Document:

HOMESTAR MORTGAGE ACCEPTANCE CORP. MBN TRUST SERIES 200_ - __

                                     Issuer

                                       AND

                           [Name of Indenture Trustee]

                                INDENTURE TRUSTEE

                     _______________________________________

                                    INDENTURE

                           Dated as of _____ __, 200_

                     _______________________________________

                              MORTGAGE-BACKED NOTES

                            _________________________

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                                TABLE OF CONTENTS

Section                                                                     Page
-------                                                                     ----

ARTICLE I

    Definitions................................................................2
    Section 1.01    Definitions................................................2
    Section 1.02    Incorporation by Reference of Trust Indenture Act..........2
    Section 1.03    Rules of Construction......................................2

ARTICLE II

    Original Issuance of Notes.................................................4
    Section 2.01    Form.......................................................4
    Section 2.02    Execution, Authentication and Delivery.....................4

ARTICLE III

    Covenants..................................................................5
    Section 3.01    Collection of Payments with Respect to the Mortgage Loans..5
    Section 3.02    Maintenance of Office or Agency............................5
    Section 3.03    Money for Payments to Be Held in Trust; Paying Agent.......5
    Section 3.04    Existence..................................................6
    Section 3.05    Payment of Principal and Interest; Defaulted Interest......7
    Section 3.06    Protection of Trust Estate.................................9
    Section 3.07    Opinions as to Trust Estate...............................10
    Section 3.08    Performance of Obligations; Servicing Agreement...........10
    Section 3.09    Negative Covenants........................................11
    Section 3.10    Annual Statement as to Compliance.........................11
    Section 3.11    Recording of Assignments..................................12
    Section 3.12    Representations and Warranties Concerning the Mortgage
                    Loans.....................................................12
    Section 3.13    Amendments to Servicing Agreement.........................12
    Section 3.14    Master Servicer as Agent and Bailee of the Mortgage
                    Loans Holder..............................................12
    Section 3.15    Investment Company Act....................................12
    Section 3.16    Issuer May Consolidate, Etc...............................13
    Section 3.17    Successor or Transferee...................................14
    Section 3.18    No Other Business.........................................15
    Section 3.19    No Borrowing..............................................15
    Section 3.20    Guarantees, Loans, Advances and Other Liabilities.........15
    Section 3.21    Capital Expenditures......................................15
    Section 3.22    [Reserved]................................................15
    Section 3.23    Restricted Payments.......................................15

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    Section 3.24    Notice of Events of Default...............................15
    Section 3.25    Further Instruments and Acts..............................16
    Section 3.26    Statements to Noteholders.................................16
    Section 3.27    Determination of Note Interest Rate.......................16
    Section 3.28    Payments under the Credit Enhancement Instrument..........16
    Section 3.29    Replacement Credit Enhancement Instrument.................17

ARTICLE IV

    The Notes; Satisfaction and Discharge of Indenture........................18
    Section 4.01    The Notes.................................................18
    Section 4.02    Registration of and Limitations on Transfer and Exchange
                    of Notes; Appointment of Certificate Registrar............18
    Section 4.03    Mutilated, Destroyed, Lost or Stolen Notes................19
    Section 4.04    Persons Deemed Owners.....................................20
    Section 4.05    Cancellation..............................................20
    Section 4.06    Book-Entry Notes..........................................21
    Section 4.07    Notices to Depository.....................................21
    Section 4.08    Definitive Notes..........................................22
    Section 4.09    Tax Treatment.............................................22
    Section 4.10    Satisfaction and Discharge of Indenture...................22
    Section 4.11    Application of Trust Money................................23
    Section 4.12    Subrogation and Cooperation...............................24
    Section 4.13    Repayment of Monies Held by Paying Agent..................24
    Section 4.14    Temporary Notes...........................................25

ARTICLE V

    Default and Remedies......................................................26
    Section 5.01    Events of Default.........................................26
    Section 5.02    Acceleration of Maturity; Rescission and Annulment........26
    Section 5.03    Collection of Indebtedness and Suits for Enforcement by
                    Indenture Trustee.........................................27
    Section 5.04    Remedies; Priorities......................................29
    Section 5.05    Optional Preservation of the Trust Estate.................31
    Section 5.06    Limitation of Suits.......................................31
    Section 5.07    Unconditional Rights of Noteholders to Receive Principal
                    and Interest..............................................32
    Section 5.08    Restoration of Rights and Remedies........................32
    Section 5.09    Rights and Remedies Cumulative............................32
    Section 5.10    Delay or Omission Not a Waiver............................32
    Section 5.11    Control by Noteholders....................................32
    Section 5.12    Waiver of Past Defaults...................................33

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    Section 5.14    Waiver of Stay or Extension Laws..........................34
    Section 5.15    Sale of Trust Estate......................................34
    Section 5.16    Action on Notes...........................................36
    Section 5.17    Performance and Enforcement of Certain Obligations........36
ARTICLE VI

    The Indenture Trustee.....................................................37
    Section 6.01    Duties of Indenture Trustee...............................37
    Section 6.02    Rights of Indenture Trustee...............................38
    Section 6.03    Individual Rights of Indenture Trustee....................38
    Section 6.04    Indenture Trustee's Disclaimer............................38
    Section 6.05    Notice of Event of Default................................39
    Section 6.06    Reports by Indenture Trustee to Holders...................39
    Section 6.07    Compensation and Indemnity................................39
    Section 6.08    Replacement of Indenture Trustee..........................40
    Section 6.09    Successor Indenture Trustee by Merger.....................41
    Section 6.10    Appointment of Co-Indenture Trustee or Separate
                    Indenture Trustee.........................................41
    Section 6.11    Eligibility; Disqualification.............................42
    Section 6.12    Preferential Collection of Claims Against Issuer..........42
    Section 6.13    Representation and Warranty...............................42
    Section 6.14    Directions to Indenture Trustee...........................43
    Section 6.15    [No Consent to Certain Acts of Depositor..................43
    Section 6.16    Indenture Trustee May Own Securities......................43

ARTICLE VII

    Noteholders' Lists and Reports............................................44
    Section 7.01    Issuer to Furnish Indenture Trustee Names and Addresses
                    of Noteholders............................................44
    Section 7.02    Preservation of Information; Communications to
                    Noteholders...............................................44
    Section 7.03    Reports by Issuer.........................................44
    Section 7.04    Reports by Indenture Trustee..............................45

ARTICLE VIII

    Accounts, Disbursements and Releases......................................46
    Section 8.02    Trust Accounts............................................46
    Section 8.03    Officer's Certificate.....................................47
    Section 8.04    Termination upon Distribution to Noteholders..............47
    Section 8.05    Release of Trust Estate...................................48
    Section 8.06    Surrender of Notes upon Final Payment.....................48

ARTICLE IX

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    Supplemental Indentures...................................................49
    Section 9.01    Supplemental Indentures Without Consent of Noteholders....49
    Section 9.02    Supplemental Indentures with Consent of Noteholders.......50
    Section 9.03    Execution of Supplemental Indentures......................52
    Section 9.04    Effect of Supplemental Indenture..........................52
    Section 9.05    Conformity with Trust Indenture Act.......................52
    Section 9.06    Reference in Notes to Supplemental Indentures.............52

ARTICLE X

    Miscellaneous.............................................................53
    Section 10.01   Compliance Certificates and Opinions, Etc.................53
    Section 10.02   Form of Documents Delivered to Indenture Trustee..........55
    Section 10.03   Acts of Noteholders.......................................55
    Section 10.04   Notices, Etc., to Indenture Trustee, Issuer, Credit
                    Enhancer and Rating Agencies..............................56
    Section 10.05   Notices to Noteholders; Waiver............................57
    Section 10.06   Alternate Payment and Notice Provisions...................57
    Section 10.07   Conflict with Trust Indenture Act.........................58
    Section 10.08   Effect of Headings........................................58
    Section 10.09   Successors and Assigns....................................58
    Section 10.10   Separability..............................................58
    Section 10.11   Benefits of Indenture.....................................58
    Section 10.12   Legal Holidays............................................58
    Section 10.13   GOVERNING LAW.............................................58
    Section 10.14   Counterparts..............................................59
    Section 10.15   Recording of Indenture....................................59
    Section 10.16   Issuer Obligation.........................................59
    Section 10.17   No Petition...............................................59
    Section 10.18   Inspection................................................59
    Section 10.19   Authority of the Administrator............................60

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EXHIBITS

Exhibit A     --    Form of Notes

Appendix A    --    Definitions

                                        v

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     This Indenture, dated as of _______________, between Homestar Mortgage
Acceptance Corp. MBN Trust Series 200_ -__, a Delaware statutory trust, as
Issuer (the "Issuer"), and ____________________________, a
____________________________, as Indenture Trustee (the "Indenture Trustee"),

                                WITNESSETH THAT:

     Each party hereto agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Issuer's Series 200_-_
Mortgage-Backed Notes (the "Notes").

                                 GRANTING CLAUSE

     The Issuer hereby Grants to the Indenture Trustee at the Closing Date, as
trustee for the benefit of the Holders of the Notes, all of the Issuer's right,
title and interest in and to whether now existing or hereafter created by (a)
the Mortgage Loans and the proceeds thereof, (b) all funds on deposit in the
Funding Account, including all income from the investment and reinvestment of
funds therein, (c) all funds on deposit from time to time in the Collection
Account allocable to the Mortgage Loans excluding any investment income from
such funds; (d) all funds on deposit from time to time in the Payment Account
and in all proceeds thereof; (e) the Policy and (f) all present and future
claims, demands, causes and chooses in action in respect of any or all of the
foregoing and all payments on or under, and all proceeds of every kind and
nature whatsoever in respect of, any or all of the foregoing and all payments on
or under, and all proceeds of every kind and nature whatsoever in the conversion
thereof, voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, checks,
deposit accounts, rights to payment of any and every kind, and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "Trust Estate" or the "Collateral").

     The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction, and to secure compliance
with the provisions of this Indenture, all as provided in this Indenture.

     The Indenture Trustee, as trustee on behalf of the Holders of the Notes,
acknowledges such Grant, accepts the trust under this Indenture in accordance
with the provisions hereof and agrees to perform its duties as Indenture Trustee
as required herein.

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                                    ARTICLE I

                                   Definitions

     Section 1.01 DEFINITIONS. For all purposes of this Indenture, except as
otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions attached hereto as Appendix A which is
incorporated by reference herein. All other capitalized terms used herein shall
have the meanings specified herein.

     Section 1.02 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the Trust Indenture Act (the "TIA"), the
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:

          "Commission" means the Securities and Exchange Commission.

          "indenture securities" means the Notes.

          "indenture security holder" means a Noteholder.

          "indenture to be qualified" means this Indenture.

          "indenture trustee" or "institutional trustee" means the Indenture
     Trustee.

          "obligor" on the indenture securities means the Issuer and any other
     obligor on the indenture securities.

     All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.

     Section 1.03 RULES OF CONSTRUCTION. Unless the context otherwise requires:

          (i) a term has the meaning assigned to it;

          (ii) an accounting term not otherwise defined has the meaning assigned
     to it in accordance with generally accepted accounting principles as in
     effect from time to time;

          (iii) "or" is not exclusive;

          (iv) "including" means including without limitation;

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          (v) words in the singular include the plural and words in the plural
     include the singular; and

          (vi) any agreement, instrument or statute defined or referred to
     herein or in any instrument or certificate delivered in connection herewith
     means such agreement, instrument or statute as from time to time amended,
     modified or supplemented and includes (in the case of agreements or
     instruments) references to all attachments thereto and instruments
     incorporated therein; references to a Person are also to its permitted
     successors and assigns.

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                                   ARTICLE II

                           Original Issuance of Notes

     Section 2.01 FORM. The Notes, together with the Indenture Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.

     The Notes shall be typewritten, printed, lithographed or engraved or
produced by any combination of these methods (with or without steel engraved
borders), all as determined by the Authorized Officers executing such Notes, as
evidenced by their execution of such Notes.

     The terms of the Notes set forth in Exhibit A are part of the terms of this
Indenture.

     Section 2.02 EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.

     Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.

     The Indenture Trustee shall upon Issuer Request authenticate and deliver
Notes for original issue in an aggregate initial principal amount of
$___________.

     Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes and the Notes shall be issuable in the minimum
initial Security Balances of $100,000 and in integral multiples of $1,000 in
excess thereof.

     No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its authorized signatories,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder.

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                                   ARTICLE III

                                    Covenants

     Section 3.01 COLLECTION OF PAYMENTS WITH RESPECT TO THE MORTGAGE LOANS. The
Indenture Trustee shall establish and maintain with itself a trust account (the
"Payment Account") in which the Indenture Trustee shall, subject to the terms of
this paragraph, deposit, on the same day as it is received from the Master
Servicer, each remittance received by the Indenture Trustee with respect to the
Mortgage Loans. The Indenture Trustee shall make all payments of principal of
and interest on the Notes, subject to Section 3.03 as provided in Section 3.05
herein from monies on deposit in the Payment Account.

     Section 3.02 MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in
the [Borough of Manhattan, The City of New York,] an office or agency where,
subject to satisfaction of conditions set forth herein, Notes may be surrendered
for registration of transfer or exchange, and where notices and demands to or
upon the Issuer in respect of the Notes and this Indenture may be served. The
Issuer hereby initially appoints the Indenture Trustee to serve as its agent for
the foregoing purposes. If at any time the Issuer shall fail to maintain any
such office or agency or shall fail to furnish the Indenture Trustee with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee
as its agent to receive all such surrenders, notices and demands.

     Section 3.03 MONEY FOR PAYMENTS TO BE HELD IN TRUST; PAYING AGENT. (a) As
provided in Section 3.01, all payments of amounts due and payable with respect
to any Notes that are to be made from amounts withdrawn from the Payment Account
pursuant to Section 3.01 shall be made on behalf of the Issuer by the Indenture
Trustee or by the Paying Agent, and no amounts so withdrawn from the Payment
Account for payments of Notes shall be paid over to the Issuer except as
provided in this Section 3.03.

     The Issuer will cause each Paying Agent other than the Indenture Trustee to
execute and deliver to the Indenture Trustee an instrument in which such Paying
Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts
as Paying Agent it hereby so agrees), subject to the provisions of this Section
3.03, that such Paying Agent will:

          (i) hold all sums held by it for the payment of amounts due with
     respect to the Notes in trust for the benefit of the Persons entitled
     thereto until such sums shall be paid to such Persons or otherwise disposed
     of as herein provided and pay such sums to such Persons as herein provided;

          (ii) give the Indenture Trustee notice of any default by the Issuer of
     which it has actual knowledge in the making of any payment required to be
     made with respect to the Notes;

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          (iii) at any time during the continuance of any such default, upon the
     written request of the Indenture Trustee, forthwith pay to the Indenture
     Trustee all sums so held in trust by such Paying Agent;

          (iv) immediately resign as Paying Agent and forthwith pay to the
     Indenture Trustee all sums held by it in trust for the payment of Notes if
     at any time it ceases to meet the standards required to be met by a Paying
     Agent at the time of its appointment; and

          (v) comply with all requirements of the Code with respect to the
     withholding from any payments made by it on any Notes of any applicable
     withholding taxes imposed thereon and with respect to any applicable
     reporting requirements in connection therewith.

     The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Request
direct any Paying Agent to pay to the Indenture Trustee all sums held in trust
by such Paying Agent, such sums to be held by the Indenture Trustee upon the
same trusts as those upon which the sums were held by such Paying Agent; and
upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.

     Subject to applicable laws with respect to escheat of funds, any money held
by the Indenture Trustee or any Paying Agent in trust for the payment of any
amount due with respect to any Note and remaining unclaimed for one year after
such amount has become due and payable shall be discharged from such trust and
be paid to the Issuer on Issuer Request; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Indenture Trustee or such Paying Agent with respect to
such trust money shall thereupon cease; provided, however, that the Indenture
Trustee or such Paying Agent, before being required to make any such repayment,
shall at the expense and direction of the Issuer cause to be published once, in
an Authorized Newspaper published in the English language, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Indenture
Trustee may also adopt and employ, at the expense and direction of the Issuer,
any other reasonable means of notification of such repayment (including, but not
limited to, mailing notice of such repayment to Holders whose Notes have been
called but have not been surrendered for redemption or whose right to or
interest in monies due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the last address of
record for each such Holder).

     Section 3.04 EXISTENCE. The Issuer will keep in full effect its existence,
rights and franchises as a statutory trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other state or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the

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validity and enforceability of this Indenture, the Notes, the Mortgage Loans and
each other instrument or agreement included in the Trust Estate.

     Section 3.05 PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST. (a) On
each Payment Date from amounts on deposit in the Payment Account after making
(x) any deposit to the Funding Account pursuant to Section 8.02(b) and (y) any
deposits to the Payment Account pursuant to Section 8.02(c)(ii) and Section
8.02(c)(i)(2), the Indenture Trustee shall pay to the Noteholders, the
Certificate Paying Agent, on behalf of the Certificateholders, and to other
Persons the amounts to which they are entitled as set forth below:

          (i) to the Noteholders the sum of (a) one month's interest at the Note
     Interest Rate on the Security Balances of Notes immediately prior to such
     Payment Date and (b) any previously accrued and unpaid interest for prior
     Payment Dates;

          (ii) if such Payment Date is after the Funding Period, to the
     Noteholders, as principal on the Notes, the applicable Security Percentage
     of the Principal Collection Distribution Amount and if such Payment Date is
     the first Payment Date following the end of the Funding Period (if ending
     due to an Amortization Event) or the Payment Date on which the Funding
     Period ends, to the Noteholders as principal on the Notes the applicable
     Security Percentage of the amount deposited from the Funding Account in
     respect of Security Principal Collections;

          (iii) to the Noteholders, as principal on the Notes, from the amount
     remaining on deposit in the Payment Account, up to the applicable Security
     Percentage of Liquidation Loss Amounts for the related Collection Period;

          (iv) to the Noteholders, as principal on the Notes, from the amount
     remaining on deposit in the Payment Account, up to the applicable Security
     Percentage of Carryover Loss Amounts;

          (v) to the Credit Enhancer, in the amount of the premium for the
     Credit Enhancement Instrument and for any Additional Credit Enhancement
     Instrument;

          (vi) to the Credit Enhancer, to reimburse it for prior draws made on
     the Credit Enhancement Instrument and on any Additional Credit Enhancement
     Instrument (with interest thereon as provided in the Insurance Agreement);

          (vii) to the Noteholders, as principal on the Notes based on the
     Security Balances from Security Interest Collections, up to the Special
     Capital Distribution Amount for such Payment Date;

          (viii) to the Credit Enhancer, any other amounts owed to the Credit
     Enhancer pursuant to the Insurance Agreement;

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          (ix) [Reserved];

          (x) to reimburse the Administrator for expenditures made on behalf of
     the Issuer with respect to the performance of its duties under the
     Indenture; and

          (xi) any remaining amount, to the Certificate Paying Agent, on behalf
     of the Certificates.

provided, however, in the event that on a Payment Date a Credit Enhancer Default
shall have occurred and be continuing then the priorities of distributions
described above will be adjusted such that payments of the Certificate
Distribution Amount and all other amounts to be paid to the Certificate Paying
Agent will not be paid until the full amount of interest and principal in
accordance with clauses (i), (x) and (ii) through (iv) above that are due on the
Notes on such Payment Date have been paid and provided, further, that on the
Final Scheduled Payment Date or other final Payment Date, the amount to be paid
pursuant to clause (ii) above shall be equal to the Security Balances of the
Securities immediately prior to such Payment Date.

     On each Payment Date, the Certificate Paying Agent shall deposit in the
Certificate Distribution Account all amounts it received pursuant to this
Section 3.05 for the purpose of distributing such funds to the
Certificateholders.

     The amounts paid to Noteholders shall be paid to each Class in accordance
with the Class Percentage as set forth in paragraph (b) below. Interest will
accrue on the Notes during an Interest Period on the basis of the actual number
of days in such Interest Period and a year assumed to consist of 360 days.

     [Any installment of interest or principal, if any, payable on any Note or
Certificate that is punctually paid or duly provided for by the Issuer on the
applicable Payment Date shall, if such Holder holds Notes or Certificates of an
aggregate initial Principal Balance of at least $1,000,000, be paid to each
Holder of record on the preceding Record Date, by wire transfer to an account
specified in writing by such Holder reasonably satisfactory to the Indenture
Trustee as of the preceding Record Date or in all other cases or if no such
instructions have been delivered to the Indenture Trustee, by check to such
Noteholder mailed to such Holder's address as it appears in the Note Register
the amount required to be distributed to such Holder on such Payment Date
pursuant to such Holder's Securities; provided, however, that the Indenture
Trustee shall not pay to such Holders any amount required to be withheld from a
payment to such Holder by the Code.]

     (b) The principal of each Note shall be due and payable in full on the
Final Scheduled Payment Date for such Note as provided in the form of Note set
forth in Exhibit A. All principal payments on each Class of Notes shall be made
to the Noteholders of such Class entitled thereto in accordance with the
Percentage Interests represented by such Notes. Upon notice to the Indenture
Trustee by the Issuer, the Indenture Trustee shall notify the Person in whose
name a Note is

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registered at the close of business on the Record Date preceding the Final
Scheduled Payment Date or other final Payment Date. Such notice shall be mailed
no later than five Business Days prior to such Final Scheduled Payment Date or
other final Payment Date and shall specify that payment of the principal amount
and any interest due with respect to such Note at the Final Scheduled Payment
Date or other final Payment Date will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for such final payment.

     Section 3.06 PROTECTION OF TRUST ESTATE. (a) The Issuer will from time to
time execute and deliver all such supplements and amendments hereto and all such
financing statements, continuation statements, instruments of further assurance
and other instruments, and will take such other action necessary or advisable
to:

          (i) maintain or preserve the lien and security interest (and the
     priority thereof) of this Indenture or carry out more effectively the
     purposes hereof;

          (ii) perfect, publish notice of or protect the validity of any Grant
     made or to be made by this Indenture;

          (iii) cause the Issuer to enforce any of the Mortgage Loans; or

          (iv) preserve and defend title to the Trust Estate and the rights of
     the Indenture Trustee and the Noteholders in such Trust Estate against the
     claims of all persons and parties.

     (b) Except as otherwise provided in this Indenture, the Indenture Trustee
shall not remove any portion of the Trust Estate that consists of money or is
evidenced by an instrument, certificate or other writing from the jurisdiction
in which it was held at the date of the most recent Opinion of Counsel delivered
pursuant to Section 3.07 (or from the jurisdiction in which it was held as
described in the Opinion of Counsel delivered at the Closing Date pursuant to
Section 3.07(a), if no Opinion of Counsel has yet been delivered pursuant to
Section 3.07(b) unless the Trustee shall have first received an Opinion of
Counsel to the effect that the lien and security interest created by this
Indenture with respect to such property will continue to be maintained after
giving effect to such action or actions.

     The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.06.

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     Section 3.07 OPINIONS AS TO TRUST ESTATE. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee and the Owner Trustee an Opinion
of Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
respect to the execution and filing of any financing statements and continuation
statements, as are necessary to perfect and make effective the lien and security
interest in the Mortgage Loans and reciting the details of such action, or
stating that, in the opinion of such counsel, no such action is necessary to
make such lien and security interest effective.

     (b) On or before ___________ in each calendar year, beginning in ____, the
Issuer shall furnish to the Indenture Trustee an Opinion of Counsel at the
expense of the Issuer either stating that, in the opinion of such counsel, such
action has been taken with respect to the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and with respect to the execution and filing of any
financing statements and continuation statements as is necessary to maintain the
lien and security interest in the Mortgage Loans and reciting the details of
such action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that will, in the opinion of such counsel, be required to maintain
the lien and security interest in the Mortgage Loans until December 31 in the
following calendar year.

     Section 3.08 PERFORMANCE OF OBLIGATIONS; SERVICING AGREEMENT. (a) The
Issuer will punctually perform and observe all of its obligations and agreements
contained in this Indenture, the Basic Documents and in the instruments and
agreements included in the Trust Estate.

     (b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Indenture Trustee in an Officer's Certificate of the Issuer
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Administrator to assist the Issuer in performing its duties
under this Indenture.

     (c) The Issuer will not take any action or permit any action to be taken by
others which would release any Person from any of such Person's covenants or
obligations under any of the documents relating to the Mortgage Loans or under
any instrument included in the Trust Estate, or which would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any of the documents relating to the Mortgage
Loans or any such instrument, except such actions as the Master Servicer is
expressly permitted to take in the Servicing Agreement. The Indenture Trustee,
as pledgee of the Mortgage Loans, shall be able to exercise the rights Issuer
and the Mortgage Loans holder, to direct the actions of the Master Servicer.

     (d) The Issuer shall at all times retain an Administrator (approved by the
Credit Enhancer under the Administration Agreement) and may enter into contracts
with other Persons for the

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performance of the Issuer's obligations hereunder, and performance of such
obligations by such Persons shall be deemed to be performance of such
obligations by the Issuer.

     Section 3.09 NEGATIVE COVENANTS. So long as any Notes are Outstanding, the
Issuer shall not:

          (i) except as expressly permitted by this Indenture, sell, transfer,
     exchange or otherwise dispose of the Trust Estate, unless directed to do so
     by the Indenture Trustee;

          (ii) claim any credit on, or make any deduction from the principal or
     interest payable in respect of, the Notes (other than amounts properly
     withheld from such payments under the Code) or assert any claim against any
     present or former Noteholder by reason of the payment of the taxes levied
     or assessed upon any part of the Trust Estate;

          (iii) (A) permit the validity or effectiveness of this Indenture to be
     impaired, or permit the lien of this Indenture to be amended, hypothecated,
     subordinated, terminated or discharged, or permit any Person to be released
     from any covenants or obligations with respect to the Notes under this
     Indenture except as may be expressly permitted hereby, (B) permit any lien,
     charge, excise, claim, security interest, mortgage or other encumbrance
     (other than the lien of this Indenture) to be created on or extend to or
     other wise arise upon or burden the Trust Estate or any part thereof or any
     interest therein or the proceeds thereof or (C) permit the lien of this
     Indenture not to constitute a valid first priority security interest in the
     Trust Estate; or

          (iv) waive or impair, or fail to assert rights under, the Mortgage
     Loans, or impair or cause to be impaired the Company's or the Issuer's
     interest in the Mortgage Loans, the Mortgage Loan Purchase Agreement or in
     any Basic Document, if any such action would materially and adversely
     affect the interests of the Noteholders.

     Section 3.10 ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver to
the Indenture Trustee, within 120 days after the end of each fiscal year of the
Issuer (commencing with the fiscal year ____), an Officer's Certificate stating,
as to the Authorized Officer signing such Officer's Certificate, that:

          (i) a review of the activities of the Issuer during such year and of
     its performance under this Indenture has been made under such Authorized
     Officer's supervision; and

          (ii) to the best of such Authorized Officer's knowledge, based on such
     review, the Issuer has complied with all conditions and covenants under
     this Indenture throughout such year, or, if there has been a default in its
     compliance with any such condition or covenant, specifying each such
     default known to such Authorized Officer and the nature and status thereof.

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     Section 3.11 RECORDING OF ASSIGNMENTS. The Company shall cause the to
exercise its right under the Mortgage Loan Purchase Agreement with respect to
the obligation of the Seller to submit or cause to be submitted for recording
all Assignments of Mortgages on or prior to ______________ with respect to the
Initial Loans and within 60 days following the related Deposit Date with respect
to any Additional Loans.

     Section 3.12 REPRESENTATIONS AND WARRANTIES CONCERNING THE MORTGAGE LOANS.
The Indenture Trustee, as pledgee of the Mortgage Loans, has the benefit of the
representations and warranties made by the Seller in Section [____] and Section
[____] of the Mortgage Loan Purchase Agreement concerning the Mortgage Loans and
the right to enforce the remedies against the Seller provided in such Section
[____] or Section [____] to the same extent as though such representations and
warranties were made directly to the Indenture Trustee.

     Section 3.13 AMENDMENTS TO SERVICING AGREEMENT. The Issuer covenants with
the Indenture Trustee that it will not enter into any amendment or supplement to
the Servicing Agreement in accordance with Section 8.01 of the Servicing
Agreement without the prior written consent of the Indenture Trustee. The
Indenture Trustee, as pledgee of the Mortgage Loans, may, in its discretion,
decline to enter into or consent to any such supplement or amendment if its own
rights, duties or immunities shall be adversely affected.

     Section 3.14 MASTER SERVICER AS AGENT AND BAILEE OF THE MORTGAGE LOANS
HOLDER. Solely for purposes of perfection under Section 9-305 of the Uniform
Commercial Code or other similar applicable law, rule or regulation of the state
in which such property is held by the Master Servicer, the Indenture Trustee
hereby acknowledges that the Master Servicer is acting as agent and bailee of
the Mortgage Loans holder in holding amounts on deposit in the Collection
Account pursuant to Section 3.02 of the Servicing Agreement, as well as its
agent and bailee in holding any Related Documents released to the Master
Servicer pursuant to Section 3.06(c) of the Servicing Agreement, and any other
items constituting a part of the Trust Estate which from time to time come into
the possession of the Master Servicer. It is intended that, by the Master
Servicer's acceptance of such agency pursuant to Section 3.02 of the Servicing
Agreement, the Trustee, as a secured party of the Mortgage Loans, will be deemed
to have possession of such Related Documents, such monies and such other items
for purposes of Section 9-305 of the Uniform Commercial Code of the state in
which such property is held by the Master Servicer.

     Section 3.15 INVESTMENT COMPANY ACT. The Issuer shall not become an
"investment company" or under the "control" of an "investment company" as such
terms are defined in the Investment Company Act of 1940, as amended (or any
successor or amendatory statute), and the rules and regulations thereunder
(taking into account not only the general definition of the term "investment
company" but also any available exceptions to such general definition);
provided, however, that the Issuer shall be in compliance with this Section 3.15
if it shall have obtained an order exempting it from regulation as an
"investment company" so long as it is in compliance with the conditions imposed
in such order.

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     Section 3.16 ISSUER MAY CONSOLIDATE, ETC. (a) The Issuer shall not
consolidate or merge with or into any other Person, unless:

          (i) the Person (if other than the Issuer) formed by or surviving such
     consolidation or merger shall be a Person organized and existing under the
     laws of the United States of America or any state or the District of
     Columbia and shall expressly assume, by an indenture supplemental hereto,
     executed and delivered to the Indenture Trustee, in form reasonably
     satisfactory to the Indenture Trustee, the due and punctual payment of the
     principal of and interest on all Notes and to the Certificate Paying Agent,
     on behalf of the Certificateholders and the performance or observance of
     every agreement and covenant of this Indenture on the part of the Issuer to
     be performed or observed, all as provided herein;

          (ii) immediately after giving effect to such transaction, no Event of
     Default shall have occurred and be continuing;

          (iii) the Rating Agencies shall have notified the Issuer that such
     transaction shall not cause the rating of the Notes [or the Certificates]
     to be reduced, suspended or withdrawn or to be considered by either Rating
     Agency to be below investment grade without taking into account the Credit
     Enhancement Instrument;

          (iv) the Issuer shall have received an Opinion of Counsel (and shall
     have delivered copies thereof to the Indenture Trustee) to the effect that
     such transaction will not have any material adverse tax consequence to the
     Issuer, any Noteholder or any Certificateholder;

          (v) any action that is necessary to maintain the lien and security
     interest created by this Indenture shall have been taken; and

          (vi) the Issuer shall have delivered to the Indenture Trustee an
     Officer's Certificate and an Opinion of Counsel each stating that such
     consolidation or merger and such supplemental indenture comply with this
     Article III and that all conditions precedent herein provided for relating
     to such transaction have been complied with (including any filing required
     by the Exchange Act).

     (b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person, unless:

          (i) the Person that acquires by conveyance or transfer the properties
     and assets of the Issuer the conveyance or transfer of which is hereby
     restricted shall (A) be a United States citizen or a Person organized and
     existing under the laws of the United States of America or any state, (B)
     expressly assumes, by an indenture supplemental hereto, executed and
     delivered to the Indenture Trustee, in form satisfactory to the Indenture
     Trustee, the due and punctual payment of the principal of and interest on
     all Notes and the performance or observance of every agreement and covenant
     of this Indenture on the part of the Issuer to be

                                       13

<PAGE>

     performed or observed, all as provided herein, (C) expressly agrees by
     means of such supplemental indenture that all right, title and interest so
     conveyed or transferred shall be subject and subordinate to the rights of
     Holders of the Notes, (D) unless otherwise provided in such supplemental
     indenture, expressly agrees to indemnify, defend and hold harmless the
     Issuer against and from any loss, liability or expense arising under or
     related to this Indenture and the Notes and (E) expressly agrees by means
     of such supplemental indenture that such Person (or if a group of Persons,
     then one specified Person) shall make all filings with the Commission (and
     any other appropriate Person) required by the Exchange Act in connection
     with the Notes;

          (ii) immediately after giving effect to such transaction, no Default
     or Event of Default shall have occurred and be continuing;

          (iii) the Rating Agencies shall have notified the Issuer that such
     transaction shall not cause the rating of the Notes or the Certificates to
     be reduced, suspended or withdrawn;

          (iv) the Issuer shall have received an Opinion of Counsel (and shall
     have delivered copies thereof to the Indenture Trustee) to the effect that
     such transaction will not have any material adverse tax consequence to the
     Issuer or any Noteholder;

          (v) any action that is necessary to maintain the lien and security
     interest created by this Indenture shall have been taken; and

          (vi) the Issuer shall have delivered to the Indenture Trustee an
     Officer's Certificate and an Opinion of Counsel each stating that such
     conveyance or transfer and such supplemental indenture comply with this
     Article III and that all conditions precedent herein provided for relating
     to such transaction have been complied with (including any filing required
     by the Exchange Act).

     Section 3.17 SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or merger
of the Issuer in accordance with Section 3.16(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.

     (b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.16(b), the Issuer will be released from every
covenant and agreement of this Indenture to be observed or performed on the part
of the Issuer with respect to the Notes immediately upon the delivery of written
notice to the Indenture Trustee of such conveyance or transfer.

                                       14

<PAGE>

     Section 3.18 NO OTHER BUSINESS. The Issuer shall not engage in any business
other than financing, purchasing, owning and selling and managing the Mortgage
Loans and the issuance of the Notes and Certificates in the manner contemplated
by this Indenture and the Basic Documents and all activities incidental thereto.

     Section 3.19 NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except for the Notes.

     Section 3.20 GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as
contemplated by this Indenture or the Basic Documents, the Issuer shall not make
any loan or advance or credit to, or guarantee (directly or indirectly or by an
instrument having the effect of assuring another's payment or performance on any
obligation or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person.

     Section 3.21 CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long- term or operating lease or otherwise) for capital assets
(either realty or personalty).

     Section 3.22 [Reserved]

     Section 3.23 RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer, (ii) redeem, purchase, retire or otherwise acquire for
value any such ownership or equity interest or security or (iii) set aside or
otherwise segregate any amounts for any such purpose; provided, however, that
the Issuer may make, or cause to be made, (x) distributions to the Owner Trustee
and the Certificateholders as contemplated by, and to the extent funds are
available for such purpose under the Trust Agreement, (y) payments to the Master
Servicer pursuant to the terms of the Servicing Agreement and (z) payments to
the Indenture Trustee pursuant to Section 1(a)(ii) of the Administration
Agreement. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.

     Section 3.24 NOTICE OF EVENTS OF DEFAULT. The Issuer shall give the
Indenture Trustee the Credit Enhancer and the Rating Agencies prompt written
notice of each Event of Default hereunder and under the Trust Agreement.

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     Section 3.25 FURTHER INSTRUMENTS AND ACTS. Upon request of the Indenture
Trustee, the Issuer will execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.

     Section 3.26 STATEMENTS TO NOTEHOLDERS. The Indenture Trustee and the
Certificate Registrar shall forward by mail to each Noteholder and
Certificateholder, respectively, the Statement delivered to it pursuant to
Section 4.01 of the Servicing Agreement.

