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                                                           Exhibit 2.1


                                  PSINET INC.
                           510 Huntmar Park Drive
                              Herndon, Virginia
                              20170-5100 U.S.A.
                                           
STRICTLY CONFIDENTIAL
                                                              November 9, 1997

iSTAR Internet Inc.
Royal Bank Tower
200 Bay Street 
North Tower
Suite 2200
Toronto, Ontario
M5J 2J4

Attention:    Jack O. Kiervin
              Chairman of the Board
Dear Sirs:

1.  The Offer


    (a)  Subject to the conditions set out in paragraph (b) below, PSINet Inc.
         (the "Offeror") is prepared to make as soon as practicable but in no
         event later than November 14, 1997, a takeover bid (the "Offer") for
         any and all outstanding Common Shares of iSTAR Internet Inc.
         ("iSTAR").  The Offer shall consist of an offer to purchase Common
         Shares of iSTAR by a circular bid prepared in accordance with the
         requirements of the Securities Act (Ontario) and other applicable
         provincial securities laws.  Subject to Section 2 hereof, the Offer
         for the Common Shares will be at a price per Common Share of $1.206
         (Cdn.), subject to the adjustments in paragraph 1(d) below, made up of
         a fraction of a convertible preferred share (a "Preference Share") of
         the Offeror.  The terms of the Preference Shares will be substantially
         as set out in Schedule "A". The obligation of the Offeror to take up
         and pay for Shares under the Offer will be subject to the following
         conditions and to other conditions usual to a comparable takeover bid
         in Canada:

         (i)  the approval and consent of all governmental or regulatory
              authorities required to be obtained in order to proceed with the 
              Offer and take up and pay for the Common Shares tendered pursuant
              to the Offer will have been obtained prior to the expiration of
              the Offer;


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         (ii) there will be no prohibition at law against the making of the
              Offer or taking up and paying for 100% of the Common Shares under
              the Offer or completing a transaction in which the Offeror would
              acquire the Common Shares not deposited pursuant to the Offer;

        (iii) all options existing under iSTAR's employee stock option plan
              will be cancelled;

         (iv) all outstanding warrants will be cancelled or otherwise dealt
              with to the satisfaction of the Offeror, failing which, the
              Offeror will purchase the outstanding warrants and adjust the
              price offered per Common Share under the Offer accordingly;

         (v)  all of the covenants contained in section 6 will have been met,
              or will not have been breached, as the case may be;

         (vi) there will be no material breach of any material contract to
              which iSTAR is a party that has not been remedied;

        (vii) the offerees must have validly deposited and not withdrawn, on or
              before the expiration of the 21st day following the making of the
              Offer, Common Shares under the Offer which represent not less
              than 66 2/3% of the issued and outstanding Common Shares on the
              date of the Offer; and

       (viii) there shall not have occurred or arisen any change or fact (or
              any condition, event or development involving a prospective
              change) in the business, assets, capitalization or financial
              condition of iSTAR or any of its subsidiaries which in the
              opinion of the Offeror is materially adverse to iSTAR or any of
              its subsidiaries or may be considered significant to a purchaser
              of the Common Shares.

    iSTAR agrees to provide to the Offeror on closing a certificate of iSTAR
    that the conditions of this Offer have been complied with by iSTAR, such
    certificate to be in a form satisfactory to the Offeror.

    The Offeror shall not be obligated to make the Offer or may withdraw its
    Offer if a third party has announced its intention to effect an Acquisition
    Proposal (as defined below) and the board of directors of iSTAR concludes
    that such an Acquisition Proposal provides greater value to the holders of
    Common Shares than the Offer.

    The Offer will be stated to expire on December 5, 1997, subject to the
    right of the Offeror to extend the same in accordance with applicable law
    (hereinafter referred to as the "Expiry Date"). 

