agent  forthwith  after  demand
     therefor  by  the   Administrative   Agent.   The  amount  payable  to  the
     Administrative  Agent  pursuant  hereto shall be set forth in a certificate
     delivered  by the  Administrative  Agent to such  Lender  and the  Borrower
     (which  certificate  shall  contain  reasonable  details  of how the amount
     payable is calculated)  and shall be prima facie evidence  thereof,  in the
     absence  of  manifest  error.  If such  Lender  makes  the  payment  to the
     Administrative  Agent required herein,  the amount so paid shall constitute
     such Lender's share of the Loan for purposes of this Agreement. The failure
     of any Lender to make such Lender's share of any Loan shall not relieve any
     other Lender of its  obligation,  if any,  hereunder to make such  Lender's
     share of such Loan on the Drawdown Date,  Rollover Date or Conversion Date,
     as the case may be, but no Lender shall be  responsible  for the failure of
     any other Lender to make such Lender's share of any Loan to be made by such
     other Lender on the date of any Drawdown,  Rollover or  Conversion,  as the
     case may be.

(c)      Subject to the terms and conditions of this Agreement, on each Drawdown
         Date in respect of a Drawdown, in immediately available funds for good
         value:

     (i)  each  Revolving  Lender will make  available  to the Borrower the same
          proportion  of the Loans which are the subject of such Drawdown as the
          amount of such Revolving Lender's Commitment at such time bears to the
          aggregate of the Commitments of all Revolving Lenders at such time, by
          forwarding to the Administrative Agent the amount of Loans required to
          be made available by such Revolving Lender; and

     (ii) each  Revolving  Lender will make  available  to the Borrower the same
          proportion of such Loans by way of Bankers'  Acceptances  (or, if such
          Revolving  Lender is a Non-Acceptance  Lender,  BA Equivalent Loans in
          lieu thereof)  which are the subject of such Drawdown as the amount of
          such Revolving Lender's Commitment at such time bears to the aggregate
          amount of the  Commitments  of all  Revolving  Lenders at such time by
          forwarding  to the  Administrative  Agent the  amount of the  Discount
          Proceeds  in respect of such  Bankers'  Acceptances  or BA  Equivalent
          Loans  required to be accepted  and (as the case may be)  purchased or
          made by such  Revolving  Lender  (less the amount of  applicable  fees
          payable by the  Borrower  to such  Lender  pursuant  to Section 6.2 or
          6.11.)

(d)  Subject to the terms and conditions of this  Agreement,  on each Conversion
     Date and Rollover Date in respect of a Conversion or Rollover of a Loan, in
     immediately  available  funds  for  good  value,  each  Lender  that  was a
     Revolving Lender on the Drawdown Date in respect of such Loan and therefore
     participated in such Loan, or to which has been assigned all or part of the
     Commitment of a financial  institution  that was a Revolving  Lender on the
     Drawdown  Date in respect of such Loan and therefore  participated  in such
     Loan will  Convert  or  Rollover  the same  proportion  of such Loan as the
     amount of such  Lender's  Commitment  on such  Conversion  Date or Rollover
     Date, as applicable,  bears to the aggregate  amount of the  Commitments on
     such Conversion  Date or Rollover Date, as applicable,  of all Lenders that
     were  Revolving  Lenders on the  Drawdown  Date in respect of such Loan and
     therefore   participated  in  such  Loan  and  are  participating  in  such
     Conversion and Rollover.

13.3     Remittance of Payments

         Forthwith after receipt of any repayment pursuant hereto or payment of
interest or fees pursuant to ARTICLE 5 or payment pursuant to ARTICLE 7, the
Administrative Agent shall remit to each Lender such Lender's share of such
payment; provided that, if the Administrative Agent, on the assumption that it
will receive on any particular date a payment of principal, interest or fees
hereunder, remits to a Lender such Lender's share of such payment and the
Borrower fails to make such payment, each of the Lenders on receipt of such
remittance from the Administrative Agent agrees to repay to the Administrative
Agent forthwith on demand an amount equal to the remittance together with all
reasonable costs and expenses incurred by the Administrative Agent in connection
therewith and interest thereon at a rate determined by the Administrative Agent
in accordance with its usual banking practices for similar advances to financial
institutions of like standing to each such Lender for each day from the date
such amount is remitted to the Lenders, without prejudice to any right such
Lender may have against the Borrower. The exact amount of the repayment required
to be made by the Lenders pursuant hereto shall be as set forth in a certificate
delivered by the Administrative Agent to each Lender, which certificate shall be
conclusive and binding for all purposes in the absence of manifest error.

13.4     Redistribution of Payment
         Each Lender agrees that:

(a)  if,  prior  to the  Adjustment  Time,  a  payment  of a  proportion  of the
     aggregate  amount of Obligations is made hereunder,  and on account of such
     Obligations,  which is greater  than the  proportion  received by any other
     Lender in respect of the aggregate  Obligations  due to such Lender (having
     regard to the respective  Lender's  Proportion),  the Lender receiving such
     proportionately  greater payment shall purchase, on a non-recourse basis at
     par,  and make payment for a  participation  (which shall be deemed to have
     been done  simultaneously  with receipt of such payment) in the outstanding
     Loans of the other  Lender or  Lenders so that  their  respective  receipts
     shall be pro rata to such Lender's Proportions;  provided, however, that if
     all or  part of  such  proportionately  greater  payment  received  by such
     purchasing Lender shall be recovered by or on behalf of the Borrower or any
     trustee, liquidator,  receiver or receiver-manager or Person with analogous
     powers from the purchasing Lender, such purchase shall be rescinded and the
     purchase price paid for such participation  shall be returned to the extent
     of such recovery,  but without  interest  unless the  purchasing  Lender is
     required to pay interest on such amount,  in which case each selling Lender
     shall  reimburse the purchasing  Lender pro rata in relation to the amounts
     received by it. Such Lender  shall  exercise  its rights in respect of such
     secured  claim  in a  manner  consistent  with the  rights  of the  Lenders
     entitled  under this  Section 13.4 to share in the benefits of any recovery
     on such secured claims.  If a Lender does, or is required to do, any act or
     thing  permitted by this Section  13.4(a),  it shall promptly  provide full
     particulars thereof to the Administrative Agent; and

(b)  if, in the  circumstances  described in Section 13.4(a) and Section 13.4(b)
     but after the Adjustment Time, a Lender, through the exercise of a right or
     the receipt of a secured claim  described in Section  13.4(a) or otherwise,
     receives any payment in respect of the Obligations,  any such payment shall
     be redistributed in accordance with Section 10.6.

13.5     Duties and Obligations

         Neither the Administrative Agent nor any of its directors, officers,
agents or employees (and, for purposes hereof, the Administrative Agent shall be
deemed to be contracting as agent and trustee for and on behalf of such Persons)
shall be liable to the Lenders for any action taken or omitted to be taken by it
or them under or in connection with this Agreement except for its or their own
gross negligence or wilful misconduct. Without limiting the generality of the
foregoing, the Administrative Agent:

(a)      may assume that there has been no assignment or transfer by any means
         by the Lenders of their rights hereunder, unless and until the
         Administrative Agent receives written notice of the assignment thereof
         from such Lender and the Administrative Agent receives from the
         assignee an executed Assignment Agreement providing, inter alia, that
         such assignee is bound hereby as it would have been if it had been an
         original Lender party hereto;

(b)      may consult with legal counsel (including receiving the opinions of
         Borrower's counsel required hereunder), independent public accountants
         and other experts selected by it and shall not be liable for any action
         taken or omitted to be taken in good faith by it in accordance with the
         advice or such counsel, accountants or experts;

(c)      shall incur no liability under or in respect of this Agreement by
         acting upon any notice, consent, certificate or other instrument or
         writing (which may be by telegram, cable, telecopier or telex) believed
         by it to be genuine and signed or sent by the proper party or parties
         or by acting upon any representation or warranty of the Borrower made
         or deemed to be made hereunder;

(d)  may  assume  that no  Default  or  Event of  Default  has  occurred  and is
     continuing unless it has actual knowledge to the contrary;

(e)  may rely as to any matters of fact which might reasonably be expected to be
     within the  knowledge  of any  Person  upon a  certificate  signed by or on
     behalf of such Person;

(f)      shall not be bound to disclose to any other Person any information
         relating to the Borrower, any of its Subsidiaries or any other Person
         if such disclosure would or might in its or their opinion constitute a
         breach of any Applicable Law, be in default of the provisions hereof or
         be otherwise actionable at the suit of any other Person;

(g)      may refrain from exercising any right, power or discretion vested in it
         which would or might in its or their reasonable opinion be contrary to
         any Applicable Law or any directive or otherwise render it or them
         liable to any Person, and may do anything which is in its or their
         reasonable opinion necessary to comply with such Applicable Law; and

(h)      may execute or perform any of its duties under the Documents by or
         through agents or attorneys-in-fact, shall be entitled to advice of
         counsel concerning all matters pertaining to such duties, and shall not
         be responsible for the negligence or misconduct of any such agents or
         attorneys-in-fact selected by it with reasonable care.

Further, the Administrative Agent:

(i)      does not make any warranty or representation to any Lender nor shall it
         be responsible to any Lender for the accuracy or completeness of the
         representations and warranties of the Borrower herein or the accuracy
         or completeness of the representations and warranties of the Guarantor
         in the Guarantee or the data made available to any of the Lenders in
         connection with the negotiation of this Agreement, the Guarantee or any
         of the Documents, or for any statements, warranties or representations
         (whether written or oral) made in or in connection with this Agreement,
         the Guarantee or any of the Documents;

(j)      shall not have any duty to ascertain or to enquire as to the
         performance or observance of any of the terms, covenants or conditions
         of this Agreement, the Guarantee or any of the Documents on the part of
         the Borrower or the Guarantor, or to inspect the property (including
         the books and records) of the Borrower, any of its Subsidiaries or the
         Guarantor; and

(k)      shall not be responsible to any Lender for the due execution, legality,
         validity, enforceability, genuineness, sufficiency or value of this
         Agreement, the Guarantee or any of the Documents or any instrument or
         document furnished pursuant hereto or thereto.

13.6     Payment, Delivery and Prompt Notice to the Lenders

         Notwithstanding anything to the contrary expressed or implied in this
Agreement, the receipt by the Administrative Agent in accordance with this
Agreement of any payment made by the Borrower for the account of any of the
Lenders or of any document which the Borrower is required to provide only to the
Administrative Agent and which the Administrative Agent is to distribute to the
Lenders shall, insofar as the Borrower's obligations to the relevant Lenders are
concerned, be deemed also to be receipt by such Lenders and the Borrower shall
have no liability in respect of any failure or delay on the part of the
Administrative Agent in disbursing and/or accounting to the relevant Lenders in
regard to any such payment or in delivering the document, to the extent
required, to the Lenders. Notwithstanding any other provision herein, the
Administrative Agent agrees to provide to the Lenders, with copies where
appropriate, all information, notices and reports required to be given to the
Administrative Agent by the Borrower, promptly upon receipt of same, excepting
therefrom information and notices relating solely to the role of Administrative
Agent hereunder.

13.7     Administrative Agent's and Lenders' Authorities

         With respect to its Commitment and the Drawdowns, Rollovers,
Conversions and Loans made by it as a Lender, the Administrative Agent shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Administrative Agent. Subject to the
express provisions hereof relating to the rights and obligations of the
Administrative Agent and the Lenders in such capacities, the Administrative
Agent and each Lender may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower and its Subsidiaries or any
corporation or other entity owned or controlled by any of them and any Person
which may do business with any of them without any duties to account therefor to
the Administrative Agent or the other Lenders and, in the case of the
Administrative Agent, all as if it was not the Administrative Agent hereunder.

13.8     Lender Credit Decision

         It is understood and agreed by each Lender that it has itself been, and
will continue to be, solely responsible for making its own independent appraisal
of and investigations into the financial condition, creditworthiness, condition,
affairs, status and nature of the Borrower, its Subsidiaries and the Guarantor.
Each Lender represents to the Administrative Agent that it is engaged in the
business of making and evaluating the risks associated with commercial revolving
or term loans, or both, to corporations similar to the Borrower, that it can
bear the economic risks related to the transaction contemplated hereby, that it
has had access to all information deemed necessary by it in making such decision
(provided that this representation shall not impair its rights against the
Borrower) and that it is entering into this Agreement in the ordinary course of
its commercial lending business. Accordingly, each Lender confirms with the
Administrative Agent that it has not relied, and will not hereafter rely, on the
Administrative Agent:

(a)      to check or enquire on its behalf into the adequacy, accuracy or
         completeness of any information provided by the Borrower or any other
         Person (including, without limitation, the Guarantor) under or in
         connection with this Agreement or the transactions herein contemplated
         (whether or not such information has been or is hereafter distributed
         to such Lender by the Administrative Agent); or

(b)      to assess or keep under review on its behalf the financial condition,
         creditworthiness, condition, affairs, status or nature of the Borrower,
         any of its Subsidiaries or the Guarantor.

Each Lender acknowledges that a copy of this Agreement has been made available
to it for review and each Lender acknowledges that it is satisfied with the form
and substance of this Agreement. Each Lender hereby covenants and agrees that,
it will not make any arrangements with the Borrower for the satisfaction of any
Loans or other Obligations without the consent of all the other Lenders.

13.9     Indemnification of Administrative Agent

         The Lenders hereby agree to indemnify the Administrative Agent and its
officers, directors, employees, representatives and agents (collectively, in
this Section 13.9, the "Indemnified Parties") (to the extent not reimbursed by
the Borrower, and without limiting the obligation of the Borrower to do so), as
to each of their respective Lender's Proportions, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever, including,
without limitation, the reasonable fees and disbursements of counsel for the
Indemnified Parties in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not the Indemnified
Parties, or any one or more of them, shall be designated a party thereto, which
may at any time be imposed on, incurred by, or asserted against any one or more
of the Indemnified Parties in any way relating to or arising out of this
Agreement or the Guarantee or any action taken or omitted by the Administrative
Agent under or in respect of this Agreement or the Guarantee in its capacity as
Administrative Agent; provided that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Administrative
Agent's gross negligence or wilful misconduct. If the Borrower subsequently
repays all or a portion of such amounts to the Administrative Agent, the
Administrative Agent shall reimburse the Lenders their pro rata shares
(according to the amounts paid by them in respect thereof) of the amounts
received from the Borrower. Without limiting the generality of the foregoing,
each Lender agrees to reimburse the Administrative Agent promptly upon demand
for its portion (determined as above) of any out-of-pocket expenses (including
counsel fees) incurred by the Administrative Agent in connection with the
preservation of any rights of the Administrative Agent or the Lenders under, or
the enforcement of, or legal advice in respect of rights or responsibilities
under, this Agreement or the Guarantee, to the extent that the Administrative
Agent is not reimbursed for such expenses by the Borrower.

13.10    Successor Administrative Agent

(a)  The Administrative Agent may, as hereinafter  provided,  resign at any time
     by giving 45 days'  prior  written  notice  thereof to the  Lenders and the
     Borrower.  Upon any such  resignation,  the Lenders shall have the right to
     appoint another Lender as a successor agent (the "Successor  Administrative
     Agent") who shall be acceptable to the Borrower,  acting reasonably.  If no
     Successor  Administrative Agent shall have been so appointed by the Lenders
     and shall have accepted such appointment  within 30 days after the retiring
     Administrative  Agent's giving of notice of resignation,  then the retiring
     Administrative  Agent shall, on behalf of the Lenders,  appoint a Successor
     Administrative  Agent who  shall be a Lender  acceptable  to the  Borrower,
     acting reasonably. Upon the acceptance of any appointment as Administrative
     Agent  hereunder  by  a  Successor  Administrative  Agent,  such  Successor
     Administrative  Agent shall thereupon succeed to and become vested with all
     the rights,  powers,  privileges and duties of the retiring  Administrative
     Agent, and the retiring  Administrative Agent shall thereupon be discharged
     from its further duties and obligations as Administrative  Agent under this
     Agreement.  After any retiring Administrative Agent's resignation hereunder
     as  Administrative  Agent, the provisions of this Article 13 shall continue
     to enure to its benefit as to any  actions  taken or omitted to be taken by
     it as Administrative Agent or in its capacity as Administrative Agent while
     it was Administrative Agent hereunder.

(b)  Notwithstanding Section 13.10(a), no Lender shall become the Administrative
     Agent  unless  such  Lender's  Commitment  constitutes  10% or  more of all
     outstanding  Commitments;  accordingly,  an  Administrative  Agent  may not
     resign unless the Successor Administrative Agent meets this requirement.

13.11    Taking and Enforcement of Remedies

         Each of the Lenders hereby acknowledges that, to the extent permitted
by Applicable Law, the remedies provided hereunder to the Lenders are for the
benefit of the Lenders collectively and acting together and not severally and
further acknowledges that its rights hereunder are to be exercised not
severally, but collectively by the Administrative Agent upon the decision of the
Majority Lenders regardless of whether acceleration was made pursuant to Section
10.1(r). Notwithstanding any of the provisions contained herein, each of the
Lenders hereby covenants and agrees that it shall not be entitled to
individually take any action with respect to the Credit Facility, including,
without limitation, any acceleration under Section 10.1(r), but that any such
action shall be taken only by the Administrative Agent with the prior written
agreement or instructions of the Majority Lenders; provided that,
notwithstanding the foregoing, if:

(a)      the Administrative Agent, having been adequately indemnified against
         costs and expenses of so doing by the Lenders, shall, for 10 days after
         such agreement or instructions and the provision of such indemnity,
         have neglected or refused to carry out any such instructions of the
         Majority Lenders, any Lender may do so on behalf of all Lenders and
         shall, in so doing, be entitled to the benefit of all protections given
         the Administrative Agent hereunder or elsewhere; and

(b)      in the absence of instructions from the Majority Lenders and where, in
         the sole opinion of the Administrative Agent, the exigencies of the
         situation warrant such action, the Administrative Agent may, without
         notice to or consent of the Lenders or any of them, take such action on
         behalf of the Lenders as it deems appropriate or desirable in the
         interests of the Lenders.

Each of the Lenders hereby further covenants and agrees that upon any such
written consent being given by the Majority Lenders, or upon a Lender or the
Administrative Agent taking action as aforesaid, it shall cooperate fully with
the Lender or the Administrative Agent to the extent requested by the Lender or
the Administrative Agent in the collective realization including, without
limitation, and, if applicable, the appointment of a receiver or receiver and
manager to act for their collective benefit. Each Lender covenants and agrees to
do all acts and things and to make, execute and deliver all agreements and other
instruments, including, without limitation, any instruments necessary to effect
any registrations, so as to fully carry out the intent and purpose of this
Section 13.11, and each of the Lenders hereby covenants and agrees that, subject
to Section 13.4 and Section 9.2(b), it has not heretofore and shall not seek,
take, accept or receive any security for any of the obligations and liabilities
of the Borrower hereunder or under any other document, instrument, writing or
agreement ancillary hereto and shall not enter into any agreement with any of
the parties hereto or thereto relating in any manner whatsoever to the Credit
Facility, unless all of the Lenders shall at the same time obtain the benefit of
any such security or agreement.

         With respect to any enforcement, realization or the taking of any
rights or remedies to enforce the rights of the Lenders hereunder, the
Administrative Agent shall be a trustee for each Lender, and all monies received
from time to time by the Administrative Agent in respect of the foregoing shall
be held in trust and shall be trust assets within the meaning of applicable
bankruptcy or insolvency legislation and shall be considered for the purposes of
such legislation to be held separate and apart from the other assets of the
Administrative Agent, and, subject to Section 10.6, each Lender shall be
entitled to such Lender's Proportion of such monies. Each Lender shall make such
payments and adjustments as are necessary or appropriate to give effect to the
foregoing. In its capacity as trustee, the Administrative Agent shall be obliged
to exercise only the degree of care it would exercise in the conduct and
management of its own business and in accordance with its usual practice
concurrently employed or hereafter instituted for other substantial commercial
loans.

13.12    Reliance Upon Administrative Agent

         The Borrower shall be entitled to rely upon any certificate, notice or
other document or other advice, statement or instruction provided to it by the
Administrative Agent pursuant to this Agreement, and the Borrower shall, except
as provided in Section 13.11 or otherwise expressly provided herein, be entitled
to deal with the Administrative Agent with respect to matters under this
Agreement which the Administrative Agent is authorized to deal with without any
obligation whatsoever to satisfy itself as to the authority of the
Administrative Agent to act on behalf of the Lenders and without any liability
whatsoever to the Lenders for relying upon any certificate, notice or other
document or other advice, statement or instruction provided to it by the
Administrative Agent, notwithstanding any lack of authority of the
Administrative Agent to provide the same.

13.13    No Liability of Administrative Agent

         The Administrative Agent shall have no responsibility or liability to
the Borrower on account of the failure of any Lender to perform its obligations
hereunder, or to any Lender on account of the failure of the Borrower or any
other Lender to perform its obligations hereunder. The Administrative Agent, in
performing its functions and duties hereunder, shall act solely as the agent of
the Lenders and does not assume, nor shall it be deemed to have assumed, any
obligation or relationship of trust or agency with or for the Borrower or any
other Person.

13.14    Article for Benefit of Administrative Agents and Lenders

         The provisions of this ARTICLE 13 which relate to the rights and
obligations of the Lenders to each other or to the rights and obligations
between the Administrative Agent and the Lenders shall be for the exclusive
benefit of the Administrative Agent and the Lenders, and, except to the extent
expressly provided in Sections 13.2 , 13.6, 13.10, and 13.12, the Borrower shall
not have any rights or obligations thereunder or be entitled to rely for any
purpose upon such provisions. Any Lender may waive in writing any right or
rights which it may have against the Administrative Agent or the other Lenders
hereunder without the consent of or notice to the Borrower.

                                   ARTICLE 14
                                     GENERAL
                                     -------

14.1     Exchange and Confidentiality of Information

(a)      The Borrower agrees that the Administrative Agent and each Lender may
         provide any assignee or participant or any prospective assignee or
         participant pursuant to Section 14.6 or Section 14.7 with any
         information concerning the financial condition of the Borrower, its
         Subsidiaries and the Guarantor provided such party agrees in writing
         with the Administrative Agent or such Lender for the benefit of the
         Borrower to be bound by a like duty of confidentiality to that
         contained in this Section 14.1.