     Section 3.27 DETERMINATION OF NOTE INTEREST RATE. On the second LIBOR
Business Day immediately preceding (i) the Closing Date in the case of the first
Interest Period and (ii) the first day of each succeeding Interest Period, the
Indenture Trustee shall determine LIBOR and the Note Interest Rate for such
Interest Period and shall inform the Issuer, the Master Servicer and the
Depositor at their respective facsimile numbers given to the Indenture Trustee
in writing thereof.

     Section 3.28 PAYMENTS UNDER THE CREDIT ENHANCEMENT INSTRUMENT. (a) On any
Payment Date, other than a Dissolution Payment Date, the Indenture Trustee on
behalf of the Noteholders, and in its capacity as Certificate Paying Agent on
behalf of the Certificateholders shall make a draw on the Credit Enhancement
Instrument in an amount if any equal to the sum of (x) the amount by which the
interest accrued at the Note Interest Rate on the Security Balance of the Notes
exceeds the amount on deposit in the Payment Account available to be distributed
therefor on such Payment Date and (y) the Guaranteed Principal Payment Amount
(the "Credit Enhancement Draw Amount").

     (b) The Indenture Trustee shall submit, if a Credit Enhancement Draw Amount
is specified in any Statement to Holders prepared by the Master Servicer
pursuant to Section 4.01 of the Servicing Agreement, the Notice for Payment (as
defined in the Credit Enhancement Instrument) in the amount of the Credit
Enhancement Draw Amount to the Credit Enhancer no later than 2:00 P.M., New York
City time, on the second Business Day prior to the applicable Payment Date. Upon
receipt of such Credit Enhancement Draw Amount in accordance with the terms of
the Credit Enhancement Instrument, the Indenture Trustee shall deposit such
Credit Enhancement Draw Amount in the Payment Account for distribution to
Holders (and the Certificate Paying Agent on behalf of the Certificates)
pursuant to Section 3.05.

     In addition, a draw may be made under the Credit Enhancement Instrument in
respect of any Avoided Payment (as defined in and pursuant to the terms and
conditions of the Credit Enhancement Instrument) and the Indenture Trustee shall
submit a Notice for Payment with respect thereto together with the other
documents required to be delivered to the Credit Enhancer pursuant to the Credit
Enhancement Instrument in connection with a draw in respect of any Avoided
Payment.

     (c) In the event that any Additional Credit Enhancement Instruments are
issued pursuant to Section 4.01 and Section 2.02(B) of the Insurance Agreement,
the Indenture Trustee shall be authorized to make draws thereon subject to the
terms and conditions therein.

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     Section 3.29 REPLACEMENT CREDIT ENHANCEMENT INSTRUMENT. In the event of a
Credit Enhancer Default or if the claims paying ability rating of the Credit
Enhancer is downgraded and such downgrade results in a downgrading of the then
current rating of the Securities (in each case, a "Replacement Event"), the
Issuer, at its expense, in accordance with and upon satisfaction of the
conditions set forth in the Credit Enhancement Instrument, including, without
limitation, payment in full of all amounts owed to the Credit Enhancer, may, but
shall not be required to, substitute a new surety bond or surety bonds for the
existing Credit Enhancement Instrument or may arrange for any other form of
credit enhancement; provided, however, that in each case the Notes shall be
rated no lower than the rating assigned by each Rating Agency to the Notes
immediately prior to such Replacement Event and the timing and mechanism for
drawing on such new credit enhancement shall be reasonably acceptable to the
Indenture Trustee and provided further that the premiums under the proposed
credit enhancement shall not exceed such premiums under the existing Credit
Enhancement Instrument. It shall be a condition to substitution of any new
credit enhancement that there be delivered to the Indenture Trustee (i) an
Opinion of Counsel, acceptable in form to the Indenture Trustee, from counsel to
the provider of such new credit enhancement with respect to the enforceability
thereof and such other matters as the Indenture Trustee may require and (ii) an
Opinion of Counsel to the effect that such substitution would not (a) adversely
affect in any material respect the tax status of the Notes or (b) cause the
Issuer to be subject to a tax at the entity level. Upon receipt of the items
referred to above and payment of all amounts owing to the Credit Enhancer and
the taking of physical possession of the new credit enhancement, the Indenture
Trustee shall, within five Business Days following receipt of such items and
such taking of physical possession, deliver the replaced Credit Enhancement
Instrument to the Credit Enhancer. In the event of any such replacement the
Issuer shall give written notice thereof to the Rating Agencies.

                                       17

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                                   ARTICLE IV

               The Notes; Satisfaction and Discharge of Indenture

     Section 4.01 THE NOTES. The Notes shall be registered in the name of a
nominee designated by the Depository. Beneficial Owners will hold interests in
the Notes through the book-entry facilities of the Depository in minimum initial
Principal Balances of $1,000 and integral multiples of $1,000 in excess thereof.

     The Indenture Trustee may for all purposes (including the making of
payments due on the Notes) deal with the Depository as the authorized
representative of the Beneficial Owners with respect to the Notes for the
purposes of exercising the rights of Holders of Notes hereunder. Except as
provided in the next succeeding paragraph of this Section 4.01, the rights of
Beneficial Owners with respect to the Notes shall be limited to those
established by law and agreements between such Beneficial Owners and the
Depository and Depository Participants. Except as provided in Section 4.08,
Beneficial Owners shall not be entitled to definitive certificates for the Notes
as to which they are the Beneficial Owners. Requests and directions from, and
votes of, the Depository as Holder of the Notes shall not be deemed inconsistent
if they are made with respect to different Beneficial Owners. The Indenture
Trustee may establish a reasonable record date in connection with solicitations
of consents from or voting by Noteholders and give notice to the Depository of
such record date. Without the consent of the Issuer and the Indenture Trustee,
no Note may be transferred by the Depository except to a successor Depository
that agrees to hold such Note for the account of the Beneficial Owners.

     In the event the Depository Trust Company resigns or is removed as
Depository, the Indenture Trustee with the approval of the Issuer may appoint a
successor Depository. If no successor Depository has been appointed within 30
days of the effective date of the Depository's resignation or removal, each
Beneficial Owner shall be entitled to certificates representing the Notes it
beneficially owns in the manner prescribed in Section 4.08.

     The Notes shall, on original issue, be executed on behalf of the Issuer by
the Owner Trustee, not in its individual capacity but solely as Owner Trustee,
authenticated by the Note Registrar and delivered by the Indenture Trustee to or
upon the order of the Issuer.

     Section 4.02 REGISTRATION OF AND LIMITATIONS ON TRANSFER AND EXCHANGE OF
NOTES; APPOINTMENT OF CERTIFICATE REGISTRAR. The Issuer shall cause to be kept
at its Corporate Trust Office a Note Register in which, subject to such
reasonable regulations as it may prescribe, the Note Registrar shall provide for
the registration of Notes and of transfers and exchanges of Notes as herein
provided.

     Subject to the restrictions and limitations set forth below, upon surrender
for registration of transfer of any Note at the Corporate Trust Office, the
Indenture Trustee shall execute and the Note Registrar shall authenticate and
deliver, in the name of the designated transferee or transferees, one

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or more new Notes in authorized initial Security Balances evidencing the same
aggregate Percentage Interests.

     Subject to the foregoing, at the option of the Noteholders, Notes may be
exchanged for other Notes of like tenor or, in each case in authorized initial
Principal Balances evidencing the same aggregate Percentage Interests upon
surrender of the Notes to be exchanged at the Corporate Trust Office of the Note
Registrar. Whenever any Notes are so surrendered for exchange, the Indenture
Trustee shall execute and the Note Registrar shall authenticate and deliver the
Notes which the Noteholder making the exchange is entitled to receive. Each Note
presented or sur rendered for registration of transfer or exchange shall (if so
required by the Note Registrar) be duly endorsed by, or be accompanied by a
written instrument of transfer in form reasonably satisfactory to the Note
Registrar duly executed by, the Holder thereof or his attorney duly authorized
in writing with such signature guaranteed by a commercial bank or trust company
located or having a correspondent located in the city of New York. Notes
delivered upon any such transfer or exchange will evidence the same obligations,
and will be entitled to the same rights and privileges, as the Notes
surrendered.

     No service charge shall be made for any registration of transfer or
exchange of Notes, but the Note Registrar shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes.

     All Notes surrendered for registration of transfer and exchange shall be
cancelled by the Note Registrar and delivered to the Indenture Trustee for
subsequent destruction without liability on the part of either.

     The Issuer hereby appoints __________________________________ as
Certificate Registrar to keep at its Corporate Trust Office a Certificate
Register pursuant to Section 3.09 of the Trust Agreement in which, subject to
such reasonable regulations as it may prescribe, the Certificate Registrar shall
provide for the registration of Certificates and of transfers and exchanges
thereof pursuant to Section 3.05 of the Trust Agreement.
__________________________________ hereby accepts such appointment.

     Section 4.03 MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Issuer and the Indenture Trustee
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Indenture Trustee that such Note has been acquired by a bona fide purchaser,
and provided that the requirements of Section 8-405 of the UCC are met, the
Issuer shall execute, and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a replacement Note of the same Class; provided,
however, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, instead
of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen
Note when so due or payable without surrender thereof. If, after the delivery of
such replacement

                                       19

<PAGE>

Note or payment of a destroyed, lost or stolen Note pursuant to the proviso to
the preceding sentence, a bona fide purchaser of the original Note in lieu of
which such replacement Note was issued presents for payment such original Note,
the Issuer and the Indenture Trustee shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Indenture Trustee in connection therewith.

     Upon the issuance of any replacement Note under this Section 4.03, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.

     Every replacement Note issued pursuant to this Section 4.03 in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.

     The provisions of this Section 4.03 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.

     Section 4.04 PERSONS DEEMED OWNERS. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee and any
agent of the Issuer or the Indenture Trustee may treat the Person in whose name
any Note is registered (as of the day of determination) as the owner of such
Note for the purpose of receiving payments of principal of and interest, if any,
on such Note and for all other purposes whatsoever, whether or not such Note be
overdue, and neither the Issuer, the Indenture Trustee nor any agent of the
Issuer or the Indenture Trustee shall be affected by notice to the contrary.

     Section 4.05 CANCELLATION. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Indenture Trustee, be delivered to the Indenture Trustee and shall be
promptly cancelled by the Indenture Trustee. The Issuer may at any time deliver
to the Indenture Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner whatsoever,
and all Notes so delivered shall be promptly cancelled by the Indenture Trustee.
No Notes shall be authenticated in lieu of or in exchange for any Notes
cancelled as provided in this Section 4.05, except as expressly permitted by
this Indenture. All cancelled Notes may be held or disposed of by the Indenture
Trustee in accordance with its standard retention or disposal policy as in
effect at the time unless the Issuer shall direct by an Issuer Request that they
be destroyed or returned to it; provided however, that such Issuer Request is
timely and the Notes have not been

                                       20

<PAGE>

previously disposed of by the Indenture Trustee.

     Section 4.06 BOOK-ENTRY NOTES. The Notes, upon original issuance, will be
issued in the form of typewritten Notes representing the Book-Entry Notes, to be
delivered to The Depository Trust Company, the initial Depository, by, or on
behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Depository, and
no Beneficial Owner will receive a Definitive Note representing such Beneficial
Owner's interest in such Note, except as provided in Section 4.08. Unless and
until definitive, fully registered Notes (the "Definitive Notes") have been
issued to Beneficial Owners pursuant to Section 4.08:

          (i) the provisions of this Section 4.06 shall be in full force and
     effect;

          (ii) the Note Registrar and the Indenture Trustee shall be entitled to
     deal with the Depository for all purposes of this Indenture (including the
     payment of principal of and interest on the Notes and the giving of
     instructions or directions hereunder) as the sole holder of the Notes, and
     shall have no obligation to the Owners of Notes;

          (iii) to the extent that the provisions of this Section 4.06 conflict
     with any other provisions of this Indenture, the provisions of this Section
     4.06 shall control;

          (iv) the rights of Beneficial Owners shall be exercised only through
     the Depository and shall be limited to those established by law and
     agreements between such Owners of Notes and the Depository and/or the
     Depository Participants. Unless and until Definitive Notes are issued
     pursuant to Section 4.08, the initial Depository will make book-entry
     transfers among the Depository Participants and receive and transmit
     payments of principal of and interest on the Notes to such Depository
     Participants; and

          (v) whenever this Indenture requires or permits actions to be taken
     based upon instructions or directions of Holders of Notes evidencing a
     specified percentage of the Security Balances of the Notes, the Depository
     shall be deemed to represent such percentage only to the extent that it has
     received instructions to such effect from Beneficial Owners and/or
     Depository Participants owning or representing, respectively, such required
     percentage of the beneficial interest in the Notes and has delivered such
     instructions to the Indenture Trustee.

     Section 4.07 NOTICES TO DEPOSITORY. Whenever a notice or other
communication to the Note Holders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Beneficial Owners pursuant to
Section 4.08, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Depository, and shall have no obligation to the Beneficial Owners.

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     Section 4.08 DEFINITIVE NOTES. If (i) the Administrator advises the
Indenture Trustee in writing that the Depository is no longer willing or able to
properly discharge its responsibilities with respect to the Notes and the
Administrator is unable to locate a qualified successor, (ii) the Administrator
at its option advises the Indenture Trustee in writing that it elects to
terminate the book-entry system through the Depository or (iii) after the
occurrence of an Event of Default, Owners of Notes representing beneficial
interests aggregating at least a majority of the Security Balances of the Notes
advise the Depository in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Beneficial
Owners, then the Depository shall notify all Beneficial Owners and the Indenture
Trustee of the occurrence of any such event and of the availability of
Definitive Notes to Beneficial Owners requesting the same. Upon surrender to the
Indenture Trustee of the typewritten Notes representing the Book-Entry Notes by
the Depository, accompanied by registration instructions, the Issuer shall
execute and the Indenture Trustee shall authenticate the Definitive Notes in
accordance with the instructions of the Depository. None of the Issuer, the Note
Registrar or the Indenture Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Notes, the
Indenture Trustee shall recognize the Holders of the Definitive Notes as
Noteholders.

     Section 4.09 TAX TREATMENT. The Issuer has entered into this Indenture, and
the Notes will be issued, with the intention that, for federal, state and local
income, single business and franchise tax purposes, the Notes will qualify as
indebtedness of the Issuer. The Issuer, by entering into this Indenture, and
each Noteholder, by its acceptance of its Note (and each Beneficial Owner by its
acceptance of an interest in the applicable Book-Entry Note), agree to treat the
Notes for federal, state and local income, single business and franchise tax
purposes as indebtedness of the Issuer.

     Section 4.10 SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall
cease to be of further effect with respect to the Notes except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.03, 3.04, 3.06, 3.09,
3.16, 3.18 and 3.19, (v) the rights, obligations and immunities of the Indenture
Trustee hereunder (including the rights of the Indenture Trustee under Section
6.07 and the obligations of the Indenture Trustee under Section 4.11) and (vi)
the rights of Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of them, and the
Indenture Trustee, on demand of and at the expense of the Issuer, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture
with respect to the Notes, when

          (A) either

               (1) all Notes theretofore authenticated and delivered (other than
               (i) Notes that have been destroyed, lost or stolen and that have
               been replaced or paid as provided in Section 4.03 and (ii) Notes
               for whose payment money has theretofore been deposited in trust
               or segregated and held in trust by the Issuer and thereafter
               repaid to the Issuer or discharged from such trust, as

                                       22

<PAGE>

               provided in Section 3.03) have been delivered to the Indenture
               Trustee for cancellation; or

               (2) all Notes not theretofore delivered to the Indenture Trustee
               for cancellation

                    a. have become due and payable,

                    b. will become due and payable at the Final Scheduled
                    Payment Date within one year, or

                    c. have been called for early redemption pursuant to Section
                    5.02.

and the Issuer, in the case of a. or b. above, has irrevocably deposited or
caused to be irrevocably deposited with the Indenture Trustee cash or direct
obligations of or obligations guaranteed by the United States of America (which
will mature prior to the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge the entire indebtedness on
such Notes and Certificates then outstanding not theretofore delivered to the
Indenture Trustee for cancellation when due on the Final Scheduled Payment Date;

          (B) the Issuer has paid or caused to be paid all other sums payable
          hereunder and under the Insurance Agreement by the Issuer; and

          (C) the Issuer has delivered to the Indenture Trustee and the Credit
          Enhancer an Officer's Certificate, an Opinion of Counsel and each
          meeting the applicable requirements of Section 10.01 each stating that
          all conditions precedent herein provided for relating to the
          satisfaction and discharge of this Indenture have been complied with
          and, if the Opinion of Counsel relates to a deposit made in connection
          with Section 4.10(A)(2)b. above, such opinion shall further be to the
          effect that such deposit will not have any material adverse tax
          consequences to the Issuer, any Noteholders or any Certificateholders.

     Section 4.11 APPLICATION OF TRUST MONEY. All monies deposited with the
Indenture Trustee pursuant to Section 4.10 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent or
Certificate Paying Agent, as the Indenture Trustee may determine, to the Holders
of Securities, of all sums due and to become due thereon for principal and
interest; but such monies need not be segregated from other funds except to the
extent required herein or required by law.

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<PAGE>

     Section 4.12 SUBROGATION AND COOPERATION. (a) The Issuer and the Indenture
Trustee acknowledge that (i) to the extent the Credit Enhancer makes payments
under the Credit Enhancement Instrument on account of principal of or interest
on the Notes, the Credit Enhancer will be fully subrogated to the rights of such
Holders to receive such principal and interest from the Issuer, and (ii) the
Credit Enhancer shall be paid such principal and interest but only from the
sources and in the manner provided herein and in the Insurance Agreement for the
payment of such principal and interest.

     The Indenture Trustee shall cooperate in all respects with any reasonable
request by the Credit Enhancer for action to preserve or enforce the Credit
Enhancer's rights or interest under this Indenture or the Insurance Agreement
without limiting the rights of the Noteholders as otherwise set forth in the
Indenture, including, without limitation, upon the occurrence and continuance of
a default under the Insurance Agreement, a request to take any one or more of
the following actions:

          (i) institute Proceedings for the collection of all amounts then
     payable on the Notes, or under this Indenture in respect to the Notes and
     all amounts payable under the Insurance Agreement enforce any judgment
     obtained and collect from the Issuer monies adjudged due;

          (ii) sell the Trust Estate or any portion thereof or rights or
     interest therein, at one or more public or private Sales called and
     conducted in any manner permitted by law;

          (iii) file or record all Assignments that have not previously been
     recorded;

          (iv) institute Proceedings from time to time for the complete or
     partial foreclosure of this Indenture; and

          (v) exercise any remedies of a secured party under the Uniform
     Commercial Code and take any other appropriate action to protect and
     enforce the rights and remedies of the Credit Enhancer hereunder.

     Section 4.13 REPAYMENT OF MONIES HELD BY PAYING AGENT. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
monies then held by any Administrator other than the Indenture Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Indenture Trustee to be held and applied according to
Section 3.05 and thereupon such Paying Agent shall be released from all further
liability with respect to such monies.

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<PAGE>

     Section 4.14 TEMPORARY NOTES. Pending the preparation of any Definitive
Notes, the Issuer may execute and upon its written direction, the Indenture
Trustee may authenticate and make available for delivery, temporary Notes that
are printed, lithographed, typewritten, photocopied or otherwise produced, in
any denomination, substantially of the tenor of the Definitive Notes in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.

     If temporary Notes are issued, the Issuer will cause Definitive Notes to be
prepared without unreasonable delay. After the preparation of the Definitive
Notes, the temporary Notes shall be exchangeable for Definitive Notes upon
surrender of the temporary Notes at the office or agency of the Indenture
Trustee, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Notes, the Issuer shall execute and the Indenture Trustee
shall authenticate and make available for delivery, in exchange therefor,
Definitive Notes of authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, such temporary Notes shall in all respects
be entitled to the same benefits under this Indenture as Definitive Notes.

                                       25

<PAGE>

                                    ARTICLE V

                              Default and Remedies

     Section 5.01 EVENTS OF DEFAULT. "Event of Default," wherever used herein,
shall have the meaning provided in Article I; provided, however, that no Event
of Default will occur under clause (i) or clause (ii) of the definition of
"Event of Default" if the Issuer fails to make payments of principal of and
interest on the Notes so long as the Credit Enhancer makes payments sufficient
therefore under the Credit Enhancement Instrument.

     The Issuer shall deliver to the Indenture Trustee and the Credit Enhancer,
within five days after learning of the occurrence of an Event of Default,
written notice in the form of an Officer's Certificate of any event which with
the giving of notice and the lapse of time would become an Event of Default
under clause (iii) of the definition of "Event of Default", its status and what
action the Issuer is taking or proposes to take with respect thereto.

     Section 5.02 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an
Event of Default should occur and be continuing or if the Master Servicer shall
purchase all of the Mortgage Loans pursuant to Section 8.08 of the Servicing
Agreement, then and in every such case the Indenture Trustee or the Holders of
Notes representing not less than a majority of the Security Balances of all
Notes may declare the Notes to be immediately due and payable, by a notice in
writing to the Issuer (and to the Indenture Trustee if given by Noteholders),
and upon any such declaration the unpaid principal amount of such Class of
Notes, together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable. Unless the prior written
consent of the Credit Enhancer shall have been obtained by the Indenture
Trustee, the Payment Date upon which such accelerated payment is due and payable
shall not be a Payment Date under the Credit Enhancement Instrument and the
Indenture Trustee shall not be authorized under Section 3.29 to make a draw
therefor.

     At any time after such declaration of acceleration of maturity with respect
to an Event of Default has been made and before a judgment or decree for payment
of the money due has been obtained by the Indenture Trustee as hereinafter in
this Article V provided, the Holders of Notes representing a majority of the
Security Balances of all Notes, by written notice to the Issuer and the
Indenture Trustee, may waive the related Event of Default and rescind and annul
such declaration and its consequences if:

          (i) the Issuer has paid or deposited with the Indenture Trustee a sum
     sufficient to pay:

          (A) all payments of principal of and interest on the Notes and all
          other amounts that would then be due hereunder or upon the Notes if
          the Event of Default giving rise to such acceleration had not
          occurred; and

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<PAGE>

          (B) all sums paid or advanced by the Indenture Trustee hereunder and
          the reasonable compensation, expenses, disbursements and advances of
          the Indenture Trustee and its agents and counsel; and

          (ii) all Events of Default, other than the nonpayment of the principal
     of the Notes that has become due solely by such acceleration, have been
     cured or waived as provided in Section 5.12.

     No such rescission shall affect any subsequent default or impair any right
consequent thereto.

     Section 5.03 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE. (a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issue shall, upon demand of the Indenture
Trustee, pay to it, for the benefit of the Holders of Notes and of the Credit
Enhancer, the whole amount then due and payable on the Notes for principal and
interest, with interest upon the overdue principal, and in addition thereto such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Indenture Trustee and its agents and counsel.

     (b) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and as trustee of an express
trust, subject to the provisions of Section 10.17 hereof may institute a
Proceeding for the collection of the sums so due and unpaid, and may prosecute
such Proceeding to judgment or final decree, and may enforce the same against
the Issuer or other obligor upon the Notes and collect in the manner provided by
law out of the property of the Issuer or other obligor the Notes, wherever
situated, the monies adjudged or decreed to be payable.

     (c) If an Event of Default occurs and is continuing, the Indenture Trustee
subject to the provisions of Section 10.17 hereof may, as more particularly
provided in Section 5.04, in its discretion, proceed to protect and enforce its
rights and the rights of the Noteholders and the Credit Enhancer, by such
appropriate Proceedings as the Indenture Trustee shall deem most effective to
protect and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy or legal or equitable
right vested in the Indenture Trustee by this Indenture or by law.

     (d) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the

                                       27

<PAGE>

Issuer or its property or such other obligor or Person, or in case of any other
comparable judicial Proceedings relative to the Issuer or other obligor upon the
Notes, or to the creditors or property of the Issuer or such other obligor, the
Indenture Trustee, irrespective of whether the principal of any Notes shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Indenture Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such Proceedings or otherwise:

          (i) to file and prove a claim or claims for the whole amount of
     principal and interest owing and unpaid in respect of the Notes and to file
     such other papers or documents as may be necessary or advisable in order to
     have the claims of the Indenture Trustee (including any claim for
     reasonable compensation to the Indenture Trustee and each predecessor
     Indenture Trustee, and their respective agents, attorneys and counsel, and
     for reimbursement of all expenses and liabilities incurred, and all
     advances made, by the Indenture Trustee and each predecessor Indenture
     Trustee, except as a result of negligence or bad faith) and of the
     Noteholders allowed in such Proceedings;

          (ii) unless prohibited by applicable law and regulations, to vote on
     behalf of the Holders of Notes in any election of a trustee, a standby
     trustee or Person performing similar functions in any such Proceedings;

          (iii) to collect and receive any monies or other property payable or
     deliverable on any such claims and to distribute all amounts received with
     respect to the claims of the Noteholders and of the Indenture Trustee on
     their behalf; and

          (iv) to file such proofs of claim and other papers or documents as may
     be necessary or advisable in order to have the claims of the Indenture
     Trustee or the Holders of Notes allowed in any judicial proceedings
     relative to the Issuer, its creditors and its property;

and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee, and, in the event that the Indenture Trustee
shall consent to the making of payments directly to such Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture Trustee and
their respective agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Indenture Trustee and each
predecessor Indenture Trustee except as a result of negligence or bad faith.

     (e) Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any Note
holder in any such proceeding except, as aforesaid, to vote for the election of
a trustee in bankruptcy or similar Person.

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<PAGE>

     (f) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Indenture Trustee without the
possession of any of the Notes or the production thereof in any trial or other
Proceedings relative thereto, and any such action or proceedings instituted by
the Indenture Trustee shall be brought in its own name as trustee of an express
trust, and any recovery of judgment, subject to the payment of the expenses,
disbursements and compensation of the Indenture Trustee, each predecessor
Indenture Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.

     (g) In any Proceedings brought by the Indenture Trustee (and also any
Proceedings involving the interpretation of any provision of this Indenture to
which the Indenture Trustee shall be a party), the Indenture Trustee shall be
held to represent all the Holders of the Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.

     Section 5.04 REMEDIES; PRIORITIES. (a) If an Event of Default shall have
occurred and be continuing, the Indenture Trustee subject to the provisions of
Section 10.17 hereof may do one or more of the following (subject to Section
5.05):

          (i) institute Proceedings in its own name and as trustee of an express
     trust for the collection of all amounts then payable on the Notes or under
     this Indenture with respect thereto, whether by declaration or otherwise,
     and all amounts payable under the Insurance Agreement, enforce any judgment
     obtained, and collect from the Issuer and any other obligor upon such Notes
     monies adjudged due;

          (ii) institute Proceedings from time to time for the complete or
     partial foreclosure of this Indenture with respect to the Trust Estate;

          (iii) exercise any remedies of a secured party under the UCC and take
     any other appropriate action to protect and enforce the rights and remedies
     of the Indenture Trustee, the Holders of the Notes and the Credit Enhancer;
     and

          (iv) sell the Trust Estate or any portion thereof or rights or
     interest therein, at one or more public or private sales called and
     conducted in any manner permitted by law;

provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, unless (A) the
Indenture Trustee obtains the consent of the Holders of 100% of the aggregate
Principal Balances of the Notes and the Credit Enhancer, which consent will not
be unreasonably withheld, (B) the proceeds of such sale or liquidation
distributable to Holders are sufficient to discharge in full all amounts then
due and unpaid upon the Notes for principal and interest and to reimburse the
Credit Enhancer for any amounts drawn under the Credit Enhancement Instrument
and any other amounts due the Credit Enhancer under the Insurance Agreement or
(C) the Indenture Trustee determines that the Mortgage Loans will not continue
to provide sufficient funds for the payment of principal of and interest on the
Notes as they would have

                                       29

<PAGE>

become due if the Notes had not been declared due and payable, and the Indenture
Trustee obtains the consent of the Credit Enhancer, which consent will not be
unreasonably withheld, and of the Holders of a majority of the aggregate
Principal Balances of the Notes. In determining such sufficiency or
insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but
need not, obtain and rely upon an opinion of an Independent investment banking
or accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
Notwithstanding the fore going, so long as an Event of Servicer Termination has
not occurred, any Sale of the Trust Estate shall be made subject to the
continued Servicing of the Mortgage Loans by the Master Servicer as provided in
the Servicing Agreement.

     (b) If the Indenture Trustee collects any money or property pursuant to
this Article V, it shall pay out the money or property in the following order:

     FIRST: to the Indenture Trustee for amounts due under Section 6.07;

     SECOND: to each Class of Noteholders for amounts due and unpaid on the
related Class Notes for interest and to each Noteholder of such Class in each
case, ratably, without preference or priority of any kind, according to the
amounts due and payable on such Class of Notes for interest from amounts
available in the Trust Estate for such Noteholders;

     THIRD: to Holders of each Class of Notes for amounts due and unpaid on the
related Class of Notes for principal, from amounts available in the Trust Estate
for such Noteholders, and to each Noteholder of such Class in each case ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Class of Notes for principal, until the Security Balances of
each Class of Notes is reduced to zero;

     FOURTH: to the Issuer for amounts required to be distributed to the
Certificateholders in respect of interest and principal pursuant to the Trust
Agreement;

     FIFTH: To the payment of all amounts due and owing to the Credit Enhancer
under the Insurance Agreement;

     SIXTH: to the Issuer for amounts due under Article VIII of the Trust
Agreement; and

     SEVENTH: to the payment of the remainder, if any to the Issuer or any other
person legally entitled thereto. The Indenture Trustee may fix a record date and
payment date for any payment to Noteholders pursuant to this Section 5.04. At
least 15 days before such record date, the Indenture Trustee shall mail to each
Noteholder a notice that states the record date, the payment date and the amount
to be paid.

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<PAGE>

     Section 5.05 OPTIONAL PRESERVATION OF THE TRUST ESTATE. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Indenture Trustee may, but need not, elect to take and maintain
possession of the Trust Estate. It is the desire of the parties hereto and the
Noteholders that there be at all times sufficient funds for the payment of
principal of and interest on the Notes and other obligations of the Issuer
including payment to the Credit Enhancer, and the Indenture Trustee shall take
such desire into account when determining whether or not to take and maintain
possession of the Trust Estate. In determining whether to take and maintain
possession of the Trust Estate, the Indenture Trustee may, but need not, obtain
and rely upon an opinion of an Independent investment banking or accounting firm
of national reputation as to the feasibility of such proposed action and as to
the sufficiency of the Trust Estate for such purpose.

     Section 5.06 LIMITATION OF SUITS. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless and subject to the provisions of Section 10.17 hereof:

          (i) such Holder has previously given written notice to the Indenture
     Trustee of a continuing Event of Default;

          (ii) the Holders of not less than 25% of the Security Balances of the
     Notes have made written request to the Indenture Trustee to institute such
     Proceeding in respect of such Event of Default in its own name as Indenture
     Trustee hereunder;

          (iii) such Holder or Holders have offered to the Indenture Trustee
     reasonable indemnity against the costs, expenses and liabilities to be
     incurred in complying with such request;

          (iv) the Indenture Trustee for 60 days after its receipt of such
     notice, request and offer of indemnity has failed to institute such
     Proceedings; and

          (v) no direction inconsistent with such written request has been given
     to the Indenture Trustee during such 60-day period by the Holders of a
     majority of the Security Balances of the Notes.

     It is understood and intended that no one or more Holders of Notes shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.

     In the event the Indenture Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of

                                       31

<PAGE>

the Security Balances of the Notes, the Indenture Trustee in its sole discretion
may determine what action, if any, shall be taken, notwithstanding any other
provisions of this Indenture.

     Section 5.07 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture and to
institute suit for the enforcement of any such payment, and such right shall not
be impaired without the consent of such Holder.

     Section 5.08 RESTORATION OF RIGHTS AND REMEDIES. If the Indenture Trustee
or any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Issuer, the Indenture Trustee and
the Noteholders shall, subject to any determination in such Proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Indenture Trustee and the Noteholders
shall continue as though no such Proceeding had been instituted.

     Section 5.09 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Indenture Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

     Section 5.10 DELAY OR OMISSION NOT A WAIVER. No delay or omission of the
Indenture Trustee or any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article V or by law to the Indenture
Trustee or to the Noteholders may be exercised from time to time, and as often
as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as
the case may be.

     Section 5.11 CONTROL BY NOTEHOLDERS. The Holders of a majority of the
Security Balances of Notes shall have the right to direct the time, method and
place of conducting any Proceeding for any remedy available to the Indenture
Trustee with respect to the Notes or exercising any trust or power conferred on
the Indenture Trustee; provided that:

          (i) such direction shall not be in conflict with any rule of law or
     with this Indenture;

          (ii) subject to the express terms of Section 5.04, any direction to
     the Indenture Trustee to sell or liquidate the Trust Estate shall be by
     Holders of Notes representing not less

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     than 100% of the Security Balances of Notes;

          (iii) if the conditions set forth in Section 5.05 have been satisfied
     and the Indenture Trustee elects to retain the Trust Estate pursuant to
     such Section, then any direction to the Indenture Trustee by Holders of
     Notes representing less than 100% of the Security Balances of Notes to sell
     or liquidate the Trust Estate shall be of no force and effect; and

          (iv) the Indenture Trustee may take any other action deemed proper by
     the Indenture Trustee that is not inconsistent with such direction.

     Notwithstanding the rights of Noteholders set forth in this Section,
subject to Section 6.01, the Indenture Trustee need not take any action that it
determines might involve it in liability or might materially adversely affect
the rights of any Noteholders not consenting to such action.

     Section 5.12 WAIVER OF PAST DEFAULTS. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Security Balances of the
Notes may waive any past Event of Default and its consequences except an Event
of Default (a) with respect to payment of principal of or interest on any of the
Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the Holder of each Note or (c) the
waiver of which would materially and adversely affect the interests of the
Credit Enhancer or modify its obligation under the Credit Enhancement
Instrument. In the case of any such waiver, the Issuer, the Indenture Trustee
and the Holders of the Notes shall be restored to their former positions and
rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Event of Default or impair any right consequent thereto.

     Upon any such waiver, any Event of Default arising therefrom shall be
deemed to have been cured and not to have occurred, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Event of
Default or impair any right consequent thereto.

     Section 5.13 UNDERTAKING FOR COSTS. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.13 shall not apply to (a) any suit instituted by
the Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the Security
Balances of the Notes or (c) any suit instituted by any Noteholder for the
enforcement of the payment of principal of or interest on any Note on or after
the respective due dates expressed in such Note and in this Indenture.

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     Section 5.14 WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, or
plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not
hinder, delay or impede the execution of any power herein granted to the
Indenture Trustee, but will suffer and permit the execution of every such power
as though no such law had been enacted.

     Section 5.15 SALE OF TRUST ESTATE. (a) The power to effect any sale or
other disposition (a "Sale") of any portion of the Trust Estate pursuant to
Section 5.04 is expressly subject to the provisions of Section 5.05 and this
Section 5.15. The power to effect any such Sale shall not be exhausted by any
one or more Sales as to any portion of the Trust Estate remaining unsold, but
shall continue unimpaired until the entire Trust Estate shall have been sold or
all amounts payable on the Notes and under this Indenture and under the
Insurance Agreement shall have been paid. The Indenture Trustee may from time to
time postpone any public Sale by public announcement made at the time and place
of such Sale. The Indenture Trustee hereby expressly waives its right to any
amount fixed by law as compensation for any Sale.