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     (b) Notwithstanding any of the terms of this agreement, the Offeror may
         terminate its obligations hereunder if, on or before the date the 
         Offeror is required to make the Offer:

         (i)  there has been any material breach of any of the covenants of 
              iSTAR contained herein;

         (ii) iSTAR shall have failed to obtain all consents to the change of
              control of iSTAR and, if applicable the amalgamation of iSTAR 
              with the Offeror and/or an affiliate of the Offeror, the absence 
              of which would be materially adverse to iSTAR;
    
        (iii) the board of directors of iSTAR shall have failed to (A) resolve 
              to recommend the Offer; or (B) provide a directors' circular 
              supporting the Offer to be mailed together with the Offer;  

         (iv) any representation and warranty set out in section 4 herein is not
              true and correct in all material respects, as determined by the
              Offeror, as at the date of the Offer;

         (v)  there shall not have occurred or arisen any change or fact (or any
              condition, event or development involving a prospective change) 
              in the business, assets, capitalization or financial condition of
              iSTAR or any of its subsidiaries which in the opinion of the 
              Offeror is materially adverse to iSTAR or any of its subsidiaries
              or may be considered significant to a purchaser of the Common 
              Shares; or

         (vi) the Offeror has not received all requisite consents of any third
              parties and Offeror agrees to use all reasonable efforts to obtain
              such consents.

         The foregoing conditions are for the sole benefit of the Offeror and 
         may be waived by the Offeror at any time.

    (c)  Bell Claims.  It is a condition of this Offer for the sole benefit of 
         the Offeror that the contract between Bell Sygma Inc. and iSTAR dated 
         August 29, 1997 ("Bell Sygma Contract") be terminated and extinquished
         before the closing of the Offer, whether by settlement with a full 
         release of any and all of the obligations of iSTAR to Bell Sygma Inc. 
         or an award pursuant to arbitration or any other mechanism acceptable 
         to the Offeror, the settlement or result of which must be acceptable 
         to the Offeror in the Offeror's sole discretion.  In the event that 
         the Offeror is not satisfied with the settlement or result, the Offeror
         shall have the right to either withdraw the Offer and terminate its 
         obligations hereunder or amend the terms of the Offer.  iSTAR 
         represents and warrants to the Offeror that, other than 
         telecommunications circuit agreements in the normal course, the only 
         agreement with Bell Sygma Inc., or any of its affiliates or the Stentor
         members, is the Bell Sygma Contract.

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    (d)  If the claim by Chrism Technology Inc. ("Chrism") against iSTAR is 
         settled, with a full release in favour of iSTAR, before the closing of
         the Offer, then the amount by which the final settlement amount paid 
         to Chrism is less than $750,000.00 (Cdn.), if any, shall be divided by
         29,315,527 and added to the price per Common Share.

2.  Further Agreements to be Entered into Between the Offeror and iSTAR

    (a)  On or about November 10, 1997, the Offeror agrees to provide a loan or
         other credit facility to iSTAR in an aggregate principal amount of
         $5,000,000 (Cdn.), with such terms and security as are set out in
         Schedule "B" hereto.  The principal amount will become immediately
         payable if an Acquisition Proposal is made and the board of directors
         of iSTAR concludes that such an Acquisition Proposal provides greater
         value to the holders of Common Shares than the Offeror, or if the
         Offer fails.

    (b)  In consideration of the loan referred to in (a) above, the parties
         agree that they will negotiate and, on or about November 10, 1997,
         enter into a sales and marketing agreement whereby the Offeror will
         become the exclusive agent of iSTAR and any new corporate customers of
         iSTAR will utilize the Offeror's or its affiliate's network.  The
         sales and marketing agreement will terminate in the event that the
         Offer fails.

3.  Representations, Warranties and Covenants of the Offeror

         The Offeror represents and warrants to iSTAR as follows:

    (a)  The Offeror is a corporation duly organized and subsisting under the
         laws of New York.

    (b)  The Offeror has the corporate power and authority to enter into this
         agreement, to make the Offer and to carry out the transactions
         contemplated hereby and by the Offer. The execution and delivery of
         this agreement and the consummation of the transactions contemplated
         hereby and by the Offer have been duly and validly authorized by all
         necessary corporate action on the part of the Offeror. This agreement
         has been duly executed and delivered by the Offeror and constitutes a
         legal, valid and binding obligation of the Offeror.