(b)      Each of the Administrative Agent and the Lenders acknowledges the
         confidential nature of the financial, operational and other information
         and data provided and to be provided to them by the Borrower pursuant
         hereto (the "Information") and agrees to use all reasonable efforts to
         prevent the disclosure thereof provided, however, that:

          (i)  the Administrative  Agent and the Lenders may disclose all or any
               part of the Information  if, in their  reasonable  opinion,  such
               disclosure  is  required  in   connection   with  any  actual  or
               threatened judicial,  administrative or governmental  proceedings
               including, without limitation,  proceedings initiated under or in
               respect of this Agreement;

          (ii) the Administrative Agent and the Lenders shall incur no liability
               in respect of any  Information  required to be  disclosed  by any
               Applicable Law to the extent of such requirement;

          (iii)the  Administrative  Agent and the Lenders  may provide  Lenders'
               Counsel and their other agents and professional advisors with any
               Information;  provided  that such  Persons  shall be under a like
               duty of confidentiality to that contained in this Section 14.1;

          (iv) the  Administrative  Agent and each of the Lenders shall incur no
               liability in respect of any Information:

               (A)  which is or becomes available to the public (other than by a
                    breach  hereof)  or which  has been  made  available  to the
                    public by the Borrower or its Subsidiaries;

               (B)  which the  Administrative  Agent or the relevant  Lender can
                    show  was,  prior to  receipt  thereof  from  the  Borrower,
                    lawfully   in  the   Administrative   Agent's  or   Lender's
                    possession  and not then  subject to any  obligation  on its
                    part to the Borrower to maintain confidentiality; or

               (C)  which  the  Administrative  Agent  or  the  relevant  Lender
                    received from a third party who was not, to the knowledge of
                    the  Administrative  Agent or such  Lender,  under a duty of
                    confidentiality  to the Borrower at the time the information
                    was so received;

          (v)  the  Administrative  Agent  and  the  Lenders  may  disclose  the
               Information to other  financial  institutions  in connection with
               the  syndication  by the  Administrative  Agent or Lenders of the
               Credit Facility or the granting by a Lender of a participation in
               the Credit Facility where such financial institution agrees to be
               under a like duty of  confidentiality  to that  contained in this
               Section 14.1; and

          (vi) the Administrative  Agent and the Lenders may disclose all or any
               part of the Information so as to enable the Administrative  Agent
               and the Lenders to initiate  any lawsuit  against the Borrower or
               to defend any lawsuit  commenced by the  Borrower,  the issues of
               which  touch  on the  Information,  but only to the  extent  such
               disclosure  is  necessary  to the  initiation  or defense of such
               lawsuit.

14.2     Nature of Obligation under this Agreement

         The obligations of each Lender and of the Administrative Agent under
this Agreement are several. The failure of any Lender to carry out its
obligations hereunder shall not relieve the other Lenders, the Administrative
Agent or the Borrower of any of their respective obligations hereunder. Neither
the Administrative Agent nor any Lender shall be responsible for the obligations
of any other Lender hereunder.

14.3     Notices

         Any demand, notice or communication to be made or given hereunder shall
be in writing and may be made or given by personal delivery or by transmittal by
telecopy or other electronic means of communication addressed to the respective
parties as follows:

                  To the Borrower:

                  KeySpan Energy Development Co.
                  1 MetroTech Centre
                  Brooklyn, New York
                  11201

                  Attention:              President
                  Telecopier No.:         (718) 403-6421



<PAGE>



                  with a copy to:

                  KeySpan Corporation
                  1 MetroTech Centre
                  Brooklyn, New York
                  11201

                  Attention:              Treasurer
                  Telecopier No.:         (718) 246-9798

                  To the Administrative Agent:

                  Royal Bank of Canada
                  Global Syndications - Canada
                  12th Floor, South Tower
                  Royal Bank Plaza, 200 Bay Street
                  Toronto, Ontario
                  M5J 2J2

                  Attention:              Manager, Agency
                  Telecopier No.:         (416) 974-2407

                  To each Lender:

                  As set forth in Schedule A annexed hereto

or to such other address or telecopy number as any party may from time to time
notify the others in accordance with this Section 14.3. Any demand, notice or
communication made or given by personal delivery or by telecopier or other
electronic means of communication during normal business hours at the place of
receipt on a Banking Day shall be conclusively deemed to have been made or given
at the time of actual delivery or transmittal, as the case may be, on such
Banking Day. Any demand, notice or communication made or given by personal
delivery or by telecopier or other electronic means of communication after
normal business hours at the place of receipt or otherwise than on a Banking Day
shall be conclusively deemed to have been made or given at 9:00 a.m. (Calgary
time) on the first Banking Day following actual delivery or transmittal, as the
case may be.

14.4     Governing Law

         This Agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta and the laws of Canada applicable therein,
without prejudice to or limitation of any other rights or remedies available
under the laws of any jurisdiction where property or assets of the Borrower may
be found.

14.5     Benefit of the Agreement

         This Agreement shall enure to the benefit of and be binding upon the
Borrower, the Lenders, the Administrative Agent and their respective successors
and permitted assigns.

14.6     Assignment

         Any Lender may, without the consent of the Borrower during the
continuance of an Event of Default, and at all other times with the prior
written consent of the Borrower and the Administrative Agent, which consents
shall not be unreasonably withheld, sell, assign, transfer or grant an interest
in its Commitments and such Lender's Proportion of the Loans; provided that,
without the consent of the Borrower not to be unreasonably withheld and the
Administrative Agent, no Lender shall sell, assign, transfer or grant an
interest in any Commitment or Loan if the effect of the same would be to have a
Lender with aggregate Commitments which are less than Cdn. $10,000,000.
Notwithstanding the foregoing, any Lender may, at any time, without the consent
of the Borrower, sell, assign, transfer or grant an interest in its Commitments
and such Lender's Proportion of the Loans to a Person affiliated with the
granting Lender (determined in accordance with the Bank Act (Canada)), including
a Person to whom an interest is granted that is a non-resident of Canada for the
purposes of the Income Tax Act (Canada); provided that any such sale,
assignment, transfer or grant shall not increase, in aggregate, the liabilities
(by way of Taxes, including withholding taxes, or otherwise), costs and
out-of-pocket expenses of the Borrower hereunder, other than the requirement to
pay any costs and expenses incurred by the Lenders in completing any assignment
by the Borrower or by a Lender if an Event of Default has occurred and is
continuing; and provided further that such a sale, assignment, transfer or grant
shall be deemed not to increase the liabilities, costs and expenses of the
Borrower hereunder solely due to the fact that the assignee or transferee is a
Schedule II Bank thereby potentially resulting in a higher Discount Rate than
would be the case with a Schedule I Bank, or that such assignment increases the
number of Lenders. It shall be a precondition to any such sale, assignment,
transfer or grant that the contemplated assignee Lender shall have paid to the
Administrative Agent, for the Administrative Agent's own account, a transfer fee
of Cdn. $3,500. Such an assignment shall be at the expense of the assignee and
assignor Lenders, unless assigned during the continuance of an Event of Default,
in which case such an assignment will be at the expense of the Borrower. Upon
any such sale, assignment, transfer or grant, the granting Lender shall have no
further obligation hereunder with respect to such interest except in case of a
grant to a Person affiliated with the granting Lender (determined in accordance
with the Bank Act (Canada)), in which case such Lender shall remain obligated
hereunder with respect to such interest. Upon any such sale, assignment,
transfer or grant, the granting Lender, the new Lender, the Administrative Agent
and the Borrower shall execute and deliver an Assignment Agreement. The Borrower
shall not assign its rights or obligations hereunder without the prior written
consent of all of the Lenders. The Borrower shall assist the Administrative
Agent in connection with any such assignment or participations referred to in
Section 14.7 including, without limitation and at the Borrower's expense:

(a)  providing all information  reasonably required by the Administrative  Agent
     to successfully complete such assignment;

(b)  assisting the Administrative Agent, on the Administrative  Agent's request,
     in the  preparation  of a syndication  memorandum  and all other  marketing
     materials to be used in connection with the syndication;

(c)  participating in syndication presentations and meetings; and

(d)  using the Borrower's best efforts to make use of the  relationships  of the
     Borrower  with other  financial  institutions  to benefit  the  syndication
     efforts.

14.7     Participations

         Any Lender may, without the consent of the Borrower during the
continuance of an Event of Default, and at all other times with the prior
written consent of the Borrower, such consent not to be unreasonably withheld,
grant one or more participations in its Commitment and such Lender's Proportion
of the Loans to other financial institutions, provided that the granting of such
a participation shall be at the Lender's own cost and shall not affect the
obligations of such Lender hereunder nor shall it increase the costs to the
Borrower hereunder or under any of the other Documents.

14.8     Severability

         Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall not invalidate the remaining provisions hereof and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

14.9     Whole Agreement

         This Agreement and the other Documents constitute the whole and entire
agreement between the parties hereto regarding the subject matter hereof and
thereof and cancel and supersede any prior agreements, undertakings,
declarations, commitments, representations, written or oral, in respect thereof.
Upon the execution of this Agreement by each of the parties hereto, the
agreement between the Administrative Agent and the Borrower dated May 21, 1999
entitled "Summary of Terms & Conditions", as amended, shall be of no further
force and effect.

14.10    Amendments and Waivers

         Any provision of this Agreement or the Documents (including, without
limitation, any Event of Default) may be amended only if the Borrower or the
applicable party to such Document and the Majority Lenders so agree in writing
and, except as otherwise specifically provided herein, may be waived only if the
Majority Lenders so agree in writing, but:

(a)      an amendment or waiver which changes or relates to:

          (i)  the amount,  term,  currency or type of Loans available hereunder
               or the amount of any Lender's Commitment;

          (ii) the  Applicable  BA Fee  Rate,  the  Applicable  Margin  and  the
               Applicable  Commitment  Fee  Rate,  or the  dates of  payment  of
               interest,  Bankers'  Acceptance fees, or mandatory  repayments of
               principal;

          (iii) Section 2.4;

          (iv) the amount or dates of payment of fees or other  amounts  payable
               hereunder;

          (v)  the definitions of "Term Date" and "Maturity Date";

          (vi) the definition of "Lender's Proportion" and "Majority Lenders";

          (vii)any  provision  hereof   contemplating   or  requiring   consent,
               approval or agreement of "all Lenders",  "the Lenders" or similar
               expressions  or  permitting  waiver of conditions or covenants or
               agreements   by  "all   Lenders",   "the   Lenders"   or  similar
               expressions;

          (viii) Section 9.2(i);

          (ix) the definition of "Event of Default";

          (x)  any material  terms or provisions of the Guarantee or any release
               of  the  Guarantee  other  than  in  circumstances   specifically
               provided for herein or in the Guarantee;

          (xi) this Section 14.10; or

          (xii)any  definitions  contained in Section 1.1 to the extent relevant
               to the foregoing provisions of this Section 14.10(a);

     shall  require the  agreement or waiver of all the Lenders in each of their
     sole  discretions  and  also  (in the case of an  amendment)  of the  other
     parties hereto; and

(b)      an amendment or waiver which changes or relates to the rights and/or
         obligations of the Administrative Agent shall also require the
         agreement of the Administrative Agent thereto.

Any such waiver and any consent by the Administrative Agent, any Lender, the
Majority Lenders or all of the Lenders under any provision of this Agreement
must be in writing and may be given subject to any conditions thought fit by the
Person giving that waiver or consent. Any waiver or consent shall be effective
only in the instance and for the purpose for which it is given. No failure on
the part of any Lender or the Administrative Agent to exercise, and no delay in
exercising, any right under any of the Documents shall operate as a waiver of
such right, nor shall any single or partial exercise of any right under any of
the Documents preclude any other or further exercise of such right or the
exercise of any other right.

14.11    Payments Free and Clear of Taxes

(a)  All  payments to the  Lenders by the  Borrower  under any of the  Documents
     shall be made free and clear of, and without  deduction or withholding for,
     any and all Taxes imposed by any Governmental Authority,  unless such Taxes
     are required by Applicable Law to be deducted or withheld.  If the Borrower
     shall be required by  Applicable  Law to deduct or withhold  any such Taxes
     from or in respect of any amount payable under any of the Documents,  then,
     (i) the amount  payable  under such  Document  shall be increased  (and for
     greater certainty, in the case of interest, the amount of interest shall be
     increased) as may be necessary so that after making all required deductions
     or withholdings  (including  deductions or  withholdings  applicable to any
     additional amounts paid under this Section  14.11(a)),  the Lenders receive
     an amount equal to the amount they would have received if no such deduction
     or withholding  had been made, (ii) the Borrower shall make such deductions
     or  withholdings,  and (iii) the Borrower  shall  immediately  pay the full
     amount  deducted or  withheld to the  relevant  Governmental  Authority  in
     accordance with Applicable Law.

(b)  The  Borrower  agrees to  immediately  pay any  present or future  stamp or
     documentary taxes or any other excise or property taxes, charges, financial
     institutions  duties,  debits  taxes or  similar  levies  (all such  taxes,
     charges,  duties and levies being referred to as "Other Taxes") which arise
     from any payment  made by the Borrower  under any of the  Documents or from
     the execution,  delivery or registration  of, or otherwise with respect to,
     any of the Documents.

(c)  The Borrower shall indemnify the  Administrative  Agent and the Lenders for
     the full amount of Taxes or Other Taxes (including, without limitation, any
     Taxes or Other Taxes imposed by any  jurisdiction on amounts payable by the
     Borrower   under  this   Section   14.11)   paid  by  the  Lenders  or  the
     Administrative Agent and any liability (including  penalties,  interest and
     expenses)  arising  from or with  respect  to such  Taxes or  Other  Taxes,
     whether or not they were correctly or legally asserted.  Payment under this
     indemnification   shall  be  made   within   30  days  from  the  date  the
     Administrative  Agent or the  relevant  Lender,  as the case may be,  makes
     written demand for payment. A certificate as to the amount of such Taxes or
     Other Taxes  submitted to the Borrower by the  Administrative  Agent or the
     relevant Lender shall be conclusive evidence, absent manifest error, of the
     amount due from the Borrower to the Administrative Agent or the Lenders, as
     the case may be.

(d)  The Borrower shall furnish to the Administrative  Agent and the Lenders the
     original or a certified  copy of a receipt  evidencing  payment of Taxes or
     Other  Taxes  made by the  Borrower  within  30 days  after the date of any
     payment of Taxes or Other Taxes.

(e)  The Lenders,  their successors and assigns,  and the Administrative  Agent,
     agree to promptly  provide to the Borrower or the Guarantor a U.S. IRS Form
     W-8 and such other similar  certificates  as may  reasonably be required by
     the Borrower or the Guarantor in connection  with their  obligations  under
     Section 14.11 of the Credit Agreement or Section 8.4 of the Guarantee.

(f)  The  provisions of this Section 14.11 shall survive the  termination of the
     Agreement and the repayment of all Obligations hereunder.

14.12    Further Assurances

         Each of the Borrower, the Lenders and the Administrative Agent shall
promptly cure any default by it in the execution and delivery of this Agreement,
the Documents or of any the agreements provided for hereunder to which it is a
party. The Borrower, at its expense, shall promptly execute and deliver to the
Administrative Agent, upon request by the Administrative Agent (acting
reasonably), all such other and further deeds, agreements, opinions,
certificates, instruments, affidavits, registration materials and other
documents reasonably necessary for the Borrower's compliance with, or
accomplishment of the covenants and agreements of the Borrower hereunder or more
fully to state the obligations of the Borrower as set out herein or to make any
registration, recording, file any notice or obtain any consent, all as may be
reasonably necessary or appropriate in connection therewith.

14.13    No Merger

         Except as otherwise expressly provided in this Agreement, the
covenants, representations and warranties of the Borrower contained herein shall
not merge on and shall survive the initial Drawdown and, notwithstanding such
initial Drawdown or any investigation made by or on behalf of any party, shall
continue in full force and effect. The closing of this transaction shall not
prejudice any right of one party against any other party in respect of anything
done or omitted under this Agreement or in respect of any right to damages or
other remedies.

14.14    Attornment

         The parties hereto each hereby attorn and submit to the jurisdiction of
the courts of the Province of Alberta in regard to legal proceedings relating to
the Documents. For the purpose of all such legal proceedings, this Agreement
shall be deemed to have been performed in the Province of Alberta and the courts
of the Province of Alberta shall have jurisdiction to entertain any action
arising under this Agreement. Notwithstanding the foregoing, nothing in this
Section 14.14 shall be construed nor operate to limit the right of any party
hereto to commence any action relating hereto in any other jurisdiction, nor to
limit the right of the courts of any other jurisdiction to take jurisdiction
over any action or matter relating hereto.

14.15    Time of the Essence

         Time shall be of the essence of this Agreement.

14.16    Conflict

         In the event of any conflict or inconsistency between the provisions of
this Agreement and the provisions of the other Documents, the provisions of this
Agreement, to the extent of the conflict or inconsistency, shall govern and
prevail. However, notwithstanding the foregoing, in the event of any conflict or
inconsistency between the provisions of this Agreement and the provisions of the
Guarantee, the provisions of the Guarantee, to the extent of the conflict or
inconsistency, shall govern and prevail.

14.17    Counterparts

         This Agreement may be executed in any number of counterparts and by
facsimile, each of which shall be deemed to be an original and all of which
taken together shall be deemed to constitute one and the same instrument, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.

         IN WITNESS WHEREOF the parties hereto have executed this Agreement.


             KEYSPAN ENERGY DEVELOPMENT CO.
             Per:
                      ---------------------------------------------------
             Name:      Saiyed Zain Mirza
             Title:     Vice President

             ROYAL BANK OF CANADA,
             in its capacity as
             Administrative Agent
             Per:
                      ---------------------------------------------------
             Name:      D.K. MacLaren
             Title:     Account Manager

             ROYAL BANK OF CANADA,
             in its capacity as
             Lender
             Per:
                      ---------------------------------------------------
             Name:      D.K. MacLaren
             Title:     Account Manager

             THE CHASE MANHATTAN BANK OF CANADA
             Per:
                      ---------------------------------------------------
             Name:      Christine Chan
             Title:     Vice President
             Per:
                      ---------------------------------------------------
             Name:
             Title:

             THE TORONTO-DOMINION BANK
             Per:
                      ---------------------------------------------------
             Name:      Phil Ghali
             Title:     Associate, Corporate Banking
             Per:
                      ---------------------------------------------------
             Name:      Dean Ariss
             Title:     Manager, Corporate Banking

             BANK OF MONTREAL
             Per:
                      ---------------------------------------------------
             Name:      Jim Baidacoff
             Title:     Director, Corporate Accounts


             FIRST CHICAGO NBD BANK, CANADA
             Per:
                      ---------------------------------------------------
             Name:      Steven P. Capouch
             Title:     First Vice President


             ALBERTA TREASURY BRANCHES
             Per:
                      ---------------------------------------------------
             Name:      Ivan W. Sawchuk
             Title:     Senior Credit Manager
             Per:
                      ---------------------------------------------------
             Name:      Charles J. Raymond
             Title:     General Manager

             NATIONAL BANK OF CANADA
             Per:
                      ---------------------------------------------------
             Name:      T.D. Bacon
             Title:     Manager, Corporate & Energy Group
             Per:
                      ---------------------------------------------------
             Name:      B.J. Mellum
             Title:     Senior Manager, Corporate & Energy Group




<PAGE>








         Schedule A to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                             LENDERS AND COMMITMENTS

Lender, Address and Fax                                        Commitment
-----------------------                                        ----------
Royal Bank of Canada                                           Cdn.  $40,000,000
23rd Floor, 335 - 8th Avenue S.W.
Calgary, Alberta
T2P 2N5

Attention:            Account Manager
Telecopier No.:       (403) 292-3234

The Chase Manhattan Bank of Canada                             Cdn.  $35,000,000
1 First Canadian Place
100 King Street West
Suite 6900, P.O. Box 106
Toronto, Ontario
M5X 1A4

Attention:            Vice President
Telecopier No.:       (416) 216-4132

with a copy to:
Chase Manhattan Bank
4 MetroTech Centre,  22nd Floor
Brooklyn, New York
11245

Attention:            Vice President
Telecopier No.:       (212) 552-1637

The Toronto-Dominion Bank                                      Cdn.  $20,000,000
8th Floor, Home Oil Tower
324 - 8th Avenue S.W.
Calgary, Alberta
T2P 2Z2

Attention:            Associate Vice President
Telecopier No.:       (403) 292-2772

Bank of Montreal                                               Cdn.  $35,000,000
First Canadian Centre
24th Floor, 350 - 7th Avenue S.W.
Calgary, Alberta
T2P 3N9

Attention:            Director, Corporate Accounts
Telecopier No.:       (403) 234-3644

First Chicago NBD Bank, Canada                                 Cdn.  $35,000,000
c/o First National Bank of Chicago
One First National Plaza
Suite 0363
Chicago, Illinois
60670

Attention:            Relationship Manager
Telecopier No.:       (312)  732-3055

National Bank of Canada                                        Cdn.  $15,000,000
600, 407 - 8th Avenue S.W.
Calgary, Alberta
T2P 1E5

Attention:            Senior Manager, Corporate & Energy Group
Telecopier No.:       (403) 294-3078

Alberta Treasury Branches                                      Cdn.  $20,000,000
ATB Place
9888 Jasper Avenue
Edmonton, Alberta
T5J 1P1

Attention:            Senior Credit Manager
Telecopier No.:       (780) 408-7262



<PAGE>









         Schedule B to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                          FORM OF ASSIGNMENT AGREEMENT


         THIS ASSIGNMENT AGREEMENT is dated the  day of ,    .