     (b) The Indenture Trustee shall not in any private Sale sell the Trust
Estate, or any portion thereof, unless

               (1) the Holders of all Notes and the Credit Enhancer consent to
               or direct the Indenture Trustee to make, such Sale, or

               (2) the proceeds of such Sale would be not less than the entire
               amount which would be payable to the Noteholders under the Notes
               and the Credit Enhancer in respect of amounts drawn under the
               Credit Enhancement Instrument and any other amounts due the
               Credit Enhancer under the Insurance Agreement, in full payment
               thereof in accordance with Section 5.02, on the Payment Date next
               succeeding the date of such Sale, or

               (3) The Indenture Trustee determines, in its sole discretion,
               that the conditions for retention of the Trust Estate set forth
               in Section 5.05 cannot be satisfied (in making any such
               determination, the Indenture Trustee may rely upon an opinion of
               an Independent investment banking firm obtained and delivered as
               provided in Section 5.05), and the Credit Enhancer consents to
               such Sale, which consent will not be unreasonably withheld and
               the Holders representing at least 66-2/3% of the Security
               Balances of the Notes consent to such Sale.

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<PAGE>

     The purchase by the Indenture Trustee of all or any portion of the Trust
Estate at a private Sale shall not be deemed a Sale or other disposition thereof
for purposes of this Section 5.15(b).

     (c) Unless the Holders and the Credit Enhancer have otherwise consented or
directed the Indenture Trustee, at any public Sale of all or any portion of the
Trust Estate at which a minimum bid equal to or greater than the amount
described in paragraph (2) of subsection (b) of this Section 5.15 has not been
established by the Indenture Trustee and no Person bids an amount equal to or
greater than such amount, the Indenture Trustee shall bid an amount at least
$1.00 more than the highest other bid.

     (d) In connection with a Sale of all or any portion of the Trust Estate

               (1) any Holder or Holders of Notes may bid for and with the
               consent of the Credit Enhancer purchase the property offered for
               sale, and upon compliance with the terms of sale may hold, retain
               and possess and dispose of such property, without further
               accountability, and may, in paying the purchase money therefor,
               deliver any Notes or claims for interest thereon in lieu of cash
               up to the amount which shall, upon distribution of the net
               proceeds of such sale, be payable thereon, and such Notes, in
               case the amounts so payable thereon shall be less than the amount
               due thereon, shall be returned to the Holders thereof after being
               appropriately stamped to show such partial payment;

               (2) the Indenture Trustee may bid for and acquire the property
               offered for Sale in connection with any Sale thereof, and,
               subject to any requirements of, and to the extent permitted by,
               applicable law in connection therewith, may purchase all or any
               portion of the Trust Estate in a private sale, and, in lieu of
               paying cash therefor, may make settlement for the purchase price
               by crediting the gross Sale price against the sum of (A) the
               amount which would be distributable to the Holders of the Notes
               and Holders of Certificates and amounts owing to the Credit
               Enhancer as a result of such Sale in accordance with Section
               5.04(b) on the Payment Date next succeeding the date of such Sale
               and (B) the expenses of the Sale and of any Proceedings in
               connection therewith which are reimbursable to it, without being
               required to produce the Notes in order to complete any such Sale
               or in order for the net Sale price to be credited against such
               Notes, and any property so acquired by the Indenture Trustee
               shall be held and dealt with by it in accordance with the
               provisions of this Indenture;

               (3) the Indenture Trustee shall execute and deliver an
               appropriate instrument of conveyance transferring its interest in
               any portion of the Trust Estate in connection with a Sale
               thereof;

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<PAGE>

               (4) the Indenture Trustee is hereby irrevocably appointed the
               agent and attorney-in-fact of the Issuer to transfer and convey
               its interest in any portion of the Trust Estate in connection
               with a Sale thereof, and to take all action necessary to effect
               such Sale; and

               (5) no purchaser or transferee at such a Sale shall be bound to
               ascertain the Indenture Trustee's authority, inquire into the
               satisfaction of any conditions precedent or see to the
               application of any monies.

     Section 5.16 ACTION ON NOTES. The Indenture Trustee's right to seek and
recover judgment on the Notes or under this Indenture shall not be affected by
the seeking, obtaining or application of any other relief under or with respect
to this Indenture. Neither the lien of this Indenture nor any rights or remedies
of the Indenture Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer. Any money or property collected by the Indenture
Trustee shall be applied in accordance with Section 5.04(b).

     Section 5.17 PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Administrator's expense, the Issuer in its capacity as holder of the Mortgage
Loans, shall take all such lawful action as the Indenture Trustee may request to
cause the Issuer to compel or secure the performance and observance by the
Seller and the Master Servicer, as applicable, of each of their obligations to
the Issuer under or in connection with the Mortgage Loan Purchase Agreement and
the Servicing Agreement, and to exercise any and all rights, remedies, powers
and privileges lawfully available to the Issuer under or in connection with the
Mortgage Loan Purchase Agreement and the Servicing Agreement to the extent and
in the manner directed by the Indenture Trustee, as pledgee of the Mortgage
Loans, including the transmission of notices of default on the part of the
Seller or the Master Servicer thereunder and the institution of legal or
administrative actions or proceedings to compel or secure performance by the
Seller or the Master Servicer of each of their obligations under the Mortgage
Loan Purchase Agreement and the Servicing Agreement.

     (b) If an Event of Default has occurred and is continuing, the Indenture
Trustee, as pledgee of the Mortgage Loans, subject to the rights of the Credit
Enhancer under the Servicing Agreement may, and at the direction (which
direction shall be in writing or by telephone (confirmed in writing promptly
thereafter)) of the Holders of 66-2/3% of the Security Balances of the Notes
shall, exercise all rights, remedies, powers, privileges and claims of the
Issuer against the Seller or the Master Servicer under or in connection with the
Mortgage Loan Purchase Agreement and the Servicing Agreement, including the
right or power to take any action to compel or secure performance or observance
by the Seller or the Master Servicer, as the case may be, of each of their
obligations to the Issuer thereunder and to give any consent, request, notice,
direction, approval, extension or waiver under the Mortgage Loan Purchase
Agreement and the Servicing Agreement, as the case may be, and any right of the
Issuer to take such action shall not be suspended.

                                       36

<PAGE>

                                   ARTICLE VI

                              The Indenture Trustee

     Section 6.01 DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Indenture Trustee shall exercise the rights and
powers vested in it by this Indenture and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.

     (b) Except during the continuance of an Event of Default:

          (i) the Indenture Trustee undertakes to perform such duties and only
     such duties as are specifically set forth in this Indenture and no implied
     covenants or obligations shall be read into this Indenture against the
     Indenture Trustee; and

          (ii) in the absence of bad faith on its part, the Indenture Trustee
     may conclusively rely, as to the truth of the statements and the
     correctness of the opinions expressed therein, upon certificates or
     opinions furnished to the Indenture Trustee and conforming to the
     requirements of this Indenture; however, the Indenture Trustee shall
     examine the certificates and opinions to determine whether or not they
     conform to the requirements of this Indenture.

     (c) The Indenture Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:

          (i) this paragraph does not limit the effect of paragraph (b) of this
     Section 6.01;

          (ii) the Indenture Trustee shall not be liable for any error of
     judgment made in good faith by a Responsible Officer unless it is proved
     that the Indenture Trustee was negligent in ascertaining the pertinent
     facts; and

          (iii) the Indenture Trustee shall not be liable with respect to any
     action it takes or omits to take in good faith in accordance with a
     direction received by it (A) pursuant to Section 5.11 or (B) from the
     Credit Enhancer, which it is entitled to give under any of the Basic
     Documents.

     (d) The Indenture Trustee shall not be liable for interest on any money
received by it except as the Indenture Trustee may agree in writing with the
Issuer.

     (e) Money held in trust by the Indenture Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Trust Agreement.

     (f) No provision of this Indenture shall require the Indenture Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder

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<PAGE>

or in the exercise of any of its rights or powers, if it shall have reasonable
grounds to believe that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.

     (g) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Indenture Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.

     Section 6.02 RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee may
rely on any document believed by it to be genuine and to have been signed or
presented by the proper person. The Indenture Trustee need not investigate any
fact or matter stated in the document.

     (b) Before the Indenture Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Indenture Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on an Officer's Certificate or Opinion of Counsel.

     (c) The Indenture Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Indenture Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee appointed with
due care by it hereunder.

     (d) The Indenture Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Indenture Trustee's conduct does
not constitute willful misconduct, negligence or bad faith.

     (e) The Indenture Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.

     Section 6.03 INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture Trustee
in its individual or any other capacity may become the owner or pledgee of Notes
and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Indenture Trustee. Any Administrator, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Indenture Trustee must comply with Sections 6.11 and 6.12.

     Section 6.04 INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee shall
not be responsible for and makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.

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<PAGE>

     Section 6.05 NOTICE OF EVENT OF DEFAULT. If an Event of Default occurs and
is continuing and if it is known to a Responsible Officer of the Indenture
Trustee, the Indenture Trustee shall give notice thereof to the Credit Enhancer.
The Trustee shall mail to each Noteholder notice of the Event of Default within
90 days after it occurs. Except in the case of an Event of Default in payment of
principal of or interest on any Note, the Indenture Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.

     Section 6.06 REPORTS BY INDENTURE TRUSTEE TO HOLDERS. The Indenture Trustee
shall deliver to each Noteholder such information as may be required to enable
such holder to prepare its federal and state income tax returns. In addition,
upon the Issuer's written request, the Indenture Trustee shall promptly furnish
information reasonably requested by the Issuer that is reasonably available to
the Indenture Trustee to enable the Issuer to perform its federal and state
income tax reporting obligations.

     Section 6.07 COMPENSATION AND INDEMNITY. The Issuer shall or shall cause
the Administrator to pay to the Indenture Trustee on each Payment Date
reasonable compensation for its services. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall or shall cause the Administrator to reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by
it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall or shall cause the Administrator to
indemnify the Indenture Trustee against any and all loss, liability or expense
(including attorneys' fees) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder. The Indenture Trustee
shall notify the Issuer and the Administrator promptly of any claim for which it
may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and
the Administrator shall not relieve the Issuer or the Administrator of its
obligations hereunder. The Issuer shall or shall cause the Administrator to
defend any such claim, and the Indenture Trustee may have separate counsel and
the Issuer shall or shall cause the Administrator to pay the fees and expenses
of such counsel. Neither the Issuer nor the Administrator need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence or bad faith.

     The Issuer's payment obligations to the Indenture Trustee pursuant to this
Section 6.07 shall survive the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of an Event of Default specified in
Section 5.01(iv) or (v) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.

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<PAGE>

     Section 6.08 REPLACEMENT OF INDENTURE TRUSTEE. No resignation or removal of
the Indenture Trustee and no appointment of a successor Indenture Trustee shall
become effective until the acceptance of appointment by the successor Indenture
Trustee pursuant to this Section 6.08. The Indenture Trustee may resign at any
time by so notifying the Issuer and the Credit Enhancer. The Holders of a
majority of Security Balances of the Notes may remove the Indenture Trustee by
so notifying the Indenture Trustee and the Credit Enhancer and may appoint a
successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:

          (i) the Indenture Trustee fails to comply with Section 6.11;

          (ii) the Indenture Trustee is adjudged a bankrupt or insolvent;

          (iii) a receiver or other public officer takes charge of the Indenture
     Trustee or its property; or

          (iv) the Indenture Trustee otherwise becomes incapable of acting.

     If the Indenture Trustee resigns or is removed or if a vacancy exists in
the office of Indenture Trustee for any reason (the Indenture Trustee in such
event being referred to herein as the retiring Indenture Trustee), the Issuer
shall promptly appoint a successor Indenture Trustee.

     A successor Indenture Trustee shall deliver a written acceptance of its
appointment to the retiring Indenture Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Indenture Trustee shall become effective,
and the successor Indenture Trustee shall have all the rights, powers and duties
of the Indenture Trustee under this Indenture. The successor Indenture Trustee
shall mail a notice of its succession to Noteholders. The retiring Indenture
Trustee shall promptly transfer all property held by it as Indenture Trustee to
the successor Indenture Trustee.

     If a successor Indenture Trustee does not take office within 60 days after
the retiring Indenture Trustee resigns or is removed, the retiring Indenture
Trustee, the Issuer or the Holders of a majority of Security Balances of the
Notes may petition any court of competent jurisdiction for the appointment of a
successor Indenture Trustee.

     If the Indenture Trustee fails to comply with Section 6.11, any Noteholder
may petition any court of competent jurisdiction for the removal of the
Indenture Trustee and the appointment of a successor Indenture Trustee.

     Notwithstanding the replacement of the Indenture Trustee pursuant to this
Section, the Issuer's and the Administrator's obligations under Section 6.07
shall continue for the benefit of the retiring Indenture Trustee.

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<PAGE>

     Section 6.09 SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture
Trustee consolidates with, merges or converts into, or transfers all or
substantially all its corporate trust business or assets to, another corporation
or banking association, the resulting, surviving or transferee corporation
without any further act shall be the successor Indenture Trustee; provided, that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies prior written notice of any such transaction.

     In case at the time such successor or successors by merger, conversion or
consolidation to the Indenture Trustee shall succeed to the trusts created by
this Indenture any of the Notes shall have been authenticated but not delivered,
any such successor to the Indenture Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; and in all such cases such certificates
shall have the full force which it is anywhere in the Notes or in this Indenture
provided that the certificate of the Indenture Trustee shall have.

     Section 6.10 APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE
TRUSTEE. (a) Notwithstanding any other provisions of this Indenture, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust Estate, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Indenture Trustee may consider necessary or desirable. No co-trustee or
separate trustee here under shall be required to meet the terms of eligibility
as a successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.08 hereof.

     (b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

          (i) all rights, powers, duties and obligations conferred or imposed
     upon the Indenture Trustee shall be conferred or imposed upon and exercised
     or performed by the Indenture Trustee and such separate trustee or
     co-trustee jointly (it being understood that such separate trustee or
     co-trustee is not authorized to act separately without the Indenture
     Trustee joining in such act), except to the extent that under any law of
     any jurisdiction in which any particular act or acts are to be performed
     the Indenture Trustee shall be incompetent or unqualified to perform such
     act or acts, in which event such rights, powers, duties and obligations
     (including the holding of title to the Trust Estate or any portion thereof
     in any such jurisdiction) shall be exercised and performed singly by such
     separate trustee or co-trustee, but solely at the direction of the
     Indenture Trustee;

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<PAGE>

          (ii) no trustee hereunder shall be personally liable by reason of any
     act or omission of any other trustee hereunder; and

          (iii) the Indenture Trustee may at any time accept the resignation of
     or remove any separate trustee or co-trustee.

     (c) Any notice, request or other writing given to the Indenture Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.

     (d) Any separate trustee or co-trustee may at any time constitute the
Indenture Trustee, its agent or attorney-in-fact with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.

     Section 6.11 ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee shall at
all times satisfy the requirements of TIA ss. 310(a). The Indenture Trustee
shall have a combined capital and surplus of at least [$50,000,000] as set forth
in its most recent published annual report of condition and it or its parent
shall have a long-term debt rating of [Baa3] or better by [Moody's]. The
Indenture Trustee shall comply with TIA ss. 310(b), including the optional
provision permitted by the second sentence of TIA ss. 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA ss. 310(b)(1)
any indenture or indentures under which other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.

     Section 6.12 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Indenture Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). An Indenture Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated.

     Section 6.13 REPRESENTATION AND WARRANTY. The Indenture Trustee hereby
represents that:

          (i) The Indenture Trustee is duly organized and validly existing as a
     corporation in good standing under the laws of the State of ___________,
     with power and authority to own its properties and to conduct its business
     as such properties are currently owned and such business is presently
     conducted.

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<PAGE>

          (ii) The Indenture Trustee has the power and authority to execute and
     deliver this Indenture and to carry out its terms; and the execution,
     delivery and performance of this Indenture have been duly authorized by the
     Indenture Trustee by all necessary corporate action.

          (iii) The consummation of the transactions contemplated by this
     Indenture and the fulfillment of the terms hereof do not conflict with,
     result in any breach of any of the terms and provisions of, or constitute
     (with or without notice or lapse of time) a default under, the articles of
     incorporation or bylaws of the Indenture Trustee or any agreement or other
     instrument to which the Indenture Trustee is a party or by which it is
     bound.

          (iv) To the Indenture Trustee's best knowledge, there are no
     proceedings or investigations pending or threatened before any court,
     regulatory body, administrative agency or other governmental
     instrumentality having jurisdiction over the Indenture Trustee or its
     properties: (A) asserting the invalidity of this Indenture (B) seeking to
     prevent the consummation of any of the transactions contemplated by this
     Indenture or (C) seeking any determination or ruling that might materially
     and adversely affect the performance by the Indenture Trustee of its
     obligations under, or the validity or enforceability of, this Indenture.

     Section 6.14 DIRECTIONS TO INDENTURE TRUSTEE. The Indenture Trustee is
hereby directed:

     (a) to accept the pledge of the Mortgage Loans and hold the assets of the
Trust in trust for the Noteholders;

     (b) to issue, execute and deliver the Notes substantially in the form
prescribed by Exhibit A in accordance with the terms of this Indenture; and

     (c) to take all other actions as shall be required to be taken by the terms
of this Indenture.

     Section 6.15 [NO CONSENT TO CERTAIN ACTS OF DEPOSITOR. The Indenture
Trustee shall not consent to any action proposed to be taken by the Depositor
pursuant to Article [_________] of the Depositor's Restated Certificate of
Incorporation.]

     Section 6.16 INDENTURE TRUSTEE MAY OWN SECURITIES. The Indenture Trustee,
in its individual or any other capacity may become the owner or pledgee of
Securities with the same rights it would have if it were not Indenture Trustee.

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                                   ARTICLE VII

                         Noteholders' Lists and Reports

     Section 7.01 ISSUER TO FURNISH INDENTURE TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Indenture
Trustee (a) not more than five days after each Record Date, a list, in such form
as the Indenture Trustee may reasonably require, of the names and addresses of
the Holders of Notes as of such Record Date, (b) at such other times as the
Indenture Trustee and the Credit Enhancer may request in writing, within 30 days
after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Indenture Trustee is the Note
Registrar, no such list shall be required to be furnished.

     Section 7.02 PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS.
(a) The Indenture Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Indenture Trustee as provided in Section 7.01
and the names and addresses of Holders of Notes received by the Indenture
Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any
list furnished to it as provided in such Section 7.01 upon receipt of a new list
so furnished.

     (b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.

     (c) The Issuer, the Indenture Trustee and the Note Registrar shall have the
protection of TIAss.312(c).

     Section 7.03 REPORTS BY ISSUER. (a) The Issuer shall:

          (i) file with the Indenture Trustee, within 15 days after the Issuer
     is required to file the same with the Commission, copies of the annual
     reports and of the information, documents and other reports (or copies of
     such portions of any of the foregoing as the Commission may from time to
     time by rules and regulations prescribe) that the Issuer may be required to
     file with the Commission pursuant to Section 13 or 15(d) of the Exchange
     Act;

          (ii) file with the Indenture Trustee, and the Commission in accordance
     with rules and regulations prescribed from time to time by the Commission
     such additional information, documents and reports with respect to
     compliance by the Issuer with the conditions and covenants of this
     Indenture as may be required from time to time by such rules and
     regulations; and

          (iii) supply to the Indenture Trustee (and the Indenture Trustee shall
     transmit by mail to all Noteholders described in TIA ss. 313(c)) such
     summaries of any information, documents and reports required to be filed by
     the Issuer pursuant to clauses (i) and (ii) of this

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     Section 7.03(a) and by rules and regulations prescribed from time to time
     by the Commission.

     (b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.

     Section 7.04 REPORTS BY INDENTURE TRUSTEE. If required by TIA ss. 313(a),
within 60 days after each January 1 beginning with January 1, 200_, the
Indenture Trustee shall mail to each Noteholder as required by TIA ss. 313(c)
and to the Credit Enhancer a brief report dated as of such date that complies
with TIA ss. 313(a). The Indenture Trustee also shall comply with TIA ss.
313(b).

     A copy of each report at the time of its mailing to Noteholders shall be
filed by the Indenture Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Indenture
Trustee if and when the Notes are listed on any stock exchange.

                                       45

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                                  ARTICLE VIII

                      Accounts, Disbursements and Releases

     Section 8.01 COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Indenture Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any payment or performance under any agreement or instrument
that is part of the Trust Estate, the Indenture Trustee may take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate Proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.

     Section 8.02 TRUST ACCOUNTS. (a) On or prior to the Closing Date, the
Issuer shall cause the Indenture Trustee to establish and maintain, in the name
of the Indenture Trustee, for the benefit of the Noteholders and the Certificate
Paying Agent, on behalf of the Certificateholders and the Credit Enhancer, the
Payment Account as provided in Section 3.01 of this Indenture.

     (b) All monies deposited from time to time in the Payment Account pursuant
to the Servicing Agreement and all deposits therein pursuant to this Indenture
are for the benefit of the Noteholders and the Certificate Paying Agent, on
behalf of the Certificateholders and all investments made with such monies
including all income or other gain from such investments are for the benefit of
the Master Servicer as provided by the Servicing Agreement.

     On each Payment Date during the Funding Period the Indenture Trustee shall
withdraw Net Principal Collections from the Payment Account and deposit Net
Principal Collections to the Funding Account.

     On each Payment Date, the Indenture Trustee shall distribute all amounts on
deposit in the Payment Account (after giving effect to the withdrawal referred
to in the preceding paragraph) to Noteholders in respect of the Notes and in its
capacity as Certificate Paying Agent to Certificateholders in the order of
priority set forth in Section 3.05 (except as otherwise provided in Section
5.04(b).

     The Master Servicer may direct the Indenture Trustee to invest any funds in
the Payment Account in Eligible Investments maturing no later than the Business
Day preceding each Payment Date and shall not be sold or disposed of prior to
the maturity. Unless otherwise instructed by the Master Servicer, the Indenture
Trustee shall invest all funds in the Payment Account in Eligible Investments.

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<PAGE>

     (c) On or before the Closing Date the Issuer shall open, at the Corporate
Trust Office, an account which shall be the "Funding Account". The Master
Servicer may direct the Indenture Trustee to invest any funds in the Funding
Account in Eligible Investments maturing no later than the Business Day
preceding each Payment Date and shall not be sold or disposed of prior to the
maturity. Unless otherwise instructed by the Master Servicer, the Indenture
Trustee shall invest all funds in the Payment Account in its Corporate Trust
Short Term Investment Fund so long as it is an Eligible Investment. During the
Funding Period, any amounts received by the Indenture Trustee in respect of Net
Principal Collections for deposit in the Funding Account, together with any
Eligible Investments in which such monies are or will be invested or reinvested
during the term of the Notes, shall be held by the Indenture Trustee in the
Funding Account as part of the Trust Estate, subject to disbursement and
withdrawal as herein provided: Amounts on deposit in the Funding Account in
respect of Net Principal Collections may be withdrawn on each Deposit Date and
(1) paid to the Issuer in payment for Additional Loans by the deposit of such
amount to the Collection Account and (2) at the end of the Funding Period any
amounts remaining in the Funding Account after the withdrawal called for by
clause (1) shall be deposited in the Payment Account to be included in the
payment of principal on the Payment Date that is the last day of the Funding
Period.

     (d) (i) Any investment in the institution with which the Funding Account is
maintained may mature on such Payment Date and (ii) any other investment may
mature on such Payment Date if the Indenture Trustee shall advance funds on such
Payment Date to the Funding Account in the amount payable on such investment on
such Payment Date, pending receipt thereof to the extent necessary to make
distributions on the Notes and the Certificates) and shall not be sold or
disposed of prior to maturity.

     Section 8.03 OFFICER'S CERTIFICATE. The Indenture Trustee shall receive at
least [seven] days notice when requested by the Issuer to take any action
pursuant to Section 8.05(a), accompanied by copies of any instruments to be
executed, and the Indenture Trustee shall also require, as a condition to such
action, an Officer's Certificate, in form and substance satisfactory to the
Indenture Trustee, stating the legal effect of any such action, outlining the
steps required to complete the same, and concluding that all conditions
precedent to the taking of such action have been complied with.

     Section 8.04 TERMINATION UPON DISTRIBUTION TO NOTEHOLDERS. This Indenture
and the respective obligations and responsibilities of the Issuer and the
Indenture Trustee created hereby shall terminate upon the distribution to
Noteholders, Certificate Paying Agent, on behalf of the Certificateholders and
the Indenture Trustee of all amounts required to be distributed pursuant to
Article III; provided, however, that in no event shall the trust created hereby
continue beyond the expiration of 21 years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the Court of St. James, living on the date hereof.

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<PAGE>

     Section 8.05 RELEASE OF TRUST ESTATE. (a) Subject to the payment of its
fees and expenses, the Indenture Trustee may, and when required by the
provisions of this Indenture shall, execute instruments to release property from
the lien of this Indenture, or convey the Indenture Trustee's interest in the
same, in a manner and under circumstances that are not inconsistent with the
provisions of this Indenture. No party relying upon an instrument executed by
the Indenture Trustee as provided in Article VIII hereunder shall be bound to
ascertain the Indenture Trustee's authority, inquire into the satisfaction of
any conditions precedent, or see to the application of any monies.

     (b) The Indenture Trustee shall, at such time as (i) there are no Notes
Outstanding, (ii) all sums due the Indenture Trustee pursuant to this Indenture
have been paid, and (iii) all sums due the Credit Enhancer have been paid,
release any remaining portion of the Trust Estate that secured the Notes from
the lien of this Indenture.

     [(c) The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.05 only upon receipt of an request from the
Issuer accompanied by an [Officers' Certificate], [an Opinion of Counsel,] and a
letter from the Credit Enhancer, stating that the Credit Enhancer has no
objection to such request from the Issuer.]

     Section 8.06 SURRENDER OF NOTES UPON FINAL PAYMENT. By acceptance of any
Note, the Holder thereof agrees to surrender such Note to the Indenture Trustee
promptly, prior to such Noteholder's receipt of the final payment thereon.

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                                   ARTICLE IX

                             Supplemental Indentures

     Section 9.01 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. (a)
Without the consent of the Holders of any Notes but with the consent of the
Credit Enhancer and prior notice to the Rating Agencies and the Credit Enhancer,
the Issuer and the Indenture Trustee, when authorized by an Issuer Request, at
any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the Trust
Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Indenture Trustee, for any of the following purposes:

          (i) to correct or amplify the description of any property at any time
     subject to the lien of this Indenture, or better to assure, convey and
     confirm unto the Indenture Trustee any property subject or required to be
     subjected to the lien of this Indenture, or to subject to the lien of this
     Indenture additional property;

          (ii) to evidence the succession, in compliance with the applicable
     provisions hereof, of another person to the Issuer, and the assumption by
     any such successor of the covenants of the Issuer herein and in the Notes
     contained;

          (iii) to add to the covenants of the Issuer, for the benefit of the
     Holders of the Notes, or to surrender any right or power herein conferred
     upon the Issuer;

          (iv) to convey, transfer, assign, mortgage or pledge any property to
     or with the Indenture Trustee;

          (v) to cure any ambiguity, to correct or supplement any provision
     herein or in any supplemental indenture that may be inconsistent with any
     other provision herein or in any supplemental indenture;

          (vi) to make any other provisions with respect to matters or questions
     arising under this Indenture or in any supplemental indenture; provided,
     that such action shall not materially and adversely affect the interests of
     the Holders of the Notes;

          (vii) to evidence and provide for the acceptance of the appointment
     hereunder by a successor trustee with respect to the Notes and to add to or
     change any of the provisions of this Indenture as shall be necessary to
     facilitate the administration of the trusts hereunder by more than one
     trustee, pursuant to the requirements of Article VI; or

          (viii) to modify, eliminate or add to the provisions of this Indenture
     to such extent as shall be necessary to effect the qualification of this
     Indenture under the TIA or under any similar federal statute hereafter
     enacted and to add to this Indenture such other provisions as

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<PAGE>

     may be expressly required by the TIA;

provided, however, that no such indenture supplements shall be entered into
unless the Indenture Trustee shall have received an Opinion of Counsel that
entering into such indenture supplement will not have any material adverse tax
consequences to the Noteholders.

     The Indenture Trustee is hereby authorized to join in the execution of any
such supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.

     (b) The Issuer and the Indenture Trustee, when authorized by an Issuer
Request, may, also without the consent of any of the Holders of the Notes but
with the consent of the Credit Enhancer and prior notice to the Rating Agencies
and the Credit Enhancer, enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, this Indenture or of modifying in any
manner the rights of the Holders of the Notes under this Indenture; provided,
however, that such action shall not, as evidenced by an Opinion of Counsel, (i)
adversely affect in any material respect the interests of any Noteholder or (ii)
cause the Issuer to be subject to an entity level tax.

     Section 9.02 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Indenture Trustee, when authorized by an Issuer Request, also
may, with prior notice to the Rating Agencies and, with the written consent of
the Credit Enhancer and with the consent of the Holders of not less than a
majority of the Security Balances of each Class of Notes affected thereby, by
Act of such Holders delivered to the Issuer and the Indenture Trustee, enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each Note
affected thereby:

          (i) change the date of payment of any installment of principal of or
     interest on any Note, or reduce the principal amount thereof or the
     interest rate thereon, change the provisions of this Indenture relating to
     the application of collections on, or the proceeds of the sale of, the
     Trust Estate to payment of principal of or interest on the Notes, or change
     any place of payment where, or the coin or currency in which, any Note or
     the interest thereon is payable, or impair the right to institute suit for
     the enforcement of the provisions of this Indenture requiring the
     application of funds available therefor, as provided in Article V, to the
     payment of any such amount due on the Notes on or after the respective due
     dates thereof;

          (ii) reduce the percentage of the Security Balances of the Notes, the
     consent of the Holders of which is required for any such supplemental
     indenture, or the consent of the Holders of which is required for any
     waiver of compliance with certain provisions of this Indenture or certain
     defaults hereunder and their consequences provided for in this Indenture;

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<PAGE>

          (iii) modify or alter the provisions of the proviso to the definition
     of the term "Outstanding" or modify or alter the exception in the
     definition of the term "Holder";

          (iv) reduce the percentage of the Security Balances of the Notes
     required to direct the Indenture Trustee to direct the Issuer to sell or
     liquidate the Trust Estate pursuant to Section 5.04;

          (v) modify any provision of this Section 9.02 except to increase any
     percentage specified herein or to provide that certain additional
     provisions of this Indenture or the Basic Documents cannot be modified or
     waived without the consent of the Holder of each Note affected thereby;

          (vi) modify any of the provisions of this Indenture in such manner as
     to affect the calculation of the amount of any payment of interest or
     principal due on any Note on any Payment Date (including the calculation of
     any of the individual components of such calculation); or

          (vii) permit the creation of any lien ranking prior to or on a parity
     with the lien of this Indenture with respect to any part of the Trust
     Estate or, except as otherwise permitted or contemplated herein, terminate
     the lien of this Indenture on any property at any time subject hereto or
     deprive the Holder of any Note of the security provided by the lien of this
     Indenture; and provided, further, that such action shall not, as evidenced
     by an Opinion of Counsel, cause the Issuer to be subject to an entity level
     tax.

     The Indenture Trustee may in its discretion determine whether or not any
Notes would be affected by any supplemental indenture and any such determination
shall be conclusive upon the Holders of all Notes, whether theretofore or
thereafter authenticated and delivered hereunder. The Indenture Trustee shall
not be liable for any such determination made in good faith.

     It shall not be necessary for any Act of Noteholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture, but
it shall be sufficient if such Act shall approve the substance thereof.

     Promptly after the execution by the Issuer and the Indenture Trustee of any
supplemental indenture pursuant to this Section 9.02, the Indenture Trustee
shall mail to the Holders of the Notes to which such amendment or supplemental
indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.

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<PAGE>

     Section 9.03 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modification thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.01 and 6.02, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.

     Section 9.04 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and shall be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Indenture Trustee, the Issuer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.

     Section 9.05 CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.

     Section 9.06 REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.

                                       52

<PAGE>

                                    ARTICLE X

                                  Miscellaneous

     Section 10.01 COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee and to the Credit Enhancer (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that, in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.

     Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:

               (1) a statement that each signatory of such certificate or
               opinion has read or has caused to be read such covenant or
               condition and the definitions herein relating thereto;

               (2) a brief statement as to the nature and scope of the
               examination or investigation upon which the statements or
               opinions contained in such certificate or opinion are based;

               (3) a statement that, in the opinion of each such signatory, such
               signatory has made such examination or investigation as is
               necessary to enable such signatory to express an informed opinion
               as to whether or not such covenant or condition has been complied
               with;

(4) a statement as to whether, in the opinion of each such signatory, such
condition or covenant has been complied with; and

(5) if the Signer of such Certificate or Opinion is required to be Independent,
the Statement required by the definition of the term "Independent".

     (b) (i) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 10.01(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such deposit) to the Issuer
of the Collateral or other property or securities to be so deposited.

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<PAGE>

          (ii) Whenever the Issuer is required to furnish to the Indenture
     Trustee an Officer's Certificate certifying or stating the opinion of any
     signer thereof as to the matters described in clause (i) above, the Issuer
     shall also deliver to the Indenture Trustee an Independent Certificate as
     to the same matters, if the fair value to the Issuer of the securities to
     be so deposited and of all other such securities made the basis of any such
     withdrawal or release since the commencement of the then-current fiscal
     year of the Issuer, as set forth in the certificates delivered pursuant to
     clause (i) above and this clause (ii), is 10% or more of the Security
     Balances of the Notes, but such a certificate need not be furnished with
     respect to any securities so deposited, if the fair value thereof to the
     Issuer as set forth in the related Officer's Certificate is less than
     $25,000 or less than one percent of the Security Balances of the Notes.

          (iii) Whenever any property or securities are to be released from the
     lien of this Indenture, the Issuer shall also furnish to the Indenture
     Trustee an Officer's Certificate certifying or stating the opinion of each
     person signing such certificate as to the fair value (within 90 days of
     such release) of the property or securities proposed to be released and
     stating that in the opinion of such person the proposed release will not
     impair the security under this Indenture in contravention of the provisions
     hereof.

          (iv) Whenever the Issuer is required to furnish to the Indenture
     Trustee an Officer's Certificate certifying or stating the opinion of any
     signer thereof as to the matters described in clause (iii) above, the
     Issuer shall also furnish to the Indenture Trustee an Independent
     Certificate as to the same matters if the fair value of the property or
     securities and of all other property, other than property as contemplated
     by clause (v) below or securities released from the lien of this Indenture
     since the commencement of the then-current calendar year, as set forth in
     the certificates required by clause (iii) above and this clause (iv),
     equals 10% or more of the Security Balances of the Notes, but such
     certificate need not be furnished in the case of any release of property or
     securities if the fair value thereof as set forth in the related Officer's
     Certificate is less than $25,000 or less than one percent of the then
     Security Balances of the Notes.

          (v) Notwithstanding any provision of this Indenture, the Issuer may,
     without compliance with the requirements of the other provisions of this
     Section 10.01, (A) collect, sell or otherwise dispose of the Mortgage Loans
     as and to the extent permitted or required by the Basic Documents or (B)
     make cash payments out of the Payment Account as and to the extent
     permitted or required by the Basic Documents [, so long as the Issuer shall
     deliver to the Indenture Trustee every six months, commencing
     _____________, an Officer's Certificate of the Issuer stating that all the
     dispositions of Collateral described in clauses (A) or (B) above that
     occurred during the preceding six calendar months were in the ordinary
     course of the Issuer's business and that the proceeds thereof were applied
     in accordance with the Basic Documents].

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     Section 10.02 FORM OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.

     Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Seller, the
Issuer or the Administrator, stating that the information with respect to such
factual matters is in the possession of the Seller, the Issuer or the
Administrator, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.

     Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

     Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.

     Section 10.03 ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall become effective when such instrument or instruments
are delivered to the Indenture Trustee, and, where it is hereby expressly
required, to the Issuer. Such instrument or instruments (and the action embodied
therein and evidenced thereby) are herein sometimes referred to as the "Act" of
the Noteholders signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Indenture Trustee and the Issuer, if made in the
manner provided in this Section 10.03.

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<PAGE>

     (b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Indenture Trustee deems
sufficient.

     (c) The ownership of Notes shall be proved by the Note Registrar.

     (d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Indenture
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.