    (c)  Neither the execution and delivery of this agreement by the Offeror
         nor the consummation of the transactions contemplated hereby in
         accordance with the terms hereof nor compliance with any of the
         provisions hereof will (i) conflict with or result in any breach of
         any provision of the Offeror's certificate of incorporation and
         by-laws (or similar constating documents), (ii) result in a violation
         or breach of, or constitute (with or without due notice or lapse of
         time or both) a 

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         default (or give rise to any right of termination, cancellation or
         acceleration) under, any of the terms, conditions or provisions of any
         note, bond, mortgage, indenture, license, contract, agreement or other
         instrument or obligation to which the Offeror or any of its
         subsidiaries is a party or by which any of them or any of their
         properties or assets may be bound, or (iii) violate any order, writ,
         injunction, decree, statute, rule or regulation applicable to the
         Offeror or any of its subsidiaries of any of their properties or
         assets, except in the case of (ii) and (iii) for violations, breaches
         or defaults which would not in the aggregate materially and adversely
         affect the Offeror and its subsidiaries taken as a whole.

    (d)  The Offer when made will comply in all material respects with
         applicable Canadian securities legislation.
 
    (e)  Following the successful completion of the Offer and any subsequent
         amalgamation of iSTAR with the Offeror or an affiliate of the Offeror,
         the Offeror will pay a retention bonus of $2,000 to each of the
         employees of iSTAR, provided that such employee continues to be
         employed by iSTAR or its affiliate on March 31, 1998. 

    (f)  Following the successful completion of the Offer, the Offeror will
         continue to keep the current director and officers' insurance in place
         for the remainder of the fiscal year.

4.       Representations and Warranties of iSTAR

         iSTAR represents and warrants to the Offeror as follows:

    (a)  iSTAR is a corporation duly organized and subsisting under the laws of
         Ontario and has all requisite corporate power and authority to own,
         lease and operate its properties and to carry on its business as now
         being conducted. Each of the subsidiaries of iSTAR is a corporation
         duly organized and validly existing under the laws of its jurisdiction
         of incorporation and has all requisite corporate power and authority
         to own, lease and operate its properties and to carry on its business
         as now being conducted.

    (b)  iSTAR has the requisite corporate power and authority to enter into
         this agreement and to carry out the transactions contemplated hereby.
         The execution and delivery of this agreement and the consummation of
         the transactions contemplated hereby have been duly and validly
         authorized by all necessary corporate action on the part of iSTAR and
         no other corporate proceedings on the part of iSTAR are necessary to
         authorize this agreement. This agreement has been approved by the
         board of directors of iSTAR, has been duly executed and delivered by
         iSTAR and constitutes a legal, valid and binding obligation of iSTAR. 

                                       5

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    (c)  iSTAR has filed all forms, reports and documents with Canadian
         securities commissions required to be filed by it under applicable
         Canadian securities legislation (collectively, the "Reports").  None
         of the Reports, including without limitation any financial statements
         or schedules included therein, at the time filed, contained any untrue
         statement of a material fact or omitted to state a material fact
         required to be stated therein or necessary in order to make the
         statements therein, in light of the circumstances under which they
         were made, not misleading.  iSTAR has not filed any confidential
         material change reports with Canadian securities commissions.

    (d)  The authorized share capital of iSTAR consists of an unlimited number
         of Common Shares of which 29,315,527 Common Shares are issued and
         outstanding as fully paid and non-assessable as at the date hereof. As
         at the date hereof, there are no outstanding options, warrants or
         other rights to acquire Common Shares or other securities of iSTAR and
         no securities convertible into or exchangeable for Common Shares or
         other securities of iSTAR other than  options outstanding under
         iSTAR's employee stock option plan, 48,107 warrants exerciseable at a
         price of $4.10 per warrant until September 28, 1998, 1,450,000
         warrants exerciseable at a price of $6.75 until November 12, 1997 and
         46,394 warrants exerciseable at a price of $0.01 until October 24,
         2005. 

    (e)  Neither the execution and delivery of this agreement by iSTAR nor the
         consummation of the transactions contemplated hereby nor the
         amalgamation of iSTAR with the Offeror or an affiliate of the Offeror
         nor compliance by iSTAR with any of the provisions hereof will (i)
         conflict with or result in any breach of any provisions of the
         articles of incorporation or by-laws of iSTAR (or similar constating
         documents); (ii) result in a violation or breach of, or constitute
         (with or without due notice or lapse of time or both) a default (or
         give rise to any right of termination, cancellation or acceleration)
         under, any of the terms, conditions or provisions of any note, bond,
         mortgage, indenture, licence, contract, agreement or other instrument
         or obligation to which iSTAR or any of the subsidiaries is a party or
         by which any of them or any of their properties or assets may be
         bound, or (iii) violate any order, writ, injunction, decree, statute,
         rule or regulation applicable to iSTAR, any of its subsidiaries or any
         of their properties or assets, except in the case of (ii) or (iii) for
         violations, breaches or defaults which would not in the aggregate be
         material to a purchaser of all of the Common Shares.