AMONG:

                  (hereinafter referred to as the "Assignor")

                                                        OF THE FIRST PART

                                     - and -

                  (hereinafter referred to as the "Assignee")

                                                        OF THE SECOND PART

                                     - and -

                    KEYSPAN  ENERGY  DEVELOPMENT  CO., a Nova  Scotia  unlimited
                    liability   company   (hereinafter   referred   to  as   the
                    "Borrower")

                                                          OF THE THIRD PART

                                     - and -

                  ROYAL BANK OF CANADA, in its capacity as administrative agent
                  of the Lenders (hereinafter referred to as the "Administrative
                  Agent")

                                                          OF THE FOURTH PART

         WHEREAS the Assignor is a Lender under the agreement entitled "Credit
Agreement" dated July 29, 1999 among the Borrower and a syndicate of Lenders
with Royal Bank of Canada as Administrative Agent (as amended, modified,
supplemented or restated from time to time, the "Credit Agreement");

         AND WHEREAS the Assignor has agreed to assign and transfer to the
Assignee certain rights under the Credit Agreement in compliance with the Credit
Agreement, and the Assignee has agreed to accept such rights and assume certain
obligations of the Assignor under the Credit Agreement;

         NOW THEREFORE in consideration of the premises and other good and
valuable consideration (the receipt and sufficiency of which are hereby
conclusively acknowledged), the parties hereby agree as follows:

1.       Interpretation

     (a)  In this  Agreement,  including  the recitals,  capitalized  terms used
          herein, and not otherwise defined herein, shall have the same meanings
          attributed thereto as set forth in the Credit Agreement.  In addition,
          the following terms shall have the following meanings:

          (i)  "Assigned  Commitment"  has the  meaning  set forth in  Section 2
               hereof;

          (ii) "Assigned  Interests"  has the  meaning  set  forth in  Section 2
               hereof;

          (iii)"Outstanding  Assignor  BAs" has the meaning set forth in Section
               3(a) hereof; and

          (iv) "Assumed  Obligations"  has the  meaning  set forth in  Section 4
               hereof.

     (b)  The division of this Agreement into Articles, Sections, paragraphs and
          other  subdivisions  and the insertion of headings are for convenience
          of  reference   only  and  shall  not  affect  the   construction   or
          interpretation hereof.

     (c)  In this Agreement:

          (i)  the terms "this Agreement",  "hereof", "herein",  "hereunder" and
               similar  expressions refer, unless otherwise  specified,  to this
               Lender  Assignment  Agreement  taken  as a  whole  and not to any
               particular section, subsection or paragraph;

          (ii) words  importing  the singular  number or masculine  gender shall
               include the plural number or the feminine or neuter genders,  and
               vice versa; and

          (iii)words and terms  denoting  inclusiveness  (such as  "include"  or
               "includes"  or  "including"),  whether or not so stated,  are not
               limited by their context or by the words or phrases which precede
               or succeed them.

     (d)  This Agreement shall be governed by and interpreted in accordance with
          the laws of the Province of Alberta and the laws of Canada  applicable
          therein.   The  parties   irrevocably   submit  to  the  non-exclusive
          jurisdiction  of  the  courts  of the  Province  of  Alberta,  without
          prejudice  to the  rights of the  parties to take  proceedings  in any
          other jurisdictions.

     (e)  If any  provision  of this  Agreement  shall be  invalid,  illegal  or
          unenforceable in any respect in any jurisdiction,  it shall not affect
          the validity,  legality or enforceability of any such provision in any
          other jurisdiction or the validity,  legality or enforceability of any
          other provision of this Agreement.

2.       Assignment Of Rights By Assignor

         Effective as of the date hereof, the Assignor hereby absolutely assigns
and transfers to the Assignee:

          (a)  Subject as provided in Section 3(a) hereof,  [all OR % of all] of
               the  Obligations of the Borrower to the Assignor under the Credit
               Facility; and

          (b)  [All or % of all] of the Assignor's  Commitment  under the Credit
               Facility (the "Assigned Commitment");

together with all of the Assignor's other rights under the Credit Agreement and
the other Documents but only insofar as such other rights relate to (a) and (b)
above (collectively, the "Assigned Interests").

3.       Outstanding Assignor BAs

          (a)  The parties hereby acknowledge that, on the date hereof, Bankers'
               Acceptances accepted by the Assignor and having terms to maturity
               ending  on  or  after  the  date   hereof   may  be   outstanding
               (collectively,  the "Outstanding Assignor BAs").  Notwithstanding
               any  provision  of the Credit  Agreement or this  Agreement,  the
               Assignee shall have no right, title, benefit or interest in or to
               any  Outstanding  Assignor  BAs.  The  Assignee  shall  assume no
               liability or obligation to the Assignor in respect of the failure
               of the  Borrower to reimburse  the  Assignor for any  Outstanding
               Assignor BAs on the maturity thereof or any fees or other amounts
               due in respect thereof.

          (b)  From time to time,  as the  Outstanding  Assignor  BAs mature and
               Rollovers  and  Conversions  are made by the  Borrower in respect
               thereof,  the Assignee shall  participate in the Loans  effecting
               such Rollovers and Conversions to the full extent of its Assigned
               Commitment in its capacity as a Lender.

4.       Assumption Of Obligations By Assignee

         The Assignee assumes and covenants and agrees to be responsible for all
obligations relating to the Assigned Interests to the extent such obligations
arise or accrue on or after the date hereof (collectively, the "Assumed
Obligations") and agrees that it will be bound by the Credit Agreement and the
other Documents to the extent of the Assumed Obligations as fully as if it had
been an original party to the Credit Agreement.

5.       Credit Agreement References; Notices

         Effective as of the date hereof:

     (a)  the  Assignee  shall  be a  Lender  for  all  purposes  of the  Credit
          Agreement  and the  other  Documents  and all  references  therein  to
          "Lenders" or "a Lender" shall be deemed to include the Assignee;

     (b)  the  Commitment of the Assignee  shall be the Assigned  Commitment and
          all references in the Credit Agreement to "Commitment" of the Assignee
          shall be deemed to be to the Assigned Commitment;

     (c)  any demand,  notice or  communication  to be given to the  Assignee in
          accordance with Section 14.3 of the Credit  Agreement shall be made or
          given to the following  address or telecopy number (until the Assignee
          otherwise gives notice in accordance with such Section 14.3); and

                           [Name of Assignee:
                           Address:


                           Attention:
                           Telecopier No:]

     (d)  Schedule A to the Credit Agreement shall be deemed to be and is hereby
          amended to the extent  necessary  to give effect to Sections  5(b) and
          5(c) hereof.

6.       The Administrative Agent

         Without in any way limiting the provisions of Section 4 hereof, the
Assignee irrevocably appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such powers under the Credit
Agreement and the other Documents as are delegated to the Administrative Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto, all in accordance with the provisions of the Credit Agreement.

7.       No Entitlement To Prior Interest Or Other Fees

         Notwithstanding any provision of the Credit Agreement or other
Documents or any other provision of this Agreement, the Assignee shall have no
right, title or interest in or to any interest or fees paid or to be paid to the
Assignor under, pursuant to or in respect of:

     (a)  [the fees payable to the Administrative  Agent pursuant to Section 5.7
          of the Credit Agreement; or]

[NOTE: 7(a) to be inserted for any assignment by Royal Bank of Canada.]

     (b)  the Loans,  the Credit Facility or the Credit Agreement for any period
          of time or in respect of any event or  circumstance  prior to the date
          hereof, including, without limitation, any commitment fees pursuant to
          Section 5.6 of the Credit  Agreement.  For certainty,  with respect to
          the Assigned  Interests,  the Assignor shall be solely entitled to the
          interest  payable in respect of that portion of the Interest Period of
          an unmatured LIBOR Loan occurring prior to the date hereof.

8.       Consent Of Borrowers And Administrative Agent

         The Borrower and the Administrative Agent consent to the assignment of
the Assigned Interests to the Assignee and the assumption of the Assumed
Obligations by the Assignee and agree to recognize the Assignee as a Lender
under the Credit Agreement as fully as if the Assignee had been an original
party to the Credit Agreement. [The Borrower and the Administrative Agent agree
that the Assignor shall have no further liability or obligation in respect of
the Assumed Obligations.]

[NOTE:  Delete the  square-bracketed  second sentence of Section 8 hereof in the
case of an assignment  to an affiliate of the  Assignor,  as provided in Section
14.6 of the Credit Agreement.]

9.       Representations And Warranties

         Each of the parties hereby represents and warrants to the other parties
as follows:

          (a)  it is duly organized and validly subsisting under the laws of its
               governing jurisdiction;

          (b)  it has all  necessary  power  and  authority  to enter  into this
               Agreement and to perform its obligations  hereunder and under the
               Credit Agreement and the other Documents;

          (c)  the execution,  delivery,  observance and performance on its part
               of this  Agreement has been duly  authorized  and this  Agreement
               constitutes a legal,  valid and binding  obligation of such party
               enforceable  against it in accordance with its terms; and

          (d)  all consents,  authorizations  and approvals of any  Governmental
               Authority,   if  any,  required  for  the  execution,   delivery,
               observance and  performance by it of this  Agreement,  the Credit
               Agreement and the other  Documents  have been obtained and remain
               in full force and effect,  all conditions have been duly complied
               with and no action by, and no notice to or other  filing with any
               Governmental Authority is required for such execution,  delivery,
               observance or performance.

         The Assignee represents and warrants that it is not a non-resident of
Canada for the purposes of the Income Tax Act (Canada).

         The Assignor represents and warrants to the Assignee that it has the
right to sell to the Assignee the Assigned Interests and that the same are free
and clear of all Security Interests. Each of the Administrative Agent and the
Assignor also represents and warrants to the Assignee that it has not received
actual notice of any Default or Event of Default having occurred under the
Credit Agreement.

         The representations and warranties set out in this Agreement shall
survive the execution and delivery of this Agreement and notwithstanding any
examinations or investigations which may be made by the parties or their
respective legal counsel.

         Except as expressly provided herein, the Assignee confirms that this
Agreement is entered into by the Assignee without any representations or
warranties by the Assignor or the Administrative Agent on any matter whatsoever,
including, without limitation, on the effectiveness, validity, legality,
enforceability, adequacy or completeness of the Credit Agreement or any document
delivered pursuant thereto or in connection therewith or any of the terms,
covenants and conditions therein or on the financial condition,
creditworthiness, condition, affairs, status or nature of the Borrower.

10.      Assignee Credit Decision

         The Assignee acknowledges to the Assignor and the Administrative Agent
that the Assignee has itself been, and will continue to be, solely responsible
for making its own independent appraisal of and investigations into the
financial condition, creditworthiness, condition, affairs, status and nature of
the Borrower, all of the matters and transactions contemplated herein and in the
Credit Agreement and other Documents and all other matters incidental to the
Credit Agreement and the other Documents. The Assignee confirms with the
Assignor and the Administrative Agent that it does not rely, and it will not
hereafter rely, on the Administrative Agent or the Assignor:

(a)               to check or inquire on its behalf into the adequacy, accuracy
                  or completeness of any information provided by the Borrower or
                  any other person under or in connection with the Credit
                  Agreement and other Documents or the transactions therein
                  contemplated (whether or not such information has been or is
                  hereafter distributed to the Assignee by the Administrative
                  Agent); or

(b)               to assess or keep under review on its behalf the financial
                  condition, creditworthiness, condition, affairs, status or
                  nature of the Borrower.

The Assignee acknowledges that a copy of the Credit Agreement (including a copy
of the schedules) has been made available to it for review and further
acknowledges and agrees that it has received copies of such other Documents and
such other information that it has requested for the purposes of its
investigation and analysis of all matters related to this Agreement, the Credit
Agreement, the other Documents and the transactions contemplated hereby and
thereby. The Assignee acknowledges that it is satisfied with the form and
substance of the Credit Agreement and the other Documents.

11.      Payments

         The Assignor and the Assignee acknowledge and agree that all payments
under the Credit Agreement in respect of the Assigned Interests from and after
the date hereof received by the Administrative Agent on or after the date hereof
shall be the property of the Assignee and the Administrative Agent shall be
entitled to treat the Assignee as solely entitled thereto.

12.      Amendments And Waivers

         Any amendment or modification or waiver of any right under any
provision of this Agreement shall be in writing (in the case of an amendment or
modification, signed by the parties) and any such waiver shall be effective only
for the specific purpose for which given and for the specific time period, if
any, contemplated therein. No failure or delay by any party in exercising any
right, power or privilege under this Agreement shall operate as a waiver thereof
and any waiver of any breach of the provisions of this Agreement shall be
without prejudice to any rights with respect to any other or further breach.

13.      General Provisions

(a)               The parties hereto shall from time to time and at all times do
                  all such further acts and things and execute and deliver all
                  such documents as are required in order to fully perform and
                  carry out the terms of this Agreement.

(b)               The provisions of this Agreement shall enure to the benefit of
                  and shall be binding upon the parties hereto and their
                  respective successors and permitted assigns.

(c)               This Agreement may be executed in any number of counterparts,
                  each of which shall be deemed to be an original, and it shall
                  not be necessary in making proof of this Agreement to produce
                  or account for more than one full set of counterparts.

         IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed by its duly authorized representative(s) as of the date first above
written.


           , as Assignor
         Per:
         ----------------------------------------------------
         Per:
         ----------------------------------------------------

           , as Assignee
         Per:
         ----------------------------------------------------
         Per:
         ----------------------------------------------------


         KEYSPAN ENERGY DEVELOPMENT CO.
         Per:
         ----------------------------------------------------


         ROYAL BANK OF CANADA,
         as Administrative
         Agent

         Per:
         ----------------------------------------------------



<PAGE>










         Schedule C to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                         FORM OF COMPLIANCE CERTIFICATE

     TO:  ROYAL BANK OF CANADA, in its capacity as  Administrative  Agent of the
          Lenders

AND TO:  The Lenders

1.   Reference is made to (i) the credit  agreement  dated July 29th, 1999 among
     KeySpan Energy  Development Co. (the "Borrower"),  Royal Bank of Canada and
     the other financial institutions party thereto in their capacity as Lenders
     (the "Lenders") and Royal Bank of Canada in its capacity as  Administrative
     Agent  for  the  Lenders  (the  "Administrative  Agent")  relating  to  the
     establishment  of a Cdn.  $200,000,000  credit  facility  in  favour of the
     Borrower  (as amended,  modified,  supplemented  or  restated,  the "Credit
     Agreement") and (ii) the guarantee of KeySpan Corporation (the "Guarantor")
     dated July 29th, 1999 in favour of the Administrative Agent and the Lenders
     (the "Guarantee"). Capitalized terms used herein, and not otherwise defined
     herein,  shall  have the  meanings  attributed  to such terms in the Credit
     Agreement.

2.   This Compliance  Certificate is delivered pursuant to Section 9.1(e)(iv) of
     the Credit Agreement.

3.   The undersigned,  [name], [title] of the Borrower hereby certifies that, as
     of the date of this  Compliance  Certificate,  I have  made or caused to be
     made such  investigations  as are necessary or appropriate for the purposes
     of this Compliance Certificate and:

(a)               the [audited or unaudited] financial statements of the
                  Borrower for the [Fiscal Year or Fiscal Quarter] ending  ,
                  199 , provided herewith or as previously provided to the
                  Administrative Agent pursuant to Section 9.1(e) of the Credit
                  Agreement were prepared in accordance with Canadian generally
                  accepted accounting principles and present fairly, in all
                  material respects, the financial condition and results of
                  operations of the Borrower and each of its Subsidiaries as at
                  the date thereof;

(b)               the representations and warranties made by the Borrower in
                  Section 8.1 of the Credit Agreement are true and correct in
                  all material respects as at the date hereof, except as has
                  heretofore been notified in writing to the Administrative
                  Agent by the Borrower and waived by the Majority Lenders [or
                  except as described in Schedule   hereto];

(c)               the Borrower is in compliance in all respects with all
                  covenants in the Credit Agreement as at the date hereof,
                  except as has heretofore been notified in writing to the
                  Administrative Agent by the Borrower and waived by the
                  Majority Lenders [or except as described in Schedule
                  hereto];

(d)               the Borrower is not in default under the terms and conditions
                  of the Credit Agreement and there is no Default or Event of
                  Default that has occurred and is continuing; [or except as
                  described in Schedule   hereto];

(e)               as of the date of this Compliance Certificate, the Guarantor's
                  senior unsecured long term debt is rated   by Moody's and   by
                  S&P (or   by a Substitute Rating Entity in accordance with
                  Section 1.7 of the Credit Agreement);

(f)               the calculations  used to determine the financial ratios set
                  out in Section 10.1(r) of the Credit Agreement have been
                  attached as Schedule   hereto;

(g)               the [audited or unaudited] financial statements of the
                  Guarantor for the [Fiscal Year or Fiscal Quarter] ending   ,
                  199 , provided herewith or as previously provided to the
                  Administrative Agent pursuant to Section 6.1( ) and ( ) of the
                  Guarantee were prepared in accordance with generally accepted
                  accounting principles in the United States of America and
                  present fairly, in all material respects, the financial
                  condition and results of operations of the Guarantor as of the
                  date thereof; and

(h)               the Guarantor is in compliance in all respects with all
                  covenants in the Guarantee as at the date hereof, except as
                  has heretofore been notified in writing to the Administrative
                  Agent by the Borrower and waived by the Majority Lenders [or
                  except as described in Schedule  hereto].

         I give this Compliance Certificate on behalf of the Borrower and in my
capacity as o of the Borrower, and no personal liability is created against or
assumed by me in the giving of this Compliance Certificate.

         Dated at  , this   day of     ,   .



                  KEYSPAN ENERGY DEVELOPMENT CO.
                  Per:
                           --------------------------------------------------
                           Name:
                           Title:
                  [To be signed by the  president  or any  vice-president  of
                  the Borrower]





<PAGE>










         Schedule D to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                            FORM OF CONVERSION NOTICE

TO:  ROYAL  BANK OF  CANADA,  in its  capacity  as  Administrative  Agent of the
     Lenders

DATE:

1.   This  Conversion  Notice  is  delivered  to you  pursuant  to the terms and
     conditions  of the credit  agreement  dated July 29th,  1999 among  KeySpan
     Energy Development Co. (the "Borrower"), Royal Bank of Canada and the other
     financial  institutions  party  thereto in their  capacity as Lenders  (the
     "Lenders"),  and Royal  Bank of Canada in its  capacity  as  Administrative
     Agent  for  the  Lenders  (the  "Administrative  Agent")  relating  to  the
     establishment  of a Cdn.  $200,000,000  credit  facility  in  favour of the
     Borrower  (as amended,  modified,  supplemented  or  restated,  the "Credit
     Agreement").  Capitalized  terms used  herein,  and not  otherwise  defined
     herein,  shall  have the  meanings  attributed  to such terms in the Credit
     Agreement.

2.       The Borrower hereby requests a Conversion as follows:

(a)      Credit Facility:  Loan in the [Revolving/Term] Period

(b)      Conversion Date:

(c)      Conversion of the following Loan under the Credit Facility:

          (i)  Type of Loan:

          (ii) Amount:

          (iii)Interest Period maturity (for LIBOR Loans,  Bankers'  Acceptances
               or BA Equivalent Loans made in lieu thereof):

         INTO the following Loan under the above Credit Facility:

          (iv) Type of Loan:

          (v)  Interest   Period   (specify   term  of  LIBOR  Loans,   Bankers'
               Acceptances or BA Equivalent Loans made in lieu thereof:

3.       Payment, delivery or issuance instructions (if any):


                    Yours truly,

                  KEYSPAN ENERGY DEVELOPMENT CO.
                  Per:
                             -----------------------------------------------
                             Name:
                             Title:


                    [To  be   signed   by  any  one  of  the   president,   a
                    vice-president,  treasurer,  controller  or the corporate
                    secretary of the Borrower]





<PAGE>












         Schedule E to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                             FORM OF DRAWDOWN NOTICE

TO:  ROYAL  BANK OF  CANADA,  in its  capacity  as  Administrative  Agent of the
     Lenders

DATE:

1.   This  Drawdown  Notice  is  delivered  to you  pursuant  to the  terms  and
     conditions  of the credit  agreement  dated July 29th,  1999 among  KeySpan
     Energy Development Co. (the "Borrower"), Royal Bank of Canada and the other
     financial  institutions  party  thereto in their  capacity as Lenders  (the
     "Lenders"),  and Royal  Bank of Canada in its  capacity  as  Administrative
     Agent  for  the  Lenders  (the  "Administrative  Agent")  relating  to  the
     establishment  of a Cdn.  $200,000,000  credit  facility  in  favour of the
     Borrower  (as amended,  modified,  supplemented  or  restated,  the "Credit
     Agreement").  Capitalized  terms used  herein,  and not  otherwise  defined
     herein,  shall  have the  meanings  attributed  to such terms in the Credit
     Agreement.

2.   The Borrower hereby requests a Drawdown as follows:

     (a)  Drawdown Date:

     (b)  Amount and Currency of Drawdown:

     (c)  Type of Loan:

     (d)  Interest Period (specify term for LIBOR Loans, Bankers' Acceptances or
          BA Equivalent Loans made in lieu thereof):



     (e)  Payment, delivery or issuance instructions (if any):



3.       The funding details respecting the Bankers' Acceptances contemplated to
         be issued in connection with this Drawdown Notice are set out in
         Exhibit 1 attached hereto.

                       Yours truly,

                       KEYSPAN ENERGY DEVELOPMENT CO.
                       Per:
                            --------------------------------------------------
                             Name:
                             Title:

                       [To  be   signed   by  any  one  of  the   president,   a
                       vice-president,  treasurer,  controller  or the corporate
                       secretary of the Borrower]



<PAGE>








                                             Exhibit 1 to the Drawdown Notice

CONFIRMATION OF BANKERS' ACCEPTANCES FUNDING DETAILS



Further to the Drawdown Notice dated ________________, we confirm funding
details in respect of Bankers' Acceptances for the period ________________ to
________________________.


<TABLE>
<CAPTION>
=============================== ==================== ==================== ==================== ==================== ================
<S>                             <C>                  <C>                 <C>                  <C>                  <C>
Name of Lender
------------------------------- -------------------- -------------------- -------------------- -------------------- ----------------
Face Amount
------------------------------- -------------------- -------------------- -------------------- -------------------- ----------------
Discount Rate
------------------------------- -------------------- -------------------- -------------------- -------------------- ----------------
Price
------------------------------- -------------------- -------------------- -------------------- -------------------- ----------------
Discount Proceeds
------------------------------- -------------------- -------------------- -------------------- -------------------- ----------------
Applicable BA Fee Rate
------------------------------- -------------------- -------------------- -------------------- -------------------- ----------------
Net Proceeds
------------------------------- -------------------- -------------------- -------------------- -------------------- ----------------
Broker Name/Location
------------------------------- -------------------- -------------------- -------------------- -------------------- ----------------
Split
=============================== ==================== ==================== ==================== ==================== ================
</TABLE>



                                                  KEYSPAN ENERGY DEVELOPMENT CO.


                                                  Per:-----------------------
                                                      Name:
                                                      Title:





<PAGE>









         Schedule F to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                                FORM OF GUARANTEE

                                    GUARANTEE

                               KEYSPAN CORPORATION

         THIS GUARANTEE is made as of July 29th, 1999 by KeySpan Corporation, a
corporation duly organized and existing under the laws of the State of New York
(the "Guarantor"), in favour of the Guarantee Beneficiaries.