     Section 10.04 NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER, CREDIT ENHANCER
AND RATING AGENCIES. Any request, demand, authorization, direction, notice,
consent, waiver or Act of Note holders or other documents provided or permitted
by this Indenture shall be in writing and if such request, demand,
authorization, direction, notice, consent, waiver or act of Noteholders is to be
made upon, given or furnished to or filed with:

          (i) the Indenture Trustee by any Noteholder or by the Issuer shall be
     sufficient for every purpose hereunder if made, given, furnished or filed
     in writing to or with the Indenture Trustee at the Corporate Trust Office.
     The Indenture Trustee shall promptly transmit any notice received by it
     from the Noteholders to the Issuer, or

          (ii) the Issuer by the Indenture Trustee or by any Noteholder shall be
     sufficient for every purpose hereunder if in writing and mailed
     first-class, postage prepaid to the Issuer addressed to: Homestar Mortgage
     Acceptance Corp. MBN Trust Series 200_ - ______, in care of [Name of Owner
     Trustee] _________________, __________, ______________, Attention of
     _________________________________________ with a copy to the Administrator
     at ________________ Attention: __________ __________________________, or at
     any other address previously furnished in writing to the Indenture Trustee
     by the Issuer or the Administrator. The Issuer shall promptly transmit any
     notice received by it from the Noteholders to the Indenture Trustee, or

          (iii) the Credit Enhancer by the Issuer, the Indenture Trustee or by
     any Noteholders shall be sufficient for every purpose hereunder to in
     writing and mailed, first-class postage pre-paid, or personally delivered
     or telecopied to: [Name of Credit Enhancer], ________________, ________,
     _______________, Attention: _________________, ___________________________,
     Telephone ______________. Telecopier ______________. The Credit Enhancer
     shall promptly transmit any notice received by it from the Issuer, the
     Indenture Trustee or the Noteholders to the Issuer or Indenture Trustee, as
     the case may be.

     Notices required to be given to the Rating Agencies by the Issuer, the
Indenture Trustee or

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<PAGE>

the Owner Trustee shall be in writing, personally delivered or mailed by
certified mail, return receipt requested, to (i) in the case of [Moody's], at
the following address: [Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007] and (ii) in the case of
[Standard & Poor's], at the following address: [Standard & Poor's Ratings Group,
26 Broadway (15th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department]; or as to each of the foregoing, at such other address
as shall be designated by written notice to the other parties.

     Section 10.05 NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture provides
for notice to Noteholders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class, postage prepaid to each Noteholder affected by such event, at such
Person's as it appears on the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Noteholders is given by mail, neither the failure to
mail such notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with respect to other
Noteholders, and any notice that is mailed in the manner herein provided shall
conclusively be presumed to have been duly given regardless of whether such
notice is in fact actually received.

     Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Indenture Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.

     In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a
sufficient giving of such notice.

     Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute an Event of Default.

     Section 10.06 ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, the Issuer may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Administrator to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer shall furnish to the Indenture Trustee a copy of
each such agreement and the Indenture Trustee shall cause payments to be made
and notices to be given in accordance with such agreements.

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     Section 10.07 CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.

     The provisions of TIA ss.ss. 310 through 317 that impose duties on any
Person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.

     Section 10.08 EFFECT OF HEADINGS. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.

     Section 10.09 SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Indenture Trustee in this
Indenture shall bind its successors, co-trustees and agents.

     Section 10.10 SEPARABILITY. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.

     Section 10.11 BENEFITS OF INDENTURE. The Credit Enhancer and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Indenture. Nothing in this Indenture or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured hereunder, and any
other Person with an ownership interest in any part of the Trust Estate, any
benefit or any legal or equitable right, remedy or claim under this Indenture.

     Section 10.12 LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.

     Section 10.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

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<PAGE>

     Section 10.14 COUNTERPARTS. This Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.

     Section 10.15 RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Indenture Trustee or any other counsel reasonably
acceptable to the Indenture Trustee) to the effect that such recording is
necessary either for the protection of the Noteholders or any other Person
secured hereunder or for the enforcement of any right or remedy granted to the
Indenture Trustee under this Indenture.

     Section 10.16 ISSUER OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Owner Trustee or
the Indenture Trustee on the Notes or under this Indenture or any certificate or
other writing delivered in connection herewith or therewith, against (i) the
Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Indenture
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Owner Trustee or the Indenture Trustee or
of any successor or assign of the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity. For all purposes of
this Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.

     Section 10.17 NO PETITION. The Indenture Trustee, by entering into this
Indenture, and each Noteholder, by accepting a Note, hereby covenant and agree
that they will not at any time institute against the Depositor or the Issuer, or
join in any institution against the Depositor or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Basic Documents.

     Section 10.18 INSPECTION. The Issuer agrees that, on reasonable prior
notice, it shall permit any representative of the Indenture Trustee, during the
Issuer's normal business hours, to examine all the books of account, records,
reports and other papers of the Issuer, to make copies and extracts therefrom,
to cause such books to be audited by Independent certified public accountants,
and to discuss the Issuer's affairs, finances and accounts with the Issuer's
officers, employees, and Independent certified public accountants, all at such
reasonable times and as often as may be reasonably requested. The Indenture
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the

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<PAGE>

Indenture Trustee may reasonably determine that such disclosure is consistent
with its obligations hereunder.

     Section 10.19 AUTHORITY OF THE ADMINISTRATOR. Each of the parties to this
Indenture acknowledges that the Issuer and the Owner Trustee have each appointed
the Administrator to act as its agent to perform the duties and obligations of
the Issuer hereunder. Unless otherwise instructed by the Issuer or the Owner
Trustee, copies of all notices, requests, demands and other documents to be
delivered to the Issuer or the Owner Trustee pursuant to the terms hereof shall
be delivered to the Administrator. Unless otherwise instructed by the Issuer or
the Owner Trustee, all notices, requests, demands and other documents to be
executed or delivered, and any action to be taken, by the Issuer or the Owner
Trustee pursuant to the terms hereof may be executed, delivered and/or taken by
the Administrator pursuant to the Administration Agreement.

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     IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused their
names to be signed hereto by their respective officers thereunto duly
authorized, all as of the day and year first above written.

                                    HOMESTAR MORTGAGE ACCEPTANCE CORP.
                                    MBN TRUST SERIES 200_ -  _____,
                                    as Issuer

                                    By: ________________________________________
                                    not in its individual capacity but solely as
                                    Owner Trustee

                                    By: ________________________________________
                                    Name:
                                    Title:

                                    ___________________________________________,
                                    as Indenture Trustee, as Certificate Paying
                                    Agent and as Note Registrar

                                    By: ________________________________________
                                    Name:
                                    Title:

_______________________________
hereby accepts the appointment
as Certificate Paying Agent
pursuant to Section 3.03 hereof
and as Certificate Registrar
pursuant to Section 4.02 hereof.

By:____________________________
Name:
Title:

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<PAGE>

STATE OF [NEW YORK]      )
                         ) ss.:
COUNTY OF [NEW YORK]     )

         On this ____ day of __________, before me personally appeared
______________, to me known, who being by me duly sworn, did depose and say,
that he resides at _________________, __________________ _____, that he is the
of the Owner Trustee, one of the corporations described in and which executed
the above instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.

                                              __________________________________
                                                        Notary Public

[NOTARIAL SEAL]

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<PAGE>

STATE OF [NEW YORK]       )
                          ) ss.:
COUNTY OF [NEW YORK]      )

     On this ____ day of __________, before me personally appeared , to me
known, who being by me duly sworn, did depose and say, that he resides at
____________________, that he is the ______________ of ________________, as
Indenture Trustee, one of the corporations described in and which executed the
above instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.

                                           _____________________________________
                                                        Notary Public

[NOTARIAL SEAL]

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<PAGE>

STATE OF [NEW YORK]            )
                               ) ss.:
COUNTY OF [NEW YORK]           )

     On this ____ day of __________, before me personally appeared , to me
known, who being by me duly sworn, did depose and say, that he resides at
________________________, that he is an ________________ of _______________, as
Indenture Trustee, one of the corporations described in and which executed the
above instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
order of the Board of Directors of said corporation; and that he signed his name
thereto by like order.

                                           _____________________________________
                                                        Notary Public

[NOTARIAL SEAL]

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<PAGE>

                                   APPENDIX A

                                   DEFINITIONS

         ADJUSTABLE RATE MORTGAGE LOAN: A Mortgage Loan with a Mortgage Rate
that is subject to periodic adjustment calculated on the basis of the Index,
plus an applicable Gross Margin. Each Adjustable Rate Mortgage Loan is secured
by a first lien on the related Mortgaged Property.

         ADJUSTMENT DATE: As to each Adjustable Rate Mortgage Loan, each date
set forth in the related Mortgage Note on which an adjustment to the interest
rate on such Mortgage Loan becomes effective.

         ADMINISTRATIVE FEE: The amount of the fee payable to the Owner Trustee
together with the amount of the premium payable to the Note Insurer, which will
accrue at ______% per annum based on the Note Principal Balance of the Notes.

         ADVANCE: As to any Mortgage Loan, any advance made by the Master
Servicer, pursuant to Section 4.04 of the Servicing Agreement.

         AFFILIATE: With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. For purposes of this
definition, "control" means the power to direct the management and policies of a
Person, directly or indirectly, whether through ownership of voting securities,
by contract or otherwise and "controlling" and "controlled" shall have meanings
correlative to the foregoing.

         APPRAISED VALUE: The appraised value of a Mortgaged Property based upon
the lesser of (i) the appraisal made at the time of the origination of the
related Mortgage Loan, or (ii) the sales price of such Mortgaged Property at
such time of origination. With respect to a Mortgage Loan the proceeds of which
were used to refinance an existing mortgage loan, the appraised value of the
Mortgaged Property based upon the appraisal (as reviewed and approved by the
Seller) obtained at the time of refinancing.

         ASSIGNMENT OF MORTGAGE: An assignment of Mortgage, notice of transfer
or equivalent instrument, in recordable form, which is sufficient under the laws
of the jurisdiction wherein the related Mortgaged Property is located to reflect
of record the sale of the Mortgage, which assignment, notice of transfer or
equivalent instrument may be in the form of one or more blanket assignments
covering Mortgages secured by Mortgaged Properties located in the same county,
if permitted by law.

         AUTHORIZED NEWSPAPER: A newspaper of general circulation in the Borough
of Manhattan, The City of New York, printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays or holidays.

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         AUTHORIZED OFFICER: With respect to the Issuer, any officer of the
Owner Trustee who is authorized to act for the Owner Trustee in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by the Owner Trustee to the Indenture Trustee on the Closing Date (as such list
may be modified or supplemented from time to time thereafter).

         AVAILABLE FUNDS: As to any Payment Date, an amount equal to the amount
on deposit in the Payment Account on such Payment Date and available for
distribution to the Noteholders (minus, if the Notes have been declared due and
payable following an Event of Default on such Payment Date, any amounts owed to
the Indenture Trustee by the Issuer pursuant to Section 6.07 of the Indenture).

         AVAILABLE FUNDS CAP CARRY-FORWARD AMOUNT: With respect to the Notes and
any Payment Date, an amount equal to the sum of (x) the amount, if any, by which
(a) the lesser of (1) the amount payable if clause (i) of the definition of Note
Interest Rate is used to calculate interest and (2) the amount payable if the
Maximum Note Interest Rate is used to calculate interest exceeds (b) the amount
payable if clause (ii) of the definition of Note Interest Rate is used to
calculate interest and (y) the interest accrued during the prior Interest Period
on the amount of any Available Funds Cap Carry-Forward Amount immediately prior
to such Payment Date, calculated on the basis of a 360-day year and the actual
number of days elapsed and using the Note Interest Rate applicable to such
Payment Date minus (z) the aggregate of all amounts distributed to the
Noteholders on all prior Payment Dates pursuant to Section 3.05(v) of the
Indenture.

         AVAILABLE FUNDS INTEREST RATE: As to any Payment Date, a per annum rate
equal to the lesser of (x) the fraction, expressed as a percentage, the
numerator of which is (i) an amount equal to (A) 1/12 of the aggregate Principal
Balance of the then outstanding Mortgage Loans times the weighted average of the
Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans minus (B)
the Administrative Fee for such Payment Date, and the denominator of which is
(ii) an amount equal to (A) the then outstanding aggregate Note Principal
Balance of the Notes multiplied by (B) the actual number of days elapsed in the
related Interest Period divided by 360 and (y) the Maximum Note Interest Rate.

         BANKRUPTCY CODE:  The Bankruptcy Code of 1978, as amended.

         BASIC DOCUMENTS: The Trust Agreement, the Certificate of Trust, the
Indenture, the Mortgage Loan Purchase Agreement, the Insurance Agreement, the
Servicing Agreement, and the other documents and certificates delivered in
connection with any of the above.

         BENEFICIAL OWNER: With respect to any Note, the Person who is the
beneficial owner of such Note as reflected on the books of the Depository or on
the books of a Person maintaining an account with such Depository (directly as a
Depository Participant or indirectly through a Depository Participant, in
accordance with the rules of such Depository).

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         BOOK-ENTRY NOTES: Beneficial interests in the Notes, ownership and
transfers of which shall be made through book entries by the Depository as
described in Section 4.06 of the Indenture.

         BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or (ii) a
day on which banking institutions in the City of New York, Delaware or
California or in the city in which the corporate trust offices of the Indenture
Trustee or the Note Insurer are located, are required or authorized by law to be
closed.

         STATUTORY TRUST STATUTE: Chapter 38 of Title 12 of the Delaware Code,
12 DEL. Codess.ss. 3801 ET SEQ., as the same may be amended from time to time.

         CASH LIQUIDATION: As to any defaulted Mortgage Loan other than a
Mortgage Loan as to which an REO Acquisition occurred, a determination by the
Master Servicer that it has received all Insurance Proceeds, Liquidation
Proceeds and other payments or cash recoveries which the Master Servicer
reasonably and in good faith expects to be finally recoverable with respect to
such Mortgage Loan.

         CERTIFICATE DISTRIBUTION ACCOUNT: The account or accounts created and
maintained pursuant to Section 3.10(d) of the Trust Agreement. The Certificate
Distribution Account shall be an Eligible Account.

         CERTIFICATE PAYING AGENT: The meaning specified in Section 3.10 of the
Trust Agreement.

         CERTIFICATE PERCENTAGE INTEREST: With respect to each Certificate, the
Certificate Percentage Interest on the face thereof.

         CERTIFICATE REGISTER: The register maintained by the Certificate
Registrar in which the Certificate Registrar shall provide for the registration
of Certificates and of transfers and exchanges of Certificates.

         CERTIFICATE REGISTRAR: Initially, the Indenture Trustee, in its
capacity as Certificate Registrar, or any successor to the Indenture Trustee in
such capacity.

         CERTIFICATE OF TRUST: The Certificate of Trust filed for the Trust
pursuant to Section 3810(a) of the Statutory Trust Statute.

         CERTIFICATES: The Homestar Mortgage Acceptance Corp., Mortgage-Backed
Certificates, Series 200_-_, evidencing the beneficial ownership interest in the
Issuer and executed by the Owner Trustee in substantially the form set forth in
Exhibit A to the Trust Agreement.

         CERTIFICATEHOLDER: The Person in whose name a Certificate is registered
in the Certificate Register. Owners of Certificates that have been pledged in
good faith may be regarded as Holders if the pledgee establishes to the
satisfaction of the Indenture Trustee or the Owner Trustee, as the

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<PAGE>

case may be, the pledgee's right so to act with respect to such Certificates and
that the pledgee is not the Issuer, any other obligor upon the Certificates or
any Affiliate of any of the foregoing Persons.

         CLOSING DATE:  ______ __, 200_.

         CODE: The Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.

         COLLATERAL: The meaning specified in the Granting Clause of the
Indenture.

         COLLECTION ACCOUNT: The account or accounts created and maintained
pursuant to Section 3.06(d) of the Servicing Agreement. The Collection Account
shall be an Eligible Account.

         COMBINED LOAN-TO-VALUE RATIO: With respect to any Mortgage Loan and any
date, the percentage equivalent of a fraction, the numerator of which is the
Cut-Off Date Principal Balance of such Mortgage Loan and the denominator of
which is the outstanding principal balance as of the date of the origination of
such Mortgage Loan of any mortgage loan or mortgage loans that are secured by
liens on the Mortgaged Property that are senior or subordinate to the Mortgage
and the denominator of which is the Appraised Value of the related Mortgaged
Property.

         COMPENSATING INTEREST: With respect to any Determination Date, an
amount equal to the lesser of (i) the aggregate amount of Prepayment Interest
Shortfall for the related Prepayment Period and (ii) the Servicing Fee for such
Determination Date.

         CONVERTED MORTGAGE LOAN: Any Convertible Mortgage Loan with respect to
which the interest rate borne by such Mortgage Loan has been converted from an
adjustable interest rate to a fixed interest rate.

         CONVERTIBLE MORTGAGE LOAN: Any Adjustable Rate Mortgage Loan which by
its terms grants to the related Mortgagor the option to convert the interest
rate borne by such Mortgage Loan from an adjustable interest rate to a fixed
interest rate.

         CONVERTING MORTGAGE LOAN: Any Convertible Mortgage Loan with respect to
which the related Mortgagor has given notice of his intent to convert from an
adjustable interest rate to a fixed interest rate and prior to the conversion of
such Mortgage Loan.

         CORPORATE TRUST OFFICE: With respect to the Indenture Trustee,
Certificate Registrar, Certificate Paying Agent and Paying Agent, the principal
corporate trust office of the Indenture Trustee and Note Registrar at which at
any particular time its corporate trust business shall be administered, which
office at the date of the execution of this instrument is located at
____________, __________, ______, __________ _____, Attention: ________ ___
______, except that for purposes of Section 4.02 of the Indenture and Section
3.09 of the Trust Agreement, such term shall include the Indenture Trustee's
office or agency at _______________, ________,

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<PAGE>

________ _____, Attention: ___________ _________. With respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee at which at
any particular time its corporate trust business shall be administered, which
office at the date of the execution of this Trust Agreement is located at
________________________, ______ ____________, ________________________,
__________, ________ _____, Attention: ______________________.

         CUT-OFF DATE: With respect to the Mortgage Loans, ______ 1, 200_.

         CUT-OFF DATE PRINCIPAL BALANCE: With respect to any Mortgage Loan, the
unpaid principal balance thereof as of the opening of business on the last day
of the related Due Period immediately prior to the Cut-Off Date.

         DEBT SERVICE REDUCTION: With respect to any Mortgage Loan, a reduction
in the scheduled Monthly Payment for such Mortgage Loan by a court of competent
jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction
constituting a Deficient Valuation or any reduction that results in a permanent
forgiveness of principal.

         DEFAULT: Any occurrence which is or with notice or the lapse of time or
both would become an Event of Default.

         DEFICIENCY AMOUNT: The meaning provided in the Note Insurance Policy.

         DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation by
a court of competent jurisdiction of the Mortgaged Property in an amount less
than the then outstanding indebtedness under the Mortgage Loan, or any reduction
in the amount of principal to be paid in connection with any scheduled Monthly
Payment that constitutes a permanent forgiveness of principal, which valuation
or reduction results from a proceeding under the Bankruptcy Code.

         DEFINITIVE NOTES: The meaning specified in Section 4.06 of the
Indenture.

         DELETED MORTGAGE LOAN: A Mortgage Loan replaced or to be replaced with
an Eligible Substitute Mortgage Loan.

         DEPOSITOR: Homestar Mortgage Acceptance Corp., a Delaware corporation,
or its successor in interest.

         DEPOSITORY OR DEPOSITORY AGENCY: The Depository Trust Company or a
successor appointed by the Indenture Trustee with the approval of the Depositor.
Any successor to the Depository shall be an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act and the
regulations of the Securities and Exchange Commission thereunder.

         DEPOSITORY PARTICIPANT: A Person for whom, from time to time, the
Depository effects book-entry transfers and pledges of securities deposited with
the Depository.

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<PAGE>

         DETERMINATION DATE: With respect to any Payment Date, the 15th of the
related month, or if the 15th day of such month is not a Business Day, the
immediately preceding Business Day.

         DUE DATE: The first day of the month of the related Payment Date.

         DUE PERIOD: With respect to any Mortgage Loan and Due Date, the period
commencing on the second day of the month preceding the month of such Payment
Date (or, with respect to the first Due Period, the day following the Cut-Off
Date) and ending on the related Due Date.

         ELIGIBLE ACCOUNT: An account that is any of the following: (i)
maintained with a depository institution the short term deposits of which have
been rated by each Rating Agency in its highest rating available, or (ii) an
account or accounts in a depository institution in which such accounts are fully
insured to the limits established by the FDIC, provided that any deposits not so
insured shall, to the extent acceptable to the Note Insurer and each Rating
Agency, as evidenced in writing, be maintained such that (as evidenced by an
Opinion of Counsel delivered to the Indenture Trustee, the Note Insurer and each
Rating Agency) the Indenture Trustee have a claim with respect to the funds in
such account or a perfected first security interest against any collateral
(which shall be limited to Eligible Investments) securing such funds that is
superior to claims of any other depositors or creditors of the depository
institution with which such account is maintained, or (iii) in the case of the
Collection Account, either (A) a trust account or accounts maintained at the
Corporate Trust Department of the Indenture Trustee or (B) an account or
accounts maintained at the Corporate Trust Department of the Indenture Trustee,
as long as its short term debt obligations are rated P-1 by Moody's and A-1 by
Standard & Poor's or better and its long term debt obligations are rated A2 by
Moody's and A by Standard & Poor's or better, or (iv) in the case of the
Collection Account and the Payment Account, a trust account or accounts
maintained in the corporate trust division of the Indenture Trustee, or (v) an
account or accounts of a depository institution acceptable to each Rating Agency
as evidenced in writing by each Rating Agency that use of any such account as
the Collection Account or the Payment Account will not reduce the rating
assigned to any of the Securities by such Rating Agency below investment grade
without taking into account the Note Insurance Policy and acceptable to the Note
Insurer as evidenced in writing.

         ELIGIBLE INVESTMENTS:  One or more of the following:

                    (i) direct obligations of, and obligations fully guaranteed
               by, the United States of America, the Federal Home Mortgage
               Corporation, the Federal National Mortgage Association, the
               Federal Home Loan Banks or any agency or instrumentality of the
               United States of America the obligations of which are backed by
               the full faith and credit of the United States of America;

                    (ii) (A) demand and time deposits in, certificates of
               deposit of, banker's acceptances issued by or federal funds sold
               by any depository institution or trust company (including the
               Indenture Trustee or its agent acting in their respective
               commercial capacities) incorporated under the laws of the United
               States of America

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               or any State thereof and subject to supervision and examination
               by federal and/or state authorities, so long as at the time of
               such investment or contractual commitment providing for such
               investment, such depository institution or trust company has a
               short term unsecured debt rating in the highest available rating
               category of each of the Rating Agencies and provided that each
               such investment has an original maturity of no more than 365
               days, and (B) any other demand or time deposit or deposit which
               is fully insured by the Federal Deposit Insurance Corporation;

                    (iii) repurchase obligations with a term not to exceed 30
               days with respect to any security described in clause (i) above
               and entered into with a depository institution or trust company
               (acting as a principal) rated "A" or higher by S&P and A2 or
               higher by Moody's; provided, however, that collateral transferred
               pursuant to such repurchase obligation must (A) be valued weekly
               at current market price plus accrued interest, (B) pursuant to
               such valuation, equal, at all times, 105% of the cash transferred
               by the Indenture Trustee in exchange for such collateral and (C)
               be delivered to the Indenture Trustee or, if the Indenture
               Trustee is supplying the collateral, an agent for the Indenture
               Trustee, in such a manner as to accomplish perfection of a
               security interest in the collateral by possession of certificated
               securities.

                    (iv) securities bearing interest or sold at a discount
               issued by any corporation incorporated under the laws of the
               United States of America or any State thereof which has a long
               term unsecured debt rating in the highest available rating
               category of each of the Rating Agencies at the time of such
               investment;

                    (v) commercial paper having an original maturity of less
               than 365 days and issued by an institution having a short term
               unsecured debt rating in the highest available rating category of
               each of the Rating Agencies at the time of such investment;

                    (vi) a guaranteed investment contract approved by each of
               the Rating Agencies and the Note Insurer and issued by an
               insurance company or other corporation having a long term
               unsecured debt rating in the highest available rating category of
               each of the Rating Agencies at the time of such investment;

                    (vii) money market funds having ratings in the highest
               available long-term rating category of each of the Rating
               Agencies at the time of such investment; any such money market
               funds which provide for demand withdrawals being conclusively
               deemed to satisfy any maturity requirement for Eligible
               Investments set forth in the Indenture; and

                    (viii) any investment approved in writing by each of the
               Rating Agencies and the Note Insurer.

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         The Indenture Trustee may purchase from or sell to itself or an
affiliate, as principal or agent, the Eligible Investments listed above.

Provided, however, that each such instrument shall be acquired in an arm's
length transaction and no such instrument shall be an Eligible Investment if it
represents, either (1) the right to receive only interest payments with respect
to the underlying debt instrument or (2) the right to receive both principal and
interest payments derived from obligations underlying such instrument and the
principal and interest payments with respect to such instrument provide a yield
to maturity greater than 120% of the yield to maturity at par of such underlying
obligations; provided further, however, that each such instrument acquired shall
not be acquired at a price in excess of par.

         ELIGIBLE SUBSTITUTE MORTGAGE LOAN: A Mortgage Loan substituted by the
Seller for a Deleted Mortgage Loan which must, on the date of such substitution,
as confirmed in an Officer's Certificate delivered to the Indenture Trustee, (i)
have an outstanding principal balance, after deduction of the principal portion
of the monthly payment due in the month of substitution (or in the case of a
substitution of more than one Mortgage Loan for a Deleted Mortgage Loan, an
aggregate outstanding principal balance, after such deduction), not in excess of
the outstanding principal balance of the Deleted Mortgage Loan (the amount of
any shortfall to be deposited by the Seller in the Collection Account in the
month of substitution); (ii) comply with each representation and warranty set
forth in clauses (ii) through (lxxvii) of Section 3.1(b) of the Mortgage Loan
Purchase Agreement other than clauses (ii), (iii), (v)-(xi), (xiii)-(xiv), (l),
(lxvi), (lxviii), (lxxi), (lxxiii); (iii) have a Mortgage Rate and Gross Margin
no lower than and not more than 1% per annum higher than the Mortgage Rate and
Gross Margin, respectively, of the Deleted Mortgage Loan as of the date of
substitution; (iv) have a Combined Loan-to-Value Ratio at the time of
substitution no higher than that of the Deleted Mortgage Loan at the time of
substitution; (v) have a remaining term to stated maturity not greater than (and
not more than one year less than) that of the Deleted Mortgage Loan and (vi) not
be 30 days or more delinquent.

         ERISA: The Employee Retirement Income Security Act of 1974, as amended.

         EVENT OF DEFAULT: With respect to the Indenture, any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):

                    (i) a default in (a) the payment of the Interest Payment
               Amount or the Principal Payment Amount with respect to a Payment
               Date on such Payment Date or (b) the Subordination Increase
               Amount or the Available Funds Cap Carry-Forward Amount, but only,
               with respect to clause (b), to the extent funds are available to
               make such payment as provided in the Indenture; or

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                    (ii) the failure by the Issuer on the Final Scheduled
               Payment Date to reduce the Note Principal Balance to zero; or

                    (iii) there occurs a default in the observance or
               performance of any covenant or agreement of the Issuer made in
               the Indenture, or any representation or warranty of the Issuer
               made in the Indenture or in any certificate or other writing
               delivered pursuant hereto or in connection herewith proving to
               have been incorrect in any material respect as of the time when
               the same shall have been made, and such default shall continue or
               not be cured, or the circumstance or condition in respect of
               which such representation or warranty was incorrect shall not
               have been eliminated or otherwise cured, for a period of 30 days
               after there shall have been given, by registered or certified
               mail, to the Issuer by the Indenture Trustee or to the Issuer and
               the Indenture Trustee by the Note Insurer, or if a Note Insurer
               Default exists the Holders of at least 25% of the Outstanding
               Amount of the Notes, a written notice specifying such default or
               incorrect representation or warranty and requiring it to be
               remedied and stating that such notice is a notice of default
               hereunder; or

                    (iv) there occurs the filing of a decree or order for relief
               by a court having jurisdiction in the premises in respect of the
               Issuer or any substantial part of the Trust Estate in an
               involuntary case under any applicable federal or state
               bankruptcy, insolvency or other similar law now or hereafter in
               effect, or appointing a receiver, liquidator, assignee,
               custodian, trustee, sequestrator or similar official of the
               Issuer or for any substantial part of the Trust Estate, or
               ordering the winding-up or liquidation of the Issuer's affairs,
               and such decree or order shall remain unstayed and in effect for
               a period of 60 consecutive days; or

                    (v) there occurs the commencement by the Issuer of a
               voluntary case under any applicable federal or state bankruptcy,
               insolvency or other similar law now or hereafter in effect, or
               the consent by the Issuer to the entry of an order for relief in
               an involuntary case under any such law, or the consent by the
               Issuer to the appointment or taking possession by a receiver,
               liquidator, assignee, custodian, trustee, sequestrator or similar
               official of the Issuer or for any substantial part of the assets
               of the Trust Estate, or the making by the Issuer of any general
               assignment for the benefit of creditors, or the failure by the
               Issuer generally to pay its debts as such debts become due, or
               the taking of any action by the Issuer in furtherance of any of
               the foregoing.

         EVENT OF SERVICER TERMINATION: With respect to the Servicing Agreement,
a Servicing Default as defined in Section 6.01 of the Servicing Agreement.

         EXCESS SUBORDINATION AMOUNT: With respect to any Payment Date, the
excess, if any, of (a) the Subordination Amount that would apply on such Payment
Date after taking into account all distributions to be made on such Payment Date
(exclusive of any reductions thereto attributable to

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Subordination Reduction Amounts on such Payment Date) over (b) the Required
Subordination Amount for such Payment Date.

         EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

         EXPENSE ADJUSTED MORTGAGE RATE: For any Mortgage Loan, the rate equal
to the then applicable Mortgage Rate thereon minus the sum of (i) the Minimum
Spread and (ii) the Servicing Fee Rate and (iii) the Indenture Trustee Fee Rate.

         EXPENSES: The meaning specified in Section 7.02 of the Trust Agreement.

         FDIC: The Federal Deposit Insurance Corporation or any successor
thereto.

         FHLMC: The Federal Home Loan Mortgage Corporation, or any successor
thereto.

         FINAL SCHEDULED PAYMENT DATE: The Payment Date occurring in _________
20__.

         FIXED RATE MORTGAGE LOAN: Any Mortgage Loan with a fixed rate of
interest.

         FNMA: The Federal National Mortgage Association, or any successor
thereto.

         FORECLOSURE PROFIT: With respect to a Liquidated Mortgage Loan, the
amount, if any, by which (i) the aggregate of its Net Liquidation Proceeds
exceeds (ii) the related Principal Balance (plus accrued and unpaid interest
thereon at the applicable Mortgage Rate from the date interest was last paid
through the date of receipt of the final Liquidation Proceeds) of such
Liquidated Mortgage Loan immediately prior to the final recovery of its
Liquidation Proceeds.

         GRANT: Pledge, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, create, and grant a lien upon and a security interest
in and right of set-off against, deposit, set over and confirm pursuant to the
Indenture. A Grant of the Collateral or of any other agreement or instrument
shall include all rights, powers and options (but none of the obligations) of
the granting party thereunder, including the immediate and continuing right to
claim for, collect, receive and give receipt for principal and interest payments
in respect of such collateral or other agreement or instrument and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring proceedings in the name of the granting party or otherwise, and generally
to do and receive anything that the granting party is or may be entitled to do
or receive thereunder or with respect thereto.

         GROSS MARGIN: With respect to any Adjustable Rate Mortgage Loan, the
percentage set forth as the "Gross Margin" for such Mortgage Loan on the
Mortgage Loan Schedule, as adjusted from time to time in accordance with the
terms of the Servicing Agreement.

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         INDEMNIFIED PARTY: The meaning specified in Section 7.02 of the Trust
Agreement.

         INDENTURE: The indenture dated as of ______ __, 200_, between the
Issuer, as debtor, and the Indenture Trustee, as Indenture Trustee.

         INDENTURE TRUSTEE: _________________________________________, a
national banking association, and its successors and assigns or any successor
indenture trustee appointed pursuant to the terms of the Indenture.

         INDENTURE TRUSTEE FEE: With respect to each Mortgage Loan and any
Payment Date the product of (i) the Indenture Trustee Fee Rate divided by 12 and
(ii) the Principal Balance of such Mortgage Loans as of such date.

         INDENTURE TRUSTEE FEE RATE:  _____% per annum.

         INDEPENDENT: When used with respect to any specified Person, the Person
(i) is in fact independent of the Issuer, any other obligor on the Notes, the
Seller, the Issuer, the Depositor and any Affiliate of any of the foregoing
Persons, (ii) does not have any direct financial interest or any material
indirect financial interest in the Issuer, any such other obligor, the Seller,
the Issuer, the Depositor or any Affiliate of any of the foregoing Persons and
(iii) is not connected with the Issuer, any such other obligor, the Seller, the
Issuer, the Depositor or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions.

         INDEPENDENT CERTIFICATE: A certificate or opinion to be delivered to
the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 10.01 of the Indenture,
made by an Independent appraiser or other expert appointed by an Issuer Order
and approved by the Indenture Trustee in the exercise of reasonable care, and
such opinion or certificate shall state that the signer has read the definition
of "Independent" in this Indenture and that the signer is Independent within the
meaning thereof.

         INDEX: With respect to any Adjustable Rate Mortgage Loan, index for the
adjustment of the Mortgage Rate set forth as such on the related Mortgage Note.

         INITIAL NOTE PRINCIPAL BALANCE: With respect to the Notes,
$______________.

         INITIAL SUBSERVICER:  _____________, a __________ corporation.

         INSOLVENCY EVENT: With respect to a specified Person, (a) the filing of
a decree or order for relief by a court having jurisdiction in the premises in
respect of such Person or any substantial part of its property in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering

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the winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 60 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due or the admission by such Person in writing (as to which
the Indenture Trustee shall have notice) of its inability to pay its debts
generally, or the adoption by the Board of Directors or managing member of such
Person of a resolution which authorizes action by such Person in furtherance of
any of the foregoing.

         INSURANCE AGREEMENT: The insurance and reimbursement agreement dated as
of _____ __, 200_, among the Master Servicer, the Seller, the Depositor, the
Issuer, Indenture Trustee and the Note Insurer, including any amendments and
supplements thereto.

         INSURANCE PROCEEDS: Proceeds paid by any insurer (other than the Note
Insurer) pursuant to any insurance policy covering a Mortgage Loan which are
required to be remitted to the Master Servicer, or amounts required to be paid
by the Master Servicer pursuant to the Servicing Agreement, net of any component
thereof (i) covering any expenses incurred by or on behalf of the Master
Servicer in connection with obtaining such proceeds, (ii) that is applied to the
restoration or repair of the related Mortgaged Property, (iii) released to the
Mortgagor in accordance with the Master Servicer's normal servicing procedures
or (iv) required to be paid to any holder of a mortgage senior to such Mortgage
Loan.

         INSURED PAYMENT: Shall have the meaning set forth in the Note Insurance
Policy.

         INTEREST DETERMINATION DATE: With respect to any Interest Period, the
second London Business Day preceding the commencement of such Interest Period.

         INTEREST PAYMENT AMOUNT: With respect to any Payment Date, an amount
equal to interest accrued during the related Interest Period on the Note
Principal Balance thereof at the then-applicable Note Interest Rate, minus any
Prepayment Interest Shortfalls and Relief Act Shortfalls to the extent not
covered by the Master Servicer by Compensating Interest for such Payment Date.

         INTEREST PERIOD: With respect to any Payment Date other than the first
Payment Date, the period beginning on the preceding Payment Date and ending on
the day preceding such Payment Date, and in the case of the first Payment Date,
the period beginning on the Closing Date and ending on the day preceding the
first Payment Date.