5.       Covenants of iSTAR

         iSTAR covenants and agrees:

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    (a)  not to declare or pay any dividend prior to or during the period of
         the Offer or make any distribution of its properties or assets to its
         shareholders or, other than as provided for herein, purchase, redeem
         or retire any shares of its capital stock or other securities of
         iSTAR;

    (b)  not to allot or issue, or enter into any agreement for the allotment
         or issuance of, or grant any other rights to acquire, shares of its
         capital stock or the capital stock of any of its subsidiaries or
         securities convertible into, exchangeable for or which carry a right
         to acquire, directly or indirectly, shares of its capital stock or the
         capital stock of any of its subsidiaries;

    (c)  not to, and not to permit any subsidiary to, merge, amalgamate, or
         consolidate into or with any person or enter into any other corporate
         reorganization, or, sell all or any substantial part of its assets to
         any person, or, perform any act or enter into any transaction or
         negotiation which can reasonably be expected to interfere or be
         inconsistent with the consummation of the transactions contemplated
         hereby;

    (d)  not to, and not permit any subsidiary to, alter or amend its articles
         or bylaws, as they exist at the date of this agreement;

    (e)  to use all reasonable efforts to make all filings and obtain all
         consents, approvals and waivers necessary or desirable in connection
         with the Offer and the transactions contemplated hereby and to take
         such other measures as may be appropriate to fulfil its obligations
         under and to carry out the transactions contemplated by this
         agreement;

    (f)  not to, and not permit any subsidiary to enter into any agreement out
         of the ordinary course of business, including, (i) the payment of any
         bonuses or benefits or increase any salaries or benefits of any kind
         to employees, or alter commissions payable to sales agents, that it is
         not contractually or legally obligated to pay or alter as at the date
         hereof; (ii) entering into an arrangement with any new consultants or
         renewing any existing arrangements with consultants or hiring any
         employees; (iii) entering into any contractual obligations for data
         communications, equipment or services with any supplier; (iv)
         contracting with new corporate customers other than as provided in the
         sales and marketing agreement to be entered into with the Offeror; (v)
         leasing or purchasing equipment from a supplier for internal use by
         iSTAR (provided that iSTAR may purchase or provide such equipment for
         resale to a customer without the prior written consent of the
         Offeror); (vi) entering into any commitment with a term greater than
         one year; (vii) entering into a commitment for or paying any
         professional fees in connection with an Acquisition Proposal (as
         defined below), other than this Offer or under the circumstances
         pursuant to which iSTAR may terminate its obligations under this
         agreement pursuant to section 7(b); 

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         (viii) entering into any new or renewing any existing facilities or
         lease arrangements; (ix) engaging in any business other than the
         provisions of internet services; (x) introducing any new products or
         providing any new services; (xi) engaging in any new research and
         development; (xii) incurring financing indebtedness in excess of
         $5,000 except in connection with the right of first refusal described
         in Schedule "B" hereto, or granting security on any of the assets of
         iSTAR or any subsidiary; or (xiii) selling any assets, including,
         without limitation, its customers, without the prior written consent
         of the Offeror, not to be unreasonably withheld;

    (g)  to afford to the Offeror and to its financial advisers, accountants,
         counsel and other representatives, full access during the period from
         the date hereof until the Expiry Date to the management, properties,
         books, contracts, commitments and records of iSTAR and its
         subsidiaries and to allow the Offeror and such representatives to
         continue to perform a diligent and complete examination of the
         financial condition, business, affairs, property and assets of iSTAR
         and its subsidiaries and to confirm the representations contained in
         section 4;

    (h)  not to, or allow its subsidiaries to, nor authorize or permit any of
         the officers, directors or employees of iSTAR or its subsidiaries or
         any financial advisor, expert or other representative retained by them
         to:

         (A)  solicit, initiate or encourage (including, without limitation, by
              way of furnishing information) any inquiry or the making of any
              proposal to iSTAR or its shareholders from any person which
              constitutes, or may reasonably be expected to lead to (in either
              case whether in one transaction or a series of transactions), (a)
              an acquisition from iSTAR or its shareholders of any securities
              of iSTAR, (b) any acquisition of a substantial amount of assets
              of any of iSTAR or its subsidiaries, (c) an amalgamation, merger,
              or consolidation of any of iSTAR or its subsidiaries, or (d) any
              take-over bid, issuer bid, exchange offer, recapitalization,
              liquidation, dissolution, reorganization or similar transaction
              involving any of iSTAR or its subsidiaries or any other
              transaction the consummation of which would or could reasonably
              be expected to impede, interfere with, prevent or delay the Offer
              or any other transactions contemplated by this agreement or that
              would or could reasonably be expected to materially reduce the
              benefits to the Offeror of the Offer (any of the foregoing being
              an "Acquisition Proposal"); or

         (B)  enter into or participate in any discussions or negotiations
              regarding any of the foregoing, or furnish to any other person

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              any information with respect to the business, properties,
              operations, prospects or conditions (financial or otherwise) of
              iSTAR or its subsidiaries or any of the foregoing, or otherwise
              co-operate in any way with, or assist or participate in,
              facilitate or encourage, any effort or attempt by any other
              person to do or seek to do any of the foregoing;

         provided that nothing in this paragraph (h) shall be construed as
         limiting the power of the board of directors of iSTAR to respond to
         any unsolicited, good faith Acquisition Proposal which the board of
         directors of iSTAR believes provides or may provide greater value to
         holders of shares in the capital stock or other securities of iSTAR
         than the Offer if the board of directors of iSTAR (having consulted
         its outside counsel) concludes that to do so would be a proper
         exercise of such directors' fiduciary duties and provided further
         that, except as contemplated by section 6(b), the foregoing shall not
         entitle iSTAR to terminate this agreement, and iSTAR shall promptly
         provide notice to the Offeror of any inquiry or proposal that iSTAR
         receives that is, or could become, an Acquisition Proposal and to
         promptly provide to the Offeror a copy of any written Acquisition
         Proposal received by it.  

    (i)  to recommend that holders of Common Shares of iSTAR accept the Offer,
         subject to section 6(b);

    (j)  to advise the Offeror as soon as practicable of any matter which comes
         to its attention which might constitute a material change in the
         affairs of iSTAR (within the meaning of the Securities Act (Ontario)); 

    (k)  to use their reasonable best efforts to secure, before the expiration
         of the Offer, commitments from no less than 66 2/3% of the holders of
         Common Shares to tender their Common Shares into the Offer; and

    (l)  to provide to the Offeror all information that would be material to a
         purchaser of all of the Common Shares. In connection therewith, iSTAR
         represents and warrants that all such Disclosed Information will be
         true, correct and complete as of the date provided to iSTAR in all
         material respects.

6.       Termination

    (a)  iSTAR may terminate its obligations hereunder if:

         (i)  the Offeror has not made the Offer by 5:00 p.m., Eastern time, on
              November 14, 1997; or

         (ii) the Offer has been made by the time specified in (i) above, if
              the Offeror has not, for any reason whatsoever, taken up and paid

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              for the shares under the Offer in the manner contemplated
              hereunder on or before 5:00 p.m. December 31, 1997, Eastern time.

    (b)  iSTAR may terminate its obligations under this agreement by notice to
         the Offeror, and iSTAR and the Offeror shall each be released from its
         obligations hereunder in the event that the board of directors of
         iSTAR has received, in circumstances in which iSTAR is not in breach
         of its obligations under section 5(h), an Acquisition Proposal which
         the board of directors of iSTAR concludes provides greater value to
         the holders of Common Shares than the Offer.

7.       General

    (a)  No disclosure of this offer and any resulting agreement will be made
         by  iSTAR or the Offeror, except to their respective counsel or to any
         financial adviser engaged by any of them and its counsel or as may be
         required by applicable law or regulatory authorities. The parties will
         co-ordinate in the making and dissemination of any public announcement
         relating to the subject matter of this agreement as soon as
         practicable after signing.

    (b)  The Offeror may assign the benefits of the agreement resulting from
         acceptance of this offer to a wholly-owned subsidiary but such
         assignment shall not relieve the Offeror from responsibility for
         performance of its obligations hereunder, and any securities issued
         will be ultimately convertible into securities of the Offeror on
         materially the same terms. This agreement shall not otherwise be
         assignable by any party hereto.