     WHEREAS the Lenders have, pursuant to the Credit Agreement,  made available
the Credit Facility to the Borrower;

         AND WHEREAS the obligation of the Lenders to make the Credit Facility
available to the Borrower is conditional on, among other things, the execution
and delivery by the Guarantor of this Guarantee and, as consideration therefor
and in order to induce the Lenders to make the Credit Facility available to the
Borrower, the Guarantor has agreed with the Lenders and the Administrative Agent
to guarantee the due and punctual payment and discharge of the Guaranteed
Obligations in accordance with the provisions of this Guarantee;

         AND WHEREAS the Borrower is an indirect wholly owned Subsidiary of the
Guarantor, and it is in the best interests of the Guarantor that the Credit
Facility be made available by the Lenders to the Borrower;

         NOW THEREFORE, WITNESSETH THAT IN CONSIDERATION of the Lenders entering
into the Credit Agreement with the Borrower and for other good and valuable
consideration, the receipt and adequacy of which is acknowledged by the
Guarantor, the Guarantor covenants and agrees as follows:

                                   ARTICLE 1
                         DEFINITIONS AND INTERPRETATION
                         ------------------------------

1.1     Definitions

         In this Guarantee, unless something in the subject matter or context is
inconsistent therewith:

"Administrative Agent" means Royal Bank of Canada, when acting in its capacity
as Administrative Agent under the Credit Agreement, and includes any successor
Administrative Agent appointed pursuant to Section 13.10 of the Credit
Agreement;

"Affiliate"  has  the  meaning  set  forth  in  the  Business  Corporations  Act
(Alberta);

"Applicable   Environmental   Laws"  means  those   Applicable  Laws  which  are
Environmental Laws;

"Applicable Law" means, with respect to any person, property, transaction or
event, all applicable provisions of laws, statutes, regulations, rules,
guidelines, by-laws, ordinances, treaties, orders, policies, judgments, decrees
and official directives of any Governmental Authority or any person acting under
any Governmental Authority;

"Banking Day" means a day, excluding Saturday and Sunday, on which banks
generally are open for business in Calgary, Alberta, Canada and New York, New
York, United States of America;

"Borrower" means KeySpan Energy Development Co., an unlimited  liability company
organized and existing under the laws of Nova Scotia,  Canada, and any successor
thereto permitted pursuant to the Credit Agreement;

"Borrower's Counsel" means the firm of Macleod Dixon, or such other firm of
legal counsel as the Borrower may from time to time designate;

"Canadian Dollars" and "Cdn $" mean the lawful money of Canada;

"Canadian  Prime  Rate"  shall  have  the  meaning  given  to it in  the  Credit
Agreement;

"Commitment" has the meaning given to it in the Credit Agreement;

"Consolidated Tangible Net Worth" of the Guarantor means, at any time: (a) the
total amount of common shareholders' equity of the Guarantor as shown on the
most current consolidated balance sheet of the Guarantor at such time, as
determined in accordance with GAAP; less (b) amounts in respect of (i) goodwill,
trademarks, licenses, patents, patent rights, patent licenses, copyrights, trade
names, organization expenses, licenses, franchises, share issuance expenses and
other similar assets, and (ii) all other assets which are treated as intangibles
in accordance with GAAP;

"Credit Agreement" means the document entitled "Credit Agreement", among the
Borrower, the Lenders and the Administrative Agent, dated as of July 29th, 1999,
as amended, restated, replaced or substituted from time to time, and includes
all agreements and instruments entered into by the Borrower pursuant thereto or
in connection therewith;

"Credit Facility" means the extendible revolving/term credit facility made
available to the Borrower by the Lenders pursuant to, and subject to the terms
and conditions of, the Credit Agreement;

"Debt" means senior, unsecured long term debt;

"Environmental Laws" mean all applicable federal, provincial, state, regional,
municipal or local laws with respect to the environment or environmental or
public health and safety matters contained in statutes, regulations, rules,
by-laws, ordinances, treaties, orders, judgments, decrees, approvals, notices,
permits or policies, guidelines or directives having the force of law;

"Equivalent Amount" means, on any date, the equivalent amount in Canadian
Dollars or United States Dollars, as the case may be, after giving effect to a
conversion of a specified amount of United States Dollars to Canadian Dollars or
of Canadian Dollars to United States Dollars, as the case may be, at the noon
spot rate of exchange for Canadian interbank transactions established by the
Bank of Canada for the day in question, or, if such rate is for any reason
unavailable, at the spot rate quoted for wholesale transactions by the
Administrative Agent at approximately noon (Toronto time) on that date in
accordance with its normal practice;

"Event of Default" shall have the meaning given to it in the Credit Agreement;

"Fiscal Quarter" means the first three months of a Fiscal Year, and each
successive period of three months in such Fiscal Year;

"Fiscal Year" means the fiscal year as adopted by the Guarantor from time to
time and which is currently the one year period commencing on January 1 of each
year and ending on December 31 of each year;

"GAAP" shall have the meaning given to it in Section 1.7;

"Governmental Authority" means:

(b)  any government, parliament or legislature, any regulatory or administrative
     authority,   agency,  commission  or  board  (including  any  board  having
     jurisdiction in respect of public utilities) and any other statute, rule or
     regulation making entity having jurisdiction in the relevant circumstances;

(c)  any  person  acting  under  authority  of any of the  foregoing  or under a
     statute, rule or regulation thereof; and

(d)  any judicial,  administrative  or arbitral  court,  authority,  tribunal or
     commission having jurisdiction in the relevant circumstances;

"Guarantee" means this guarantee,  as it may be amended,  restated,  replaced or
substituted from time to time;

"Guarantee Beneficiaries" means, collectively,  the Administrative Agent and the
Lenders;

"Guaranteed Obligations" means all present and future indebtedness, obligations
and liabilities of the Borrower to the Guarantee Beneficiaries or any of them
under or relating to the Credit Agreement, whether direct or indirect, absolute
or contingent, matured or not, liquidated or unliquidated, and whether incurred
alone or with others, and including, without limitation:

(a)  indebtedness  for principal  (including  obligations in respect of bankers'
     acceptances),  interest  (both  before  and  after  maturity,  default  and
     judgment),  fees (including  stamping fees and commitment fees),  costs and
     expenses   (including   breakage  costs  and   enforcement   expenses)  and
     indemnities; and

(b)  obligations  and  liabilities  under any order or  judgment of any court of
     competent jurisdiction arising out of or related to the Credit Agreement;

"Lenders" means each of the financial institutions named on Schedule A to the
Credit Agreement as a Lender which has executed the Credit Agreement, and any
person which has become a party thereto as a Lender, and includes Royal Bank of
Canada in its capacity as a Lender, but excluding any such financial
institution, the Commitment of which has been reduced to zero, and excluding the
Administrative Agent in its capacity as the Administrative Agent;

"Lenders' Counsel" means the firm of Stikeman, Elliott, or such other firm of
legal counsel as the Administrative Agent may from time to time designate;

"Material Adverse Effect" means, with respect to the Guarantor, a material
adverse effect on:

(a)  its business,  condition  (financial or otherwise),  operations,  assets or
     properties,  taken as a whole; provided that a Material Adverse Effect with
     respect to the Guarantor shall occur under this paragraph (a) only if there
     has been a Material  Adverse  Effect on the Guarantor and its  Subsidiaries
     taken as a whole;

(b)  the validity or enforceability of this Guarantee;

(c)  the  ability  of the  Guarantor  to  perform  its  obligations  under  this
     Guarantee;

(d)  the rights or remedies of the Guarantee Beneficiaries or any one or more of
     them under this Guarantee; or

(e)  the ability of the  Guarantor  to pay any amounts  payable by it under this
     Guarantee or under any other  documents  provided to or that the  Guarantor
     enters into with the Guaranteed Beneficiaries or any one or more of them in
     connection with the Credit Agreement or this Guarantee;

"Moody's" means Moody's Investors Services, Inc., and its successors;

"person" includes an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization, government or any agency or
instrumentality thereof, or any other entity;

"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,  Inc.,
and its successors;

"Security Interest" means a mortgage, pledge, deposit by way of security,
charge, hypothec, assignment by way of security, security interest, lien
(whether statutory, equitable or at common law), title retention agreement,
lease with option to purchase, right of set-off (if created for the purpose of
directly or indirectly securing the repayment of borrowed money), and any other
interest in property or assets, howsoever created or arising, that secures
payment or performance of an obligation, including a trust and statutory deemed
trust;

"Subsidiary" means:

(a)  any  corporation  of which at least a majority  of the  outstanding  shares
     having by the terms  thereof  ordinary  voting power to elect a majority of
     the board of directors of such corporation (irrespective of whether, at the
     time,  shares of any other class or classes of such corporation  might have
     voting  power by reason of the  happening  of any  contingency,  unless the
     contingency  has occurred and then only for as long as it continues) is, at
     the time, directly or indirectly beneficially owned by the Guarantor or one
     or  more of its  Subsidiaries  or by the  Guarantor  and one or more of its
     Subsidiaries; and

(b)  any  partnership  of which at least a majority  of the  outstanding  income
     interests  or capital  interests  are at the time  directly  or  indirectly
     beneficially  owned by the Guarantor or one or more of its  Subsidiaries or
     by the Guarantor and one or more of its Subsidiaries;

"Taxes" shall have the meaning given to it in the Credit Agreement;

"United States Dollars" and "U.S. $" means the lawful money of the United States
of America; and

"Year 2000 Compliance" means a product is compliant if the product, when used in
accordance with its associated documentation, is capable of processing,
providing, and/or receiving data without material error relating to date data
which represents or references different centuries or more than one century,
provided all other products used with the product properly exchange similarly
accurate date data with the product. "Year 2000 Compliant" shall have a
corresponding meaning.

1.2     Headings and Guarantee References

(a)      The division of this Guarantee into Articles and Sections, Schedules,
         the inclusion of a table of contents and the insertion of headings is
         for convenience of reference only and shall not affect the construction
         or interpretation of this Guarantee.

(b)      The terms "this Guarantee", "hereof", "hereunder" and similar
         expressions refer to this Guarantee and not to any particular Article,
         Section, Schedule or other portion hereof, and include any amendments
         or supplements hereto. Unless otherwise stated, references herein to
         Articles, Sections and Schedules are to Articles, Sections and
         Schedules of this Guarantee. References to "the date hereof" or similar
         references shall mean the date of this Guarantee.

1.3     Number; Person

         Words importing the singular number only shall include the plural and
vice versa, words importing the masculine gender shall include the feminine and
neuter genders and vice versa.

1.4     Time; Including

(a)  Unless  otherwise  stated,  references  to time  shall  mean  local time in
     Calgary, Alberta, Canada.

(b)  The word  "including"  shall  not be  construed  to limit or  restrict  the
     generality of the matter that precedes it.

1.5     Legislation

         All references herein to a statute include, unless otherwise stated,
regulations passed or in force pursuant thereto and any amendments to such
statute or regulations from time to time, and any legislation or regulations
substantially replacing the same or substantially replacing any specific
provision to which such reference is made.

1.6     Administrative Agent for Guarantee Beneficiaries

(a)      Any action that may be taken, communication or demand given or remedy
         exercised by the Guarantee Beneficiaries hereunder may be taken, given
         or exercised by the Administrative Agent on their behalf, and any
         payment required to be made by the Guarantor to the Guarantee
         Beneficiaries hereunder shall be made to the Administrative Agent on
         behalf of the Guarantee Beneficiaries.

(b)      All documents, statements, certificates and other materials required to
         be delivered by the Guarantor to the Administrative Agent hereunder
         shall be delivered in a sufficient number of copies to allow the
         Administrative Agent to deliver one such copy to each Guarantee
         Beneficiary.

(c)      A reference in this Guarantee to the "Guarantee Beneficiaries" shall be
         a reference to the Guarantee Beneficiaries or any one or more of them,
         as the case may be.

(d)  The  Guarantor  shall be entitled to rely upon any  certificate,  notice or
     other  document  (including  any  facsimile) or other advice,  statement or
     instruction  provided to it by the  Administrative  Agent  pursuant to this
     Guarantee.  Except with respect to Sections 3.5, 3.14, 7.2 and any Lender's
     demand or enforcement of remedies hereunder  (collectively,  the "Guarantee
     Beneficiary  Actions")  the  Guarantor  shall be  entitled to deal with the
     Administrative  Agent with  respect to all  matters  under this  Guarantee,
     without any obligation  whatsoever to satisfy itself as to the authority of
     the  Administrative  Agent to act on behalf of the Guarantee  Beneficiaries
     and without any liability  whatsoever to the  Guarantee  Beneficiaries  for
     relying upon any  certificate,  notice or other  document or other  advice,
     statement  or  instruction  provided  to it by  the  Administrative  Agent,
     notwithstanding  any  lack of  authority  of the  Administrative  Agent  to
     provide the same.

          Notwithstanding the foregoing the applicable Guarantee Beneficiary may
          authorize  the  Guarantor to deal with the  Administrative  Agent with
          respect  to  any  Guarantee  Beneficiary  Action  undertaken  by  that
          Guarantee Beneficiary.

1.7     Accounting Principles

         Wherever in this Guarantee reference is made to "GAAP", such reference
shall be deemed to be to the generally accepted accounting principles in the
United States of America from time to time approved by the American Institute of
Chartered Accountants, or any successor institute, applicable as at the date on
which the relevant determination or calculation is made or required to be made.
Where the character or amount of any asset or liability or item of revenue or
expense is required to be determined, or any consolidation or other accounting
computation is required to be made for the purpose of this Guarantee, such
determination or calculation shall, unless the context otherwise requires, be
made in accordance with GAAP applied on a consistent basis.

                                   ARTICLE 2
                            No collateral agreements
                            ------------------------

2.1     Acknowledgement

         The Guarantor confirms that its obligations under this Guarantee are
not subject to any promise or condition affecting or limiting its liability, and
no statement, representation, collateral agreement or promise by the Guarantee
Beneficiaries or any of them or by any officer, employee or agent of any of them
forms any part of this Guarantee or has induced the making thereof, or shall be
deemed in any way to affect the Guarantor's liability hereunder. It is intended
that all conditions and limitations relating to this Guarantee are expressly set
out herein, failing which the Guarantor expressly waives reliance on any
conditions or limitations not set forth herein as a defence to or limitation of
its obligations hereunder.

2.2     Subsidiary Assets Not Charged

         This Guarantee is an unsecured guarantee and does not create or grant
any charge on or security over any of the property and assets of the Guarantor
or any of its Subsidiaries, including its Subsidiaries, Brooklyn Union, Brooklyn
Union of Long Island and KeySpan Generation LLC (the "Utility Subsidiaries"). No
lien, levy, execution, seizure, attachment, garnishment or other encumbrance
whatsoever may be placed on or enforced against any of the property and assets
of the Utility Subsidiaries, and no obligation of the Borrower or the Guarantor
may be enforced against any of the Utility Subsidiaries, as a consequence of
this Guarantee or in connection with the enforcement hereof, notwithstanding any
Applicable Law, common law or equitable principle to the contrary, including any
bankruptcy law, principle of consolidation or otherwise whatsoever; provided
that nothing herein shall in any way restrict the Guarantee Beneficiaries from
enforcing any claim or judgment pursuant to this Guarantee against any assets of
the Guarantor, including against the shares or other securities of the Utility
Subsidiaries held by the Guarantor.

                                    ARTICLE 3
                                    Guarantee
                                    ---------

3.1     Guarantee

         The Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to the Guarantee Beneficiaries the due and punctual payment and
discharge of all of the Guaranteed Obligations. The Guarantor covenants that the
Guaranteed Obligations will be duly and punctually paid and discharged in
accordance with the terms of the Credit Agreement, whether the same become due
on maturity, by mandatory prepayment, by demand, by acceleration or otherwise.

3.2     Continuing Guarantee

         This Guarantee shall be a continuing guarantee, shall cover and secure
any ultimate balance of the Guaranteed Obligations owing to the Guarantee
Beneficiaries, and shall be operative and binding notwithstanding that at any
time or times the Guaranteed Obligations may be zero, or that any payments from
time to time may be made to the Guarantee Beneficiaries, or any settlements of
account effected, or any other thing whatsoever done, suffered or permitted, or
any other action short of actual payment of all the Guaranteed Obligations and
any other amounts payable hereunder.

3.3     Other Guarantors

(a)      This Guarantee shall be operative and binding regardless of whether or
         not any proposed guarantor or any other persons have executed or shall
         execute a guarantee in respect of the Guaranteed Obligations or is or
         are or shall become in any other way responsible to the Guarantee
         Beneficiaries for or in respect of the Guaranteed Obligations or any
         part thereof, and regardless of whether or not any other persons now or
         hereafter liable to the Guarantee Beneficiaries for the Guaranteed
         Obligations or any part thereof (whether under this Guarantee or
         otherwise) shall cease to be so liable.

(b)      The Guarantor's obligations hereunder shall be joint and several with
         any other guarantor guaranteeing all or any part of the Guaranteed
         Obligations.

3.4     Borrower

         This Guarantee shall extend to the Borrower's obligations to the
Guarantee Beneficiaries under the Credit Agreement notwithstanding any change or
changes in the name, business, shareholders, directorate, powers, objects,
capital structure, organization or management of the Borrower, and
notwithstanding any reorganization of the Borrower or the amalgamation or other
merger or combination of the Borrower with another or others (including with the
Guarantor, in which case the obligations of the Guarantor under and in respect
of the Credit Agreement shall be direct), or the sale or disposal of any of the
Borrower's properties, business or undertaking in whole or in part to another or
others, or the amendment, surrender, forfeiture or termination of the Borrower's
certificate of incorporation, memorandum of association, articles of association
or by-laws or the receivership, dissolution, insolvency, winding-up,
arrangement, reorganization, bankruptcy or liquidation of or in respect of the
Borrower, and no such event shall lessen, release or discharge the obligations
of the Guarantor under this Guarantee.

3.5     Acknowledgement of Continued Liability

         The Guarantor shall, from time to time, forthwith on the reasonable
request of any Guarantee Beneficiary:

(a)  deliver to such  Guarantee  Beneficiary  suitable  acknowledgements  of the
     Guarantor's  continued liability hereunder in such form as Lenders' Counsel
     may advise; and

(b)  prevent any action  brought  against  the  Guarantor  hereunder  from being
     barred by any  statute  of  limitations  now or  hereafter  in force in the
     province  of  Alberta,  Canada,  the  state of New York,  United  States of
     America and elsewhere,  and in the event of the failure of the Guarantor to
     do so, the Guarantor hereby irrevocably appoints each Guarantee Beneficiary
     the  attorney  in fact and  agent of the  Guarantor  to make,  execute  and
     deliver such written acknowledgements or other instruments as may from time
     to time become  necessary or advisable to fully  maintain and keep in force
     the liability of the Guarantor hereunder.

3.6     Payment on Demand; Interest

(a)      At any time when an Event of Default is continuing, the Guarantee
         Beneficiaries shall be entitled to immediate payment of the Guaranteed
         Obligations by the Guarantor on written demand for payment made by the
         Administrative Agent on the Guarantor.

(b)      If and whenever the Administrative Agent makes demand for payment upon
         the Guarantor as provided in this Section, the Guarantor shall be
         liable to the Guarantee Beneficiaries for the amount demanded directly
         as principal, and not just as surety, and will not plead or assert to
         the contrary in any proceeding taken by or on behalf of the Guarantee
         Beneficiaries in enforcing this Guarantee.

(c)      The Guarantor shall pay interest on the amount of the Guaranteed
         Obligations for which demand shall have been made hereunder (but
         without duplication of interest payable under the Credit Agreement),
         computed from and including the date of the applicable demand until
         payment in full, both before and after default, maturity and judgment,
         at the rate or rates provided in the Credit Agreement in respect of the
         obligation so demanded, calculated and compounded in the manner set out
         in the Credit Agreement.

(d)      All amounts payable by the Guarantor under this Guarantee shall be paid
         without set-off or counterclaim and without any deduction whatsoever.

(e)      The Guarantor acknowledges that the Guaranteed Obligations may be
         payable either in United States Dollars or Canadian Dollars or partly
         in one currency and partly in the other, and, without limiting the
         effect of Section 8.3, the Guarantor agrees to make all required
         payments hereunder in the currency or currencies in which such
         Guaranteed Obligations are owing by the Borrower.

3.7     Statement of Obligations

         Any account settled between the Administrative Agent and the Borrower
as to the amount of the Guaranteed Obligations shall be conclusive evidence
thereof. All right to question in any way the Guarantee Beneficiaries' present
or future method of dealing with the Borrower, or with any persons now or
hereafter liable to the Guarantee Beneficiaries for the Guaranteed Obligations
or any part thereof, or with any security held by the Guarantee Beneficiaries,
or with any property covered thereby, is hereby waived. The Guarantor waives any
right it may otherwise have to be kept appraised, advised or informed by the
Guarantee Beneficiaries (or any of them) of the activities, or of the position
(financial or otherwise), of the Borrower. The Guarantor hereby renounces all
benefits of discussion and division.

3.8     Not Bound to Exhaust Recourse

         The Guarantee Beneficiaries shall not be bound to exhaust their
recourse against the Borrower or to pursue any rights or remedies they may have
against the Borrower or any other persons, or to pursue any rights or remedies
under any security, or to value any security, or to make any demand on or
present any note or security to the Borrower or any other person, before
demanding or being entitled to payment from the Guarantor hereunder.

3.9     Corporate Authority

         The Guarantee Beneficiaries shall not be concerned to see or enquire
into the status, powers, capacity, authority or ability of the Borrower or any
of its directors, officers or agents acting or purporting to act on its behalf,
and all moneys, advances, renewals and credits in fact borrowed or obtained in
the professed exercise of such powers shall be deemed to form part of the
Guaranteed Obligations even if irregularly, fraudulently, defectively or
informally effected, or in excess of the powers or authority of the Borrower or
any of its directors, officers or agents, and notwithstanding any incapacity or
disability of any thereof, and further notwithstanding any actual or
constructive notice of the Administrative Agent or any of the Guarantee
Beneficiaries of the authority or lack of authority of the Borrower or its
directors, officers, employees or agents.

3.10    Reinstatement

         This Guarantee shall continue to be effective or be reinstated, as the
case may be, if at any time payment of the Guaranteed Obligations or any part
thereof is rescinded or must otherwise be restored or returned by the Guarantee
Beneficiaries or any of them upon the insolvency, bankruptcy or reorganization
of the Borrower or the Guarantor or for any other reason whatsoever, all as
though such payment had not been made.