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         INTEREST RATE ADJUSTMENT DATE: With respect to each Mortgage Loan, the
date or dates on which the Mortgage Rate is adjusted in accordance with the
related Mortgage Note.

         ISSUER: The Homestar Mortgage Acceptance Corp. MBN Trust Series 200_-_,
a Delaware statutory trust, or its successor in interest.

         ISSUER REQUEST: A written order or request signed in the name of the
Issuer by any one of its Authorized Officers and approved in writing by the Note
Insurer, so long as no Note Insurer Default exists and delivered to the
Indenture Trustee.

         LIBOR BUSINESS DAY: Any day other than (i) a Saturday or a Sunday or
(ii) a day on which banking institutions in the State of New York, Delaware or
California, or in the city of London, England are required or authorized by law
to be closed.

         LIEN: Any mortgage, deed of trust, pledge, conveyance, hypothecation,
assignment, participation, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority right or interest or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing; provided,
however, that any assignment pursuant to Section 6.02 of the Servicing Agreement
shall not be deemed to constitute a Lien.

         LIFETIME RATE CAP: With respect to each Mortgage Loan with respect to
which the related Mortgage Note provides for a lifetime rate cap, the maximum
Mortgage Rate permitted over the life of such Mortgage Loan under the terms of
such Mortgage Note, as set forth on the Mortgage Loan Schedule and initially as
set forth on Exhibit A to the Servicing Agreement.

         LIQUIDATED MORTGAGE LOAN: With respect to any Payment Date, any
Mortgage Loan in respect of which the Master Servicer has determined, in
accordance with the servicing procedures specified in the Servicing Agreement,
as of the end of the related Prepayment Period that substantially all
Liquidation Proceeds which it reasonably expects to recover with respect to the
disposition of the related REO Property have been recovered.

         LIQUIDATION EXPENSES: Out-of-pocket expenses (exclusive of overhead)
which are incurred by or on behalf of the Master Servicer in connection with the
liquidation of any Mortgage Loan and not recovered under any insurance policy,
such expenses including, without limitation, legal fees and expenses, any
unreimbursed amount expended (including, without limitation, amounts advanced to
correct defaults on any mortgage loan which is senior to such Mortgage Loan and
amounts advanced to keep current or pay off a mortgage loan that is senior to
such Mortgage Loan) respecting the related Mortgage Loan and any related and
unreimbursed expenditures for real estate property taxes or for property
restoration, preservation or insurance against casualty loss or damage.

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         LIQUIDATION PROCEEDS: Proceeds (including Insurance Proceeds but not
including amounts drawn under the Note Insurance Policy) received in connection
with the liquidation of any Mortgage Loan or related REO Property, whether
through trustee's sale, foreclosure sale or otherwise.

         LOAN YEAR: With respect to any Mortgage Loan, the one year period
commencing on the day succeeding the origination of such Mortgage Loan and
ending on the anniversary date of such Mortgage Loan, and each annual period
thereafter.

         LONDON BUSINESS DAY: Any day on which banks in the City of London,
England are open and conducting transactions in United States dollars.

         LOST NOTE AFFIDAVIT: With respect to any Mortgage Loan as to which the
original Mortgage Note has been permanently lost or destroyed and has not been
replaced, an affidavit from the Seller certifying that the original Mortgage
Note has been lost, misplaced or destroyed (together with a copy of the related
Mortgage Note).

         MASTER SERVICER: _______________________, a __________ corporation, and
its successors and assigns.

         MASTER SERVICING FEE: With respect to each Mortgage Loan and any
Payment Date the product of (i) the Master Servicing Fee Rate divided by 12 and
(ii) the Principal Balance of such Mortgage Loans as of such date.

         MASTER SERVICING FEE RATE: With respect to each Mortgage Loan, ____%
per annum.

         MAXIMUM NOTE INTEREST RATE: With respect to any Payment Date, the per
annum rate equal to the fraction, expressed as a percentage, the numerator of
which is (i) an amount equal to (A) 1/12 of the aggregate Principal Balance of
the then outstanding Mortgage Loans times the weighted average of the Expense
Adjusted Maximum Mortgage Rates on the then outstanding Mortgage Loans minus (B)
the Administrative Fee for such Payment Date, and the denominator of which is
(ii) an amount equal to (A) the aggregate Note Principal Balance of the Notes
multiplied by (B) the actual number of days elapsed in the related Interest
Period divided by 360.

         MAXIMUM MORTGAGE RATE: With respect to each Adjustable Rate Mortgage
Loan, the maximum Mortgage Rate.

         MINIMUM MORTGAGE RATE: With respect to each Adjustable Rate Mortgage
Loan, the minimum Mortgage Rate.

         MINIMUM SPREAD: ____% per annum.

         MONTHLY PAYMENT: With respect to any Mortgage Loan (including any REO
Property) and any Due Date, the payment of principal and interest due thereon in
accordance with the amortization

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schedule at the time applicable thereto (after adjustment, if any, for partial
Prepayments and for Deficient Valuations occurring prior to such Due Date but
before any adjustment to such amortization schedule by reason of any bankruptcy,
other than a Deficient Valuation, or similar proceeding or any moratorium or
similar waiver or grace period).

         MOODY'S: Moody's Investors Service, Inc. or its successor in interest.

         MORTGAGE: The mortgage, deed of trust or other instrument creating a
first or second lien on an estate in fee simple interest in real property
securing a Mortgage Loan.

         MORTGAGE FILE: The file containing the Related Documents pertaining to
a particular Mortgage Loan and any additional documents required to be added to
the Mortgage File pursuant to the Mortgage Loan Purchase Agreement or the
Servicing Agreement.

         MORTGAGE LOAN PURCHASE AGREEMENT: The Mortgage Loan Purchase Agreement,
dated as of the Cut-Off Date, between the Seller, as seller, and the Purchaser,
as purchaser, with respect to the Mortgage Loans, dated as of ______ __, 200_.

         MORTGAGE LOAN SCHEDULE: With respect to any date, the schedule of
Mortgage Loans held by the Issuer on such date. The initial schedule of Mortgage
Loans as of the Cut-Off Date is the schedule set forth in Exhibit A of the
Servicing Agreement, which schedule sets forth as to each Mortgage Loan

                (i)    the loan number and name of the Mortgagor;

                (ii) the street address, city, state and zip code of the
         Mortgaged Property;

                (iii)  the Mortgage Rate;

                (iv)   the Maximum Rate;

                (v)    the maturity date;

                (vi)   the original principal balance;

                (vii)  the first payment date;

                (viii) the type of Mortgaged Property;

                (ix)   the Monthly Payment in effect as of the Cut-Off Date;

                (x)    the Cut-off Date Principal Balance;

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                (xi)   the occupancy status;

                (xii)  the purpose of the Mortgage Loan;

                (xiii) the Appraised Value of the Mortgaged Property;

                (xiv)  the original term to maturity;

                (xv)   the paid-through date of the Mortgage Loan;

                (xvi)  the Loan-to-Value Ratio; and

                (xvii) whether or not the Mortgage Loan was underwritten
         pursuant to a limited documentation program.

         The Mortgage Loan Schedule shall also set forth the total of the
amounts described under (ix) above for all of the Mortgage Loans.

         MORTGAGE LOANS: At any time, collectively, all Mortgage Loans that have
been sold to the Depositor under the Mortgage Loan Purchase Agreement or
substituted for pursuant to Section 2.1 and 3.1 of the Mortgage Loan Purchase
Agreement and transferred and conveyed to the Issuer, in each case together with
the Related Documents, and that remain subject to the terms thereof.

         MORTGAGE NOTE: The note or other evidence of the indebtedness of a
Mortgagor under a Mortgage Loan.

         MORTGAGE RATE: With respect to any Mortgage Loan, the annual rate at
which interest accrues on such Mortgage Loan.

         MORTGAGED PROPERTY: The underlying property, including real property
and improvements thereon, securing a Mortgage Loan.

         MORTGAGOR: The obligor or obligors under a Mortgage Note.

         NET LIQUIDATION PROCEEDS: With respect to any Liquidated Mortgage Loan,
Liquidation Proceeds net of Liquidation Expenses.

         NET MONTHLY EXCESS CASHFLOW: For any Payment Date, the amount of
Available Funds and any Insured Payment remaining after distributions pursuant
to clauses (i) through (iii) of Section 3.05 of the Indenture (minus any Insured
Payment and any Subordination Reduction Amount).

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         NET MORTGAGE RATE: With respect to any Mortgage Loan and any day, the
related Mortgage Rate less the sum of the related Servicing Fee Rate, the
Administrative Fee Rate and the Indenture Trustee Fee Rate.

         NONRECOVERABLE ADVANCE: Any advance (i) which was previously made or is
proposed to be made by the Master Servicer; and (ii) which, in the good faith
judgment of the Master Servicer, will not or, in the case of a proposed advance,
would not, be ultimately recoverable by the Master Servicer from Liquidation
Proceeds, Insurance Proceeds or future payments on any Mortgage Loan.

         NOTE INSURANCE POLICY: The bond guaranty insurance policy number 21885,
issued by the Note Insurer to the Indenture Trustee for the benefit of the
Noteholders.

         NOTE INSURER: MBIA Insurance Corporation, a New York insurance company,
any successor thereto or any replacement bond insurer substituted pursuant to
Section 3.29 of the Indenture.

         NOTE INSURER DEFAULT: The existence and continuance of any of the
following: (a) a failure by the Note Insurer to make a payment required under
the Note Insurance Policy in accordance with its terms; or (b)(i) the Note
Insurer (A) files any petition or commences any case or proceeding under any
provision or chapter of the Bankruptcy Code or any other similar federal or
state law relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (B) makes a general assignment for the benefit of its creditors,
or (C) has an order for relief entered against it under the Bankruptcy Code or
any other similar federal or state law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization which is final and nonappealable;
or (ii) a court of competent jurisdiction, the New York Department of Insurance
or other competent regulatory authority enters a final and nonappealable order,
judgment or decree (A) appointing a custodian, trustee, agent or receiver for
the Note Insurer or for all or any material portion of its property or (B)
authorizing the taking of possession by a custodian, trustee, agent or receiver
of the Note Insurer (or the taking of possession of all or any material portion
of the property of the Note Insurer).

         NOTE INTEREST RATE: With respect to each Payment Date after the first
Payment Date, a floating rate equal to the lesser of (i) with respect to each
Payment Date up to and including the Payment Date in _________ 200_, One-Month
LIBOR plus ____%, and with respect to each Payment Date thereafter, One-Month
LIBOR plus ____% and (ii) the Available Funds Interest Rate with respect to such
Payment Date. The Note Interest Rate for the first Payment Date will equal ____%
per annum.

         NOTE OWNER:  The Beneficial Owner of a Note.

         NOTE PERCENTAGE: With respect to any Payment Date and any Note, the
ratio expressed as a percentage of the Note Principal Balance of such Note to
the aggregate Note Principal Balance of all Notes immediately prior to such
Payment Date.

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         NOTE PRINCIPAL BALANCE: With respect to any Note, the initial Note
Principal Balance thereof minus all amounts distributed in respect of principal
with respect to such Note.

         NOTE REGISTER: The register maintained by the Note Registrar in which
the Note Registrar shall provide for the registration of Notes and of transfers
and exchanges of Notes.

         NOTE REGISTRAR: The Indenture Trustee, in its capacity as Note
Registrar.

         NOTEHOLDER: The Person in whose name a Note is registered in the Note
Register, except that, any Note registered in the name of the Depositor, the
Issuer or the Indenture Trustee or any Affiliate of any of them shall be deemed
not to be outstanding and the registered holder will not be considered a
Noteholder or holder for purposes of giving any request, demand, authorization,
direction, notice, consent or waiver under the Indenture or the Trust Agreement
provided that, in determining whether the Indenture Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that the Indenture Trustee or the Owner Trustee
knows to be so owned shall be so disregarded. Owners of Notes that have been
pledged in good faith may be regarded as Holders if the pledgee establishes to
the satisfaction of the Indenture Trustee or the Owner Trustee the pledgee's
right so to act with respect to such Notes and that the pledgee is not the
Issuer, any other obligor upon the Notes or any Affiliate of any of the
foregoing Persons. Any bonds on which payments are made under the Note Insurance
Policy shall be deemed Outstanding until the Note Insurer has been reimbursed
with respect thereto and the Note Insurer shall be deemed the Noteholder thereof
to the extent of such unreimbursed payment.

         NOTES:  The Notes designated as the "Notes" in the Indenture.

         OFFICER'S CERTIFICATE: With respect to the Master Servicer, a
certificate signed by the President, Managing Director, a Director, a Vice
President or an Assistant Vice President, of the Master Servicer and delivered
to the Indenture Trustee. With respect to the Issuer, a certificate signed by
any Authorized Officer of the Issuer, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 10.01 of the
Indenture, and delivered to the Indenture Trustee. Unless otherwise specified,
any reference in the Indenture to an Officer's Certificate shall be to an
Officer's Certificate of any Authorized Officer of the Issuer.

         ONE-MONTH LIBOR: With respect to any Interest Period, the rate
determined by the Indenture Trustee on the related Interest Determination Date
on the basis of the offered rates of the Reference Banks for one-month United
States dollar deposits, as such rates appear on the Reuters Screen LIBOR Page,
as of 11:00 a.m. (London time) on such Interest Determination Date. On each
Interest Determination Date, One-Month LIBOR for the related Interest Period
will be established by the Indenture Trustee as follows:

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                    (i) If on such Interest Determination Date two or more
               Reference Banks provide such offered quotations, One-Month LIBOR
               for the related Interest Period shall be the arithmetic mean of
               such offered quotations (rounded upwards if necessary to the
               nearest whole multiple of 1/16%).

                    (ii) If on such Interest Determination Date fewer than two
               Reference Banks provide such offered quotations, One-Month LIBOR
               for the related Interest Period shall be the higher of (i)
               One-Month LIBOR as determined on the previous Interest
               Determination Date and (ii) the Reserve Interest Rate.

         OPINION OF COUNSEL: A written opinion of counsel acceptable to Note
Insurer who may be in-house counsel for the Master Servicer if acceptable to the
Indenture Trustee, the Note Insurer and the Rating Agencies or counsel for the
Depositor, as the case may be.

         ORIGINAL SPECIFIED SUBORDINATION AMOUNT: An amount equal to ____% of
the aggregate Principal Balance of the Mortgage Loans as of the Cut-Off Date.

         ORIGINAL VALUE: Except in the case of a refinance Mortgage Loan, the
lesser of the Appraised Value or sales price of Mortgaged Property at the time a
Mortgage Loan is closed, and for a refinance Mortgage Loan, the Original Value
is the value of such property set forth in an appraisal acceptable to the Master
Servicer.

         OUTSTANDING: With respect to the Notes, as of the date of
determination, all Notes theretofore executed, authenticated and delivered under
this Indenture except:

                    (i) Notes theretofore cancelled by the Note Registrar or
               delivered to the Indenture Trustee for cancellation; and

                    (ii) Notes in exchange for or in lieu of which other Notes
               have been executed, authenticated and delivered pursuant to the
               Indenture unless proof satisfactory to the Indenture Trustee is
               presented that any such Notes are held by a holder in due course;

                    (iii) Notes that have been paid with funds provided under
               the Note Insurance Policy shall be deemed to be Outstanding until
               the Note Insurer has been reimbursed with respect thereto.

         OWNER TRUST: The Homestar Mortgage Acceptance Corp. MBN Trust Series
200_-_ to be created pursuant to the Trust Agreement.

         OWNER TRUST ESTATE: The corpus of the Issuer created by the Trust
Agreement which consists of items in Section 2.01 of the Trust Agreement.

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<PAGE>

         OWNER TRUSTEE: ________________________ and its successors and assigns
or any successor owner trustee appointed pursuant to the terms of the Trust
Agreement.

         OWNER TRUSTEE FEE:

         OWNER TRUSTEE FEE RATE:  ______% per annum.

         PAYING AGENT: Any paying agent or co-paying agent appointed pursuant to
Section 3.03 of the Indenture, which initially shall be the Indenture Trustee.

         PAYMENT ACCOUNT: The account established by the Indenture Trustee
pursuant to Section 8.02 of the Indenture and Section 4.03 of the Servicing
Agreement. The Payment Account shall be an Eligible Account.

         PAYMENT DATE: The 25th day of each month, or if such day is not a
Business Day, then the next Business Day.

         PERCENTAGE INTEREST: With respect to any Note, the percentage obtained
by dividing the Note Principal Balance of such Note by the aggregate of the Note
Principal Balances of all Notes. With respect to any Certificate, the percentage
on the face thereof.

         PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

         POOL BALANCE: With respect to any date, the aggregate of the Principal
Balances of all Mortgage Loans as of such date.

         PREFERENCE AMOUNT: Any amount previously distributed to an Owner on the
Notes that is recoverable and sought to be recovered as a voidable preference by
a trustee in bankruptcy pursuant to the United States Bankruptcy Code (11
U.S.C.), as amended from time to time, in accordance with a final nonappealable
order of a court having competent jurisdiction.

         PREMIUM AMOUNT: The amount of premium due to the Note Insurer in
accordance with the terms of the Insurance Agreement.

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<PAGE>

         PREPAYMENT INTEREST SHORTFALL: As to any Payment Date and any Mortgage
Loan (other than a Mortgage Loan relating to an REO Property) that was the
subject of (a) a Principal Prepayment in full during the related Prepayment
Period, an amount equal to the excess of interest accrued during the related
Prepayment Period at the Net Mortgage Rate on the Principal Balance of such
Mortgage Loan over the amount of interest (adjusted to the Net Mortgage Rate)
paid by the Mortgagor for such Prepayment Period to the date of such Principal
Prepayment in full or (b) a partial Prepayment during the prior calendar month,
an amount equal to interest accrued during the related Prepayment Period at the
Net Mortgage Rate on the amount of such partial Prepayment.

         PREPAYMENT PERIOD: As to any Payment Date, the calendar month preceding
the month of distribution.

         PRIMARY INSURANCE POLICY: Each primary policy of mortgage guaranty
insurance issued by a Qualified Insurer or any replacement policy therefor.

         PRINCIPAL BALANCE: With respect to any Mortgage Loan or related REO
Property, at any given time, (i) the Cut-off Date Principal Balance of the
Mortgage Loan, minus (ii) the sum of (a) the principal portion of the Monthly
Payments due with respect to such Mortgage Loan or REO Property during each Due
Period ending prior to the most recent Payment Date which were received or with
respect to which an Advance was made, and (b) all Principal Prepayments with
respect to such Mortgage Loan or REO Property, and all Insurance Proceeds,
Liquidation Proceeds and REO Proceeds, to the extent applied by the Master
Servicer as recoveries of principal in accordance with the Servicing Agreement
with respect to such Mortgage Loan or REO Property, and (c) any Realized Loss
with respect thereto for any previous Payment Date.

         PRINCIPAL PAYMENT AMOUNT: With respect to any Payment Date (a) other
than the Final Scheduled Payment Date, and the first Payment Date following any
acceleration of the Notes following an Event of Default, the lesser of (a) the
sum of the Available Funds remaining after distributions pursuant to clause (i)
of Section 3.05 of the Indenture and any portion of any Insured Payment for such
Payment Date representing a Subordination Deficit and (b) the sum of:

         (1) the principal portion of all Monthly Payments received during the
related Due Period or advanced on each Mortgage Loan;

         (2) the Principal Balance of any Mortgage Loan repurchased during the
related Prepayment Period (or deemed to have been so repurchased) pursuant to
the Mortgage Loan Purchase Agreement or Section 3.18 of the Servicing Agreement
and the amount of any Substitution Adjustment Amounts during the related
Prepayment Period;

         (3) the principal portion of all other unscheduled collections
(including, without limitation, Principal Prepayments in full, partial
Prepayments, Insurance Proceeds, Liquidation Proceeds and REO Proceeds) received
during the related Prepayment Period to the extent applied by the Master
Servicer as payments or recoveries of principal of the related Mortgage Loan;

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<PAGE>

         (4) any Insured Payment made with respect to any Subordination Deficit;
and

         MINUS

         (5) the amount of any Subordination Reduction Amount for such Payment
Date;

         and (b) with respect to the Final Scheduled Payment Date, and the first
Payment Date following any acceleration of the Notes following an Event of
Default, the amount necessary to reduce the Note Principal Balance to zero.

         PRINCIPAL PREPAYMENT: Any payment of principal made by the Mortgagor on
a Mortgage Loan which is received in advance of its scheduled Due Date and which
is not accompanied by an amount of interest representing scheduled interest due
on any date or dates in any month or months subsequent to the month of
prepayment.

         PROCEEDING: Any suit in equity, action at law or other judicial or
administrative proceeding.

         PURCHASE PRICE: The meaning specified in Section 2.2(a) of the Mortgage
Loan Purchase Agreement.

         PURCHASER: _________________________, a ____________ corporation, and
its successors and assigns.

         QUALIFIED INSURER: A mortgage guaranty insurance company duly qualified
as such under the laws of the state of its principal place of business and each
state having jurisdiction over such insurer in connection with the insurance
policy issued by such insurer, duly authorized and licensed in such states to
transact a mortgage guaranty insurance business in such states and to write the
insurance provided by the insurance policy issued by it, approved as an insurer
by the Master Servicer and as a FNMA-approved mortgage insurer.

         RATING AGENCY: Any nationally recognized statistical rating
organization, or its successor, that rated the Notes at the request of the
Depositor at the time of the initial issuance of the Notes. Initially, Moody's
or Standard & Poor's. If such organization or a successor is no longer in
existence, "Rating Agency" shall be such nationally recognized statistical
rating organization, or other comparable Person, designated by the Note Insurer
so long as no Note Insurer Default exists, notice of which designation shall be
given to the Indenture Trustee. References herein to the highest short term
unsecured rating category of a Rating Agency shall mean A-1 or better in the
case of Standard & Poor's and P-1 or better in the case of Moody's and in the
case of any other Rating Agency shall mean such equivalent ratings. References
herein to the highest long-term rating category of a Rating Agency shall mean
"AAA" in the case of Standard & Poor's and "Aaa" in the case of Moody's and in
the case of any other Rating Agency, such equivalent rating.

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<PAGE>

         REALIZED LOSS: With respect to each Mortgage Loan (or REO Property) as
to which a Cash Liquidation or REO Disposition has occurred, an amount (not less
than zero) equal to (i) the Principal Balance of the Mortgage Loan (or REO
Property) as of the date of Cash Liquidation or REO Disposition, plus (ii)
interest (and REO Imputed Interest, if any) at the Net Mortgage Rate from the
Due Date as to which interest was last paid or advanced to Noteholders up to the
last day of the month in which the Cash Liquidation (or REO Disposition)
occurred on the Principal Balance of such Mortgage Loan (or REO Property)
outstanding during each Due Period that such interest was not paid or advanced,
minus (iii) the proceeds, if any, received during the month in which such Cash
Liquidation (or REO Disposition) occurred, to the extent applied as recoveries
of interest at the Net Mortgage Rate and to principal of the Mortgage Loan, net
of the portion thereof reimbursable to the Master Servicer or any Subservicer
with respect to related Advances or expenses as to which the Master Servicer or
Subservicer is entitled to reimbursement thereunder but which have not been
previously reimbursed. With respect to each Mortgage Loan which has become the
subject of a Deficient Valuation, the difference between the principal balance
of the Mortgage Loan outstanding immediately prior to such Deficient Valuation
and the principal balance of the Mortgage Loan as reduced by the Deficient
Valuation. With respect to each Mortgage Loan which has become the object of a
Debt Service Reduction, the amount of such Debt Service Reduction.

         RECORD DATE: With respect to the Notes and any Payment Date, the last
day of the calendar month preceding such Payment Date.

         REFERENCE BANKS: Bankers Trust Company, Barclay's Bank PLC, The Bank of
Tokyo and National Westminster Bank PLC and their successors in interest;
provided that if any of the foregoing banks are not suitable to serve as a
Reference Bank, then any leading banks selected by the Indenture Trustee which
are engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
not controlling, under the control of or under common control with the Company
or any Affiliate thereof, (iii) whose quotations appear on the Reuters Screen
LIBO Page on the relevant Interest Determination Date and (iv) which have been
designated as such by the Indenture Trustee.

         REGISTERED HOLDER: The Person in whose name a Note is registered in the
Note Register on the applicable Record Date.

         RELATED DOCUMENTS: With respect to each Mortgage Loan, the documents
specified in Section 2.1(b) of the Mortgage Loan Purchase Agreement and any
documents required to be added to such documents pursuant to the Mortgage Loan
Purchase Agreement, the Trust Agreement, Indenture or the Servicing Agreement.

         RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.

         RELIEF ACT SHORTFALL: For any Payment Date, As to any Payment Date and
any Mortgage Loan (other than a Mortgage Loan relating to an REO Property) any
shortfalls relating to the Relief Act or similar legislation or regulations.

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         REO ACQUISITION: The acquisition by the Master Servicer on behalf of
the Indenture Trustee for the benefit of the Noteholders of any REO Property
pursuant to Section 3.13 of the Servicing Agreement.

         REO DISPOSITION: As to any REO Property, a determination by the Master
Servicer that it has received substantially all Insurance Proceeds, Liquidation
Proceeds, REO Proceeds and other payments and recoveries (including proceeds of
a final sale) which the Master Servicer expects to be finally recoverable from
the sale or other disposition of the REO Property.

         REO IMPUTED INTEREST: As to any REO Property, for any period, an amount
equivalent to interest (at the Net Mortgage Rate that would have been applicable
to the related Mortgage Loan had it been outstanding) on the unpaid principal
balance of the Mortgage Loan as of the date of acquisition thereof for such
period.

         REO PROCEEDS: Proceeds, net of expenses, received in respect of any REO
Property (including, without limitation, proceeds from the rental of the related
Mortgaged Property) which proceeds are required to be deposited into the
Collection Account only upon the related REO Disposition.

         REO PROPERTY: A Mortgaged Property that is acquired by the Issuer in
foreclosure or by deed in lieu of foreclosure.

         REPURCHASE EVENT: With respect to any Mortgage Loan, either (i) a
discovery that, as of the Closing Date the related Mortgage was not a valid lien
on the related Mortgaged Property subject only to (A) the lien of any prior
mortgage indicated on the Mortgage Loan Schedule, (B) the lien of real property
taxes and assessments not yet due and payable, (C) covenants, conditions, and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such Mortgage and such other permissible title
exceptions as are permitted and (D) other matters to which like properties are
commonly subject which do not materially adversely affect the value, use,
enjoyment or marketability of the related Mortgaged Property or (ii) with
respect to any Mortgage Loan as to which the Seller delivers an affidavit
certifying that the original Mortgage Note has been lost or destroyed, a
subsequent default on such Mortgage Loan if the enforcement thereof or of the
related Mortgage is materially and adversely affected by the absence of such
original Mortgage Note.

         REPURCHASE PRICE: With respect to any Mortgage Loan required to be
repurchased on any date pursuant to the Mortgage Loan Purchase Agreement or
purchased by the Master Servicer pursuant to the Servicing Agreement, an amount
equal to the sum, without duplication, of (i) 100% of the Principal Balance
thereof (without reduction for any amounts charged off) and (ii) unpaid accrued
interest at the Mortgage Rate on the outstanding principal balance thereof from
the Due Date to which interest was last paid by the Mortgagor to the first day
of the month following the month of purchase plus (iii) the amount of Advances
and any unreimbursed Servicing Advances or unreimbursed Advances made with
respect to such Mortgage Loan plus (iv) any other amounts owed

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to the Master Servicer or the Subservicer pursuant to Section 3.07 of the
Servicing Agreement not included in clause (iii) of this definition.

         REQUIRED SUBORDINATION AMOUNT: With respect to any Payment Date
occurring from the initial Payment Date and ending on the later of (i) the date
on which the aggregate Principal Balance of the Mortgage Loans is 50% of the
initial aggregate Principal Balance of the Mortgage Loans and (ii) the 30th
Payment Date, the greater of:

         (a) the Original Specified Subordination Amount; and

         (b) two times the excess of (1) 50% of the aggregate Principal Balance
of the Mortgage Loans which are 91 or more days delinquent (including Mortgage
Loans in foreclosure and REO Properties) as of such date over (2) two times the
current Net Monthly Excess Cash Flow for such Payment Date; and

         with respect to any Payment Date thereafter, the greatest of:

         (a) the lesser of (1) the Original Specified Subordination Amount and
(2) two times ____% times the aggregate Note Principal Balance as of such
Payment Date;

         (b) two times the excess of (A) 50% of the aggregate Principal Balance
of the Mortgage Loans which are 91 or more days delinquent (including Mortgage
Loans in foreclosure and REO Properties) as of such date over (B) two times the
current Net Monthly Excess Cash Flow for such Payment Date;

         (c) 0.5% of the Cut-Off Date Principal Balance of the Mortgage Loans;
and

         (d) an amount equal to the outstanding balance of the four largest
Mortgage Loans as of the Cut-Off Date;

Provided, however, that if (x) a Servicer Default has occurred and is continuing
as of such Payment Date, and such Servicer Default has not been waived by the
Note Insurer or (y) a claim has been made on the Note Insurance Policy by the
Indenture Trustee, the Required Subordination Amount shall not decrease on any
Payment Date.

         RESERVE INTEREST RATE: With respect to any Interest Determination Date,
the rate per annum that the Indenture Trustee determines to be either (i) the
arithmetic mean (rounded upwards if necessary to the nearest whole multiple of
1/16%) of the three-month United States dollar lending rates which New York City
banks selected by the Indenture Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Indenture Trustee can
determine no such arithmetic mean, the lowest three-month United States dollar
lending rate which New York City banks selected by the Indenture Trustee are
quoting on such Interest Determination Date to leading European banks.

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<PAGE>

         RESPONSIBLE OFFICER: With respect to the Indenture Trustee, any officer
of the Indenture Trustee with direct responsibility for the administration of
the Trust Agreement and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.

         SECURITIES ACT: The Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.

         SECURITY:  Any of the Certificates or Notes.

         SECURITYHOLDER OR HOLDER: Any Noteholder or a Certificateholder.

         SECURITY INSTRUMENT: A written instrument creating a valid first lien
on a Mortgaged Property securing a Mortgage Note, which may be any applicable
form of mortgage, deed of trust, deed to secure debt or security deed, including
any riders or addenda thereto.

         SELLER: _______________________, a __________ corporation, and its
successors and assigns.

         SERVICING ACCOUNT: The separate trust account created and maintained by
the Master Servicer or each Subservicer with respect to the Mortgage Loans or
REO Property, which shall be an Eligible Account, for collection of taxes,
assessments, insurance premiums and comparable items as described in Section
3.08 of the Servicing Agreement.

         SERVICING ADVANCES: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in connection with a default, delinquency or
other unanticipated event in the performance by the Master Servicer of its
servicing obligations, including, without duplication, but not limited to, the
cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
(iii) the management and liquidation of any REO Property and (iv) compliance
with the obligations under Sections 3.10, 3.11, 3.13 of the Servicing Agreement.

         SERVICING AGREEMENT: The Servicing Agreement dated as of ______ __,
200_, between the Master Servicer and the Issuer.

         SERVICING CERTIFICATE: A certificate completed and executed by a
Servicing Officer on behalf of the Master Servicer in accordance with Section
4.01 of the Servicing Agreement.

         SERVICING DEFAULT: The meaning assigned in Section 6.01 of the
Servicing Agreement.

         SERVICING FEE: With respect to any Mortgage Loan, the sum of the
related Master Servicing Fee and the related Subservicing Fee.

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         SERVICING FEE RATE: With respect to any Mortgage Loan, the sum of the
related Master Servicing Fee Rate and the Subservicing Fee Rate.

         SERVICING OFFICER: Any officer of the Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and specimen signature appear on a list of servicing officers furnished to
the Indenture Trustee (with a copy to the Note Insurer) by the Master Servicer,
as such list may be amended from time to time.

         SINGLE NOTE: A Note in the amount of $1,000.

         STANDARD & POOR'S: Standard & Poor's Ratings Service, or its successor
in interest.

         SUBORDINATION AMOUNT: As of any Payment Date, the excess, if any, of
(x) the sum of the aggregate Principal Balances of the Mortgage Loans as of the
close of business on the last day of the related Due Period as of such Payment
Date over (y) the Note Principal Balance of the Notes as of such Payment Date
(and following the making of all distributions on such Payment Date)

         SUBORDINATION DEFICIT: With respect to any Payment Date, the amount, if
any, by which (x) the aggregate Note Principal Balance of the Notes as of such
Payment Date, and following the making of all distributions to be made on such
Payment Date (except for any payment to be made as to principal from proceeds of
the Note Insurance Policy), exceeds (y) the aggregate Principal Balances of the
Mortgage Loans as of the close of business on the preceding Due Date on such
Payment Date.

         SUBORDINATION INCREASE AMOUNT: With respect to any Payment Date, the
amount of any Net Monthly Excess Cashflow (including any Subordination Reduction
Amount) available in the Payment Account to increase the Subordination Amount up
to the Required Subordination Amount.

         SUBORDINATION REDUCTION AMOUNT: With respect to any Payment Date, an
amount equal to the lesser of (a) the Excess Subordination Amount and (b) the
principal collections received by the Master Servicer with respect to the prior
Due Period.

         SUBSERVICER: Any Person with whom the Master Servicer has entered into
a Subservicing Agreement as a Subservicer by the Master Servicer and acceptable
to the Note Insurer and the Indenture Trustee, including the Initial
Subservicers.

         SUBSERVICING ACCOUNT: An Eligible Account established or maintained by
a Sub servicer as provided for in Section 3.06(e) of the Servicing Agreement.

         SUBSERVICING AGREEMENT: The written contract between the Master
Servicer and any Subservicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02 of the Servicing Agreement.

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         SUBSERVICING FEE: With respect to each Mortgage Loan and any date of
determination, the product of (i) the Subservicing Fee Rate divided by 12 and
(ii) the Principal Balance of such Mortgage Loans as of such date.

         SUBSERVICING FEE RATE: For any date of determination, ____% per annum.

         SUBSTITUTION ADJUSTMENT AMOUNT: With respect to any Eligible Substitute
Mortgage Loan, the amount as defined in Section 2.03 of the Servicing Agreement.

         TELERATE SCREEN PAGE 3750: The display designated as page 3750 on the
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks). If
such rate does not appear on such page (or such other page as may replace that
page on that service, or if such service is no longer offered, such other
service for displaying One-Month LIBOR or comparable rates as may be selected by
the Issuer after consultation with the Indenture Trustee), the rate will be the
Reference Bank Rate.

         TREASURY REGULATIONS: Regulations, including proposed or temporary
Regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.

         TRUST AGREEMENT: The Trust Agreement dated as of ______ __, 200_
between the Owner Trustee and the Depositor.

         TRUST ESTATE: The meaning specified in the Granting Clause of the
Indenture.

         TRUST INDENTURE ACT OR TIA: The Trust Indenture Act of 1939, as amended
from time to time, as in effect on any relevant date.

         UCC: The Uniform Commercial Code, as amended from time to time, as in
effect in any specified jurisdiction.

         WEIGHTED AVERAGE NET MORTGAGE RATE: With respect to the Mortgage Loans
in the aggregate, and any Due Date, the average of the Net Mortgage Rate for
each Mortgage Loan as of the last day of the related Due Period weighted on the
basis of the related Principal Balances outstanding as of the last day of the
related Due Period for each Mortgage Loan as determined by the Master Servicer
in accordance with the Master Servicer's normal servicing procedures.