    (c)  The Offer may be effected by the Offeror by way of a merger,
         reorganization, or other form of arrangement, including without
         limitation a plan of arrangement, provided there is no material change
         in the consideration received by the shareholders of iSTAR who accept
         the Offer and the terms hereof shall apply mutatis mutandis.  iSTAR
         and its directors will take all reasonable steps required to put an
         Offer by way of merger or plan arrangement before the shareholders for
         their consideration.

    (d)  This agreement shall be binding upon and shall enure to the benefit of
         and be enforceable by iSTAR and the Offeror and their respective
         successors and permitted assigns.

    (e)  Time shall be of the essence of this agreement.

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    (f)  Any notice or other communication required or permitted to be given
         hereunder shall be sufficiently given if delivered by hand or sent by
         means of facsimile transmission: 

         (ii) in the case of iSTAR, to the address appearing on the first page
              of the letter, Attention: Jack O. Kiervin, and in the case of a
              facsimile transmission, to Facsimile No. (416) 367-5827; and 

         (ii) in the case of the Offeror to PSINet Inc., 510 Huntmar Park
              Drive, Herndon, VA 20170-5100, Attention: William Schrader, and
              in the case of a facsimile transmission, to Facsimile No. (703)
              904-1608; 

         or at such other address or telecopy number as the party to which such
         notice or other communication is to be given has last notified the
         party giving the same in the manner provided in this paragraph.

    (g)  Each of the parties upon the request of the other parties, shall do,
         execute, acknowledge and deliver or cause to be done, executed,
         acknowledged or delivered all such further acts, deeds, documents and
         instruments as may be reasonably necessary or desirable to carry out
         the provisions of their agreement and to enhance the benefits to all
         relevant parties, so long as no party is materially prejudiced,
         financially or otherwise.

    (h)  This agreement shall be governed by and construed in accordance with
         the laws of the Province of Ontario and the laws of Canada applicable
         therein.

    (i)  References herein to Common Shares of iSTAR include any shares into
         which Common Shares may be reclassified, subdivided, redivided,
         consolidated or converted.

    (j)  The Offeror shall have the option to review and oversee the operations
         of iSTAR including without limitation the right to have one of the
         Offeror's personnel participate in the day to day management and
         operation of iSTAR's business.  In addition to its obligations in
         Section 5 hereof, iSTAR agrees to consult with the Offeror on the day
         to day management and operations of iSTAR's business.  For greater
         certainty, the Offeror shall not have any authority or right to make
         decisions for or direct either the officers or directors of iSTAR in
         their duties and responsibilities in the management and operation of
         iSTAR's business.

         If you are in agreement with the foregoing, kindly signify your
acceptance by signing the second copy of this letter and delivering it to the
Offeror in the manner provided above. This Offer may be signed in two or more
counterparts 

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which together shall be deemed to constitute one valid and binding agreement and
delivery of the counterparts may be effected by means of facsimile transmission
from the Offeror to iSTAR and from the iSTAR to the Offeror.


                                           Yours very truly,
         
                                           PSINET INC.
         
         
                                       By: /s/Harold S. Wills  
                                          ------------------------------------
                                           Harold S. Wills
                                           Executive Vice-President and Chief
                                           Operating Officer

In consideration of your agreement to make the Offer described above and other
good and valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), we hereby irrevocably accept the foregoing this 9th day of
November, 1997.

                                           iSTAR INTERNET INC.
         
         
                                       By: /s/ Craig Wallace   
                                          ------------------------------------
                                           Craig Wallace
                                           President and Chief Executive 
                                           Officer
         
         
                   

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                                  Schedule A
                             Terms of Preference Shares
                                           
Class                        Convertible preferred shares.

Voting/Non-Voting            Non-voting.

Ranking                      On parity with Series B 8% Convertible Preferred
                             Stock 

Coupon                       8.0% per annum, cumulative, payable in cash on a
                             quarterly basis, in arrears (the record date shall
                             be March 31, June 30, September 30 and December 31
                             of each year).

Conversion by the Holder     Up to 1/3rd of the aggregate number of preferred 
                             shares held by a holder may be converted into   
                             common shares of the Offeror at the holder's    
                             option on or after each of April 1, 1998, 
                             July 1, 1998 and January 1, 1999.