3.11    Subrogation and Indemnity

         The Guarantor shall not exercise any rights which it may have acquired
by way of subrogation, indemnity or contribution under this Guarantee (by virtue
of any payment being made by it hereunder, or any liability of it to make
payment hereunder, or otherwise) or exercise any right of contribution against
any other guarantor, unless and until all Guaranteed Obligations have been
finally paid and performed in full. If any amount shall be paid (including
through any exercise of set-off rights) to the Guarantor arising out of or based
upon such right of subrogation, indemnity or contribution at a time when the
Guaranteed Obligations have not been finally paid and performed in full, such
amount shall be deemed to have been paid to the Guarantor for the benefit of,
and held by the Guarantor in trust for, the Guarantee Beneficiaries, and shall
forthwith be paid to the Guarantee Beneficiaries, to be credited and applied to
the Guaranteed Obligations, whether matured or unmatured.

3.12    Postponement of Claims

         All indebtedness, obligations and liabilities, present and future,
direct or indirect, of the Borrower to the Guarantor (the "Intercorporate
Debt"), together with each and every security therefor, shall be and is hereby
subordinated and postponed to the prior payment in full of all of the Guaranteed
Obligations, and all monies received by the Guarantor on account of the
principal amount of any Intercorporate Debt, and all monies received by the
Guarantor on account of interest or other amounts paid or payable in respect of
any Intercorporate Debt at any time following the occurrence and during the
continuance of an Event of Default, shall be received and held by the Guarantor
in trust for the Guarantee Beneficiaries, and forthwith upon demand by the
Administrative Agent shall be paid over to the Guarantee Beneficiaries and
applied to the Guaranteed Obligations until the Guaranteed Obligations are
finally paid and satisfied in full, all without prejudice to, and without in any
way limiting or lessening, the liability of the Guarantor to the Guarantee
Beneficiaries under this Guarantee.

3.13    Filing of Claims in Insolvency

         Notwithstanding Section 3.12, on request by the Administrative Agent,
the Guarantor will file, enforce and collect all claims against the Borrower in
any receivership, bankruptcy or other proceedings in which the filing of claims
is contemplated by law in respect of any indebtedness of the Borrower to the
Guarantor, and will hold in trust and assign to the Administrative Agent, on
behalf of the Guarantee Beneficiaries, all of the Guarantor's rights thereunder.
If the Guarantor fails to file, enforce or collect any such claim:

(a)      the Administrative Agent, as attorney in fact and agent of the
         Guarantor, is hereby authorized to do so in the name of the Guarantor
         or, in its discretion, to assign the claim to the Administrative Agent
         on behalf of the Guarantee Beneficiaries and to cause a proof of claim
         to be filed in the Guarantee Beneficiaries' name or the name of the
         Administrative Agent; and

(b)      in all such cases, the person or persons authorized to pay such claim
         shall be fully authorized and entitled to pay to the Guarantee
         Beneficiaries or the Administrative Agent the full amount payable on
         the claim in the proceeding before making any payment to the Guarantor,
         and to the extent necessary to give effect hereto, the Guarantor hereby
         assigns to the Administrative Agent on behalf of the Guarantee
         Beneficiaries all of its rights to any payments or distributions to
         which the Guarantor otherwise would be entitled in such proceeding.

3.14    Appropriation

         The Guarantee Beneficiaries shall be at liberty (without in any way
prejudicing or affecting their rights hereunder) to appropriate any payment made
or monies received to any portion of the Guaranteed Obligations, whether then
due or to become due, and from time to time to revoke or alter any such
appropriation, all as the Guarantee Beneficiaries see fit; provided that any
such payment or monies shall first be applied against Guaranteed Obligations
which are due before being appropriated to Guaranteed Obligations which are not
due.

3.15    Interest Act

         The Guarantor hereby acknowledges that certain of the rates of interest
applicable to the Guaranteed Obligations or any other amounts payable by the
Guarantor hereunder may be computed on the basis of a year of 360 days or 365
days, as the case may be, and paid for the actual number of days elapsed. For
purposes of the Interest Act (Canada), whenever any interest is calculated using
a rate based on a year of 360 days or 365 days, as the case may be, such rate,
determined pursuant to such calculation, when expressed as an annual rate, is
equivalent to the amount obtained when the product of:

(a)  the  applicable  rate based on a year of 360 days or 365 days,  as the case
     may be; and

(b)  the actual number of days in the calendar year in which the period for such
     interest is payable (or compounded) ends;

is divided by 360 or 365, as the case may be.

                                   ARTICLE 4
                            OBLIGATIONS NOT RELEASED

4.1     Obligations Absolute

         The obligations of the Guarantor hereunder shall be absolute and
unconditional, and shall not be released, discharged or in any way lessened,
abated or reduced by:

(a)  the Guarantee  Beneficiaries  agreeing to any renewal,  extension,  change,
     variation,  alteration,  waiver or  modification  in or in  respect  of the
     Guaranteed  Obligations,  the Credit Agreement or any security, or anything
     done,  suffered or permitted by the Guarantee  Beneficiaries in relation to
     the  Guaranteed  Obligations,   the  Credit  Agreement,  or  any  security,
     including any amendment or change in the manner, time, place or calculation
     of payment of the Guaranteed  Obligations (including increases or decreases
     in interest rates);

(b)  extensions  of time or any  indulgence  being given to the  Borrower or any
     other person by the Guarantee Beneficiaries,

(c)  any  contest by the  Borrower  or any other  person as to the  validity  or
     enforceability  of  any  terms  of the  Credit  Agreement  or any  security
     provided  in  respect  of the  Credit  Agreement  or of the  amount  of the
     Guaranteed Obligations;

(d)  any defence, counter-claim or right of set-off available to the Borrower or
     the  Guarantor,  whether in  connection  with this  Guarantee or the Credit
     Agreement or any unrelated transaction;

(e)  the  merging  of the  Credit  Agreement,  any  security  or the  Guaranteed
     Obligations  or other  obligations  of the Borrower  in, or any  alteration
     thereof by virtue of, any subsequent agreement or amending agreement;

(f)  the  Guarantee   Beneficiaries   agreeing  to  any  compromise,   proposal,
     arrangement or plan of  reorganization  affecting the Borrower or any other
     guarantor;

(g)  the  Guarantee  Beneficiaries  agreeing  to the release at any time or from
     time to time of any other  guarantor or other person liable  directly or as
     surety or otherwise for the Guaranteed  Obligations or any part thereof, or
     the addition of any guarantor, endorser or surety from time to time;

(h)  the Guarantee Beneficiaries failing or omitting to take, or refraining from
     taking, any action to enforce the Credit Agreement,  or any security or any
     rights or remedies thereunder, or proving the claim or part of the claim of
     the Guarantee  Beneficiaries  in any liquidation,  bankruptcy,  winding-up,
     compromise,  receivership,  arrangement or other proceeding relating to the
     Borrower or any other person;

(i)  the lack of validity or enforceability (in whole or in part) for any reason
     of, or any  informality,  defect or  irregularity  in or omission from, the
     Guaranteed  Obligations,  the  Credit  Agreement  or any  security,  or any
     impossibility,  impracticability,  frustration,  illegality, force majeure,
     act of government or change in Applicable  Laws, or the loans,  advances or
     other obligations  constituting the Guaranteed Obligations having been made
     in excess of the power of the Guarantee  Beneficiaries or any of them or in
     contravention of any of their governing statutes or constating documents;

(j)      any invalidity, irregularity or unenforceability of any term,
         condition, covenant or obligation in or arising under, or pursuant to,
         this Guarantee or the Credit Agreement or any other guarantee held by
         the Administrative Agent or the Lenders for the Guaranteed Obligations;

(k)      any common law or statute bar on enforcement of the whole or any part
         of the Guaranteed Obligations, the Credit Agreement or any security, or
         any stay of proceedings in respect of the Borrower or any other direct
         or indirect guarantor of the Guaranteed Obligations;

(l)      any defence that the Guarantor might have based on a failure to have
         been or to have remained informed of the condition (financial or
         otherwise) of the Borrower or any other guarantor, or of any
         circumstances affecting the ability of the Borrower to perform under
         the Credit Agreement;

(m)  any incapacity,  disability or lack or limitation of status or power of the
     Borrower,   the  Guarantor  or  any  other   guarantor  of  the  Guaranteed
     Obligations;

(n)  any notice by the  Guarantor  purporting  in any way to limit its liability
     hereunder in respect of any Guaranteed  Obligations,  whether arising prior
     or subsequent to such notice;

(o)  the bankruptcy, insolvency,  liquidation,  dissolution or winding up of the
     Borrower,   the  Guarantor  or  any  other   guarantor  of  the  Guaranteed
     Obligations;

(p)  any Applicable Law now or hereafter in effect in any jurisdiction affecting
     any of the Guaranteed Obligations or the rights of the Administrative Agent
     or the Lenders with respect thereto; or

(q)  any other event or circumstance which might otherwise constitute a legal or
     equitable  defence  available  to, or  discharge  of,  the  Guarantor,  the
     Borrower  or  any  other  person  of  or  in  respect  of  the   Guaranteed
     Obligations;

in each case regardless of how substantial or material such event or
circumstance mentioned above may be, or however prejudicial it may be to the
Guarantor, and without any requirement for notice to the Guarantor of any of the
foregoing.

4.2     Security provided by the Borrower

(a)  Without limiting the generality of Section 4.1, the Guarantee Beneficiaries
     shall,  subject to the  provisions of the Credit  Agreement,  be at liberty
     (without in any way prejudicing or affecting  their rights  hereunder) from
     time to time to receive any security for the Guaranteed  Obligations or any
     part thereof as they may deem  proper,  and may  give-up,  vary,  exchange,
     release, discharge, waive, postpone, subordinate, abandon or otherwise deal
     with,  or fail to deal  with,  security  or any part  thereof  or  property
     covered  thereby or allow the  Borrower or others to deal with the property
     covered thereby, all as the Guarantee  Beneficiaries may consider expedient
     or appropriate;  provided that nothing in this Guarantee shall obligate the
     Borrower or the Guarantor to provide any such security.

(b)  The Guarantee  Beneficiaries may, without releasing in whole or in part the
     Guarantor,  abstain from perfecting or registering,  or from continuing any
     such perfection or registration,  or from taking advantage of, any security
     or the provisions of any Applicable Laws relating thereto.

(c)  The Guarantee  Beneficiaries may realize or refrain from realizing upon any
     security  when,  and in such manner as, the  Guarantee  Beneficiaries  deem
     expedient, and the Guarantor waives any right it may have to receive notice
     of any actions or proceedings taken in respect thereof.

(d)      Neither:

     (i)  any loss of or in  respect of any  security  or the  property  covered
          thereby,  whether occasioned by the negligence or wilful misconduct of
          the Guarantee  Beneficiaries  or otherwise  (including  improvident or
          improper handling,  collection or realization  thereof or thereunder);
          nor

     (ii) the failure by the  Guarantee  Beneficiaries,  in whole or in part, to
          put or keep themselves in a position to deliver the security or any of
          it to the Guarantor on payment of the Guaranteed Obligations;

          shall in any way  limit,  lessen or  release  or  otherwise  abate the
          liability of the Guarantor hereunder.

(e)      The Guarantor shall not have any recourse against the Administrative
         Agent or the Lenders for any invalidity, non-perfection or
         unenforceability of any security held by the Administrative Agent or
         the Lenders in respect of the Guaranteed Obligations or any
         irregularity or defect in the manner or procedure by which the
         Administrative Agent or the Lenders realize on such security, whether
         occasioned by the fault of the Administrative Agent or the Lenders or
         otherwise.

4.3     Dealing with the Borrower

         It is the intent of the Guarantor and the Guarantee Beneficiaries that
the Guarantee Beneficiaries may discontinue, reduce, increase or otherwise vary
the Guaranteed Obligations and otherwise deal, in the broadest sense of that
word, with the Borrower and others, including any other guarantor, as the
Guarantee Beneficiaries may see fit, all without prejudice to or in any way
limiting or lessening the Guarantor's liability hereunder and without necessity
for obtaining the consent of, or giving notice to, the Guarantor.

4.4     Extensions

         Without limiting the generality of the foregoing Sections in this
Article, the Guarantor hereby specifically authorizes and consents to any
requests now or hereafter made by the Borrower from time to time for any
extension of the revolving period or any maturity date under the Credit
Agreement, and to the granting by the Guarantee Beneficiaries of any such
extension from time to time, regardless of whether or not the Guarantor signs or
otherwise consents to any particular request. For certainty, but without
limitation, all amounts advanced and otherwise owing during any such extended
period, and all interest thereon and fees, expenses and indemnities related
thereto, shall form part of the Guaranteed Obligations.

4.5     Increased Commitments

         Notwithstanding anything to the contrary contained herein if and
whenever the Guarantee Beneficiaries and the Borrower amend or restate the
Credit Agreement by agreement in writing to increase the aggregate principal
amount of the Commitments, the Guarantor shall not be liable hereunder to pay
any such aggregate principal amount of the Commitments in excess of Cdn.
$200,000,000 (or the Equivalent Amount thereof) unless the Guarantor has agreed
in writing with the Guarantee Beneficiaries to be liable for such excess
aggregate principal amount; provided that the foregoing provisions of this
Section shall not relieve the Guarantor of any other obligations under this
Guarantee all of which other obligations shall continue in full force and effect
and shall be binding on the Guarantor.

                                   ARTICLE 5
                         REPRESENTATIONS AND WARRANTIES

5.1     Representations and Warranties By the Guarantor

         The Guarantor represents and warrants to the Guarantee Beneficiaries as
follows, and acknowledges that the Guarantee Beneficiaries are relying on such
representations and warranties in entering into the Credit Agreement and making
the Credit Facility available to the Borrower:

(a)      Incorporation and Registration:  it is:

     (i)  duly organized and validly existing under the laws of the State of New
          York and is a valid and subsisting  corporation in good standing under
          the laws of the State of New York;

     (ii) duly  licensed,  registered  or  qualified to carry on business in the
          State of New York, and in all other  jurisdictions where the character
          of its  property  owned or  leased  or the  nature  of the  activities
          conducted by it makes such licensing,  registration  or  qualification
          necessary  and where a failure  to so  register  would have a Material
          Adverse Effect in respect of the Guarantor;

     (iii)a public  corporation  with its  common  shares  listed and posted for
          trading on the New York Stock Exchange;

(b)      Corporate Power and Capacity: it has the full corporate power, capacity
         and authority to own or lease its properties, to carry on its
         businesses as presently conducted, to guarantee obligations and to
         perform all of its obligations hereunder. Without limiting the
         generality of the foregoing, there are no restrictions, limitations,
         conditions or constraints of any nature whatsoever (whether by
         Applicable Law, contract or otherwise) in respect of or adversely
         affecting the power, capacity and authority of the Guarantor to
         execute, deliver and perform all of its obligations under this
         Guarantee;

(c)  Principal Business;  Licenses and Permits: it has obtained and continues to
     hold all licences, permits,  franchises,  consents and other authorizations
     materially  necessary to its ownership of its material  property and to the
     conduct of its material business;

(d)      Authorizations: it is duly authorized to guarantee the Guaranteed
         Obligations and to execute, deliver and perform its obligations under
         and in respect of this Guarantee, and all corporate steps and
         proceedings necessary for the due execution and delivery of this
         Guarantee by it and the performance of its obligations hereunder have
         been taken;

(e)      Validity and Enforceability: this Guarantee has been duly executed and
         delivered by it and constitutes a legal, valid and binding obligation
         of it, enforceable by the Guarantee Beneficiaries in accordance with
         its terms, subject, as to enforcement of remedies, to applicable
         bankruptcy, reorganization, insolvency, moratorium or other similar
         Applicable Laws affecting creditor's rights generally from time to time
         in effect, and to equitable principles, which may limit the
         availability of certain remedies, including the remedy of specific
         performance;

(f)      Non-Violation of Instruments: the execution, delivery and performance
         by it of this Guarantee does not and will not: (i) contravene its
         charter or by-laws; (ii) contravene any Applicable Laws (including any
         financial assistance prohibitions of Applicable Laws); (iii) contravene
         any instrument, indenture, contract or other agreement or commitment to
         which it or its assets are bound, or require any consent thereunder,
         except to the extent that if any such contravention occurred or if such
         consent was not received that in either case there would not be a
         Material Adverse Effect on the Guarantor; or (iv) contravene any
         resolution of its directors or officers or any committee of either;

(g)      Approvals and Consents: no consent, authorization, approval or other
         action by, and no notice to or filing or registration with, any
         Governmental Authority is required to be obtained or made by or on
         behalf of the Guarantor for the due execution, delivery and performance
         by it of this Guarantee or to ensure the validity or enforceability
         thereof against it, other than those that have been made or obtained;

(h)      No Actions: there are no actions, suits, claims or proceedings
         (including counterclaims or third party proceedings) existing or, to
         its knowledge, threatened against it or its property or its
         Subsidiaries or their properties before any Governmental Authority
         having jurisdiction in the circumstances in respect of which there is a
         reasonable possibility of a determination adverse to the Guarantor or
         any of its Subsidiaries which would be reasonably likely to have a
         Material Adverse Effect in respect of the Guarantor, except as set
         forth on Schedule 1 hereto;

(i)  Title to  Shares:  it has  indirect  ownership  of 100% of the  issued  and
     outstanding  shares of every  class of the capital  stock of the  Borrower,
     free and clear of any Security Interests or adverse claims whatsoever;

(j)  Pari Passu:  all of its payment  obligations  under this  Guarantee rank at
     least pari passu in priority of payment with its other Debt and in priority
     to all of its indebtedness for borrowed money to any of its Affiliates;

(k)      Financial Information: its audited consolidated financial statements,
         (including its consolidated balance sheet, its consolidated statement
         of income and its consolidated statement of cash flows) for the period
         ending December 31, 1998 are true and correct in all material respects
         as at the date thereof, have (in respect of financial data) been
         prepared in accordance with GAAP, and fairly present its financial
         position and condition as at the date thereof;

(l)  Financial Condition:  since December 31, 1998 nothing has occurred (whether
     external or internal to it) which has had, or would be reasonably likely to
     have, a Material Adverse Effect in respect of the Guarantor; and

(m)  Ratings of Debt:  its Debt is rated A3 by  Moody's  and A- by S&P as of the
     date hereof.

5.2     General

(a)      The Guarantor acknowledges that the Guarantee Beneficiaries have
         entered into the Credit Agreement and agreed to extend credit to the
         Borrower in full reliance upon the foregoing representations and
         warranties. Such representations and warranties shall survive until the
         Credit Agreement and this Guarantee have been terminated by the
         Guarantee Beneficiaries. Any investigations made at any time by or on
         behalf of any of or all of the Guarantee Beneficiaries shall not
         diminish in any respect whatsoever any Guarantee Beneficiary's right to
         rely on such representations and warranties.

(b)      All statements certified as true in any certificates or other documents
         and all information contained in any financial statements delivered by
         or on behalf of the Guarantor under or pursuant to this Guarantee shall
         constitute representations and warranties made by the Guarantor to the
         Guarantee Beneficiaries under this Guarantee.