                                       92Exhibit 4.3

                                CDN. $30,000,000
                            REVOLVING CREDIT FACILITY

                           MITEL NETWORKS CORPORATION,
                                   As Borrower

                                     - and -

                                BANK OF MONTREAL,
                            As Administrative Agent,
                            Lead Arranger and Lender

                                    - and -

                          THE LENDERS FROM TIME TO TIME
                                 PARTIES HERETO

                    ---------------------------------------
                     AMENDED AND RESTATED CREDIT AGREEMENT
                          MADE AS OF FEBRUARY 27, 2003
                    ---------------------------------------

<PAGE>

                                TABLE OF CONTENTS

                                    ARTICLE 1
                                 INTERPRETATION

         1.1       Definitions................................................2
         1.2       Headings..................................................16
         1.3       Extended Meanings.........................................16
         1.4       References to the Administrative Agent and Lenders........16
         1.5       Accounting Terms and Practices............................16
         1.6       Non-Banking Days..........................................17
         1.7       References to Time of Day.................................17
         1.8       Severability..............................................17
         1.9       Currency..................................................17
         1.10      References to Statutes....................................17
         1.11      References to Agreements..................................17
         1.12      Consents and Approvals....................................17
         1.13      Schedules.................................................18

                                    ARTICLE 2
                                  THE FACILITY

         2.1       The Facility..............................................18
         2.2       Purpose...................................................18
         2.3       Availability..............................................18
         2.4       Making of an Advance......................................19
         2.5       Participation of Each Lender..............................20
         2.6       Repayment of the Facility.................................20
         2.7       Cancellation or Reduction of the Facility.................21
         2.8       Application of Repayments.................................22
         2.9       Interest on Prime Rate Advances...........................23
         2.10      Interest on U.S. Base Rate Advances.......................23
         2.11      Libor Advances............................................23
         2.12      Method and Place of Payment...............................24
         2.13      Commitment Fees...........................................25
         2.14      Conversion Options........................................25
         2.15      Execution of Notices......................................27
         2.16      Evidence of Indebtedness..................................27
         2.17      Interest on Unpaid Costs and Expenses.....................28
         2.18      Criminal Rate of Interest.................................28
         2.19      Compliance with the Interest Act (Canada).................28
         2.20      Nominal Rate of Interest..................................28

                                      -i-
<PAGE>

                                    ARTICLE 3
                                LETTERS OF CREDIT

         3.1       Term and Availability.....................................28
         3.2       Reimbursement.............................................29
         3.3       Indemnity for Costs.......................................30
         3.4       Fees......................................................30

                                    ARTICLE 4
                 BANKERS' ACCEPTANCES AND BA EQUIVALENT ADVANCES

         4.1       Form of Bankers' Acceptance Advance and Interest..........30
         4.2       Minimum Amount............................................31
         4.3       Term and Interest Periods.................................31
         4.4       Purchase of Drafts, Acceptance Fee and Interest...........31
         4.5       Payment on Maturity.......................................31
         4.6       Waiver of Days of Grace...................................32
         4.7       No Market.................................................32

                                    ARTICLE 5
                   CHANGE OF CIRCUMSTANCES AND INDEMNIFICATION

         5.1       Increased Costs...........................................32
         5.2       Illegality................................................34

                                    ARTICLE 6
                        CONDITIONS PRECEDENT TO DRAWDOWN

         6.1       Conditions for Closing....................................34
         6.2       Conditions for Subsequent Drawdowns.......................37

                                    ARTICLE 7
                         REPRESENTATIONS AND WARRANTIES

         7.1       Representations and Warranties............................37
         7.2       Survival of Representations and Warranties................42

                                    ARTICLE 8
                                    COVENANTS

         8.1       Affirmative Covenants.....................................42
         8.2       Negative Covenants........................................48
         8.3       Financial Covenants.......................................50

                                    ARTICLE 9
                                   GUARANTEES

         9.1       Guarantors to Provide Guarantees..........................51

                                      -ii-
<PAGE>

                                   ARTICLE 10
                                    SECURITY

         10.1      Borrower's Security Documents.............................51
         10.2      Guarantors' Security Documents............................52

                                   ARTICLE 11
                            DEFAULT AND ACCELERATION

         11.1      Events of Default.........................................53
         11.2      Acceleration..............................................55
         11.3      Remedies Cumulative and Waivers...........................56
         11.4      Suspension of Lenders' Obligations........................56
         11.5      Application of Payments After an Event of Default.........56

                                   ARTICLE 12
                               SUCCESSOR COMPANIES

         12.1      Certain Requirements in Respect of Merger, Etc............57
         12.2      Vesting of Powers in Successor............................58

                                   ARTICLE 13
                       COSTS, EXPENSES AND INDEMNIFICATION

         13.1      Costs and Expenses........................................59
         13.2      Indemnification by the Borrower...........................59
         13.3      Funds.....................................................59
         13.4      General Indemnity.........................................60
         13.5      Environmental Claims......................................61

                                   ARTICLE 14
                            THE ADMINISTRATIVE AGENT

         14.1      The Administrative Agent..................................62
         14.2      The Administrative Agent's Responsibility.................62
         14.3      Administrative Agent's Duties.............................64
         14.4      Protection of Administrative Agent........................64
         14.5      Indemnification of Administrative Agent...................65
         14.6      Termination or Resignation of Administrative Agent........65
         14.7      Rights of Administrative Agent as Lender..................66
         14.8      Authorized Waivers, Variations and Omissions..............66
         14.9      Financial Information Concerning Borrower.................66
         14.10     Knowledge of Financial Situation of Borrower..............66
         14.11     Legal Proceedings.........................................66
         14.12     Capacity as Administrative Agent..........................67
         14.13     Capacity as Lead Arranger.................................67
         14.14     Deposits or Loans Respecting the Borrower.................67

                                     -iii-
<PAGE>

                                   ARTICLE 15
                                     GENERAL

         15.1      Term......................................................67
         15.2      Survival..................................................67
         15.3      Benefit of the Agreement..................................67
         15.4      Notices...................................................68
         15.5      Amendment and Waiver......................................68
         15.6      Governing Law.............................................69
         15.7      Further Assurances........................................69
         15.8      Enforcement and Waiver by the Lenders.....................69
         15.9      Execution in Counterparts.................................69
         15.10     Assignment by the Borrower................................69
         15.11     Assignments and Transfers by the Lenders..................70
         15.12     Set-Off...................................................70
         15.13     Time of the Essence.......................................71
         15.14     Judgment Currency.........................................71
         15.15     Equal Ranking of Lenders..................................71
         15.16     Sharing of Information....................................72
         15.17     Continuing Obligations and Liabilities....................72

SCHEDULE A - BORROWING BASE CERTIFICATE
SCHEDULE B - DRAWDOWN NOTICE
SCHEDULE C - CONVERSION NOTICE
SCHEDULE D - ROLLOVER NOTICE
SCHEDULE E - [Intentionally deleted]
SCHEDULE F - PERMITTED ENCUMBRANCES
SCHEDULE G - LITIGATION
SCHEDULE H - NON-COMPLIANCE MATTERS
SCHEDULE I - SUBSIDIARIES
SCHEDULE J - TRANSFER AGREEMENT
SCHEDULE K - COMMITTED AMOUNTS
SCHEDULE L - BUSINESS PLAN

                                      -iv-
<PAGE>

                      AMENDED AND RESTATED CREDIT AGREEMENT

      MEMORANDUM OF AGREEMENT made as of the 27th day of February, 2003.

B E T W E E N:

                        MITEL NETWORKS CORPORATION,
                        a corporation incorporated under the laws of
                        Canada, as borrower

                        (hereinafter referred to as the "Borrower"),

                                     - and -

                        THE LENDERS FROM TIME TO TIME PARTIES HERETO,

                        (hereinafter referred to as the "Lenders"),

                                     - and -

                        BANK OF MONTREAL,

                        a Canadian chartered bank, as Administrative Agent
                        and Lead Arranger

                        (hereinafter referred to in its own capacity as
                        "BMO" and in its capacity as administrative agent
                        on behalf of the Lenders, as the "Administrative
                        Agent"),

            WHEREAS  pursuant to a credit  agreement made as of May 11, 2001, as
amended  and  restated  by an  agreement  made as of  January  21,  2002  and as
subsequently  amended by amending agreement made the 12th day of February,  2002
(collectively,  as amended, the "Original Credit Agreement"), a revolving credit
facility was made  available  to the Borrower  upon and subject to the terms and
conditions therein set forth;

            AND WHEREAS the  Borrower  and the Lenders have agreed to extend the
Maturity  Date and further  amend and restate the Original  Credit  Agreement by
executing and delivering this Agreement;

            NOW THEREFORE THIS AGREEMENT WITNESSES that, in consideration of the
premises, the covenants herein contained and other valuable  consideration,  the
parties hereto agree as follows:

<PAGE>
                                      -2-

                                    ARTICLE 1
                                 INTERPRETATION

1.1         Definitions

            In this Agreement:

      "Acceptance Fee" means, with respect to each Bankers'  Acceptance drawn by
      the Borrower as borrower hereunder,  an amount equal to the product of (i)
      the  Applicable  Margin,  (ii)  the  Face  Amount  of each  such  Bankers'
      Acceptance purchased by a Lender on the relevant Drawdown Date and (iii) a
      fraction  (x) the  numerator of which is the number of days in the term to
      maturity of such Bankers'  Acceptance and (y) the  denominator of which is
      365 days;

      "Accounts" means the accounts kept by the Administrative Agent pursuant to
      Section 2.16(a) to record the Borrower's liabilities to the Administrative
      Agent and each Lender under this Agreement;

      "Additional Compensation" has the meaning specified in Section 5.1;

      "Administrative  Agent" means BMO, in its capacity as administrative agent
      for the Lenders hereunder, or any successor Administrative Agent appointed
      pursuant to Section 14.6;

      "Administrative  Agent's Counsel" means the firm of Davies Ward Phillips &
      Vineberg LLP, Toronto, Ontario, or such other firm of legal counsel as the
      Administrative Agent may from time to time designate;

      "Advance" means a Prime Rate Advance, a Bankers' Acceptance Advance, Libor
      Advance  or a U.S.  Base Rate  Advance or the issue of a Letter of Credit,
      and "Advances" means all of them;

      "Affiliate" means an affiliated body corporate, partnership, joint venture
      or other  entity and,  for the  purposes of this  Agreement,  (i) one body
      corporate,  partnership,  joint venture or other entity is affiliated with
      another if one such body  corporate,  partnership,  joint venture or other
      entity  is the  Subsidiary  of or is  Controlled  by the other or both are
      Subsidiaries  of the same body  corporate,  partnership,  joint venture or
      other entity or each of them is  Controlled by the same Person and (ii) if
      two bodies corporate,  partnerships,  joint ventures or other entities are
      affiliated  with the same body  corporate,  partnership,  joint venture or
      other entity at the same time,  they are deemed to be affiliated with each
      other;

      "Agreement" means this agreement and all Schedules attached hereto, as the
      same from time to time may be amended, restated, replaced or superseded;

      "Agreement Currency" shall have the meaning specified in Section 15.14;

<PAGE>
                                      -3-

      "Applicable Law" means, with respect to any Person, property,  transaction
      or event, all present or future  applicable laws,  statutes,  regulations,
      rules,  orders,   codes,   treaties,   conventions,   judgments,   awards,
      determinations  and  decrees of any  governmental,  regulatory,  fiscal or
      monetary  authority or court of competent  jurisdiction  in any applicable
      jurisdiction;

      "Applicable  Margin"  means,  (i)  until  such  time as the  Borrower  has
      received net proceeds of $20,000,000  from the issue of equity pursuant to
      a Confidential  Offering  Memorandum dated September  25,2002 from persons
      other than any Affiliate of the Borrower,  2.5% per annum in the case of a
      Prime Rate Advance or a U.S. Base Rate Advance, 3.5% per annum in the case
      of a Libor Advance or a Bankers' Acceptance Advance,  and (ii) thereafter,
      1.5% per annum in the case of a Prime  Rate  Advance  or a U.S.  Base Rate
      Advance,  2.5%  per  annum in the case of a Libor  Advance  or a  Bankers'
      Acceptance Advance;

      "Arm's  Length" has the meaning  ascribed  thereto for the purposes of the
      Income Tax Act (Canada) in effect as of the date hereof;

      "Available  Amount"  means,  at any time, the lesser of: (a) the Committed
      Amount or its  Equivalent  Amount in U.S.  Dollars,  and (b) the Borrowing
      Base;

      "BA Purchase  Price" means the difference  between (i) the result (rounded
      to the nearest  whole cent,  with  one-half of one cent being  rounded up)
      obtained by dividing the Face Amount of such  Bankers'  Acceptance  by the
      sum of one  plus  the  product  of (x)  the  BA  Reference  Discount  Rate
      multiplied by (y) a fraction, the numerator of which is the number of days
      in the term to maturity of such Bankers'  Acceptance,  and the denominator
      of which is 365 and (ii) the Acceptance Fee;

      "BA Reference Discount Rate" means the average rate applicable to bankers'
      acceptances  denominated  in Canadian  Dollars for the  applicable  period
      appearing  on  the   "Reuters   Screen  CDOR  Page"  (as  defined  in  the
      International  Swaps and Derivatives  Association,  Inc. 2000 Definitions)
      rounded up to the nearest 1/100th of 1% at approximately 10:00 a.m. on the
      relevant Drawdown Date;  provided that if such rate is not available,  the
      "BA Reference  Discount  Rate" shall mean the  arithmetic  mean of the bid
      rates  quoted  by Bank of  Montreal  and the  other  Lenders,  if any,  at
      approximately 10:00 a.m. for the purchase,  on the relevant Drawdown Date,
      of bankers' acceptances or drafts having an aggregate Face Amount equal to
      and with a term to maturity  the same as the  Bankers'  Acceptances  to be
      purchased by the Lenders on such Drawdown Date;

      "Bankers'  Acceptance" means a draft or other bill of exchange in Canadian
      Dollars drawn by the Borrower and accepted by a Lender in accordance  with
      Article 4;

      "Bankers'  Acceptance  Advance" means the advance of funds to the Borrower
      as borrower by way of creation  and  issuance of Bankers'  Acceptances  in
      accordance with the provisions of Article 4;

      "Banking Day" means a day,  other than a Saturday or a Sunday or other day
      on which banks are  required  or  authorized  to close in either  Toronto,
      Canada or New York, New

<PAGE>
                                      -4-

      York and,  where used in the context of a Libor  Advance,  which is also a
      day on which  banks are not  required  or  authorized  to close in London,
      England and dealings are carried on in the London interbank market;

      "Base  Rate" means the greater of (i) the  variable  rate of interest  per
      annum,  expressed  on the basis of a year of 365 or 366 days,  as the case
      may be,  established  or quoted from time to time by BMO as the  reference
      rate of interest  then in effect for  determining  interest  rates on U.S.
      Dollar  denominated  commercial  loans made by it in Canada;  and (ii) the
      Federal Funds  Effective Rate  multiplied by a fraction,  the numerator of
      which is the  actual  number  of days in the year and the  denominator  of
      which is 360, plus 1/2 of 1% per annum;

      "BMO" means Bank of Montreal, a Canadian Schedule I chartered bank and any
      successor;

      "Borrower" means Mitel Networks  Corporation,  a corporation  incorporated
      under the Canada Business  Corporations Act, and its permitted  successors
      and assigns;

      "Borrower's Security" has the meaning specified in Section 10.1;

      "Borrower's Security Documents" has the meaning specified in Section 10.1;

      "Borrowing Base" shall mean, at any time, the sum of:

              (i) 75% of Eligible Accounts Receivable; plus

             (ii) 90% of EDC Receivables; plus

            (iii) 100% of trade  accounts  of the  Borrower  and the  Guarantors
                  which are  secured  by bank  letters  of  credit or  guarantee
                  satisfactory  to the  Required  Lenders  which bank letters of
                  credit  or   guarantees   shall  have  been  assigned  to  the
                  Administrative  Agent if so  requested  by the  Administrative
                  Agent; less

             (iv) an amount equal to the principal  amount  outstanding  at such
                  time under the EDC Facility.

      For  purposes  of  calculating  the  Borrowing  Base,   Eligible  Accounts
      Receivable and EDC  Receivables of the Borrower and the Guarantors and the
      principal amount outstanding under the EDC Facility, shall be expressed in
      Canadian  Dollars based on the Equivalent  Amount of the value of any such
      amounts in U.S. Dollars, Sterling or Euros;

      "Borrowing  Base  Certificate"  shall mean a certificate to be executed by
      the Borrower and  delivered  by the Borrower to the  Administrative  Agent
      from time to time in the form attached to this Agreement as Schedule A;

<PAGE>
                                      -5-

      "Business" means the communications  systems business,  including research
      and development of  communications  and related products carried on, or to
      be carried on, by the Borrower and its Subsidiaries;

      "Business Plan" has the meaning specified in Section 6.1(n);

      "Canadian  Dollars"  and "Cdn.  $" mean the lawful  currency  of Canada in
      immediately available funds;

      "change in law" has the meaning specified in Section 5.1;

      "Claims" has the meaning specified in Section 13.4(a);

      "Closing Date" means February 27, 2003;

      "Commitment"  means,  with  respect  to a  Lender,  the  amount  set forth
      opposite the name of such Lender on Schedule K, or the  Equivalent  Amount
      in U.S. Dollars, subject to reduction pursuant to Section 2.7;

      "Committed  Amount" means Cdn.  $30,000,000,  or the Equivalent  Amount in
      U.S. Dollars, subject to reduction pursuant to Section 2.7;

      "Control"  and  its  derivatives  means,  with  respect  to  control  of a
      corporation by a Person,  the holding (other than by way of security only)
      by or for the  benefit of that  Person,  or  affiliates  of that Person or
      others with whom that Person does not deal at Arm's  Length of  securities
      of such  corporation  or the  right  to  vote  or  direct  the  voting  of
      securities of such  corporation to which,  in the aggregate,  are attached
      more  than 50% of the  votes  that may be cast to elect  directors  of the
      corporation,  provided  that the votes  attached to those  securities  are
      sufficient,  if  exercised,  to elect a majority of the  directors  of the
      corporation  and means,  with  respect to control of a Person other than a
      corporation,  the power to direct or cause the direction of the management
      and policies of such Person,  directly or indirectly,  and whether through
      the ownership or control of voting securities,  voting rights, contract or
      otherwise, without the cooperation of others;

      "Conversion" means the conversion of an Advance pursuant to Section 2.14;

      "Conversion  Notice" means a notice  substantially  in the form set out in
      Schedule C;

      "Corporate Distribution" has the meaning specified in Section 8.2(h);

      "Counsel to the  Borrower"  means  Gowling  Lafleur  Henderson LLP or such
      other  firm  of  legal  counsel  as the  Borrower  may  from  time to time
      designate with the approval of the Administrative Agent, such approval not
      to be unreasonably withheld;

      "Debt" of any Person  means,  at any date,  without  duplication,  (i) all
      obligations  of such Person for borrowed  money,  (ii) all  obligations of
      such Person evidenced by bonds,  debentures,  notes,  letters of credit or
      other similar instruments, (iii) all obligations of such Person to pay the
      deferred  purchase  price of property or services,  except trade  accounts

<PAGE>
                                      -6-

      payable within 90 days that arise in the ordinary course of business, (iv)
      all  obligations  of such  Person  as  lessee  which  are  capitalized  in
      accordance  with GAAP, (v) all  indebtedness,  liabilities and obligations
      secured by a Lien on any asset of such Person,  whether or not the same is
      otherwise  indebtedness,  liabilities or obligations of such Person,  (vi)
      all indebtedness, liabilities and obligations of others which is, directly
      or  indirectly,  guaranteed by such Person or which such Person has agreed
      (contingently  or otherwise) to purchase or otherwise  acquire,  (vii) all
      indebtedness,   liabilities   and  obligations  in  respect  of  financial
      instruments  which are  classified  as a liability on the balance sheet of
      such Person, and (viii) all obligations of such Person to otherwise assure
      a creditor against loss;

      "Default"  means an event which,  with the giving of notice or the passage
      of time or the making of any  determination or any combination  thereof as
      provided for herein, could become an Event of Default;

      "Drawdown" means a drawdown of an Advance;

      "Drawdown Date" means, in relation to any Advance,  the date,  which shall
      be a Banking  Day, on which the  Drawdown  of such  Advance is made by the
      Borrower pursuant to a Drawdown Notice;

      "Drawdown  Notice"  means a  notice  substantially  in the form set out in
      Schedule B;

      "EBITDA" means, for any Person on a consolidated basis and for any period,
      without duplication,  the amount equal to net income less interest income,
      income tax  recoveries  and any  non-cash  income  included in net income,
      plus,  to  the  extent  deducted  from  net  income,   interest   expense,
      depreciation expense,  amortization  expense,  other non-cash expenses and
      income tax expenses;  provided that foreign  exchange  gains or losses and
      extraordinary or unusual gains or losses, including gains or losses on the
      disposition  of  assets  outside  the  ordinary  course  of  business  and
      restructuring charges, shall not be included in EBITDA;

      "EDC" means Export Development Canada and its successors;

      "EDC  Facility"  means  the  credit  facility  in  the  aggregate  maximum
      principal  amount  of  Sterling  4,100,000  made  available  to MNL by EDC
      pursuant to a loan agreement dated on or about the date hereof;

      "EDC Receivables"  means trade accounts of the Borrower and MNI insured by
      EDC;

      "Eligible Accounts Receivable" means the combined Canadian,  United States
      and United  Kingdom trade  accounts of the Borrower and the  Guarantors as
      determined in accordance with GAAP, but excluding the following:

      (a)   any trade accounts which are  outstanding for more than 90 days from
            the date of  invoice,  except a  limited  number  of  extended  term
            accounts  agreed by the  Required  Lenders to be  Eligible  Accounts
            Receivable;

<PAGE>
                                      -7-

      (b)   trade accounts if the account  debtors are located in a jurisdiction
            other  than  Canada,  the  United  States  or in the  case of  trade
            accounts of MNL only, the United Kingdom;

      (c)   trade  accounts  which are payable in a currency other than Canadian
            Dollars,  U.S. Dollars or in the case of trade accounts of MNL only,
            Sterling or Euros;

      (d)   trade accounts if the account debtors are Affiliates of the Borrower
            or the  Guarantors  including,  for greater  certainty,  Breconridge
            Manufacturing Solutions,  Inc., Breconridge  Manufacturing Solutions
            Corporation and Breconridge Manufacturing Solutions Limited;

      (e)   accounts  subject to a right of  set-off  if a claim of set-off  has
            been asserted by the account debtor;

      (f)   doubtful or disputed accounts;

      (g)   EDC Receivables;

      (h)   those  accounts  referred to in sub-part  (iii) of the definition of
            Borrowing Base; and

      (i)   any accounts, including any account not specifically excluded above,
            determined  by  any  Lender,  in  its  sole  discretion,  not  to be
            eligible;

      "Environmental Claims" means any and all enforcement, clean-up, removal or
      other   governmental  or  regulatory   actions,   orders,   directions  or
      proceedings  instituted,  pending  or  completed  or,  to the  best of the
      knowledge of the Borrower and the  Guarantors,  threatened or  anticipated
      pursuant to any Environmental  Laws and all claims made or, to the best of
      the knowledge of the Borrower and the Guarantors, threatened, by any third
      party against the Borrower or any of the  Guarantors,  any property of the
      Borrower  or any of the  Guarantors  or any of their  Subsidiaries  or any
      party having  charge,  management or control of any property of any of the
      Borrower,  the  Guarantors  or  their  Subsidiaries  relating  to  damage,
      contribution,  cost recovery,  compensation, loss or injury resulting from
      any violation or alleged violation of Environmental Laws;

      "Environmental  Laws"  means any  present  or future  applicable  federal,
      provincial,  state,  municipal or other local law, statute,  regulation or
      by-law, code, ordinance, decree, directive, standard, policy, rule, order,
      treaty, convention, judgment, award or determination for the protection of
      the environment or human health and safety, present or future;

      "Equivalent  Amount"  on any  given  date  in  one  currency  (the  "first
      currency")  of any amount  denominated  in another  currency  (the "second
      currency") means the amount of the first currency which could be purchased
      with such amount of the second  currency at the rate of exchange quoted by
      BMO at 11:00  a.m.  (Toronto  time) on such date for the  purchase  of the
      first currency with the second currency;

<PAGE>
                                      -8-

      "Euro"  means the lawful  currency  of the member  states of the  European
      Union that have adopted the single  currency in accordance with the Treaty
      establishing the European Community,  as amended by the Treaty on European
      Union;

      "Event of Default" means any of the events described in Section 11.1;

      "Face  Amount"  means,  in respect of a  Bankers'  Acceptance,  the amount
      payable  to the holder  thereof  on the  maturity  thereof  and means,  in
      respect of a Letter of Credit, the maximum amount payable to a beneficiary
      thereunder;

      "Facility" means the revolving  credit facility in an aggregate  principal
      amount  of up to  Cdn.  $30,000,000  (or  the  Equivalent  Amount  in U.S.
      Dollars) to be made  available to the Borrower by the Lenders as set forth
      in Article 2;

      "Federal Funds Effective Rate" means, for any particular day, the variable
      rate of interest per annum,  calculated  on the basis of a 360-day year as
      determined by BMO for the actual number of days elapsed, equal to:

             (i)  the weighted  average of the rates on overnight  federal funds
                  transactions  with  members  of  the  Federal  Reserve  System
                  arranged by federal  funds  brokers as published  for such day
                  (or, if such day is not a Banking Day, for the next  preceding
                  Banking Day) by the Federal Reserve Bank of New York, or

            (ii)  for any Banking Day on which such rate is not so  published by
                  the  Federal  Reserve  Bank of New York,  the  average  of the
                  quotations for such day for such transactions  received by BMO
                  from  three  federal  funds  brokers  of  recognized  standing
                  selected by BMO in consultation with the Borrower;

      "GAAP" means those generally accepted accounting  principles  consistently
      applied in Canada;

      "Governmental  Receivables" means trade accounts of the Borrower where the
      account debtors are the federal  government of Canada or the United States
      of America or any  provincial  government  or any state  government or any
      territorial  government or any political  subdivision  thereof,  or of any
      political  subdivision of a political  subdivision thereof, and any entity
      exercising executive, legislative, judicial, regulatory, administrative or
      other function of or pertaining to government;

      "Guarantees" means,  collectively,  (i) the amended and restated guarantee
      and  security  agreement  dated as of January 21, 2002 between MNI and the
      Administrative Agent, (ii) the amended and restated guarantee and security
      agreement dated as of January 21, 2002 between MNSI and the Administrative
      Agent,  and (iii) the guarantee and indemnity  dated July 25, 2001 between
      MNL and the  Administrative  Agent,  and, in each case, as may be amended,
      supplemented  or restated from time to time and  "Guarantee"  means any of
      them;

<PAGE>
                                      -9-

      "Guarantors" means, collectively,  MNI, MNSI and MNL, and their respective
      permitted successors and assigns and "Guarantor" means any of them;

      "Guarantors' Security" has the meaning specified in Section 10.2;

      "Guarantors'  Security  Documents"  has the meaning  specified  in Section
      10.2;

      "Hazardous  Material" means any  contaminant,  pollutant or substance that
      causes harm or  degradation  to the  surrounding  environment or injury to
      human health and,  without  restricting  the  generality of the foregoing,
      includes any pollutant,  contaminant,  waste, hazardous waste, deleterious
      substance  or  dangerous  good  present in such  quantity or state that it
      contravenes or is regulated under any Environmental  Laws or gives rise or
      could give rise to any  liability or  obligation  under any  Environmental
      Law;

      "Indemnifying Party" has the meaning specified in Section 13.4(c);

      "Indemnitee" has the meaning specified in Section 13.4(a);

      "Intercreditor  Agreement" means the intercreditor  agreement made between
      the  Administrative  Agent,  for and on behalf of the  Lenders,  EDC,  the
      Borrower and the Guarantors, dated the date of this Agreement;

      "Interest Date" means the first day of each calendar month;

      "Interest  Period"  means,  with  respect  to a Libor  Advance,  a  period
      commencing  (i) in the  case  of the  initial  Interest  Period  for  such
      Advance,  on the  date  of  such  Advance;  and  (ii)  in the  case of any
      subsequent  Interest  Period  for  such  Advance,  on the  last day of the
      immediately  preceding  Interest Period applicable  thereto and ending, in
      either  case,  on the last day of such  period as shall be selected by the
      Borrower  pursuant to the  provisions  hereof;  provided that if any Libor
      Advance  arises as a result of a  Conversion  of  another  type of Advance
      pursuant to the provisions  hereof,  the initial  Interest Period for such
      Libor Advance  after such  Conversion  shall  commence on the date of such
      Conversion;

      "Lenders"  means the Persons listed as lenders on Schedule K and any other
      Person that shall have become a party hereto in accordance  with the terms
      of Section 14.11;

      "Letter of Credit" means a term letter of credit,  sight letter of credit,
      standby  letter  of  credit or  documentary  letter of credit  issued by a
      Lender at the request of the Borrower pursuant to Section 3.1;

      "Libor  Advance"  means a loan  made by a Lender to the  Borrower  in U.S.
      Dollars on which interest is payable at the Libor Rate plus the Applicable
      Margin;

      "Libor  Interest  Payment  Date"  has the  meaning  specified  in  Section
      2.11(c);

      "Libor Rate" means,  for each Interest  Period for each Libor  Advance,  a
      rate of interest per annum, calculated on the basis of a year of 360 days,
      equal to the London interbank offered rate for U.S. Dollars, at 11:00 a.m.
      (London, England time) on the day that is two

<PAGE>
                                      -10-

      Banking Days prior to the first day of such Interest Period,  and having a
      term  equal to such  Interest  Period,  as such  rate is  reported  on the
      display designated as "page 3750" (or any replacement page) by "Telerate -
      the Financial Information Network" published by Telerate Systems, Inc. (or
      such other company or service as may be nominated by the British  Bankers'
      Association  as the  information  vendor  for the  purpose  of  displaying
      British  Bankers'  Association  Interest  Settlement Rates for deposits in
      U.S.  Dollars)  and,  if such  rate is not  available,  then  the  rate of
      interest  per  annum,  calculated  on the basis of a year of 360 days,  at
      which BMO is offered deposits in U.S. Dollars by prime banks in the London
      interbank market at approximately  11:00 a.m.  (London,  England time) two
      Banking Days prior to the first day of such  Interest  Period for a period
      comparable to such Interest Period and in an amount approximately equal to
      the amount of the Libor  Advance to be  outstanding  during such  Interest
      Period;

      "Liens" means mortgages,  pledges,  liens,  hypothecs,  charges,  security
      agreements or other  encumbrances or other  arrangements that in substance
      secure  payment  or  performance  of an  obligation,  statutory  and other
      non-consensual liens or encumbrances and includes the interest of a vendor
      or lessor under any  conditional  sale  agreement,  capital lease or other
      title retention agreement;

      "Loan  Documents"  means,  collectively,   this  Agreement,  the  Security
      Documents and the Intercreditor

      Agreement;

      "Losses" has the meaning specified in Section 13.4(a);

      "Material  Agreement"  means any agreement,  contract or document which is
      material to the  Business or to the  operations,  financial  condition  or
      prospects of the Borrower or any of the Guarantors;

      "Maturity Date" means February 26, 2004;

      "MNI" means Mitel Networks, Inc. a corporation incorporated under the laws
      of Delaware and an indirect wholly-owned Subsidiary of the Borrower;

      "MNL" means Mitel Networks  Limited,  a private  company limited by shares
      incorporated in England and Wales under number 1309629,  whose  registered
      office  is at  Portskewett,  Monmouthshire,  NP2G  5YR,  and  an  indirect
      wholly-owned Subsidiary of the Borrower;

      "MNSI" means Mitel Networks  Solutions,  Inc., a corporation  incorporated
      under  the laws of the  State of  Delaware  and an  indirect  wholly-owned
      Subsidiary of the Borrower;

      "Notice of Amount" has the meaning specified in Section 5.1;

      "Notification Date" has the meaning specified in Section 13.5(c);

      "Officer's  Certificate"  means  a  certificate  signed  by any one of the
      following officers of the Borrower:  (i) the Chief Executive Officer, (ii)
      the Chief Operating Officer,  (iii) the Chief Financial  Officer,  or (iv)
      the Treasurer;

<PAGE>
                                      -11-

      "Original  Credit  Agreement"  shall  have the  meaning  specified  in the
      recitals to this Agreement;

      "Other  Taxes" means any present or future stamp or  documentary  taxes or
      any other excise or property taxes,  charges or similar levies which arise
      from any  payment  made  hereunder  or from  the  execution,  delivery  or
      registration  of, or  otherwise  with respect to, this  Agreement,  or any
      other document in connection herewith;

      "Outstanding Amount" has the meaning specified in Section 2.6(b);

      "Participation"  of a Lender  means the  percentage  which  such  Lender's
      Commitment  with  respect to the  Facility is of the  aggregate  Committed
      Amount,  as such percentage may be adjusted pursuant to this Agreement and
      subject to the Administrative  Agent's authority to make allocations among
      the  Lenders  as  herein  provided,  or,  as  the  context  requires,  the
      percentage determined as aforesaid of such Lender in any issue of Bankers'
      Acceptances, in any Advance or in any repayment thereof or, as the context
      may require, in any payment of interest or fees or other payment;

      "Permits" has the meaning specified in Section 7.1(i);

      "Permitted Debt" means:

               (i)   Debt owing hereunder and under the Security Documents;

              (ii)   Subordinated Debt;

             (iii)   trade debt and similar unsecured  indebtedness  incurred in
                     the ordinary course of business (but excluding indebtedness
                     for borrowed  money not  outstanding  for more than 90 days
                     other  than  certain  indebtedness  of MNL  owing  to Mitel
                     Networks International Limited on account of royalties);

              (iv)   intercorporate  Debt owed by any Subsidiary to the Borrower
                     or any of the Guarantors;

               (v)   intercorporate   Debt   between   the   Borrower   and  the
                     Guarantors;

              (vi)   intercorporate Debt owed by any wholly-owned  Subsidiary of
                     the  Borrower   (other  than  the  Guarantors)  to  another
                     wholly-owned Subsidiary of the Borrower;

             (vii)   Debt in an aggregate amount not exceeding Cdn.  $15,000,000
                     (or its Equivalent Amount in another currency)  incurred in
                     connection with the obligations of a Person as lessee which
                     are capitalized in accordance with GAAP;

            (viii)   Debt incurred pursuant to performance  bonds, bid bonds and
                     other  similar  instruments  entered  into in the  ordinary
                     course of business;

<PAGE>
                                      -12-

              (ix)   Debt  for  borrowed  money  in  an  aggregate   amount  not
                     exceeding (pound)15,000,000 incurred pursuant to overdraft,
                     working  capital  credit  facilities  and any other form of
                     financing  by  Subsidiaries  of the  Borrower  carrying  on
                     business  in the United  Kingdom  and Europe  (including  a
                     (pound)7.5  million real estate  mortgage dated January 24,
                     2002  granted by MNL in favour of  Barclays  Bank plc and a
                     (pound)5  million  chattel  mortgage dated October 31, 2001
                     granted by MNL in favour of Barclays  Bank plc, as each may
                     be amended, restated, supplemented or replaced from time to
                     time with the consent of the Required Lenders);

               (x)   Debt  pursuant  to letters of credit in an  aggregate  face
                     amount not exceeding Cdn. $800,000 issued in respect of the
                     Borrower's supplemental executive retirement plan;

              (xi)   Debt  incurred  or assumed  in  connection  with  Permitted
                     Purchase Money Security Interests;

             (xii)   Debt  secured  by  assets  or  properties  at the  time  of
                     entering into an agreement with respect to the  acquisition
                     of such assets or properties and assumed in connection with
                     such acquisition and Debt of a corporation  existing at the
                     time such corporation  becomes a Subsidiary of the Borrower
                     provided,  in either case,  that such Debt was not incurred
                     in anticipation  of such  acquisition or in anticipation of
                     such  corporation  becoming a Subsidiary  and excluding any
                     extensions or renewals of any such Debt;

            (xiii)   unsecured  Debt  incurred in connection  with  transactions
                     entered  into for the purpose of hedging  foreign  exchange
                     risk  of the  Borrower  and  its  Subsidiaries  or for  the
                     purpose of hedging interest rate exposure on Permitted Debt
                     (but, in either case not for speculative purposes);