                             In the event of a change of control of the        
                             Offeror, the preferred shares will become
                             immediately convertible, provided that the holders
                             thereof agree not to prohibit the change of 
                             control.

                             In the event that on or after April 1, 1998, the 
                             number of common shares of the Offeror into which 
                             the preferred shares are convertible would exceed 
                             5,665,676 common shares of the Offeror then the   
                             preferred shares will become convertible at the   
                             holders' option.  The Offeror will notify the 
                             holders of the preferred shares that the preferred
                             shares have become convertible as promptly as 
                             possible thereafter.

Redemption by the Offeror    The preferred shares may be redeemed by the    
                             Offeror for cash at any time after the period   
                             ending six months from the date of issue.

Optional Redemption          The preferred shares will be subject to optional  
                             redemption at Offeror's option on 30 days written 
                             notice at a redemption price of $.01 (U.S.) per  
                             share upon the earlier of:

                               (i) the period ending 36 months from the date of 
                                   issuance; or

                               (ii) upon the change of control of the Offeror.




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                             There will be put in place a trustee arrangement 
                             or other arrangement designed so as to ensure that
                             all preferred shares are converted into common
                             shares prior to the end of the 36 month period.

Value for Conversion/
Redemption                   Each of the shares will be valued at the same 
                             amount per Common Share price after accounting for
                             all adjustments, converted to U.S. dollars at the  
                             exchange rate published in the Wall Street Journal 
                             on Monday, November 10, 1997.

Market Price for             The market price of the Offeror's common stock
Conversion/Redemption        (based on a 10 day weighted average of the closing
                             price) at the time of the event; provided that the 
                             maximum number of common shares of the Offeror to 
                             be issued upon conversion or redemption will not
                             exceed 7,400,000 common shares of the Offeror.  As
                             at the date of this agreement, there are 
                             approximately 40,000,000 common shares of the 
                             Offeror outstanding, and the most recent trading 
                             price was approximately US$8.00.

                    


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<PAGE>
                                           

                                     Schedule B
                              Terms of Credit Facility
                                          
                                          
Amount                       $5.0 million dollars (Cdn.).

Interest                     9.9% per annum calculated and payable monthly not 
                             in arrears.

Term                         Ninety (90) days from November 10, 1997.

Security                     1.   First security interest on all accounts     
                             receivable, free and clear of any and all liens  
                             and encumbrances.
                             2.   General security interest on other assets  
                             subordinate to existing secured creditors.
                             3.   All prior security registrations against   
                             accounts receivable to be discharged or fully     
                             postponed.
    
Repayment                    All outstanding indebtedness payable on the     
                             earliest to occur of:

                             1.   demand by the Offeror for payment (provided 
                             that demand will not be made prior to the 90 day 
                             term); or 
                             2.   if an Acquisition Proposal is received by   
                             iSTAR and the board of directors of iSTAR       
                             concludes that such an Acquisition Proposal     
                             provides greater value to the holders of Common 
                             Shares than the Offer; or
                             3.   the Offer fails or is terminated by the    
                             Offeror.


Advances                     Up to $2.5 million dollars will be advanced on   
                             November 10, 1997 subject to iSTAR providing to 
                             the Offeror a statement of use of the funds to be
                             advanced.  It is agreed that the funds may be used
                             to pay existing accounts payable and accounts   
                             payable incurred in the ordinary course after   
                             November 10, 1997.

                             Remaining funds to be drawn in tranches of      
                             $250,000 subject to iSTAR providing to the Offeror
                             a statement of use of the funds to be advanced.


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<PAGE>


Restrictions                 Amounts advanced cannot be used for purposes that 
                             violate the covenants in the agreement to which  
                             this Schedule is attached.

                             After the first advance under the facility is
                             made, iSTAR is restricted from soliciting any
                             alternative/additional financing from any third
                             party.

Right of First Refusal       Offeror has the right of first refusal on any
                             alternative/additional financing that iSTAR seeks
                             to obtain between the date of the agreement to
                             which this Schedule is attached and the date upon
                             which the first advance under the facility is
                             made, exercisable within 48 hours after receipt of
                             written notice from iSTAR of such additional
                             financing and the terms thereof.

Termination:                 Offer of credit shall be terminated in the event
                             the agreement to which this Schedule is attached 
                             is terminated or alternative/additional financing
                             is obtained.
                                           

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