                                    ARTICLE 6
                                    COVENANTS
                                    ---------

6.1     Covenants of the Guarantor

         The Guarantor covenants and agrees with the Guarantee Beneficiaries
that it shall:

(a)  Maintain  Corporate  Existence:  except  as  permitted  by  paragraph  (d),
     maintain and preserve its  corporate  existence  and  organization  in good
     standing in each jurisdiction in which it carries on a material business or
     owns material property,  and make all corporate and other filings necessary
     therefore,  and obtain and  maintain  all  licences,  permits,  franchises,
     consents and other authorizations  materially necessary to the ownership of
     its material  property and to the conduct of its material  business in each
     such jurisdiction;

(b)  Conduct  Business:  carry  on  and  continuously  conduct  its  businesses,
     activities and operations in an efficient, diligent and businesslike manner
     and in accordance  with good  industry  practices  unless  failure to do so
     would not have a Material Adverse Effect on the Guarantor;

(c)  Comply with Laws:  comply in all material  respects with  Applicable  Laws,
     including  Applicable  Environmental  Laws, where failure to do so would be
     likely to have a Material Adverse Effect in respect of the Guarantor;

(d)  Reorganizations:  not become a party to any transaction  whereby all or any
     substantial  part of its  property  would  become the property of any other
     person,  whether  by way of  reconstruction,  reorganization,  arrangement,
     recapitalization,   consolidation,  dissolution,  winding-up,  liquidation,
     amalgamation,  merger,  combination,  transfer,  sale,  lease or otherwise,
     unless:

(i)               the successor or acquiror resulting from such transaction
                  ("Successor Corporation") is (or upon consummation of the
                  transaction will be) a corporation or other legal entity
                  incorporated, continued or amalgamated and validly subsisting
                  under the laws of the United States of America (or one of its
                  States), the laws of Canada (or one of its Provinces) or the
                  laws of a member state of the European Union;

(ii)              the Successor Corporation has executed, prior to or
                  contemporaneously with the consummation of such transaction,
                  such instruments, if any, as are, in the opinion of Lenders'
                  Counsel (acting reasonably), necessary or advisable to
                  evidence the obligation of the Successor Corporation to
                  observe and perform all the Guarantor's obligations under this
                  Guarantee;

(iii)             no default has occurred and is continuing under this Guarantee
                  immediately prior to such transaction or will occur or would
                  be continuing under this Guarantee immediately after such
                  transaction;

(iv)              such transaction does not result in a Material Adverse Effect
                  in respect of the Guarantor, or adversely affect the validity
                  or enforceability of this Guarantee in any manner; and

(v)               the Debt of the Successor Corporation has been assigned a
                  rating of at least Baa3 by Moody's (or an equivalent rating by
                  a substitute rating entity which are both acceptable to the
                  Guarantee Beneficiaries) and BBB- by S&P (or an equivalent
                  rating by a substitute rating entity which are both acceptable
                  to the Guarantee Beneficiaries);

(e)      Annual Financial Statements: furnish to the Administrative Agent,
         within 120 days after the end of each of its Fiscal Years, audited
         annual financial statements of it (including, without limitation, its
         consolidated balance sheet, its consolidated statement of income and
         its consolidated statement of cash flows), prepared in accordance with
         GAAP and setting forth in each case comparative figures from its
         preceding fiscal year, together with a report of auditors of recognized
         national standing thereon;

(f)      Quarterly Financial Statements: furnish to the Administrative Agent,
         within 60 days after the end of each of its first, second and third
         Fiscal Quarters and within 120 days after the end of its fourth Fiscal
         Quarter, of each of its Fiscal Years, unaudited financial statements of
         it for each such quarter (including, without limitation, its
         consolidated balance sheet, its consolidated statement of income and
         its consolidated statement of cash flows) prepared in accordance with
         GAAP, setting forth in each case comparative figures for the
         corresponding period in the preceding fiscal year;

(g)  Other Financial Reports:  promptly furnish to the Administrative  Agent any
     financial or operating  statements  or reports  relating to its business or
     affairs as the  Administrative  Agent may  reasonably  request from time to
     time in writing;

(h)  Maintain Property:  maintain,  protect and preserve its property and assets
     in accordance with good business practice except to the extent that failure
     to do so would not have a Material Adverse Effect on the Guarantor;

     (i)  Notices: promptly given written notice to the Administrative Agent of:

     (i)  Defaults: any breach of a representation, warranty or any covenant, or
          other default, under this Guarantee, promptly (but in any event with 7
          Banking Days) after it becomes aware of the same;

     (ii) Financial Reporting: any material amendment to its method of financial
          reporting,   together  with  full  particulars  thereof,  the  reasons
          therefor and effect thereof;

     (iii)Actions  Against:  the commencement of, or any new development in, any
          action,   suit  or  proceeding  against  it  before  any  Governmental
          Authority which  individually or together with any such other actions,
          suits or proceedings against it could reasonably be expected to have a
          Material Adverse Effect;

     (iv) Amendments  to Charter  or  By-laws:  any  material  amendment  of its
          charter or by-laws, such notice to include a copy of the amendment;

     (v)  Credit  Agreement  Defaults:  any  material  default  by it under  any
          agreement  or  agreements   creating,   evidencing   or   guaranteeing
          indebtedness  for borrowed  money in an aggregate  amount in excess of
          U.S.$50,000,000 (or the Equivalent Amount in other currencies), or any
          default or event which could  entitle the lender or holder  thereof to
          accelerate  the  payment  of  such  indebtedness  in  excess  of  such
          aggregate amount; and

     (vi) Rating  Changes:  any  change in the  rating of its Debt by Moody's or
          S&P, or the failure of either Moody's or S&P to rate its Debt;

(j)  Maintain  Ownership of Borrower:  maintain direct or indirect  ownership of
     all of the  issued and  outstanding  shares of all  classes of the  capital
     stock of the Borrower;

(k)      Restriction on Disposition of Assets: not, in any Fiscal Year, sell or
         dispose of (other than in connection with a transaction permitted by,
         and undertaken in accordance with the provisions of, Section 6.1(d))
         any substantial part of its property or assets; provided that the
         foregoing shall not prohibit any such sale or disposition which,
         together with all other such sales or dispositions in any Fiscal Year,
         could not reasonably be expected to have a Material Adverse Effect; and
         provided further that in any event, the Guarantor shall at all times,
         both before and after any such sale or disposition, continue to have a
         Consolidated Tangible Net Worth equal of at least U.S.$1,600,000,000;

(l)      Subordination: ensure that payment of all long term debt for borrowed
         money (including any current portion of that long term debt) owed by
         the Guarantor to any Affiliate of the Guarantor is postponed and
         subordinated in right of payment to all amounts payable by the
         Guarantor to the Guarantee Beneficiaries under this Guarantee;

(m)  Guaranteed  Obligations Pari Passu: ensure that the Guaranteed  Obligations
     rank at least pari passu in  priority  of payment  with all other long term
     debt for borrowed money of the Guarantor;

(n)  Maintenance of Ratings:  cause its Debt to continue to be assigned a rating
     by each of Moody's and S&P;

(o)  Remain Publicly Traded:  cause its common stock or other equity  securities
     to  continue  to be listed  and  posted  for  trading on the New York Stock
     Exchange;

(p)  Pay all Amounts:  punctually pay all amounts payable by it pursuant to this
     Guarantee; and

(q)  Year 2000 Compliance: take all reasonable commercial efforts as part of its
     Year 2000 Compliance program, to ensure that its material  mission-critical
     computer   systems  and  programs  are  Year  2000  Compliant  as  soon  as
     practicable and, in any event before December 31, 1999.

                                   ARTICLE 7
                             EXPENSES AND INDEMNITY
                             ----------------------

7.1     Expenses

         The Guarantor shall pay to the Guarantee Beneficiaries all reasonable
out-of-pocket costs and expenses, including all reasonable legal fees (on a
solicitor and his own client basis) and other expenses incurred by the Guarantee
Beneficiaries from time to time in the enforcement, realization and collection
of or in respect of this Guarantee. All such amounts shall be payable by the
Guarantor on demand, shall bear interest at a rate per annum equal to the
Canadian Prime Rate plus 2% per annum, calculated from the date incurred by the
Guarantee Beneficiaries to the date paid by the Guarantor, compounded monthly on
the last day of each month, both before and after default, maturity and
judgment.

7.2     Indemnity

         The Guarantor shall indemnify the Guarantee Beneficiaries and hold them
harmless against all losses, costs, expenses, liabilities, claims or damages
(collectively, the "Claims") incurred by the Guarantee Beneficiaries as a result
of:

(a)  any representation or warranty made herein by the Guarantor being incorrect
     at the time it was made;

(b)  a default by the Guarantor in the payment of any Guaranteed Obligations;

(c)  the failure by the  Guarantor to comply with any of its  covenants or other
     obligations hereunder; or

(d)  non-compliance by the Guarantor with Applicable Environmental Laws;

provided that this indemnity shall not apply in respect of any Claims which are
caused by the gross negligence or wilful misconduct of the Guarantee Beneficiary
claiming to be indemnified.

         Without limiting the generality of the foregoing, the foregoing
indemnities shall extend to:

(i)               reasonable legal fees (on a solicitor and his own client
                  basis), including the costs of defending and/or
                  counterclaiming or claiming over against third parties in
                  respect of any action or matter; and

(ii)              any amounts payable arising out of a settlement of any action
                  brought against the Guarantee Beneficiaries with or without
                  the consent of the Guarantor.

         The foregoing indemnities shall also extend to the officers, directors,
employees, agents, shareholders and assignees of the Guarantee Beneficiaries,
and the Guarantee Beneficiaries will hold the benefit of the foregoing
indemnities in trust for such indemnified parties to the extent necessary to
give effect hereto. A certificate of a Guarantee Beneficiary (accompanied by
reasonably detailed particulars) as to the amount of any such loss or expense
shall be prima facie proof of the amount thereof. The amount required to be paid
by the Guarantor hereunder shall be payable by the Guarantor on demand, and
shall bear interest at Canadian Prime Rate plus 2% per annum, calculated from
the date any indemnified amount is paid by any one or more Guarantee
Beneficiaries to the date paid by the Guarantor, both before and after default,
maturity and judgment. The undertakings and indemnities set out in this Section
shall survive the payment and satisfaction of the Guaranteed Obligations and the
termination of the Credit Agreement and this Guarantee.

                                    ARTICLE 8
                                     GENERAL
                                     -------

8.1     Notice

         Any notice, communication or demand to be made or given hereunder shall
be in writing and may be made or given by personal delivery or by telecopy or
other electronic means of communication addressed as follows:



<PAGE>



                  To the Guarantor:

                  KeySpan Corporation
                  1 Metro Tech Centre
                  Brooklyn, New York
                  11201

                  Attention:        Treasurer
                  Telecopier No.:   (718) 403-6421

                  To the Administrative Agent and Guarantee Beneficiaries:

                  Royal Bank of Canada
                  Global Syndications - Canada
                  12th Floor, South Tower
                  Royal Bank Plaza, 200 Bay Street
                  Toronto, Ontario
                  M5J 2J2

                  Attention:        Manager, Agency
                  Telecopier No.:   (416) 974-2407

or such other address or telecopy number as any party may from time to time
notify the other in accordance with this Section. Any notice, communication or
demand made or given by personal delivery during usual business hours at the
place of receipt on a Banking Day shall conclusively be deemed to have been
given on the day of actual delivery thereof. Any notice, communication or demand
made or given by personal delivery or by telecopier or other electronic means of
communication after normal business hours at the place of receipt or otherwise
than on a Banking Day shall be conclusively deemed to have been made or given at
9:00 a.m. on the Banking Day following actual delivery or transmittal, as the
case may be.

8.2     Governing Law and Jurisdiction

(a)  This  Guarantee  and any  other  documents  delivered  hereunder  shall  be
     governed by and  interpreted in accordance with the laws of Alberta and the
     laws of Canada applicable therein,  and shall in all respects be treated as
     Alberta contracts.

(b)  The Guarantor  hereby (i)  irrevocably  submits to the  jurisdiction of the
     courts of the  Province  of  Alberta  over any suit,  action or  proceeding
     arising out of or relating to this Guarantee;  (ii) irrevocably agrees that
     all claims in respect of any suit;  action or  proceeding  may be heard and
     determined in such courts;  (iii) irrevocably waives, to the fullest extent
     permitted by law, any objection  which it may have or hereafter have to the
     laying of the venue of any such suit, action or proceeding  brought in such
     courts and any claim that any such suit,  action or  proceeding  brought in
     such courts has been brought in an inconvenient forum; and (iv) irrevocably
     appoints  Macleod Dixon (the "Process  Agent"),  with an office at the date
     hereof at 3700, 400 - 3rd Avenue S.W.,  Calgary,  Alberta,  T2P 4H2, as its
     authorized  agent to accept and acknowledge  service of any and all process
     which may be served in any suit, action or proceeding,  and upon which such
     process may be served.  Service of all  process  which may be served in any
     suit,  action or  proceeding  on the  Guarantor may be made by delivering a
     copy of such  process to the  Process  Agent at the Process  Agent's  above
     address,  and the Guarantor hereby  irrevocably  authorizes and directs the
     Process  Agent to receive such service on its behalf.  Notwithstanding  the
     foregoing  the Guarantor may from time to time request by notice in writing
     to the  Administrative  Agent that the person  designated  as Process Agent
     and/or  the   address  of  the   Process   Agent  be  changed  and  if  the
     Administrative  Agent agrees to that change  "Process Agent" as used herein
     shall  mean  that  the  new  person  designated  as  Process  Agent  or  if
     applicable,  the  new  address  of  the  Process  Agent  as  agreed  by the
     Administrative  Agent.  The Guarantor  agrees that a final  judgment in any
     such action or proceeding  shall be  conclusive  and may be enforced in any
     other  manner  provided by law.  Nothing in this  section  shall affect the
     right of the  Administrative  Agent and the Lenders to serve process in any
     manner  permitted by law, or limit the rights of the  Administrative  Agent
     and the Lenders to bring proceedings against the Guarantor in the courts of
     any other jurisdiction.

8.3     Judgment Currency

(a)      If, for the purpose of obtaining or enforcing judgment against the
         Guarantor in any court in any jurisdiction, it becomes necessary to
         convert into any other currency (such other currency being hereinafter
         in this Section 8.3 referred to as the "Judgment Currency") an amount
         due in Canadian Dollars or United States Dollars under this Guarantee
         (including a conversion of United States Dollars to Canadian Dollars),
         the conversion shall be made at the rate of exchange prevailing on the
         Banking Day immediately preceding:

          (i)  the date of actual  payment of the amount due, in the case of any
               proceeding  in the  courts  of any  jurisdiction  that  will give
               effect to such conversion being made on such date; or

          (ii) the date on  which  the  judgment  is  given,  in the case of any
               proceeding in the courts of any other jurisdiction;

          (the date as of which such conversion is made pursuant to this Section
          8.3 being hereinafter in this Section 8.3 referred to as the "Judgment
          Conversion Date").

(b)      If, in the case of any proceeding in the court of any jurisdiction
         referred to in Section 8.3, there is a change in the rate of exchange
         prevailing between the Judgment Conversion Date and the date of actual
         payment of the amount due, the Guarantor shall pay such additional
         amount (if any) as may be necessary to ensure that the amount paid in
         the Judgment Currency, when converted at the rate of exchange
         prevailing on the date of payment, will produce the amount of Canadian
         Dollars or United States Dollars, as the case may be, which could have
         been purchased with the amount of Judgment Currency stipulated in the
         judgment or judicial order at the rate of exchange prevailing on the
         Judgment Conversion Date.

(c)      Any amount due from the Guarantor under the provisions of Section 8.3
         shall be due as a separate debt and shall not be affected by or merged
         into any judgment being obtained for any other amounts due under or in
         respect of this Guarantee.

(d)      The term "rate of exchange" in this Section 8.3 means the rate of
         exchange at which the Administrative Agent is able, on the relevant
         date, to purchase the currency converted for the Judgment Currency.

8.4     Payments Free and Clear of Taxes

(a)  All payments to the Guarantee  Beneficiaries  by the  Guarantor  under this
     Guarantee  shall be made  free and  clear  of,  and  without  deduction  or
     withholding for, any and all Taxes imposed by any  Governmental  Authority,
     unless  such  Taxes  are  required  by  Applicable  Law to be  deducted  or
     withheld. If the Guarantor shall be required by Applicable Law to deduct or
     withhold any such Taxes from or in respect of any amount payable hereunder,
     then (i) the amount  payable under this  Guarantee  shall be increased (and
     for  greater  certainty,  in the case of  interest,  the amount of interest
     shall be increased) as may be necessary so that,  after making all required
     deductions or withholdings (including deductions or withholdings applicable
     to any  additional  amounts paid under this Section  14.11),  the Guarantee
     Beneficiaries  receive  an  amount  equal to the  amount  they  would  have
     received  if no such  deduction  or  withholding  had been  made,  (ii) the
     Guarantor  shall  make  such  deductions  or  withholdings,  and  (iii) the
     Guarantor shall immediately pay the full amount deducted or withheld to the
     relevant Governmental Authority in accordance with Applicable Law.

(b)  The  Guarantor  agrees to  immediately  pay any present or future  stamp or
     documentary taxes or any other excise or property taxes, charges, financial
     institutions  duties,  debits  taxes or  similar  levies  (all such  taxes,
     charges,  duties and levies being referred to as "Other Taxes") which arise
     from any payment made by the  Guarantor  hereunder  or from the  execution,
     delivery or registration of, or otherwise with respect to, this Guarantee.

(c)  The Guarantor  shall  indemnify the  Guarantee  Beneficiaries  for the full
     amount of Taxes or Other Taxes (including, without limitation, any Taxes or
     Other Taxes imposed by any jurisdiction on amounts payable by the Guarantor
     under this Section  14.11) paid by the  Guarantee  Beneficiaries  or any of
     them,  and any  liability  (including  penalties,  interest  and  expenses)
     arising from or with  respect to such Taxes or Other Taxes,  whether or not
     they were correctly or legally asserted. Payment under this indemnification
     shall  be  made  within  10 days  from  the  date  the  relevant  Guarantee
     Beneficiaries  makes a written claim to the Guarantor in respect thereof. A
     certificate as to the amount of such Taxes or Other Taxes  submitted to the
     Guarantor  by the  relevant  Guarantee  Beneficiaries  shall be  conclusive
     evidence,  absent  manifest  error, of the amount due from the Guarantor to
     the relevant Guarantee Beneficiaries.

(d)  The Guarantor  shall furnish to the relevant  Guarantee  Beneficiaries  the
     original or a certified  copy of a receipt  evidencing  payment of Taxes or
     Other  Taxes  made by the  Guarantor  within 30 days  after the date of any
     payment of Taxes or Other Taxes.

(e)  The  provisions of this Section 14.11 shall survive the  termination of the
     Credit Agreement and this Guarantee and the payment and satisfaction of all
     Guaranteed Obligations.

8.5     Prohibited Rate

(a)  Notwithstanding  anything  herein  or  elsewhere  contained,  if and to the
     extent that under any  circumstances  the effective annual rate of interest
     (including,  to the extent applicable to such determination,  the aggregate
     of all charges and expenses, whether in the form of fees, fines, penalties,
     commissions or similar  charges or expenses)  received or to be received by
     the  Guarantee  Beneficiaries  would but for this Section be a rate that is
     prohibited  by  Applicable  Laws (such rate  being  hereinafter  called the
     "Prohibited Rate"), then the effective annual rate of interest shall be and
     be deemed to be  adjusted  to the  highest  rate  (hereinafter  called  the
     "Adjusted  Rate") that the  Guarantor  could validly have agreed to pay the
     Guarantee  Beneficiaries  by contract on the date hereof  under  Applicable
     Laws.

(b)  If the Guarantee  Beneficiaries  have received a payment or partial payment
     which would,  but for this Section,  constitute  payment at the  Prohibited
     Rate, then any amount or amounts so received by the Guarantee Beneficiaries
     in excess of the Adjusted Rate shall and shall be deemed to have  comprised
     a credit to be applied to subsequent payments on account of interest,  fees
     or other  amounts  properly due to the  Guarantee  Beneficiaries,  or if no
     further amounts are due, shall be repaid to the Guarantor.

(c)  It is the  intent of this  Section  that under no  circumstances  shall the
     Guarantee Beneficiaries be entitled to receive nor shall it in fact receive
     any payment of interest, fees or other amounts at a rate that is prohibited
     under Applicable Laws.

8.6     Assignment

(a)      The Guarantee Beneficiaries may assign, or grant participations in,
         this Guarantee (in whole or in part) to any person to whom they are
         entitled to assign interests, or grant participations in the Credit
         Agreement provided that such an assignment or grant of participation is
         made concurrently with a corresponding assignment or grant of
         participation under the Credit Agreement.

(b)      Subject to Section 6.1(d), the Guarantor shall not assign its rights or
         obligations hereunder without the prior written consent of the
         Guarantee Beneficiaries.

(c)      In the event that another Lender is appointed as Administrative Agent
         pursuant to and in accordance with the Credit Agreement, the
         Administrative Agent shall give notice to the Guarantor and shall be
         entitled to assign to such successor Administrative Agent all its
         rights and obligations hereunder and the Guarantor shall take such
         actions and execute and deliver to the Administrative Agent and other
         such successor Administrative Agent all such documents as the
         Administrative Agent and its counsel shall reasonably request for the
         purpose of effecting the assignment.

8.7     Severability

         Any provision of this Guarantee which is prohibited or unenforceable in
any jurisdiction shall not invalidate the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

8.8     Whole Agreement

         This Guarantee constitutes the whole and entire agreement with regard
to the subject matter hereof and cancels and supersedes any prior agreements,
undertakings, declarations, commitments and representations, written or oral, in
respect thereof.

8.9     Amendments, Waivers and Consents

         This Guarantee may only be amended by agreement in writing between the
Guarantor and the Administrative Agent, and provisions hereof may be waived or
matters consented to by the Guarantee Beneficiaries only if the Guarantee
Beneficiaries so agree in writing. Any waiver or consent by the Guarantee
Beneficiaries under any provision of this Guarantee may be given subject to any
conditions thought fit by the Guarantee Beneficiaries. Any waiver or consent
shall be effective only in the specific instance and for the purpose for which
it is given.

8.10    Further Assurances

(a)  The  Guarantor  shall  promptly  cure any defect by it in the execution and
     delivery of this Guarantee.

(b)  The Guarantor,  at its expense,  shall promptly  execute and deliver to the
     Guarantee  Beneficiaries,  upon  request  by the  Administrative  Agent  in
     writing,  all such  other  and  further  documents,  agreements,  opinions,
     certificates  and  instruments in order to give effect to the covenants and
     agreements  of  the  Guarantor  in  this  Guarantee,  and  shall  make  any
     recording,  file any notice or obtain any consent in connection  therewith,
     all as may be reasonably necessary or appropriate.

8.11    Time of the Essence

         Time shall be of the essence of this Guarantee.

8.12    Separate Action

         In case of default hereunder, the Guarantee Beneficiaries may maintain
an action or separate successive actions upon this Guarantee against the
Guarantor whether or not the Borrower is joined therein or a separate action is
brought against the Borrower or any other guarantor or any judgment obtained
against any of them. The Guarantee Beneficiaries' rights shall not be exhausted
by the exercise of any of the Guarantee Beneficiaries' rights hereunder or
otherwise against the Guarantor or by any number of successive actions until and
unless all Guaranteed Obligations have been fully paid an performed, and each of
the Guarantor's obligations hereunder has been fully paid and performed.

8.13    Waiver and Acknowledgement

(a)      The Guarantor hereby expressly waives:

          (i)  notice of acceptance of this Guarantee;

          (ii) notice  of  the  existence  or  creation  of  all  or  any of the
               Guaranteed Obligations;

          (iii)presentment,  demand, notice of dishonour, protest, and all other
               notices whatsoever; and

          (iv) all diligence in collection or protection of or realization  upon
               the  Guaranteed  Obligations  or any thereof,  or any  obligation
               hereunder;

(b)      The Guarantor hereby acknowledges that:

          (i)  the Guarantor has received and reviewed the Credit Agreement; and

          (ii) this Guarantee is intended to guarantee payment of the Guaranteed
               Obligations.

8.14    No Merger

         Neither the taking of any judgment nor the exercise of any right or
remedy shall operate to extinguish the liability of the Guarantor to make
payment of the Guaranteed Obligations nor shall the acceptance of any payment
constitute or create any novation, and it is further agreed that the taking of a
judgment or judgments under any of the covenants herein contained shall not
operate as a merger of such covenants.

8.15    Successors and Assigns

         This Guarantee shall be binding upon the Guarantor, its successors and
assigns, and shall enure to the benefit of the Lenders, the Administrative Agent
and their respective successors and assigns.

8.16    Execution

         This Guarantee may be executed by facsimile transmission. Any facsimile
transmission copy of this Guarantee shall be considered an original copy. The
Guarantor shall promptly deliver to the Administrative Agent an original
executed copy of this Guarantee immediately following facsimile transmission of
an executed copy of this Guarantee being delivered.

         IN WITNESS WHEREOF the Guarantor has executed this Guarantee.

                          KEYSPAN CORPORATION


                          By:
                                 -----------------------------------------------
                                 Name:
                                 Title:


<PAGE>












                                   SCHEDULE 1

                               LITIGATION SCHEDULE

Legal Proceedings Regarding Environmental Matters

Air. The Guarantor has submitted timely applications for permits in accordance
with the requirements of the Title V of the 1990 amendments to the Federal Clean
Air Act ("CAA"). Final permits have been issued for all of the Guarantor's
electric generating facilities with the exception of the Far Rockaway facility,
which is pending. The permits allow the Guarantor's electric generating plants
to continue to operate without any additional significant expenditures, except
as described below.