             (xiv)   unsecured  Debt in an aggregate  amount not exceeding  Cdn.
                     $15,000,000 (or its Equivalent  Amount in another currency)
                     pursuant to a daylight  overdraft  facility incurred solely
                     to facilitate the clearance of inter-corporate Debt;

              (xv)   Debt  represented  by  obligations of MNL in respect of its
                     defined benefit pension plan;

             (xvi)   Debt  in  an  aggregate   principal  amount  not  exceeding
                     Sterling  4,100,000  under  the  EDC  Facility  (including,
                     without duplication,  Debt represented by guarantees issued
                     by the Borrower, MNI and MNSI in connection therewith); and

            (xvii)   unsecured Debt not included in any of the foregoing and not
                     exceeding  Cdn.  $5,000,000  (or its  Equivalent  Amount in
                     another currency), in the aggregate;

<PAGE>
                                      -13-

      "Permitted Encumbrances" has the meaning specified in Schedule F;

      "Permitted  Purchase  Money  Security  Interest"  means  any  Lien  on any
      property  or asset  created,  issued or assumed to secure  Debt  incurred,
      assumed or issued to satisfy,  in whole or in part,  the purchase price of
      such property or asset  (including  installation  costs) and  expenditures
      made  for  any  repairs,   alterations,   construction,   development   or
      improvements performed thereon or added thereto,  provided that such Lien,
      or any agreement or other instrument under which such Lien is constituted,
      is  limited to the  property  or asset  acquired  in  connection  with the
      assumption,  issuance or incurring of such Debt and is created,  issued or
      assumed concurrently with the acquisition of such property or assets;

      "Permitted  Securitization  Transactions" means any transaction  providing
      for the sale,  securitization  or other  asset-backed  financing  of trade
      accounts  receivable  of or owing to the Borrower or a  Subsidiary  of the
      Borrower,  and  excluding any  Canadian,  United States or United  Kingdom
      trade  accounts  receivable,  provided that such  disposition  of accounts
      receivable  pursuant  to  the  securitization   transactions  are  without
      recourse to the Borrower or such Subsidiary and provided  further that the
      aggregate  amount  of  accounts  receivable  sold  does  not  exceed  Cdn.
      $3,000,000 at any time;

      "Person" means an individual,  company, partnership (whether or not having
      separate legal  personality),  corporation  (including a business  trust),
      joint stock company, trust, unincorporated  association,  joint venture or
      other entity, or a government,  state or political  subdivision thereof or
      any agency of such government, state or political subdivision;

      "Prime Rate" means the greater of (i) the arithmetic  mean of the variable
      rates of interest  per annum,  expressed  on the basis of a year of 365 or
      366 days, as the case may be,  established  or quoted from time to time by
      BMO and the other Lenders,  if any, as the reference rate of interest then
      in effect for determining  interest rates on Canadian  Dollar  denominated
      commercial loans made by it in Canada and (ii) the sum of (x) the rate per
      annum for Canadian  Dollar bankers'  acceptances  having a term of 30 days
      that  appears  on the  display  page  designated  as the CDOR Page (or any
      replacement page) by Reuters Money Market Service (or its successor) as of
      10:00 a.m. on the date of determination as reported by the  Administrative
      Agent, and (y) 1.0% per annum;

      "Prime  Rate  Advance"  means a loan  made by a Lender  to a  Borrower  in
      Canadian  Dollars on which  interest is payable at the Prime Rate plus the
      Applicable Margin;

      "Priority Claims" means, at any time, the aggregate of any amounts due and
      payable  prior to such time, to the extent not paid by the Borrower or any
      of the Guarantors in respect of:

      (a)   wages, salaries, commissions or other remunerations;

      (b)   vacation pay;

<PAGE>
                                      -14-

      (c)   deductions at source for employees,  federal and  provincial  income
            taxes, Canada Pension Plan and Employment Insurance;

      (d)   GST and PST (net of input tax credits);

      (e)   Workers' Compensation Board premiums or similar premiums;

      (f)   all taxes  under the  federal  and state laws of the  United  States
            including,  but not limited to, all  federal,  state or local net or
            gross income, gross receipts, net proceeds,  sales, use, ad valorem,
            value added, franchise,  withholding,  payroll, employment,  excise,
            sales, use, property,  alternative or add-on minimum,  environmental
            or  other  taxes,   assessments,   duties,  fees,  levies  or  other
            governmental  charges of any nature  whatever,  whether  disputed or
            not,  together  with any  interest,  penalties,  additions to tax or
            additional amounts with respect thereto;

      (g)   all payments in connection  with an employee  benefit plan,  program
            and arrangement including, without limitation, any "employee benefit
            plan" as defined in Section 3(3) of the Employee  Retirement  Income
            Security  Act  of  1974,   as  amended   ("ERISA"),   maintained  or
            contributed  to by the  Borrower  or any of the  Guarantors,  or any
            other  applicable law covering  employee  benefit plans  (including,
            without  limitation,  the Internal Revenue Code of 1986, as amended)
            or  any  applicable  agreement  controlling  such  employee  benefit
            plan(s);

      (h)   all payments in  connection  with  workers'  compensation,  workers'
            disability  insurance,  or any  similar  program as  required by any
            applicable state or federal law, such as, for example,  the New York
            State  "Workers'  Compensation  Law"  (New  York  Consolidated  Laws
            Chapter 67, ss.ss.1 et seq.);

      (i)   property taxes;

      (j)   rent;

      (k)   value  added tax  (VAT)  and all  deductions,  taxes,  premiums  and
            payments  which may be payable  by MNL and which are  similar to the
            deductions,  taxes,  premiums and payments referred to in paragraphs
            (c),  (d),  (e),  (f), (g) and (h) of this  definition  of "Priority
            Claims"; and

      (l)   claims  which may rank in  priority  to the  Administrative  Agent's
            security interest in respect of accounts receivable.

      "rate of exchange" has the meaning specified in Section 15.14;

      "Release" has the meaning specified in Section 7.1(j);

      "Reorganization" has the meaning specified in Section 12.1;

<PAGE>
                                      -15-

      "Required Lenders" means, at any time, Lenders having undrawn  Commitments
      or outstanding  Advances  representing  more than two-thirds of the sum of
      the total Committed Amount or outstanding Advances at such time;

      "Rollover"  means  a  rollover  of a  Libor  Advance  pursuant  to  and in
      accordance  with  Section  2.11 or a  rollover  of a  Bankers'  Acceptance
      Advance pursuant to and in accordance with Section 4.5;

      "Rollover Notice" means a notice substantially in the form of Schedule D;

      "Security"   means,   collectively,   the  Borrower's   Security  and  the
      Guarantors' Security;

      "Security   Documents"  means,   collectively,   the  Borrower's  Security
      Documents and the Guarantors' Security Documents;

      "Sterling"  means the lawful currency of the United Kingdom in immediately
      available funds;

      "Stock"  shall  mean all  shares,  options,  warrants,  general or limited
      partnership interests or other equivalents  (regardless of how designated)
      of or in a  corporation,  partnership,  limited  partnership or equivalent
      entity whether voting or non-voting or participating or non-participating;

      "Subordinated  Debt" shall mean Debt of the  Borrower or any  Guarantor or
      Subsidiary  subordinated  to all amounts at any time due and payable under
      any of the  Loan  Documents  in a  manner  and  form  satisfactory  to the
      Required Lenders in their sole discretion, as to right and time of payment
      and as to any other rights and remedies thereunder;

      "Subsidiary"  means any corporation  more than 50% of the Voting Shares of
      which at the time of  determination  are beneficially  owned,  directly or
      indirectly, by the Borrower or any corporation, joint venture, partnership
      or other entity which is subject to the direct or indirect  Control of the
      Borrower;

      "Successor Corporation" has the meaning specified in Section 12.1;

      "Take-Over  Bid"  means  an  offer  to  acquire  made by the  Borrower,  a
      Guarantor or a Subsidiary of the Borrower,  alone or acting  jointly or in
      concert with any other Person or Persons (collectively, the "Offeror"), to
      any holder of Voting Shares or  securities  convertible,  exchangeable  or
      exercisable  into  Voting  Shares  (the  "Target  Shares")  of the offeree
      issuer,  which has not been  solicited  by or made at the  request  of the
      board of  directors  of the offeree  issuer,  or with respect to which the
      board of directors of the offeree issuer has not  recommended  acceptance,
      where the Target Shares subject to the offer to acquire, together with the
      Target  Shares  held by or on  behalf  of the  offeror  on the date of the
      offer,  constitute,  in aggregate, 20% (or such lesser percentage as would
      require compliance with the formal  requirements  governing take-over bids
      (such as the delivery of circulars or equivalent  disclosure  documents to
      shareholders  under  Applicable  Law)) or more of the  outstanding  Target
      Shares at the date of the offer to acquire, but

<PAGE>
                                      -16-

      excluding  any  such  offer  which,   under  the  Applicable  Law  of  the
      jurisdiction in which such offer is made, would be exempt from such formal
      requirements;

      "Taxes"  includes  all present  and future  income,  corporation,  capital
      gains, capital and value-added, and goods and services taxes and all stamp
      and other  taxes and  levies,  imposts,  deductions,  duties,  charges and
      withholdings  whatsoever together with interest thereon and penalties with
      respect thereto, if any, and charges, fees and other amounts made on or in
      respect thereof;

      "Transferee" has the meaning specified in Section 15.11(a);

      "U.S.  Base Rate Advance" means a loan made by a Lender to the Borrower on
      which interest is payable at the Base Rate plus the Applicable Margin;

      "U.S.  Dollars" and "U.S. $" mean the lawful currency of the United States
      of America in immediately available funds; and

      "Voting  Shares"  means  shares of any class of any  corporation  carrying
      voting rights under all  circumstances,  provided that, for the purpose of
      this definition,  shares which only carry the right to vote  conditionally
      on the happening of an event shall not be considered  Voting Shares unless
      such right has become exercisable.

1.2         Headings

            The division of this  Agreement  into  Articles and Sections and the
insertion  of an index and headings are for  convenience  of reference  only and
shall not affect the  construction  or  interpretation  hereof.  The terms "this
Agreement",   "hereof",  "hereunder"  and  similar  expressions  refer  to  this
Agreement and not to any particular Article, Section, paragraph or other portion
hereof and include any agreement supplemental hereto. Save as expressly provided
herein,  references herein to Articles and Sections are to Articles and Sections
of this Agreement.

1.3         Extended Meanings

            Words  importing  the singular  number only shall include the plural
and vice versa,  and words  importing any gender shall include all genders.  The
term "including" means "including without limitation".

1.4         References to the Administrative Agent and Lenders

            Any reference in this Agreement to the Administrative  Agent and any
Lender  shall  be  construed  so as to  include  its  successors  and  permitted
transferees or assigns hereunder in accordance with its respective interests.

1.5         Accounting Terms and Practices

            Unless otherwise  provided herein,  all accounting terms referred to
herein shall be construed in accordance  with Canadian GAAP as established  from
time  to  time  by the  Canadian  Institute  of  Chartered  Accountants  and all
financial data submitted pursuant to this Agreement

<PAGE>
                                      -17-

shall be prepared  in  accordance  with such  principles,  consistently  applied
except for the absence of footnotes in unaudited statements.

1.6         Non-Banking Days

            Whenever any payment to be made hereunder  shall be stated to be due
or any action to be taken  hereunder  shall be stated to be required to be taken
on a day other than a Banking  Day,  such  payment  shall be made or such action
shall  be  taken  on the next  succeeding  Banking  Day and,  in the case of the
payment of any monetary amount,  the extension of time shall be included for the
purposes of computation of interest or fees thereon.

1.7         References to Time of Day

            Except  as  otherwise  specified  herein,  a time  of day  shall  be
construed as a reference to Toronto, Canada time.

1.8         Severability

            In the event that one or more of the  provisions  contained  in this
Agreement shall be invalid,  illegal or  unenforceable  in any respect under any
applicable  law,  the  validity,  legality or  enforceability  of the  remaining
provisions hereof shall not be affected or impaired thereby.

1.9         Currency

            All monetary  amounts in this  Agreement  refer to Canadian  Dollars
unless otherwise specified.

1.10        References to Statutes

            Except as otherwise provided herein, any reference in this Agreement
to a statute  shall be  construed  to be a reference to such statute as the same
may have been, or may from time to time be, amended or re-enacted.

1.11        References to Agreements

            Except as otherwise  provided  herein,  any reference herein to this
Agreement  or any  other  agreement  or  document  shall  be  construed  to be a
reference to this Agreement or such other agreement or document, as the case may
be, as the same may have  been,  or may from time to time be,  amended,  varied,
novated or supplemented.

1.12        Consents and Approvals

            Whenever  the consent or approval of a party hereto is required in a
particular  circumstance,  unless otherwise expressly provided for therein, such
consent or approval shall not be unreasonably withheld or delayed by such party.

<PAGE>
                                      -18-

1.13        Schedules

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

            Schedule A     -     Borrowing Base Certificate
            Schedule B     -     Drawdown Notice
            Schedule C     -     Conversion Notice
            Schedule D     -     Rollover Notice
            Schedule E     -     [Intentionally deleted]
            Schedule F     -     Permitted Encumbrances
            Schedule G     -     Litigation
            Schedule H     -     Non-Compliance Matters
            Schedule I     -     Subsidiaries
            Schedule J     -     Transfer Agreement
            Schedule K     -     Committed Amounts
            Schedule L     -     Business Plan

                                   ARTICLE 2
                                  THE FACILITY

2.1         The Facility

            Upon the terms and  subject to the  conditions  hereof,  each of the
Lenders hereby severally  agrees to make the Facility  available to the Borrower
up to the  maximum  amount of its  Participation.  For  greater  certainty,  any
amounts  outstanding  under the  Original  Credit  Agreement on the Closing Date
shall be deemed to be and the  parties  hereto  confirm  that such  amounts  are
outstanding  hereunder  in  the  amounts  specified  in  the  certificate  to be
delivered  pursuant  to  Section  6.1(o).  The  failure of any Lender to make an
Advance  required  to be made  available  hereunder  by it shall not relieve any
other Lender of its obligations hereunder; provided that the obligations of each
Lender  hereunder  with respect to its  Participation  are several and no Lender
shall be responsible for any other Lender's failure to make Advances as required
hereunder.

2.2         Purpose

            The Facility is being made  available to the Borrower by the Lenders
to finance the Borrower's  working capital  requirements  and general  corporate
purposes.

2.3         Availability

      (a) The  Facility  shall be  available by way of Drawdown of an Advance by
the Borrower in a minimum  amount of Cdn.  $1,000,000  (or such lesser amount as
may from time to time be agreed to by the Lenders at their sole  discretion) and
integral  multiples  of Cdn.  $100,000  in  excess  thereof  (or,  if not such a
multiple,  the then remaining  Available Amount), at the option of the Borrower,
by way of Prime Rate Advance or Bankers' Acceptance Advance or the issue of

<PAGE>
                                      -19-

a Letter  of  Credit or in a minimum  amount  of Cdn.  $1,000,000  and  integral
multiples of Cdn.  $100,000 in excess  thereof (or, if not such a multiple,  the
then remaining  Available  Amount) (a minimum amount of Cdn. $10,000 in the case
of Letters of Credit  denominated in Canadian  Dollars) or, at the option of the
Borrower,  by way of Libor  Advance or U.S.  Base Rate Advance or the issue of a
Letter of Credit in a minimum amount of U.S.  $1,000,000 and integral  multiples
of U.S.  $100,000  in  excess  thereof  (or,  if not such a  multiple,  the then
remaining  Available  Amount) (a minimum  amount of U.S.  $10,000 in the case of
Letters of Credit  denominated in U.S. Dollars),  or any combination  thereof by
irrevocable Drawdown Notice given to the Administrative Agent not later than (i)
10:00 a.m. on the Banking Day prior to the Drawdown  Date in the case of a Prime
Rate Advance or a Bankers'  Acceptance  Advance in an amount not exceeding  Cdn.
$10,000,000  or a U.S.  Base Rate  Advance  or issue of a Letter of Credit in an
amount not exceeding U.S. $10,000,000; (ii) 10:00 a.m. on the second Banking Day
prior to the  Drawdown  Date in the case of a Prime  Rate  Advance or a Bankers'
Acceptance  Advance in an amount exceeding Cdn.  $10,000,000 or a U.S. Base Rate
Advance in an amount  exceeding  U.S.  $10,000,000;  or (iii)  10:00 a.m. on the
third  Banking Day prior to the  relevant  Drawdown  Date in the case of a Libor
Advance.  Subject to the terms and  conditions  contained  herein,  the Borrower
shall  have the  right  and  option  to  determine  in which of these  forms the
Facility  shall be utilized  from time to time and the  Borrower  shall have the
right to convert the manner in which the  Facility is utilized  from one form to
another as it sees fit, subject to Section 2.14.

      (b) The  Borrower  may not make a  Drawdown  under the  Facility  if, as a
result of such  Drawdown,  the aggregate of (i) the aggregate  principal  amount
outstanding  under the Facility and (ii) the maximum  amount  payable  under all
outstanding Letters of Credit, in each case expressed in Canadian Dollars (based
on the Equivalent Amount of any obligations in U.S.  Dollars),  would exceed the
Available  Amount.  The Lenders  shall have no obligation to make any Advance or
issue any  Letters of Credit  hereunder  at any time after  demand has been made
pursuant to Section  11.2 hereof or at any time that the  Borrower or any of the
Guarantors  has failed to observe or perform any of its covenants or obligations
hereunder or under any of the Security Documents and such default is continuing,
regardless of whether the  Administrative  Agent or the Lenders have made demand
pursuant to Section 11.2 hereof.

      (c) All or any portion of the amount outstanding under the Facility may be
repaid and reborrowed  from time to time.  The Facility  shall  terminate on the
Maturity Date.

      (d)  Notwithstanding  Section  2.3(a),  the Borrower  may, by delivering a
Drawdown  Notice to the  Administrative  Agent not later than 10:00 a.m.  on any
Drawdown  Date,  make a Drawdown  on such  Drawdown  Date by way of a Prime Rate
Advance in an amount not exceeding Cdn. $2,000,000 or by way of a U.S. Base Rate
Advance in an amount not exceeding U.S. $2,000,000.

2.4         Making of an Advance

            If the  Borrower  delivers  a  Drawdown  Notice in  accordance  with
Section  2.3,  the  Administrative  Agent shall  promptly  notify each Lender in
writing of the amount of the Advance and such Lender's  portion  thereof and, if
on the  proposed  Drawdown  Date the amount of such  Advance is equal to or less
than the Available Amount, then:

<PAGE>
                                      -20-

                   (i)  each  Lender  shall,  not later than  11:00 a.m.  on the
                        Drawdown Date,  make, or procure to be made, its portion
                        of the Advance  available to the  Administrative  Agent;
                        and

                  (ii)  the  Agent  shall,  not  later  than  4:00  p.m.  on the
                        Drawdown  Date,  make  such  Advance  available  to  the
                        Borrower.

2.5         Participation of Each Lender

      (a) The amount of the Participation of each Lender in any Advance or issue
of Bankers'  Acceptances  shall be  determined  by the  Administrative  Agent by
reference,  subject to the Administrative  Agent's authority pursuant to Section
2.5(b),  to each such Lender's  Participation,  as such  Participation  shall be
immediately  prior to the  making of the  Advance  or the issue of the  Bankers'
Acceptances.

      (b) The Administrative Agent is authorized by the Borrower and each Lender
to  allocate  amongst  the Lenders  the  Bankers'  Acceptances  to be issued and
purchased  in such  manner  and  amounts  as the  Agent  may,  in its  sole  and
unfettered  discretion acting  reasonably,  consider  necessary,  rounding up or
down,  so as to ensure  that no Lender is  required  to accept  and  purchase  a
Bankers'  Acceptance  for a fraction of Cdn.  $100,000,  and in such event,  the
Lenders'  respective   Participations  in  any  such  Bankers'  Acceptances  and
repayments  thereof shall be altered  accordingly.  Further,  the Administrative
Agent is  authorized  by the  Borrower  and  each  Lender  to cause  one or more
Lenders'  Commitment  to be  exceeded by not more than Cdn.  $100,000  each as a
result of such  allocations  provided that the principal  amount of Advances and
Bankers'  Acceptances   outstanding  shall  not  thereby  exceed  the  aggregate
Committed Amount.

2.6         Repayment of the Facility

      (a) Provided that the Facility is not prepaid or accelerated in accordance
with Article 11, the Borrower  shall repay the principal  amount of all Advances
outstanding  under the  Facility,  together  with  accrued  and unpaid  interest
thereon, on the Maturity Date.

      (b) In the event  that the sum of (i) the  aggregate  principal  amount of
Prime Rate  Advances,  (ii) the Face Amount of Bankers'  Acceptances,  (iii) the
maximum amount which may be drawn in Canadian Dollars and the Equivalent  Amount
in Canadian  Dollars of the maximum  amount  which may be drawn in U.S.  Dollars
under  Letters of Credit  which have been issued and are  outstanding,  (iv) the
Equivalent Amount in Canadian Dollars of the aggregate principal amount of Libor
Advances,  and (v) the  Equivalent  Amount in Canadian  Dollars of the aggregate
principal amount of U.S. Base Rate Advances,  in each case outstanding under the
Facility (such amount being referred to in this Section 2.6 as the  "Outstanding
Amount"),  exceeds the amount allowed  pursuant to Section 2.3(b) for any reason
whatsoever (including changes in the Canadian Dollar/U.S. Dollar exchange rate),
then any Lender may, by notice to the  Borrower,  require the Borrower to repay,
within  two  Banking  Days  of  receipt  of such  notice,  that  portion  of the
Outstanding  Amount which is in excess of the maximum amount allowed pursuant to
Section 2.3(b) determined on the date of such notice; provided, however, that if
the Outstanding Amount exceeds the Available Amount solely because of changes in
the Canadian Dollar/U.S. Dollar exchange rate (and does not exceed the amount of
the Borrowing Base), then unless the amount

<PAGE>
                                      -21-

by which the  Outstanding  Amount  exceeds the Available  Amount is greater than
Cdn. $750,000,  the Borrower shall not be obliged to make a repayment  hereunder
until the next following Interest Date,  Drawdown Date, date of Rollover or date
of Conversion (whichever is the first to occur following receipt of such notice)
and provided  further that if such repayment  would result in the repayment of a
Bankers'  Acceptance  Advance  prior to its maturity  date or the repayment of a
Libor Advance prior to the last day of its Interest Period, the Borrower may, at
its  option  and in lieu  of  repayment  of  such  Advances,  deposit  with  the
Administrative  Agent  cash  collateral  in an  amount  equal  to  the  required
repayment  amount  to be held by the  Administrative  Agent  as  repayment  of a
Bankers' Acceptance Advance on its maturity date or repayment of a Libor Advance
on the  last  day of its  then  current  Interest  Period,  as the  case may be.
Notwithstanding the foregoing,  in the event that the Outstanding Amount exceeds
the amount  allowed  pursuant  to Section  2.3(b)  because of a decrease  in the
amount of the  Borrowing  Base,  the  Borrower  shall repay,  concurrently  with
delivery of the Borrowing Base Certificate pursuant to Section 8.1(a)(iv),  that
portion  of the  Outstanding  Amount  which is in excess of the  maximum  amount
pursuant to Section 2.3(b)  determined on the date of delivery of such Borrowing
Base Certificate  without any requirement for notice of a required payment to be
given by the Administrative Agent or any Lender to the Borrower.

      (c) Without limiting the obligations of the Borrower under Section 2.3(b),
the Borrower may, upon giving the Administrative Agent three Banking Days' prior
written notice, repay any outstanding Advances,  provided further, however, that
repayment of Libor  Advances shall be subject to the provisions of Section 2.11.
All repayments of the Facility by the Borrower,  other than repayments  pursuant
to paragraphs  (a) and (b) of this Section 2.6,  shall be in a minimum amount of
Cdn.  $100,000 or the  Equivalent  Amount in U.S.  Dollars and amounts in excess
thereof in integral  multiples  of Cdn.  $100,000  (or, if less,  the  remaining
amount of the relevant  Advance) and shall be made to the  Administrative  Agent
for the ratable  account of the Lenders.  Repayments of any Advance  outstanding
under the  Facility  shall be made in the  currency  in which  such  Advance  is
denominated.

      (d) If the  Required  Lenders,  at any  time,  become  concerned  with the
payment  of  Priority  Claims  by the  Borrower  or any of the  Guarantors,  the
Administrative Agent may, at the direction of the Required Lenders but otherwise
in its  absolute  sole  discretion,  reduce the  Borrowing  Base by the Priority
Claims.  Priority  Claims from time to time shall be deducted from the Borrowing
Base for the purpose of  determining  the  Available  Amount  until the Required
Lenders otherwise direct.

2.7         Cancellation or Reduction of the Facility

            The  Borrower  may at any time,  upon giving at least three  Banking
Days' prior notice to the Administrative  Agent, cancel in full or, from time to
time,  cancel  in part any  undrawn  portion  of the  Facility  and  reduce  the
Committed Amount of the Facility accordingly;  provided,  however, that any such
reduction shall be in minimum amounts of Cdn.  $1,000,000 and integral multiples
of Cdn.  $100,000 in excess thereof.  Any such  cancellation  shall  permanently
reduce the Facility and may not be reinstated.

<PAGE>
                                      -22-

2.8         Application of Repayments

      (a)  Except  as  otherwise  indicated  herein,  all  payments  made to the
Administrative  Agent by or for the  Borrower  for the account of the Lenders in
connection  herewith  shall be  distributed  the same day by the  Administrative
Agent,  in accordance with its normal  practice,  in funds having same day value
among the Lenders to the  accounts  last  designated  in writing by such Lenders
respectively  to the  Administrative  Agent pro rata in  accordance  with  their
respective  Participations.  Amounts  so  distributed  shall be  applied  by the
Lenders as follows:

              (i)    to  amounts   due   hereunder   in   respect  of   Bankers'
                     Acceptances;

             (ii)    to amounts (other than principal or interest) due under any
                     Loan  Document  in  respect  of fees,  expenses  and  other
                     amounts;

            (iii)    to amounts  due  hereunder  in respect of  interest  on any
                     outstanding Advances; and

             (iv)    to the principal amount of any outstanding Advances.

Further,  payments  of interest or  principal  received by the Lenders  shall be
applied against Advances in order of:

              (v)    in the  case of  Prime  Rate  Advances  or U.S.  Base  Rate
                     Advances,  their  respective  Drawdown  Dates  or  dates of
                     Conversion, as the case may be, commencing with the earlier
                     or earliest thereof;

             (vi)    in the case of Libor  Advances,  the day following the last
                     day of their respective  Interest Periods,  commencing with
                     the earlier or earliest thereof; and

            (vii)    in the  case  of  Bankers'  Acceptances,  their  respective
                     maturity  dates,  commencing  with the  earlier or earliest
                     thereof.

Payments received by the  Administrative  Agent on the Maturity Date of Bankers'
Acceptances  shall be  distributed  pro rata  among the  Lenders  based on their
Participation   in  each   Bankers'   Acceptance.   Payments   received  by  the
Administrative  Agent on account of the Principal Amount of Bankers' Acceptances
which are  maturing  or which  have  previously  matured,  whether  pursuant  to
enforcement of remedies or otherwise, shall also be so distributed.

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

<PAGE>
                                      -23-

to its having  received such sum;  provided that nothing in this Section  2.8(b)
shall limit any rights or remedies that the Borrower may otherwise  have against
a defaulting  Lender or the rights and remedies that a Lender may otherwise have
against the Borrower or a defaulting Lender.

2.9         Interest on Prime Rate Advances

            Interest on each Prime Rate Advance shall accrue at a rate per annum
equal to the  Applicable  Margin plus the Prime Rate in effect from time to time
during  the  period of time that the Prime Rate  Advance  is  outstanding.  Such
interest shall be payable in Canadian Dollars monthly in arrears on the Interest
Date of each calendar month  commencing  with the Interest Date occurring in the
calendar  month  following  the  initial  Drawdown  Date for the period from and
including  the Drawdown  Date for such Advance (or, if  applicable,  the date on
which such Advance was  converted  into a Prime Rate  Advance) or the  preceding
Interest Date for such Prime Rate Advance,  as the case may be, to and including
the day  preceding  such  Interest Date and shall be calculated on the principal
amount of the Prime Rate Advance outstanding during such period and on the basis
of the actual  number of days elapsed in a year of 365 or 366 days,  in the case
of an Interest  Date  occurring in a leap year.  Changes in the Prime Rate shall
cause an automatic  and  immediate  adjustment  of the interest  rate payable on
Prime Rate Advances without the necessity of any notice to the Borrower.

2.10        Interest on U.S. Base Rate Advances

            Interest on each U.S.  Base Rate Advance  shall accrue at a rate per
annum equal to the  Applicable  Margin plus the Base Rate in effect from time to
time during the period of time that the U.S.  Base Rate Advance is  outstanding.
Such  interest  shall be  payable  in U.S.  Dollars  monthly  in  arrears on the
Interest Date of each calendar month commencing with the Interest Date occurring
in the calendar  month  following the initial  Drawdown Date for the period from
and including the Drawdown Date for such Advance (or, if applicable, the date on
which such Advance was converted into a U.S. Base Rate Advance) or the preceding
Interest  Date for such  U.S.  Base  Rate  Advance,  as the case may be,  to and
including  the day  preceding  such Interest Date and shall be calculated on the
principal  amount of the U.S. Base Rate Advance  outstanding  during such period
and on the basis of the  actual  number of days  elapsed in a year of 365 or 366
days, in the case of an Interest Date  occurring in a leap year.  Changes in the
U.S. Base Rate shall cause an automatic and immediate adjustment of the interest
rate payable on U.S. Base Rate  Advances  without the necessity of any notice to
the Borrower.

2.11        Libor Advances

            (a) Libor Advances  shall be available in U.S.  Dollars in a minimum
principal amount of U.S.  $1,000,000 and integral  multiples of U.S. $100,000 in
excess thereof. The Drawdown Notice and each Conversion Notice or Rollover shall
specify the applicable  Interest  Period for the Libor Advance.  The duration of
each such Interest Period shall be for periods of approximately  one, two, three
or six  months  (or  such  other  period  as may be  agreed  to by the  Required
Lenders),  as the  Borrower  may  select  in  the  applicable  Drawdown  Notice,
Conversion  Notice or  Rollover  Notice.  No Libor  Advance may have an Interest
Period ending after the Maturity Date. If any Interest Period would end on a day
which is not a Banking Day, such  Interest  Period shall be extended to the next
succeeding Banking Day unless such next

<PAGE>
                                      -24-

succeeding  Banking  Day falls in the next  calendar  month,  in which case such
Interest Period shall be shortened to end on the immediately  preceding  Banking
Day.

      (b) If a Lender  determines that deposits of the necessary  amount for the
relevant  Interest Period are not available in the London interbank market or if
for any other reason a Lender,  acting  reasonably,  is unable to determine  the
applicable  Libor Rate,  then the relevant Libor Advance will not be made to the
Borrower,   such  Lender   shall  notify  the   Administrative   Agent  and  the
Administrative  Agent will notify the Borrower of such event  forthwith and will
discuss with the Borrower the particular  circumstances and implications of such
event. In the event that such determination is made by a Lender in the case of a
proposed  Rollover of an existing  Libor  Advance or a proposed  Conversion of a
U.S.  Base Rate Advance into a Libor  Advance,  the proposed  Libor Advance will
automatically be deemed to be a U.S. Base Rate Advance.

      (c) Interest on any Libor  Advance shall be calculated at a rate per annum
equal to the Libor Rate plus the Applicable Margin, shall accrue from day to day
and shall be  calculated  on the  basis of the  actual  number  of days  elapsed
(including  the first day of each  Interest  Period but  excluding  the last day
thereof) and divided by 360.  Interest on any Libor  Advance shall be payable in
U.S. Dollars in arrears on the last day of the Interest Period relating thereto;
provided,  however, that if the Interest Period is for a term of more than three
months,  interest  shall be  payable  on the last day of the  first  three-month
period and on the last day of each three-month period thereafter,  as well as on
the last day of the  Interest  Period  (each such  payment date being the "Libor
Interest Payment Date").

      (d) If a Libor  Advance is neither  repaid on the last day of an  Interest
Period nor  converted  into  another  type of Advance on such date  pursuant  to
Section 2.14, and if the Administrative Agent has not received a Rollover Notice
or a Conversion  Notice specifying the term of the next Interest Period for such
Libor Advance on or before 10:00 a.m. on the third Banking Day prior to the last
day of the then current  Interest  Period,  then the  outstanding  Libor Advance
shall be deemed to be  converted,  by way of  Conversion  on the last day of the
then current Interest Period, to a U.S. Base Rate Advance.

      (e) Except as  otherwise  provided  herein,  Libor  Advances  shall not be
repaid, prepaid or converted into another type of Advance except on the last day
of any  Interest  Period  relating  thereto  unless  the  Borrower  pays  to the
Administrative  Agent  for the  account  of a Lender  any  amounts  which may be
payable under Section 13.2.

2.12        Method and Place of Payment

            All payments of principal, interest and fees hereunder shall be made
for value at or before  12:00  noon on the day such  amount is due by deposit or
transfer  thereof to an  account of the  Borrower  maintained  at the  principal
office  of the  Administrative  Agent  in  Toronto  or such  other  place as the
Borrower  and the  Administrative  Agent may from time to time  agree.  Payments
received after such time shall be deemed to have been made on the next following
Banking Day. Each payment to be made by the Borrower under this Agreement  shall
be made without  deduction,  set-off or counterclaim.  Repayments of any Advance
and  payments of interest on any Advance  shall be made in the currency in which
such Advance is denominated.

<PAGE>
                                      -25-

The Borrower hereby irrevocably  authorizes and directs the Administrative Agent
to deduct and set-off  from such  account all amounts due to the  Administrative
Agent from time to time hereunder.

2.13        Commitment Fees

            The Borrower shall pay to the  Administrative  Agent for the ratable
account  of the  Lenders a  commitment  fee  calculated  monthly  for the period
commencing  on the Closing Date and ending on the Maturity  Date at the rate per
annum  specified  below  in this  Section  2.13  on the  average  daily  undrawn
Committed Amount of the Facility,  determined on the basis of the number of days
elapsed  in a year of 365 days or 366 days in the case of a period  ending  in a
leap  year.  Such  commitment  fee shall  accrue  daily  and be due and  payable
monthly,  in arrears,  on the first  Banking Date of each  calendar  month.  The
applicable rate per annum for the commitment fee shall be as follows:

              (i)    if  the  daily  average  outstanding  principal  amount  of
                     Advances  under the  Facility for any month is less than or
                     equal to 33.3% of the  Committed  Amount  of the  Facility,
                     then 0.70%;

             (ii)    if  the  daily  average  outstanding  principal  amount  of
                     Advances  under the  Facility for any month is greater than
                     33.3%  but less  than or  equal  to 66.7% of the  Committed
                     Amount of the Facility, then 0.60%; and

            (iii)    if  the  daily  average  outstanding  principal  amount  of
                     Advances  under the  Facility for any month is greater than
                     66.7% of the Committed Amount of the Facility, then 0.50%.