The Guarantor's generating facilities are located within a CAA severe ozone
non-attainment area, and are subject to the Phase I, II, and III NOx reduction
requirements established under the Ozone Transportation Commission ("OTC")
memorandum of understanding. Software and equipment upgrades of approximately $1
million for continuous emissions monitors ("CEM") may be required in 1999-2000
to meet EPA requirements for the NOx allowance tracking/trading program and
certain other regulatory changes affecting the operation of CEM systems. The
Guarantor currently estimates that it may be required to spend between $10
million and $35 million by the year 2003 for additional pollution control
equipment to achieve the OTC Phase III NOx reduction requirements and/or new
requirements imposed under the EPA NOx state implementation plan, depending on
the actual level of NOx emission reductions which are required when pending
regulations are implemented by the State of New York.

Water. The Guarantor possesses permits for its generating units which authorize
discharges from cooling water circulating systems and chemical treatment
systems. Several of these permits are being renewed; one or more of the new
permits are expected to require biological monitoring to determine if the
cooling water intake structures meet the best available technology requirements
of the Federal Clean Water Act ("CWA") for the protection of marine life.

On behalf of Long Island Power Authority ("LIPA"), the Guarantor provides
management and operations support for the LIPA-Connecticut Light and Power
Company electric transmission cable system located under the Long Island Sound
(the "Sound Cable"). The Connecticut Department of Environmental Protection
("DEP") and the New York State Department of Environmental Conservation ("DEC")
separately have issued Administrative Consent Orders ("ACOs") in connection with
releases of insulating fluid from the Sound Cable. The ACOs require the
submission of a series of reports and studies describing cable system condition,
operation and repair practices, alternatives for cable improvements or
replacement, and environmental impacts associated with prior leaks of fluid into
the Long Island Sound. Compliance activities associated with the ACOs are
ongoing.

Superfund Sites. Federal and New York State Superfund laws impose liability,
regardless of fault, upon generators of hazardous substances for costs
associated with remediating contaminated property. In the course of its business
operations, the Guarantor generates materials which are subject to these laws.
From time to time, the Guarantor has received notices under these laws
concerning possible claims with respect to sites at which hazardous substances
generated by the Guarantor and other potentially responsible parties ("PRPs")
allegedly were disposed.

The DEC has notified the Guarantor, pursuant to the State Superfund program,
that the Guarantor may be responsible for the disposal of hazardous substances
at the Huntington/East Northport Site, a municipal landfill property. The DEC
investigation is in its preliminary stages, and the Guarantor currently is
unable to estimate its share, if any, of the costs required to investigate and
remediate this site.

Manufactured Gas Plant ("MGP") Sites. The Guarantor or its predecessor entities,
including Brooklyn Union of Long Island and Long Island Lighting Company
("LILCO"), historically owned or operated several former MGP sites. Operations
at these plants in the late 1800's and early 1900's may have resulted in the
release of hazardous substances. These former sites have been identified to the
DEC for inclusion on appropriate waste site inventories. In certain
circumstances, former MGP sites can give rise to environmental cleanup
responsibilities for the Guarantor.

The Guarantor has several former MGP sites that will require investigation
and/or remediation. In 1995, the Guarantor executed an ACO with the DEC which
addressed the investigation and remediation of the Brooklyn Borough Works site
in Coney Island, Brooklyn. In 1998, the Guarantor executed an ACO for the
investigation and remediation of the Clifton MGP site in Staten Island. Both of
these properties are owned by the Guarantor. The City of New York has notified
the Guarantor that a property now owned by the City which was formerly owned and
operated by a Brooklyn Union of Long Island predecessor, the Citizen's Site,
should be investigated. The Guarantor has submitted an investigation study plan
and requested cost sharing for this property with the City. The Guarantor is
awaiting the City's response. Two ACO's were executed on March 31, 1999 for
Brooklyn Union of Long Island MGP sites. One ACO addressed two MGP sites
classified as "Class II Sites" on the State registry of inactive hazardous waste
sites. The other ACO addressed the four other MGP sites. Both ACO's generally
require Brooklyn Union of Long Island to investigate the condition of each site
and conduct remediation activities depending on the results of the
investigation. The investigation of the Class II listed sites will proceed
first, to be followed by the investigation of the four other sites in three
month intervals.

The final end uses for these sites and acceptable remediation goals have not
been determined in the ACOs. In addition, investigation may be required at other
former MGP sites before determinations can be made regarding the need for or
scope of potential remediation at these locations. Based upon activities
conducted to date, the Guarantor estimates the minimum cost of its MGP-related
environmental cleanup activities will be approximately $130 million; that amount
has been accrued by the Guarantor as an environmental liability. The actual
MGP-related costs may be substantially higher, depending upon remediation
experience, selected end use for each site, and actual environmental conditions
encountered.

Ravenswood. In June 1999 the Guarantor acquired the 2,168 megawatt Ravenswood
electric generating facility located in Queens, New York from Consolidated
Edison Company of New York, Inc. ("Con Ed") for approximately $597 million. The
Guarantor has assumed all of Con Ed's historical and current environmental
contingency obligations relating to facility operations other than liabilities
arising from pre-closing disposal of waste at off-site locations and any
monetary fines arising from Con Ed's pre-closing conduct. Presently, there are
four ACO's issued to Con Ed by the DEC. Generally, the Guarantor's derivative
obligations are expected to include investigation and remediation of certain
petroleum releases, inspection and any necessary corrective action for certain
aboveground storage tanks and underground piping, potential upgrades to existing
cooling water intake structures, and implementation of an air emissions opacity
reduction program. Pursuant to its derivative obligations, the Guarantor will
complete the investigation and remediation of certain petroleum and other
hazardous material releases at Ravenswood, as necessary. The Guarantor will also
address similar releases not covered by the ACO's. The Ravenswood facility is
also located on a former MGP site. In general, costs arising from remediation of
MGP wastes could be material. Based on information currently available for
environmental contingencies related to the Ravenswood acquisition, the Guarantor
has accrued $5 million as the minimum liability to be incurred.





<PAGE>









         Schedule G to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                            FORM OF POWER OF ATTORNEY


     The undersigned,  KeySpan Energy  Development Co. (the "Borrower"),  hereby
appoints [name of Lender] (the "Lender"),  acting by any authorized signatory of
the Lender, the attorney of the Borrower:

(a)  to sign,  for and on behalf and in the name of the Borrower as drawer,  and
     to endorse on its behalf,  Bankers' Acceptances drawn on the Lender payable
     to the order of the  Borrower or payable to the order of the Lender or "CDS
     & Co.";

(b)  to  fill  in  the  amount,   date  and  maturity  date  of  those  Bankers'
     Acceptances; and

(c)  to discount  and/or  deliver  those  Bankers'  Acceptances  which have been
     accepted by the Lender;

provided that those acts in each case are to be undertaken by the Lender
strictly in accordance with instructions given to the Lender by the Borrower as
provided in this Power of Attorney. For certainty, signatures of any authorized
signatory of the Lender may be mechanically reproduced in facsimile on Bankers'
Acceptances in accordance herewith and the Credit Agreement and those facsimile
signatures shall be binding and effective as if they had been manually executed
by such authorized signatory of the Lender.


         This Power of Attorney is provided pursuant to the credit agreement
made as of July 29th, 1999 among the Borrower, the financial institutions from
time to time as Lenders thereunder and Royal Bank of Canada as Administrative
Agent for the Lenders (as amended, modified, supplemented or restated from time
to time in accordance with the provisions thereof, the "Credit Agreement").
Capitalized terms used in this Power of Attorney and which are not defined
herein shall have the meanings given to those terms in the Credit Agreement.


         Instructions from the Borrower to the Lender relating to the execution,
completion, endorsement, discount and/or delivery by the Lender on behalf of the
Borrower of Bankers' Acceptances which the Borrower wishes to submit to the
Lender for acceptance by the Lender shall be communicated by the Borrower in
writing to the Lender by delivery to the Administrative Agent on behalf of the
Lender of a Drawdown Notice by way of Bankers' Acceptances in the form of
Schedule E to the Credit Agreement, a Conversion Notice where a Loan is to be
converted into a Loan by way of Bankers' Acceptances in the form of Schedule D
to the Credit Agreement or a Rollover Notice in respect of a Loan by way of
Bankers' Acceptances in the form of Schedule J to the Credit Agreement, each
being a "Notice" in accordance with provisions of the Credit Agreement.


         The communications in writing by the Borrower to the Administrative
Agent on behalf of the Lender of the instructions set out in the Notice shall
constitute:

(a)               the authorization and instruction of the Borrower to the
                  Lender to sign for and on behalf and in the name of the
                  Borrower as drawer the requested Bankers' Acceptances and to
                  complete and/or endorse Bankers' Acceptances in accordance
                  with such information as set out above; and

(b)               the request of the Borrower to the Lender to accept such
                  Bankers' Acceptances and purchase the same in accordance with
                  the Credit Agreement.


         The Borrower acknowledges that the Lender shall not be obligated to
accept any such Bankers' Acceptances except in accordance with the provisions of
the Credit Agreement.


         The Lender shall be and it is hereby authorized to act on behalf of the
Borrower upon and in compliance with instructions communicated to the Lender as
provided herein if the Lender reasonably believes those instructions to be
genuine. The Lender's actions in compliance with those instructions shall be
conclusively deemed to have been in accordance with the instructions of the
Borrower.


         The Borrower hereby agrees to indemnify the Lender and its directors,
officers, employees, affiliates and agents and to hold it and them harmless from
and against any loss, liability, expense or claim of any kind or nature
whatsoever incurred by any of them as a result of any way acting or inaction in
any way relating to or arising out of this Power of Attorney or the acts
contemplated hereby; provided that this indemnity shall not apply to any such
loss, liability, expense or claim which results from the gross negligence or
wilful misconduct of the Lender or any of its directors, officers, employees,
affiliates and agents.


         No revocation of this Power of Attorney shall reduce, limit or
otherwise affect the obligations of the Borrower in respect of any Bankers'
Acceptances executed, completed, endorsed, discounted and/or delivered in
accordance herewith prior to the time at which that revocation becomes
effective.


         This Power of Attorney is in addition to and not in substitution of any
agreement to which the Lender and the Borrower are parties.


         This Power of Attorney shall be governed in all respects by the laws of
Alberta and the laws of Canada applicable therein and the Borrower and the
Lender each hereby irrevocably attorns to the non-exclusive jurisdiction of the
courts of that jurisdiction in respect of all matters arising out of this Power
of Attorney.


         In the event of a conflict between the provisions of this Power of
Attorney and the Credit Agreement, the Credit Agreement shall prevail.


   Dated this                 day of                             , 199   .
             ----------------       ------------------------------     ---


                               KEYSPAN ENERGY DEVELOPMENT CO.
                               Per:
                                        ----------------------------------------
                                        Name:
                                        Title:


<PAGE>










         Schedule H to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                            FORM OF REPAYMENT NOTICE

TO: ROYAL BANK OF CANADA, in its capacity as Administrative Agent of the Lenders

DATE:

1.   This  Repayment  Notice  is  delivered  to you  pursuant  to the  terms and
     conditions  of the credit  agreement  dated July 29th,  1999 among  KeySpan
     Energy Development Co. (the "Borrower"), Royal Bank of Canada and the other
     financial  institutions  party  thereto in their  capacity as Lenders  (the
     "Lenders"),  Royal  Bank of Canada in its  capacity  as the  Administrative
     Agent  for  the  Lenders  (the  "Administrative  Agent")  relating  to  the
     establishment  of a Cdn.  $200,000,000  credit  facility  in  favour of the
     Borrower  (as amended,  modified,  supplemented  or  restated,  the "Credit
     Agreement").  Capitalized  terms used  herein , and not  otherwise  defined
     herein  shall  have the  meanings  attributed  to such  terms in the Credit
     Agreement.

2.   The Borrower hereby gives notice of repayment as follows:

(a)  Credit Facility: Loan in [Revolving/Term] Period:

(b)  Date of repayment:

(c)  Loan(s):

(d)  Interest Period maturity (specify for LIBOR Loans,  Bankers' Acceptances or
     BA Equivalent Loans made in lieu thereof):

(e)  Amount(s)  being  repaid  (specify for each (if more than one) type of Loan
     set out in (c) above:

                    Yours truly,

                      KEYSPAN ENERGY DEVELOPMENT CO.
                      Per:
                           ----------------------------------------------
                           Name:
                           Title:


                    [To  be   signed   by  any  one  of  the   president,   a
                    vice-president,  treasurer,  controller  or the corporate
                    secretary of the Borrower]



<PAGE>







         Schedule I to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                    FORM OF REQUEST FOR AN OFFER OF EXTENSION

Date:

Royal Bank of Canada
Global Syndications Canada
12th Floor
South Tower, Royal Bank Plaza
200 Bay Street
Toronto, Ontario
M5J 2J5

Telecopier No.: (416) 974-2407

Dear Sirs/Mesdames:

Re:      Request for an Offer of Extension Pursuant to
         Section 2.4 of the Credit Agreement

         We refer to the credit agreement dated July 29th, 1999 among KeySpan
Energy Development Co. as Borrower, and a syndicate of Lenders, with Royal Bank
of Canada as Administrative Agent (as amended, modified, supplemented or
restated, the "Credit Agreement"), and in particular to Section 2.4 of the
Credit Agreement. Terms and expressions defined in the Credit Agreement which
are used and not otherwise defined herein shall have the same meanings ascribed
to them in the Credit Agreement.

We hereby request that the Revolving Lenders extend the Revolving Period to
_________________ [for a period of 364 days from the last date of the current
Revolving Period.]

                                 Yours truly,

                                 KEYSPAN ENERGY DEVELOPMENT CO.
                                 Per:
                                      -----------------------------
                                      Name:
                                      Title:






<PAGE>







       Schedule J to the Credit Agreement dated July 29th, 1999 among KeySpan
       Energy Development Co. as Borrower and a syndicate of Lenders, with
       Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                             FORM OF ROLLOVER NOTICE

TO:  ROYAL  BANK OF  CANADA,  in its  capacity  as  Administrative  Agent of the
     Lenders

DATE:

1.   This  Rollover  Notice  is  delivered  to you  pursuant  to the  terms  and
     conditions  of the credit  agreement  dated July 29th,  1999 among  KeySpan
     Energy Development Co. (the "Borrower"), Royal Bank of Canada and the other
     financial  institutions  party  thereto in their  capacity as Lenders  (the
     "Lenders"),  and Royal  Bank of Canada in its  capacity  as  Administrative
     Agent  for  the  Lenders  (the  "Administrative  Agent")  relating  to  the
     establishment  of a Cdn.  $200,000,000  credit  facility  in  favour of the
     Borrower  (as amended,  modified,  supplemented  or  restated,  the "Credit
     Agreement").  Capitalized  terms used  herein,  and not  otherwise  defined
     herein,  shall  have the  meanings  attributed  to such terms in the Credit
     Agreement.

2.   The Borrower hereby requests a Rollover as follows:

(a)  Credit Facility: Loan in [Revolving/Term] Period:

(b)  Rollover Date:

(c)  Amount of Rollover:

(d)  Type of Loan:

(e)  New Interest Period (specify term of LIBOR Loans,  Bankers'  Acceptances or
     BA Equivalent Loans made in lieu thereof):

(f)  Payment, delivery or issuance instructions (if any):

                Yours truly,

                KEYSPAN ENERGY DEVELOPMENT CO.
                Per:
                     -----------------------------------------------
                     Name:
                     Title:

                [To  be   signed   by  any   one   of   the   president,   a
                vice-president,   treasurer,  controller  or  the  corporate
                secretary of the Borrower]


<PAGE>








         Schedule K to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                         FORM OF SUBORDINATION AGREEMENT

     This  Subordination  Agreement  dated as of July 29th,  1999 among  KeySpan
Energy  Development Co., as Borrower,  KS Midstream Finance Co., as Subordinated
Lender and Royal Bank of Canada, as  Administrative  Agent, and in trust for the
rateable benefit of the Senior Lenders.

RECITALS:

(a)               Royal Bank of Canada, as Administrative Agent and Senior
                  Lender, and the other Senior Lenders have agreed to make the
                  Credit Facility available to the Borrower upon the terms and
                  conditions contained in the Credit Agreement;

(b)               The Borrower is indebted to the Subordinated Lender in the
                  amount of $101,511,840 plus interest thereon since April 27,
                  1999 pursuant to the KS Finance Loan and the terms and
                  provisions of the Term Loan Agreement;

(c)               It is a condition precedent to the Senior Lenders making the
                  Credit Facility available to the Borrower that the
                  Subordinated Lender agree to postpone and subordinate its
                  claims against the Borrower in favour of the Administrative
                  Agent and the Senior Lenders on the terms set forth below;

         Now therefore in consideration of the foregoing and the mutual
agreements contained herein (the receipt and adequacy of which are hereby
acknowledged by all parties hereto), the parties hereto agree as follows:

                                    Artice 1
                         DEFINITIONS AND INTERPRETATION
                         ------------------------------

Section 1.1      Certain Defined Terms

         As used in this agreement, the following terms shall have the following
meanings:

"Administrative Agent" means Royal Bank of Canada, when acting in its capacity
as Administrative Agent under the Credit Agreement, and includes any successor
Administrative Agent appointed pursuant to Section 13.10 of the Credit
Agreement;

"Borrower" means KeySpan Energy Development Co., an unlimited  liability company
organized and existing under the laws of Nova Scotia,  Canada, and any successor
thereto permitted pursuant to the Credit Agreement;

"Credit Agreement" means the document entitled "Credit Agreement", among the
Borrower, the Senior Lenders and the Administrative Agent, dated as of July 29,
1999, as amended, restated, replaced or substituted from time to time, and
includes all agreements and instruments entered into by the Borrower pursuant
thereto or in connection therewith;

"Credit Facility" means the extendible revolving/term credit facility made
available to the Borrower by the Senior Lenders pursuant to, and subject to the
terms and conditions of, the Credit Agreement;

          "Indebtedness"  means,  collectively,  the Senior Indebtedness and the
          Subordinated Indebtedness;

         "KS Finance Loan" means the term loan and all other indebtedness and
         liabilities of the Borrower outstanding pursuant to the Term Loan
         Agreement;

         "Permitted Payments" means (i) payments made on the Subordinated
         Indebtedness with the prior written consent of the Administrative
         Agent; and (ii) reasonable payments of interest only on the
         Subordinated Indebtedness, (and no other payments thereon without the
         prior written consent of the Administrative Agent, including, without
         limitation, voluntary prepayments of principal), such reasonable
         interest payments to be Permitted Payments only when and so long as
         there is no Default or Event of Default outstanding under the Credit
         Agreement, and then only to the extent that the consolidated cash flow
         of the Borrower is, and after such payment will continue to be,
         sufficient to meet all of the obligations of the Borrower, including
         all of the obligations of the Borrower to the Senior Lenders under the
         Credit Agreement;

"Senior Lenders" means each of the financial institutions named on Schedule A to
the Credit Agreement as a Lender which has executed the Credit Agreement, and
any other person which has become a party to the Credit Agreement as a Lender,
and includes the Administrative Agent in its capacity as a Lender, but excluding
any such financial institution, the Commitment of which has been reduced to
zero, and excluding the Administrative Agent in its capacity as the
Administrative Agent;

         "Senior Indebtedness" means all present and future obligations,
         indebtedness, liabilities, covenants, agreements and undertakings of
         the Borrower to the Senior Lenders under or in relation to the Credit
         Agreement, howsoever arising, whether direct or indirect, absolute or
         contingent, matured or not, extended or renewed, wheresoever and
         howsoever incurred, and any ultimate unpaid balance thereof, including
         all future advances and re-advances, and whether the same is from time
         to time reduced and thereafter increased or entirely extinguished and
         thereafter incurred again and whether the Borrower be bound alone or
         with others and whether as principal or surety, and including, without
         limitation, all obligations, liabilities and indebtedness of the
         Borrower under the Credit Agreement and all expenses paid or incurred
         by the Administrative Agent or by or on behalf of the Senior Lenders in
         endeavouring to collect or realize upon any of the foregoing;

         "Senior Lenders' Security" means any security heretofore or hereafter
         granted by the Borrower or any other person to the Administrative Agent
         or the Senior Lenders, or both, as security for the Senior
         Indebtedness;

         "Subordinated Indebtedness" means all present and future obligations,
         indebtedness, liabilities, covenants, agreements and undertakings of
         the Borrower to the Subordinated Lender under or in relation to the
         Term Loan Agreement, howsoever arising, whether direct or indirect,
         absolute or contingent, matured or not, extended or renewed,
         wheresoever and howsoever incurred, and any ultimate unpaid balance
         thereof, including all future advances and readvances, and whether the
         same is from time to time reduced and thereafter increased or entirely
         extinguished and thereafter incurred again and whether the Borrower be
         bound alone or with others and whether as principal or surety, and
         including, without limitation, all obligations, liabilities and
         indebtedness of the Borrower to the Subordinated Lender in respect of
         the KS Finance Loan or under the Term Loan Agreement, and includes all
         expenses paid or incurred by the Subordinated Lender in endeavouring to
         collect or realize upon the foregoing;

         "Subordinated Credit Documents" means, collectively, (c) the Term Loan
         Agreement, and (d) all other documents executed and delivered from time
         to time by the Borrower or any other person (whether alone or with
         another or others) to the Subordinated Lender under, pursuant to or
         otherwise in connection with, the Term Loan Agreement;

          "Subordinated  Lender"  means KS Midstream  Finance Co., a corporation
          existing  under  the  laws  of the  Province  of Nova  Scotia  and any
          purchaser,  assignee or  transferee of the  Subordinated  Indebtedness
          that complies with the provisions of Section 2.8;

         "Subordinated Security" means any security heretofore or hereafter
         granted by the Borrower or any other person to the Subordinated Lender
         as security for the Subordinated Indebtedness; and

         "Term Loan Agreement" means the term loan agreement entered into
         between Royal Bank of Canada and the Borrower dated as of December 17,
         1998, which Term Loan Agreement and the indebtedness and liabilities
         thereunder were assigned and transferred by Royal Bank of Canada to the
         Subordinated Lender by way of an Assignment and Assumption Agreement
         dated April 27, 1999 entered into among Royal Bank of Canada, as
         assignor, the Borrower, and the Subordinated Lender, as assignee.

Section 1.2      Further Defined Terms

         Capitalized terms used in this agreement and not otherwise defined
herein but where are defined in the Credit Agreement shall have the meanings
herein given to them in the Credit Agreement.

Section 1.3      Gender and Number

         Any reference in this agreement to gender shall include all genders and
words importing the singular number only shall include the plural and vice
versa.

Section 1.4      Headings, etc.

         The provision of a Table of Contents, the division of this agreement
into Articles and Sections and the insertion of headings are for convenient
reference only and are not to affect its interpretation.

Section 1.5      Reliance by Borrower and Subordinated Lender

         The Subordinated Lender and the Borrower shall be entitled to rely upon
any certificate, notice or other document (including any facsimile) or other
advice, statement or instruction provided to it by the Administrative Agent
pursuant to this Agreement, and they shall be entitled to deal with the
Administrative Agent with respect to all matters under this Agreement, without
obligation whatsoever to satisfy itself as to the authority of the
Administrative Agent to act on behalf of the Senior Lenders and without
liability whatsoever to the Senior Lenders for relying upon any certificate,
notice or other document or other advice, statement or instruction provided to
it by the Administrative Agent, notwithstanding any lack of authority of the
Administrative Agent to provide the same.

                                   Article 2
                                  SUBORDINATION
                                  -------------

Section 2.1      Subordination of Indebtedness

(1)      The Subordinated Indebtedness shall for all purposes be, and shall at
         all times remain, inferior, junior, subordinate and postponed in
         payment to the Senior Indebtedness in the manner and to the extent
         provided in this agreement.

(a)      So long as any Senior Indebtedness is or may become outstanding, the
         Borrower shall not (and shall not permit any of its Subsidiaries to)
         purchase or otherwise acquire the Subordinated Indebtedness, and no
         payments shall be made by the Borrower to, or received by, the
         Subordinated Lender on account of, or in respect of, the Subordinated
         Indebtedness (whether as principal, interest, fees or otherwise) except
         for (but subject to the provisions of Section 2.1(b) and Section
         2.1(c)), Permitted Payments.

(b)      If a Default or an Event of Default occurs and is continuing, no
         Permitted Payments or any other direct or indirect payment (whether in
         cash, property, securities or otherwise or by way of set-off or in any
         other manner) shall be made by the Borrower or received by the
         Subordinated Lender on account of, or in respect of, the Subordinated
         Indebtedness.

(m)      All payments or distributions on account of, or in respect of, the
         Subordinated Indebtedness which are received by the Subordinated Lender
         other than in accordance with the provisions hereof shall be received
         by the Subordinated Lender in trust for the benefit of the Senior
         Lenders, shall be segregated from other funds and property held by the
         Subordinated Lender and shall be immediately paid over to the
         Administrative Agent in the same form as received (with any necessary
         endorsement) to be applied (in the case of cash) to, or held as
         collateral (in the case of non-cash or securities) for, the payment or
         prepayment of the Senior Indebtedness in accordance with the terms of
         the Credit Agreement.

(c)      Subordination of Security

         The Subordinated Security shall for all purposes be, and at all times
remain, inferior, junior, subordinate and postponed to the Senior Lenders'
Security, and no amounts shall be payable or any action taken under the
Subordinated Security except as permitted in this agreement. Without limiting
the generality of the foregoing, the foregoing priority shall prevail in all
circumstances and irrespective of:

(a)  the priorities  otherwise  accorded to the Senior Lenders' Security and the
     Subordinated Security by any Applicable Law;

(b)  the time or order of the  creation,  granting or execution of the Documents
     and the Subordinated Credit Documents;

(c)  the time or order of attachment  or  perfection  of any security  interests
     constituted by the Senior Lenders' Security and the Subordinated Security;

(d)  the time or order of registration  of the Senior Lenders'  Security and the
     Subordinated  Security  or the  filing  of  financing  statements  or other
     instruments and documents with respect thereto;

(e)  the time of the  making of  advances  and  other  loans  under  the  Credit
     Agreement and the Term Loan Agreement; or

(f)  the giving of, or the failure to give, any notice to the Borrower or to any
     other person or the time of giving of any such notice.

Section 2.3      No Action by Subordinated Lender

         The Administrative Agent shall, within a reasonable time of the
occurrence of an Event of Default and a decision by the Senior Lenders to
declare the Senior Indebtedness due and payable, inform the Subordinated Lender
by way of a notice in writing of such decision. The Subordinated Lender shall
neither before nor after the giving of such notice (notwithstanding anything to
the contrary contained in the Subordinated Credit Documents), take or authorize
to be taken any legal proceedings to realize against the assets or properties of
the Borrower until such time as either:

(a)      the Subordinated Lender has paid to the Senior Lenders the Senior
         Indebtedness in full and all commitments of the Senior Lenders to the
         Borrower, under the Documents or otherwise, have been terminated; or

(b)      the Administrative Agent has notified the Subordinated Lender in
         writing that the Senior Indebtedness has been paid in full and all
         commitments of the Senior Lenders to the Borrower under the Documents
         or otherwise, have been terminated.

Section 2.4      Distribution to Creditors

         Upon any distribution of assets of the Borrower to its creditors upon
any dissolution, winding-up, total or partial liquidation, readjustment of debt,
reorganization, compromise, adjustment of debt, arrangement with creditors or
similar proceedings of the Borrower or its property, or in any bankruptcy,
insolvency, receivership, assignment for the benefit of creditors, marshalling
of assets and liabilities of the Borrower or other proceedings, or in the event
of any sale of all or substantially all of its assets within relevant provisions
of any Applicable Law, or proceedings in relation to any of the foregoing,
whether any of the foregoing is voluntary or involuntary, partial or complete:

(a)      all of the Senior Indebtedness shall first be indefeasibly paid and
         performed in full and satisfied before the Subordinated Lender shall be
         entitled to receive or retain any payment or distribution of
         Subordinated Indebtedness from the Borrower or any receiver, trustee in
         bankruptcy, liquidating trustee, agent or other person making such
         payment or distribution or in respect of such proceedings or under or
         in respect of any of the Subordinated Indebtedness or the Subordinated
         Credit Documents;

(b)      the Subordinated Lender irrevocably authorizes the Administrative Agent
         to file as attorney in fact and agent on behalf of the Subordinated
         Lender any and all claims, proofs of debt, petitions, consents and
         other documents in respect of such proceedings or under or in respect
         of any of the Subordinated Indebtedness and the Subordinated Credit
         Documents; and

(c)  any  payment  or  distribution  of  assets of the  Borrower  of any kind or
     character,   whether  in  cash,  property  or  securities,   to  which  the
     Subordinated   Lender  would  be  entitled   (whether  in  respect  of  the
     Subordinated   Indebtedness  or  the   Subordinated   Credit  Documents  or
     otherwise),  shall be paid by the Borrower or by any  receiver,  trustee in
     bankruptcy,  liquidating trustee, agent or other person making such payment
     or   distribution   and  subject  to  Applicable   Law,   directly  to  the
     Administrative  Agent to the extent  necessary to satisfy and  indefeasibly
     pay in full all the Senior  Indebtedness before any payment or distribution
     is made to the Subordinated Lender or any representative thereof.

Section 2.5     Postponement and Trust

         Subject to the provisions hereof in respect of Permitted Payments, the
Senior Lenders shall be entitled to receive payment of the Senior Indebtedness
in full before the Subordinated Lender shall be entitled to receive any payment
on account of the Subordinated Indebtedness. Subject to the provisions hereof in
respect of Permitted Payments, the Administrative Agent, as Administrative
Agent, and in trust for the rateable benefit of itself and the other Senior
Lenders, shall be entitled to receive, for application in payment of the Senior
Indebtedness, any payment or distribution of any kind or character, whether in
cash, property or securities, which may be payable or deliverable to the
Subordinated Lender in respect of the Subordinated Indebtedness. All payments or
distributions upon, or with respect to, the Subordinated Indebtedness which are
received by the Subordinated Lender contrary to these provisions shall be
received in trust for the benefit of the Senior Lenders, shall be segregated
from other funds and property held by the Subordinated Lender and shall be
immediately paid over to the Administrative Agent in the same form as received
(with any necessary endorsement) to be applied (in the case of cash) to, or held
as collateral (in the case of non-cash property or securities) for, the payment
or prepayment of the Senior Indebtedness in accordance with its terms.

Section 2.6     Preservation of Senior Lenders' Rights

         Neither the Administrative Agent nor the Senior Lenders shall be
prejudiced in any way in the right to enforce this agreement by any act or
failure to act on the part of the Borrower or the Subordinated Lender. The
Administrative Agent and the Senior Lenders may, at any time and from time to
time, without any consent of, or notice to, the Subordinated Lender and without
impairing or releasing the obligations of the Subordinated Lender under this
agreement:

(a)  change the  manner,  place or terms of payment or change or extend the time
     of payment of, or renew or alter,  the Senior  Indebtedness  (including any
     change  in the  rate  of  interest),  or  amend  in any  manner  any of the
     Documents;

(b)  sell, exchange,  release,  perfect, not perfect,  alter, renew or otherwise
     deal with any of the Senior Lenders' Security;

(c)  release any person liable in any manner under, or in respect of, any of the
     Documents;

(d)  exercise or refrain from  exercising any rights  against the Borrower,  the
     Guarantor or any other guarantor of the Senior  Indebtedness,  or any other
     person; or

(e)  apply any sums from time to time received to the Senior Indebtedness.

Section 2.7     No Contest of Documents

         The Subordinated Lender will not:

(2)  assert  in any  action,  suit  or  proceeding  whatsoever  the  invalidity,
     unenforceability  or  ineffectiveness  of  this  agreement  or  any  of the
     Documents; or

(3)  participate  in or  co-operate  with any  other  party to  pursue  any such
     action, suit or proceeding;

it being understood and agreed that, regardless of the validity, effectiveness
or enforceability of any Document, as between the Subordinated Lender and the
Administrative Agent and the Senior Lenders, the Administrative Agent and the
Senior Lenders shall have first and prior rights of payment as contemplated in
this agreement.

Section 2.8     Transfers of Subordinated Indebtedness and Subordinated Security

         The Subordinated Indebtedness and the Subordinated Security will not be
sold, assigned, or transferred in whole or in part unless and until:

(a)  the proposed purchaser,  assignee or transferee has executed and delivered,
     to the satisfaction of the Administrative Agent, an agreement substantially
     the same as this agreement; or

(b)  any rights  arising  under such sale,  assignment or transfer are otherwise
     subordinated to the Senior Indebtedness and the Senior Lenders' Security in
     a manner satisfactory to the Administrative Agent.

Section 2.9     Replacement Indebtedness

         If any of the Subordinated Indebtedness is repaid or retired from the
proceeds of any sale or issue of instruments evidencing indebtedness for
borrowed money, no such sale or issue will be completed unless and until:

(a)  the  proposed  lender or  purchaser  has  executed  and  delivered,  to the
     satisfaction of the Senior Lenders, an agreement  substantially the same as
     this agreement; or

(b)  any rights arising under such sale or issue are otherwise  subordinated  to
     the Senior Indebtedness in a manner satisfactory to the Senior Lenders.

Section 2.10     Participations

         Subject to the terms of the Credit Agreement, the Senior Lenders may,
from time to time, without notice to the Subordinated Lender, assign or transfer
or grant participations in respect of any or all of the Senior Indebtedness and
Senior Lenders' Security or any interest therein; and, notwithstanding any such
assignment or transfer or grant of a participation or any subsequent assignment
or transfer thereof or grant of a participation therein, the Subordinated Lender
acknowledges that such Senior Indebtedness and Senior Lenders' Security shall be
and remain Senior Indebtedness and Senior Lenders' Security for the purposes
hereof, and every immediate and successive assignee or transferee of, or
participant in, any of the Senior Indebtedness and Senior Lenders' Security or
of any interest therein shall, to the extent of the interest of such assignee,
transferee or participant in the Senior Indebtedness and Senior Lenders'
Security, be entitled to the full rights and benefits hereof.

                                   Article 3
                    Representations, Warranties and Covenants
                    -----------------------------------------

Section 3.1     Representations and Warranties of the Subordinated Lender

         The Subordinated Lender represents and warrants to the Administrative
Agent and to each of the Senior Lenders that:

(a)  the  Subordinated  Lender is duly organized and validly  existing under the
     laws of the Province of Nova Scotia;

(b)  the  Subordinated  Lender  has  the  full  corporate  power,  capacity  and
     authority  to enter  into this  agreement  and to do all acts and  execute,
     perform and deliver all other documents as are required hereunder;

(c)  the  Subordinated  Lender  has  taken  all  necessary  corporate  action to
     authorize the creation, execution, delivery of, and the performance of, its
     obligations under this agreement in accordance with the terms hereof;

(d)  this  agreement  constitutes a legal,  valid and binding  obligation of the
     Subordinated  Lender,   enforceable  against  the  Subordinated  Lender  in
     accordance  with its terms,  and the  Subordinated  Lender has obtained all
     consents and approvals necessary for the performance by it of the terms and
     conditions contained herein;

(e)  there has been  provided  to the  Administrative  Agent  true and  complete
     copies of all agreements,  documents,  instruments and writings  containing
     all of the terms and  provisions  relating  to the KS Finance  Loan and the
     Subordinated Indebtedness;

(f)  the  Subordinated  Lender  is the sole  legal and  beneficial  owner of the
     Subordinated  Indebtedness,  including,  without limitation, the KS Finance
     Loan, and has not assigned, transferred, pledged, hypothecated or otherwise
     disposed of the Subordinated Indebtedness held by it; and

(g)  the  Subordinated  Indebtedness,  including,  without  limitation,  the  KS
     Finance Loan, is not subject to any setoff, counterclaim or other defence.

Section 3.2     Covenants of the Subordinated Lender

         The Subordinated Lender covenants and agrees with the Administrative
Agent and each of the Senior Lenders that, so long as any Obligation is
outstanding under the Documents:

(a)  the Subordinated  Lender will promptly notify the  Administrative  Agent of
     the  occurrence of any "Event of Default"  under and as defined in the Term
     Loan Agreement;

(b)  the Subordinated  Lender will, on the written request of the Administrative
     Agent from time to time, advise the Administrative  Agent in writing of the
     details of the amount of the Subordinated Indebtedness outstanding pursuant
     to the Subordinated Credit Documents;

(c)  the  Subordinated   Lender  will  not  sell,  assign,   transfer,   pledge,
     hypothecate  or  otherwise   dispose  of  the  Subordinated   Indebtedness,
     including, without limitation, the KS Finance Loan; and

(d)  the  Subordinated  Lender  shall not  amend,  modify or  supplement  in any
     material manner the Subordinated Credit Documents without the prior written
     consent of the Administrative Agent, provided however, the Borrower and the
     Subordinated  Lender may extend the  Maturity  Date (as defined in the Term
     Loan  Agreement)  in respect of the KS Finance  Loan without the consent of
     the Administrative Agent.

                                   Article 4
                        ACKNOWLEDGEMENTS OF THE BORROWER
                        --------------------------------

Section 4.1    Acknowledgements

         The Borrower hereby acknowledges and agrees that:

(a)  it  authorizes  the  Administrative  Agent and the Senior  Lenders  and the
     Subordinated  Lender to share with each other any information  possessed by
     them  relating  to  the  Indebtedness  and  to  payments  received  by  the
     Administrative  Agent and the Senior Lenders and the Subordinated Lender in
     respect thereof;

(b)  this  agreement  shall not  modify,  relieve  or release it from any of its
     Indebtedness  or  the  performance  of its  obligations  under  the  Credit
     Agreement,  the Senior Lenders Security,  the Subordinated Credit Documents
     or the Subordinated Security;

(c)  it  is  a  party   hereto   solely  for  the  purpose  of   providing   the
     acknowledgements  and  agreements set forth herein and does not, and is not
     intended to, derive any benefits hereunder;

(d)  it will not grant any Security Interests to the Subordinated Lender;

(e)  it consents to the terms of this  Agreement and agrees to comply with,  and
     to not act contrary to, the terms of this Agreement; and

(f)  this   Agreement,   other  than  this  Article,   may  be  amended  by  the
     Administrative  Agent and the  Subordinated  Lender at any time without the
     concurrence of, or notice to, the Borrower; provided that such amendment is
     not prejudicial to the interests of the Borrower hereunder.

                                   Article 5
                            MISCELLANEOUS PROVISIONS
                            ------------------------

Section 5.1    Notices

         Any notice, direction or other communication required or permitted to
be given under this agreement shall be in writing and given by delivering it or
sending it by facsimile or other similar form of recorded communication
addressed as follows:

(a)      to the Borrower at:

         KeySpan Energy Development Co.
         1 MetroTech Centre
         Brooklyn, New York
         11201

         Attention:        President
         Telecopier No.:   (718) 403-6421

(b)      to the Subordinated Lender at:

         KS Midstream Finance Co.
         1 MetroTech Centre
         Brooklyn, New York
         11201

         Attention:        President
         Telecopier No.:   (718) 403-6421



<PAGE>



(c)      to the Administrative Agent at:

         Royal Bank of Canada
         Global Syndications - Canada
         12th Floor, South Tower
         Royal Bank Plaza, 200 Bay Street
         Toronto, Ontario
         M5J 2J2

         Attention:        Manager, Agency
         Telecopier No.:   (416) 974-2407

or to such other address or telecopy number as any party may from time to time
notify the others in accordance with this Section 5.1. Any demand, notice or
communication made or given by personal delivery or by telecopier or other
electronic means of communication during normal business hours at the place of
receipt on a Banking Day shall be conclusively deemed to have been made or given
at the time of actual delivery or transmittal, as the case may be, on such
Banking Day. Any demand, notice or communication made or given by personal
delivery or by telecopier or other electronic means of communication after
normal business hours at the place of receipt or otherwise than on a Banking Day
shall be conclusively deemed to have been made or given at 9:00 a.m. (Calgary
time) on the first Banking Day following actual delivery or transmittal, as the
case may be.

Section 5.2    No Waiver; Remedies

         No failure on the part of the Senior Lenders or the Administrative
Agent to exercise, and no delay in exercising, any right under this agreement
shall operate as a waiver of such right; nor shall any single or partial
exercise of any right preclude any other or further exercise of the right or the
exercise of any other right. No waiver of any provision of this agreement nor
consent to any departure by the Subordinated Lender or the Borrower therefrom
shall be effective unless the same is in writing and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given. These remedies are cumulative and not exclusive of any
remedies provided by law.

Section 5.3    No Representations, etc.

         There are no other representations, collateral agreements or conditions
with respect to this agreement or affecting the Senior Lenders' or the
Subordinated Lender's rights and obligations to each other, other than as
contained or referred to in this agreement.

Section 5.4    No Merger

         Neither the taking of any judgment nor the exercise of any power of
seizure or sale shall operate to extinguish the liability of the Borrower or the
Subordinated Lender under this agreement nor shall the acceptance of any payment
or alternate security constitute or create any novation and it is further agreed
that the taking of a judgment or judgments under any of the covenants contained
in this agreement shall not operate as a merger of such covenants.

Section 5.5    Further Assurances

         Each of the parties shall execute all such further agreements,
instruments, assignments and other documents and shall do all such further acts
and things as may reasonably be required from time to time to give full force
and effect to this agreement and the subordination and postponement provided for
herein.

Section 5.6    Successors and Assigns

         This agreement shall be binding upon the Borrower and the Subordinated
Lender and their respective successors and assigns, and shall enure to the
benefit of the Administrative Agent and the Senior Lenders and their respective
successors and assigns. All rights of the Administrative Agent and the Senior
Lenders shall be assignable and in any action brought by an assignee to enforce
those rights, the Borrower and the Subordinated Lender shall not assert against
the assignee any claim or defence which the Borrower and the Subordinated Lender
now has or hereafter may have against the Administrative Agent or the Senior
Lenders. The Borrower and the Subordinated Lender shall not assign this
agreement without the consent of the Administrative Agent.

Section 5.7    Severability

         If any provision of this agreement shall be deemed by any court of
competent jurisdiction to be invalid or void, the remaining provisions shall
remain in full force and effect.

Section 5.8    Governing Law

         This agreement shall be governed by and interpreted and enforced in
accordance with the laws of the Province of Alberta and the federal laws of
Canada applicable therein.



<PAGE>



SEction 5.9     Counterparts

         This agreement may be executed in any number of counterparts and by
facsimile and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.

         IN WITNESS WHEREOF the parties have executed this agreement.

                             KEYSPAN ENERGY DEVELOPMENT CO.

                             Per:
                                 -----------------------------------------------
                                 Name:
                                 Title:

                             KS MIDSTREAM FINANCE CO.

                             Per:
                                 -----------------------------------------------
                                 Name:
                                 Title:

                             ROYAL BANK OF CANADA, in
                             its capacity as
                             Administrative Agent
                             Per:
                                 -----------------------------------------------
                                 Name:
                                 Title:





<PAGE>






         Schedule L to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                      FORM OF OPINION OF BORROWER'S COUNSEL



<PAGE>






         Schedule M to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                     FORM OF OPINION OF GUARANTOR'S COUNSEL



<PAGE>




         Schedule N to the Credit Agreement dated July 29th, 1999 among KeySpan
         Energy Development Co. as Borrower and a syndicate of Lenders, with
         Royal Bank of Canada as Administrative Agent
--------------------------------------------------------------------------------


                          SUBSIDIARIES OF THE BORROWER

<TABLE>

Subsidiary
----------
<CAPTION>
1.      Gulf Midstream Services Partnership

                     Partners                           Initial Capital Contribution          Percentage Ownership
                                                                                                    Interest
<S>                                                     <C>                                  <C>
Gulf Canada Resources Limited                                 $263,500,000                          49.985%
KeySpan Energy Development Co.                                $263,600,000                          50.005%
Gulf Midstream Services Limited
                                                                                                     0.010%
2.       GMS Facilities Limited

                   Shareholders                                 Shareholdings                 Percentage Ownership
                                                                                                    Interest

Gulf Canada Resources Limited                             4015 Class A Common                           50%
KeySpan Energy Development Co.                            4014 Class B Common                           50%
                                                          1 Non-Voting
                                                          1 Special
3.      Gulf Midstream Services Limited

                   Shareholders                                 Shareholdings                 Percentage Ownership
                                                                                                    Interest

Gulf Canada Resources Limited                             50 Common Shares                              50%
                                                          1 Class A Preferred

KeySpan Energy Development Co.                            50 Common Shares                              50%
                                                          1 Class B Preferred
</TABLE>