2.14        Conversion Options

            Subject to the  provisions  of this  Agreement  (including,  without
limitation, Sections 2.11 and 4.7), the Borrower may convert any type of Advance
outstanding under the Facility into another type of Advance as follows:

              (i)    provided  that no  Event of  Default  has  occurred  and is
                     continuing,  a Prime Rate Advance or a portion thereof into
                     a Bankers'  Acceptance Advance by giving the Administrative
                     Agent a  Conversion  Notice no later than 10:00 a.m. on the
                     Banking Day prior to the date of the proposed Conversion;

             (ii)    the Face  Amount  of a  Bankers'  Acceptance  or a  portion
                     thereof into a Prime Rate  Advance on the maturity  date of
                     the Bankers' Acceptance by giving the Administrative  Agent
                     a Conversion Notice no later than 10:00 a.m. on the Banking
                     Day prior to the date of the proposed Conversion;

            (iii)    provided  that no  Event of  Default  has  occurred  and is
                     continuing,  a U.S. Base Rate Advance or a portion  thereof
                     into a Libor Advance by giving the  Administrative  Agent a
                     Conversion  Notice no later than 10:00 a.m.  three  Banking
                     Days prior to the date of the proposed Conversion;

<PAGE>
                                      -26-

              (iv)   a Libor Advance or a portion  thereof into a U.S. Base Rate
                     Advance  on the  last  day of the  Interest  Period  of the
                     relevant Libor Advance by giving the Administrative Agent a
                     Conversion  Notice no later than 10:00 a.m.  on the Banking
                     Day prior to the date of the proposed Conversion;

               (v)   a Prime Rate Advance or a portion  thereof into a U.S. Base
                     Rate  Advance  in  the  Equivalent  Amount  by  giving  the
                     Administrative  Agent a  Conversion  Notice  no later  than
                     10:00  a.m.  on the  Banking  Day  prior to the date of the
                     proposed Conversion;

              (vi)   provided  that no  Event of  Default  has  occurred  and is
                     continuing,  a Prime Rate Advance or a portion thereof into
                     a Libor  Advance  in the  Equivalent  Amount by giving  the
                     Administrative  Agent a  Conversion  Notice  no later  than
                     10:00  a.m.  three  Banking  Days  prior to the date of the
                     proposed Conversion;

             (vii)   the Face  Amount  of a  Bankers'  Acceptance  or a  portion
                     thereof  into a U.S.  Base Rate  Advance in the  Equivalent
                     Amount on the maturity  date of the Bankers'  Acceptance by
                     giving  the  Administrative  Agent a  Conversion  Notice no
                     later than 10:00 a.m.  on the Banking Day prior to the date
                     of the proposed Conversion;

            (viii)   provided  that no  Event of  Default  has  occurred  and is
                     continuing,  the Face Amount of a Bankers'  Acceptance or a
                     portion  thereof  into a Libor  Advance  in the  Equivalent
                     Amount on the maturity  date of the Bankers'  Acceptance by
                     giving  the  Administrative  Agent a  Conversion  Notice no
                     later than 10:00 a.m.  three Banking Days prior to the date
                     of the proposed Conversion;

              (ix)   a U.S. Base Rate Advance or a portion  thereof into a Prime
                     Rate  Advance  in  the  Equivalent  Amount  by  giving  the
                     Administrative  Agent a  Conversion  Notice  no later  than
                     10:00  a.m.  on the  Banking  Day  prior to the date of the
                     proposed Conversion;

               (x)   provided   no  Event  of  Default  has   occurred   and  is
                     continuing,  a U.S. Base Rate Advance or a portion  thereof
                     into  a   Bankers'   Acceptance   Advance   by  giving  the
                     Administrative  Agent a  Conversion  Notice  no later  than
                     10:00  a.m.  on the  Banking  Day  prior to the date of the
                     proposed Conversion;

              (xi)   a Libor  Advance  or a portion  thereof  into a Prime  Rate
                     Advance  in the  Equivalent  Amount  on the last day of the
                     Interest Period of the relevant Libor Advance by giving the
                     Administrative  Agent a  Conversion  Notice  no later  than
                     10:00  a.m.  on the  Banking  Day  prior to the date of the
                     proposed Conversion; and

             (xii)   provided   no  Event  of  Default  has   occurred   and  is
                     continuing,  a Libor  Advance or a portion  thereof  into a
                     Bankers' Acceptance Advance in the Equivalent Amount on the
                     last day of the Interest Period of the relevant

<PAGE>
                                      -27-

                     Libor  Advance  by  giving  the   Administrative   Agent  a
                     Conversion  Notice no later than 10:00 a.m.  on the Banking
                     Day prior to the date of the proposed Conversion.

Notwithstanding  the foregoing,  if a Default has occurred and is continuing,  a
Conversion  pursuant  to  clause  (i),  (iii),  (vi),  (viii),  (x) or (xii) and
conversions  into a different  currency of Advance will be permitted only in the
discretion of the Required Lenders. For purposes of Conversions of Advances from
Canadian Dollars into U.S.  Dollars or from U.S. Dollars into Canadian  Dollars,
the  Equivalent  Amount  shall  be the  Equivalent  Amount  on the  date  of the
Conversion.  For greater certainty,  Conversions of Advances into the Equivalent
Amount  in  a  different  currency  are  permitted   notwithstanding  that  such
Equivalent  Amount may not be in amounts  required in connection with a Drawdown
of an Advance in such currency.

2.15        Execution of Notices

            Each Drawdown Notice,  Conversion Notice, Rollover Notice and notice
of repayment,  prepayment or cancellation and, unless otherwise provided herein,
all other notices,  requests, demands or other communications to be given to the
Administrative  Agent by the  Borrower  hereunder  shall be  executed by any one
officer or director of the Borrower.

2.16        Evidence of Indebtedness

      (a) The  Administrative  Agent shall open and maintain in accordance  with
its usual  practice  books of  account  evidencing  all  Advances  and all other
amounts  owing by the  Borrower  to the  Administrative  Agent  and the  Lenders
hereunder.  The  Administrative  Agent  shall  enter in the  foregoing  accounts
details of every  Drawdown  Date,  date of  Rollover  or date of  Conversion  in
respect of each  Advance and of all  amounts  from time to time owing or paid by
the Borrower to the Administrative Agent, and the amounts of principal, interest
and fees payable from time to time  hereunder.  The  information  entered in the
foregoing  accounts shall  constitute,  in the absence of manifest error,  prima
facie evidence of the  obligations of the Borrower to the  Administrative  Agent
and the Lenders  hereunder,  the date each Lender made each Advance available to
the  Borrower and the amounts the Borrower has paid from time to time on account
of the principal of, interest on and fees related to the Advances.

      (b) Each  Lender  shall open and  maintain  in  accordance  with its usual
practice books of account evidencing all Advances and all other amounts owing by
the Borrower to such Lender hereunder.  Such Lender shall enter in the foregoing
accounts  details of every Drawdown Date, date of Rollover or date of Conversion
in respect of each Advance by such Lender hereunder and of all amounts from time
to time  owing  or paid by the  Borrower  to such  Lender,  and the  amounts  of
principal, interest and fees payable to such Lender from time to time hereunder.
The  information  entered in the foregoing  accounts  shall  constitute,  in the
absence of manifest  error,  prima  facie  evidence  of the  obligations  of the
Borrower  to the  Lender  hereunder,  the date such  Lender  made  each  Advance
available  to the  Borrower  and the amounts the  Borrower has paid from time to
time on  account  of the  principal  of,  interest  on and fees  related  to the
Advances made by such Lender hereunder.  These accounts shall constitute (in the
absence of manifest  error or of  contradictory  entries in the  accounts of the
Administrative  Agent  referred to in Section  2.16(a))  prima facie evidence of
their content against the Borrower and the Guarantors.

<PAGE>
                                      -28-

2.17        Interest on Unpaid Costs and Expenses

            Unless the payment of interest is  otherwise  specifically  provided
for herein,  where the Borrower  fails to pay any amount  required to be paid by
the Borrower hereunder when due, having received notice that such amount is due,
the  Borrower  shall pay  interest  on such  unpaid  amount,  including  overdue
interest  from the time such amount is due until paid at an annual rate equal to
the sum of (i) 1%, plus (ii) the Applicable  Margin,  plus (iii) the Prime Rate,
in the case of amounts payable in Canadian  Dollars,  and the U.S. Base Rate, in
the case of amounts payable in U.S.  Dollars.  Such interest shall be determined
daily,  compounded  monthly in arrears on the last Banking Day of each  calendar
month in each year and payable on demand.

2.18        Criminal Rate of Interest

            Notwithstanding  the  foregoing  provisions  of this  Article 2, the
Borrower  shall in no event be obliged to make any payments of interest or other
amounts payable to the Administrative Agent or any Lender hereunder in excess of
an  amount  or rate  which  would be  prohibited  by law or would  result in the
receipt by the Administrative Agent or any Lender of interest at a criminal rate
(as such terms are construed under the Criminal Code (Canada)).

2.19        Compliance with the Interest Act (Canada)

            For the  purposes  of  this  Agreement,  whenever  any  interest  is
calculated  on the basis of a period of time  other than a  calendar  year,  the
annual rate of interest  to which each rate of interest  determined  pursuant to
such  calculation is equivalent for the purposes of the Interest Act (Canada) is
such  rate as so  determined  multiplied  by the  actual  number  of days in the
calendar year in which the same is to be  ascertained  and divided by the number
of days used in the basis of such determination.

2.20        Nominal Rate of Interest

            The parties  acknowledge and agree that all calculations of interest
under this  Agreement  are to be made on the basis of the nominal  interest rate
described  herein and not on the basis of effective yearly rates or on any other
basis which gives effect to the  principle of deemed  reinvestment  of interest.
The parties  acknowledge that there is a material  difference between the stated
nominal  interest rates and the effective yearly rates of interest and that they
are capable of making the  calculations  required to  determine  such  effective
yearly rates of interest.

                                   ARTICLE 3
                                LETTERS OF CREDIT

3.1         Term and Availability

            Upon the terms and subject to the conditions  hereof,  BMO shall, at
the request of the Borrower,  issue as Advances  under the Facility  irrevocable
Letters of Credit in BMO's usual form and  expiring  no later than the  Maturity
Date and having a Face Amount which,  together  with the aggregate  undrawn Face
Amount of all outstanding Letters of Credit, would not exceed

<PAGE>
                                      -29-

Cdn.  $5,000,000 (or its Equivalent  Amount in U.S.  Dollars).  The Borrower may
request  Letters  of Credit to be  denominated  in  Canadian  Dollars or in U.S.
Dollars. Each Lender severally agrees to participate in Letters of Credit issued
for the account of the Borrower in accordance  with the terms of this Agreement.
Accordingly,  each  Lender  shall be  deemed  to,  and  hereby  irrevocably  and
unconditionally  agrees to, purchase from BMO a  participation  in any Letter of
Credit  outstanding  on the Closing Date which was issued by BMO pursuant to the
provisions of the Original Credit  Agreement or issued at any time following the
Closing Date in accordance  with the terms of this  Agreement in an amount equal
to such  Lender's  Participation,  multiplied  by the  amount of such  Letter of
Credit.  Each Lender hereby  severally agrees to indemnify and hold harmless BMO
with respect to any loss, cost, expense, damages or claim asserted by any Person
against BMO as a result of the  issuance by BMO of any such Letter of Credit and
agrees to  reimburse  BMO on a pro rata  basis  with the other  Lenders  for any
amounts paid by BMO under any such Letter of Credit and to make funds  available
to the  Administrative  Agent for the account of BMO in accordance  with Section
2.4(i).  Each Lender's  obligation to make Advances to reimburse BMO for amounts
drawn under such Letters of Credit,  as  contemplated by this Section 3.1, shall
be absolute  and  unconditional  and shall not be affected by any  circumstance,
including  (A) any  set-off,  counterclaim,  recoupment,  defence or other right
which such Lender may have against BMO, the Borrower or any other Person for any
reason  whatsoever;  (B) the occurrence or continuance of a Default;  or (C) any
other  occurrence,  event or  condition,  whether  or not  similar to any of the
foregoing.  Any such  reimbursement  shall not relieve or  otherwise  impair the
obligation  of the Borrower to reimburse  BMO for the amount of any payment made
by BMO under any such  Letter of Credit,  together  with  interest  as  provided
herein.

3.2         Reimbursement

            In the event that BMO is called  upon by a  beneficiary  to honour a
Letter of Credit,  BMO shall  forthwith  give notice thereof to the Borrower and
the Administrative  Agent.  Unless the Borrower has made other arrangements with
BMO with  respect  to payment  to BMO of an amount  sufficient  to permit BMO to
discharge its  obligations  under the Letter of Credit plus that amount equal to
any and all charges  and  expenses  which BMO may pay or incur  relative to such
Letter of Credit,  any such payment so payable  shall be deemed to be a Drawdown
in accordance with Sections 2.3 and 2.4 of a Prime Rate Advance if payment under
such Letter of Credit was made in  Canadian  Dollars and shall be deemed to be a
Drawdown of a U.S.  Base Rate Advance if payment under such Letter of Credit was
made in U.S.  Dollars;  provided that the provisions of Section 2.3(a) regarding
Drawdown  Notice,  the  provisions  of  Section  6.2  regarding  conditions  for
subsequent Drawdowns and the provisions of Section 11.2 relieving the Lenders of
the obligation to make further  Advances shall not apply to such Advances.  Such
drawdown  shall be deemed to be made on a pro rata basis by all of the  Lenders.
In the event that any amount so payable by BMO exceeds the amount  available  to
be  drawn  down by the  Borrower  under  the  Facility  in  accordance  with the
provisions  of Section  2.3(b),  then BMO shall so notify the  Borrower  and the
Administrative  Agent and  forthwith  upon receipt of such notice,  the Borrower
shall  provide to BMO an amount  equal to such  excess  amount and any amount so
payable  shall be deemed to be a Prime Rate Advance (if such excess amount is in
Canadian  Dollars) or a U.S. Base Rate Advance (if such excess amount is in U.S.
Dollars), payable on demand.

<PAGE>
                                      -30-

3.3         Indemnity for Costs

            The Borrower shall  indemnify BMO and the other Lenders  against any
and all actions, proceedings,  costs, damages, expenses, taxes (other than taxes
on overall  net income,  assets or  capital),  claims and demands  which BMO may
incur or sustain by reason of or arising  in any way  whatsoever  in  connection
with the  operating,  establishing  or paying of the amounts  payable under each
Letter of Credit or arising in  connection  with any amounts  payable by BMO and
the other  Lenders  thereunder  save and except for amounts  which have resulted
from the gross negligence or the wilful misconduct of BMO.

3.4         Fees

      (a) At the time of issue of a Letter of Credit  following  syndication  of
the  Facility by BMO, the  Borrower  shall pay to BMO,  for its own  account,  a
fronting fee of 0.125%  calculated on the Face Amount of the Letter of Credit on
the basis of the actual  number of days in the year for the period from the date
of issue of such Letter of Credit to the expiry date thereof.

      (b) The  Borrower  shall pay to the  Administrative  Agent for the ratable
account of the  Lenders an issuance  fee on each  Letter of Credit  equal to the
Applicable  Margin for Bankers'  Acceptance  Advances  calculated on the undrawn
portion  of the Face  Amount of the  Letter of Credit on the basis of the actual
number of days in the year for the period from the date of issue  thereof to the
expiry date thereof.  Such fee shall be paid quarterly in advance  commencing on
the date of issuance of each Letter of Credit and  thereafter  on the  quarterly
anniversary of the date of issuance.

      (c) The Borrower  shall pay to BMO for its own account an amendment fee in
respect of each amendment to any Letter of Credit in such manner as is customary
for BMO to charge its customers at the time of request for such amendment.

                                   ARTICLE 4
                 BANKERS' ACCEPTANCES AND BA EQUIVALENT ADVANCES

4.1         Form of Bankers' Acceptance Advance and Interest

            Bankers'  Acceptance  Advances  shall be  available  to the Borrower
under the Facility by way of Drawdown or Rollover or  Conversion by the Borrower
delivering to the  Administrative  Agent a Drawdown Notice or Rollover Notice or
Conversion Notice, as the case may be. To facilitate the procedures contemplated
herein,  the  Borrower  hereby  irrevocably  appoints  each  of the  Lenders  as
attorney-in-fact  of the  Borrower to execute,  endorse and deliver on behalf of
the  Borrower,  drafts in the form  prescribed  by it for  Bankers'  Acceptances
denominated in Canadian Dollars. Each Bankers' Acceptance executed and delivered
by a Lender on behalf of the  Borrower as provided  herein shall be binding upon
the  Borrower as if it had been  executed  and  delivered  by a duly  authorized
officer or officers of the  Borrower.  The dates,  maturity  dates and principal
amounts of all drafts shall be completed by the Lenders as required hereby.

<PAGE>
                                      -31-

4.2         Minimum Amount

            The aggregate of the Face Amounts of any drafts presented under this
Article 4 for any Drawdown or Conversion shall be not less than Cdn.  $1,000,000
and integral  multiples  of Cdn.  $100,000 in excess  thereof.  The minimum Face
Amount of any draft shall be Cdn. $100,000 or any integral multiple thereof.

4.3         Term and Interest Periods

                  The term of any Bankers'  Acceptance shall be specified in the
draft and in the Drawdown Notice or Rollover Notice or Conversion Notice and the
term of any Bankers' Acceptance shall be for periods of approximately 30, 60, 90
or 180  days,  unless  otherwise  agreed  to by the  Lenders.  The  term of each
Bankers'  Acceptance  shall mature on a Banking  Day. The Borrower  shall ensure
that no Bankers'  Acceptance  issued  hereunder shall have a maturity date after
the Maturity Date.

4.4         Purchase of Drafts, Acceptance Fee and Interest

            Each  Drawdown  of a  Bankers'  Acceptance  Advance  shall  be  made
pursuant to a Drawdown Notice, Conversion Notice or Rollover Notice given by the
Borrower to the  Administrative  Agent not later than 10:00 a.m. one Banking Day
prior to the  applicable  Drawdown  Date,  or date of  Conversion  or  Rollover;
provided,  however,  that in the case of a  Drawdown  of a  Bankers'  Acceptance
Advance in a Face  Amount in excess of Cdn.  $10,000,000,  the  Drawdown  Notice
shall be given by the Borrower to the Administrative  Agent not later than 10:00
a.m. two Banking  Days prior to the  applicable  Drawdown  Date.  Each  Drawdown
Notice or Rollover Notice or Conversion  Notice shall be irrevocable and binding
on the Borrower and shall specify the Drawdown Date or date of Rollover, the sum
of the aggregate Face Amount of the Bankers' Acceptances to be purchased and the
maturity date for such drafts. Not later than 12 noon on the applicable Drawdown
Date or date of Conversion or Rollover,  the Lenders shall  complete one or more
drafts in accordance  with the Drawdown  Notice,  Conversion  Notice or Rollover
Notice and the Lenders accept such drafts and purchase the Bankers'  Acceptances
thereby created for the BA Purchase Price.  Bankers' Acceptances  purchased by a
Lender  hereunder  may be held by it for its own account until the maturity date
or sold by it at any time prior thereto in any relevant market therefor,  in the
Lender's sole discretion.

4.5         Payment on Maturity

            The Borrower shall pay to the  Administrative  Agent for the account
of the Lenders on the maturity of a Bankers'  Acceptance  an amount equal to the
Face Amount of such  maturing  Bankers'  Acceptance;  provided that the Borrower
may, at its option, so reimburse the Lenders, in whole or in part, by delivering
to the  Administrative  Agent no later than 10:00 a.m.  one Banking Day prior to
the  maturity  date  of  a  maturing  Bankers'  Acceptance,  a  Rollover  Notice
specifying the term of the Bankers'  Acceptances  and  presenting  drafts to the
Lenders for  acceptance and purchase  having,  in the case of  reimbursement  in
whole by replacement Bankers' Acceptances, an aggregate Face Amount equal to the
Face Amount of the maturing Bankers' Acceptances. In the event that the Borrower
fails  to  deliver  a  Rollover   Notice  and  fails  to  make  payment  to  the
Administrative Agent in respect of the maturing Bankers'  Acceptances,  the Face

<PAGE>
                                      -32-

Amount of the maturing Bankers' Acceptances shall be deemed to be converted to a
Prime Rate Advance on the relevant  maturity date. The Borrower shall pay to the
Administrative  Agent for the account of the Lenders on the maturity date of the
maturing  Bankers'  Acceptance  the  difference  between  the Face Amount of the
maturing  Bankers'  Acceptance  and the BA Purchase  Price for such  replacement
Bankers' Acceptances.

4.6         Waiver of Days of Grace

            The Borrower renounces and shall not claim any days of grace for the
payment of any Bankers' Acceptance.

4.7         No Market

            If a Lender  determines  in good faith,  by reason of  circumstances
affecting  the  Canadian  money  market,  which  determination  shall be  final,
conclusive  and binding upon the Borrower,  that there is no market for Bankers'
Acceptances,   such  Lender  shall   notify  the   Administrative   Agent.   The
Administrative  Agent shall then notify the Borrower that there is no market for
Bankers'  Acceptances,  and the right of the  Borrower to request  the  Bankers'
Acceptance  Advances shall be suspended  until such Lender,  acting  reasonably,
determines  that the  circumstances  causing such suspension no longer exist and
the Administrative Agent so notifies the Borrower and any notice of drawing of a
Bankers'  Acceptance  Advance  which is  outstanding  shall be cancelled and the
drawing  requested  therein shall, at the option of the Borrower,  either not be
made or be made as a Prime Rate Advance. The Administrative Agent shall promptly
notify the  Borrower  of the  suspension  of the  Borrower's  right to request a
Bankers' Acceptance Advance and of the termination of any such suspension.

                                   ARTICLE 5
                   CHANGE OF CIRCUMSTANCES AND INDEMNIFICATION

5.1         Increased Costs

            In the event of (i) any  Applicable  Law coming into force after the
date  hereof  or (ii) any  change  in any  existing  Applicable  Law,  or in the
interpretation  or application  thereof by any court or by any  governmental  or
other  authority  or entity  charged  with the  administration  thereof or (iii)
compliance by a Lender with any direction,  request or  requirement  (whether or
not having the force of law) of any  governmental  or other  authority or entity
charged with the  administration  of any  Applicable  Law (each such event being
hereinafter referred to as a "change in law") which now or hereafter:

      (a)   subjects  (whether  directly,  or as a result of any  withholding or
            deduction by the  Borrower) a Lender to any Tax or changes the basis
            of taxation, or increases any existing Tax (in each case, except for
            the coming  into force of any tax or change in the basis of taxation
            or manner of  collection  of any tax in  respect of or the change in
            the rate of Tax  charged on income or capital of a Lender as a whole
            and  including  any Other  Tax that is  payable  by a Lender  on, or
            required by Applicable  Law to be withheld by the Borrower from, any
            Additional  Compensation,  as hereinafter  defined),  on payments of
            principal,  interest or other amounts payable

<PAGE>
                                      -33-

            by the Borrower to the Administrative  Agent for the account of such
            Lender hereunder or on or by reference to the amount of any Advances
            made or to be made by such Lender hereunder or on or by reference to
            the commitment of such Lender hereunder, or

      (b)   imposes,  modifies or deems applicable any reserve,  special deposit
            or similar requirements or otherwise imposes any cost on a Lender in
            funding or maintaining all or any of the Advances hereunder, or

      (c)   will have the effect of  increasing  the  amount of overall  capital
            required  to be  maintained  by a Lender,  taking  into  account the
            existence of such Lender's  participation  in any Advance  hereunder
            (including, without limitation, all or any part of its commitment),

and the result of any of the  foregoing  is to increase the cost to such Lender,
reduce the income receivable by it or reduce the effective return on the capital
of such Lender in respect of any  Advances  and/or its  Commitment  to an extent
which such Lender believes to be material, such Lender shall give notice thereof
to the  Borrower and to the  Administrative  Agent  (herein  called a "Notice of
Amount")  stating  the event by reason of which it  believes  it is  entitled to
Additional   Compensation  (as  hereinafter  defined),  such  cost  and/or  such
reduction  in such return (or such  proportion  of such  reduction as is, in the
reasonable and bona fide opinion of such Lender, attributable to its obligations
hereunder),  the amount of such Additional Compensation (as hereinafter defined)
incurred by such Lender and supplying reasonable supporting evidence (including,
in the event of change of  Applicable  Law, a photocopy  of the  Applicable  Law
evidencing such change) together with a certificate of a duly authorized officer
of such  Lender  setting  forth  the  Additional  Compensation  and the basis of
calculation of such Additional Compensation; provided that such Lender shall not
be required to disclose  any  information  required to be kept  confidential  by
Applicable  Law. In the event such Lender  subsequently  recovers all or part of
the Additional Compensation paid by the Borrower, it shall repay an equal amount
to the  Borrower.  The Borrower  shall pay to the  Administrative  Agent for the
account of such  Lender,  within 10  Banking  Days of the date of receipt of any
Notice of Amount, the amount specified in such Notice of Amount (in this Article
5  referred  to as  "Additional  Compensation").  The  obligation  to  pay  such
Additional  Compensation for subsequent  periods will continue until the earlier
of termination of the Advance or the Commitment affected by the change in law or
the  lapse  or  cessation  of the  change  in law  giving  rise  to the  initial
Additional Compensation.  Each Lender shall make reasonable efforts to limit the
incidence of any such Additional  Compensation and seek recovery for the account
of the Borrower upon the Borrower's request at the Borrower's expense,  provided
a Lender in its reasonable determination suffers no appreciable economic, legal,
regulatory or other disadvantage.  Notwithstanding the foregoing  provisions,  a
Lender shall only be entitled to rely upon the provisions of this Section 5.1 if
and for so long as it is not treating the Borrower in any  materially  different
or in any less  favourable  manner than is applicable to any other  customers of
such Lender,  where such other customers are bound by similar  provisions to the
foregoing provisions of this Section 5.1.

<PAGE>
                                      -34-

            5.2         Illegality

            If, with  respect to a Lender,  the  implementation  of any existing
provision of Applicable Law or the adoption of any Applicable Law, or any change
therein or in the  interpretation or application  thereof by any court or by any
statutory board or commission now or hereafter makes it unlawful for such Lender
to make,  fund or maintain  all or any  portion of an  outstanding  Advance,  to
maintain  all or any part of its  commitment  hereunder or to give effect to its
obligations  in respect of all or any portion of an  outstanding  Advance,  such
Lender may, by written notice thereof to the Borrower (supported, at the request
and expense of the Borrower,  by an opinion of such Lender's  counsel),  declare
the  obligations of such Lender under this Agreement to be terminated  whereupon
the  same  shall  forthwith  terminate,  and the  Borrower  shall  repay  to the
Administrative  Agent for the account of such Lender within the time required by
such law (or as promptly  as  practicable  if already  unlawful or at the end of
such longer period, if any, as such Lender, in its bona fide opinion, may agree)
the  principal  of the Advances  made by such  Lender.  If any such change shall
affect only that portion of such Lender's  obligations under this Agreement that
is, in the bona fide opinion of such  Lender,  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 such
Lender or the  Borrower  hereunder,  such Lender shall  declare its  obligations
under only that portion so terminated.

                                   ARTICLE 6
                        CONDITIONS PRECEDENT TO DRAWDOWN

6.1         Conditions for Closing

            The following  conditions  shall be satisfied by the Borrower on the
Closing Date:

      (a)   this Agreement and the Borrower's Security Documents, in form and on
            terms  satisfactory to the Lenders,  acting  reasonably,  shall have
            been duly authorized,  executed and delivered to the  Administrative
            Agent by the Borrower and shall constitute legal,  valid and binding
            obligations of the Borrower;

      (b)   the Guarantees and the Guarantors'  Security Documents,  in form and
            on terms satisfactory to the Lenders, acting reasonably,  shall have
            been duly authorized, executed and delivered by the Guarantors party
            thereto  to the  Administrative  Agent and shall  constitute  legal,
            valid and binding obligations of the Guarantors party thereto;

      (c)   the  Borrower  shall  have  delivered  to the  Administrative  Agent
            certified  copies of its  constating  documents and by-laws,  all as
            amended to date, the resolution  authorizing  this Agreement and the
            Borrower's Security Documents and the incumbency of officers signing
            this  Agreement  and  the  Borrower's  Security  Documents  and  any
            documents  to be  provided  pursuant  to the  provisions  hereof  or
            thereof  and a  certificate  of  compliance,  good  standing or like
            certificate  with  respect  to the  Borrower  issued by  appropriate
            government officials of the jurisdiction of its incorporation;

<PAGE>
                                      -35-

      (d)   each of the Guarantors  shall have  delivered to the  Administrative
            Agent  certified  copies of its  certificate  of  incorporation  and
            by-laws,  all as amended to date,  the  resolution  authorizing  the
            Guarantees  and the  Guarantors'  Security  Documents  to which such
            Guarantor  is a party and the  incumbency  of  officers  signing the
            Guarantee  and the  Guarantors'  Security  Documents  to which  such
            Guarantor is a party and any  documents  to be provided  pursuant to
            the provisions  hereof or thereof and a certificate of status,  good
            standing or like  certificate  with respect to such Guarantor issued
            by  appropriate  government  officials  of the  jurisdiction  of its
            incorporation;

      (e)   MNL shall have delivered to the Administrative Agent such consent or
            acknowledgement  regarding  the  continuation  of the  security  and
            applicability of the Guarantor's Security Documents to which it is a
            party,  and the Security granted  thereunder,  to the obligations of
            the Borrower under this Agreement  notwithstanding  the amendment to
            the  terms of the  Original  Credit  Agreement  in form and on terms
            satisfactory to the Lenders, acting reasonably;

      (f)   the representations and warranties set forth in Section 7.1 shall be
            true and correct in all  material  respects on and as of the Closing
            Date by reference to the facts and  circumstances  then existing and
            the Borrower shall have  delivered an Officer's  Certificate to such
            effect;

      (g)   no Default or Event of Default shall have occurred and be continuing
            and the Borrower  shall have  delivered an Officer's  Certificate to
            such effect;

      (h)   a Borrowing  Base  Certificate as at the fiscal month ending January
            26, 2003 shall have been delivered to the Administrative Agent;

      (i)   the Security and all necessary  financing  change  statements  shall
            have been duly registered,  filed and recorded in all  jurisdictions
            where such registration,  filing or recording, in the opinion of the
            Lenders,  is necessary  or  advantageous  to  preserve,  protect and
            perfect the charges and security  interest created or intended to be
            created by the Security Documents;

      (j)   the  Borrower  shall  have  delivered  to the  Administrative  Agent
            evidence of a policy of  insurance  by EDC in favour of the Borrower
            in  form  and   substance   satisfactory   to  the  Lenders  and  an
            acknowledgement  by EDC of the  direction  to pay  delivered  by the
            Borrower as part of the Borrower's Security Documents;

      (k)   all fees and expenses  payable in connection  with the  transactions
            contemplated  hereby shall be paid in full,  to the extent that such
            fees and expenses shall then be due and payable;

      (l)   opinions of Counsel to the Borrower  and counsel to the  Guarantors,
            addressed to the  Administrative  Agent and the Lenders from time to
            time  party  hereto,  in  form  and  substance  satisfactory  to the
            Administrative  Agent and each Lender,  shall have been delivered to
            the Administrative  Agent (except for the opinion of

<PAGE>
                                      -36-

            counsel to MNL,  which shall be  delivered on a date  occurring  not
            more than 3 Banking Days following the Closing Date);

      (m)   there  shall have been no  material  adverse  change in the  assets,
            liabilities,   business,   operations,   condition   (financial   or
            otherwise)  or  prospects  of the  Borrower  and  its  Subsidiaries,
            considered  as a whole,  which has occurred  since October 27, 2002,
            the end of the Borrower's second quarter of its 2003 fiscal year;

      (n)   a  business  plan (the  "Business  Plan") for the  Borrower  and its
            Subsidiaries  in the form  attached  hereto as  Schedule  L has been
            approved by the board of  directors  of the  Borrower for the period
            commencing on November 12, 2002 and ending on October 29, 2004;

      (o)   the  Borrower  shall  have  repaid  Advances  outstanding  under the
            Original  Credit  Agreement  such  that the total  principal  amount
            outstanding  on the Closing Date shall not exceed Cdn.  $25,000,000,
            provided  that the  aggregate  undrawn  Face  Amount of  outstanding
            Letters of Credit shall be deemed, for such purpose, to be principal
            amounts outstanding under Advances.  The Administrative  Agent shall
            prepare  a  statement  as to  all  Advances  outstanding  under  the
            Original Credit Agreement on the Closing Date and the Borrower shall
            provide confirmation of the details in such statement;

      (p)   all  outstanding  Debt of the Borrower and its  Subsidiaries to T.H.
            Matthews   being  an   aggregate   amount  of   approximately   Cdn.
            $21,000,000,  shall have been  subordinated  on terms and conditions
            satisfactory to the Lenders;

      (q)   the  Borrower  shall have  received net proceeds of not less than an
            aggregate amount consisting of Cdn. $10,000,000 and U.S. $7,500,000,
            or in each case the Equivalent Amount in another currency,  from the
            issuance of preferred shares to T.H. Matthews on terms  satisfactory
            to the Lenders, acting reasonably (or, in the alternative,  such net
            proceeds  shall  have  been  received  from the  Borrower  from T.H.
            Matthews by way of  subordinated  debt on terms  satisfactory to the
            Lenders, in their sole discretion);

      (r)   accounts  receivable  owing to the  Borrower  from  Mitel  Knowledge
            Corporation  in the  aggregate  amount of Cdn.  $5,195,712  and from
            Mitel Systems  Corporation in the aggregate amount of Cdn.  $733,000
            shall have been paid in full;

      (s)   the  Debt  of  BreconRidge   Manufacturing   Solutions  Corporation,
            BreconRidge    Manufacturing   Solutions,   Inc.   and   BreconRidge
            Manufacturing  Solutions Limited to the Borrower, MNI and MNL in the
            principal amount of U.S.  $2,466,346.02,  U.S.  $421,665.86 and U.S.
            $2,312,852.03,  respectively, plus accrued interest, as evidenced by
            three promissory notes dated August 31, 2001, shall have been repaid
            in full; and

      (t)   the  Administrative   Agent  shall  have  received  such  additional
            evidence,  documents or  undertakings  as the Lenders may reasonably
            request  to  establish   the   consummation   of  the   transactions
            contemplated hereby.

<PAGE>
                                      -37-

            In  each  case  where  a  document   shall  be   delivered   to  the
Administrative  Agent, the Borrower shall provide a sufficient  number of copies
for delivery of an originally executed copy of each document to each Lender. The
conditions  set forth in this  Section 6.1 are  inserted for the sole benefit of
each  Lender  and may be  waived  by each  Lender  in whole or in part,  with or
without terms or conditions.

            6.2         Conditions for Subsequent Drawdowns

            The  following  conditions  shall be satisfied by the Borrower at or
prior to the time of each Drawdown of an Advance  (other than a deemed  Drawdown
of a Prime Rate Advance  pursuant to the  provisions  of Section 3.2 or 4.5 or a
deemed  Drawdown  of a U.S.  Base Rate  Advance  pursuant to the  provisions  of
Section  2.11(b) or (d) or Section  3.2) under the  Facility  subsequent  to the
first Drawdown:

      (a)   the Borrower shall have given to the Administrative Agent a Drawdown
            Notice in accordance with the provisions of Section 2.3(a);

      (b)   the representations and warranties set forth in Section 7.1 shall be
            deemed to have been given on the Drawdown Date and shall be, mutatis
            mutandis, true and correct in all material respects on and as of the
            Drawdown  Date,  both before and after giving effect to the Drawdown
            of such Advance and to the  application  of proceeds  therefrom,  by
            reference to the facts and circumstances  then existing and assuming
            that each of such  representations  and warranties and the Schedules
            referred to therein had been amended to reflect any notices provided
            by the  Borrower  to the  Administrative  Agent  in  respect  of the
            matters dealt with therein and,  with respect to the  representation
            set forth in Section  7.1(g),  the reference to the date October 27,
            2002 shall be deemed to be a reference to the date of the  financial
            statements  of the  Borrower  most  recently  delivered  pursuant to
            Section 8.1(a) and, with respect to unaudited financial  statements,
            that such statements  fairly present the financial  condition of the
            Borrower  and its  Subsidiaries  as at such date and the  results of
            their  operations for the financial period then ended, in accordance
            with GAAP  consistently  applied,  subject to normal  year end audit
            adjustments; and

      (c)   no  Default  or  Event  of  Default   shall  have  occurred  and  be
            continuing, nor shall any such event occur as a result of making the
            Advances or the application of proceeds therefrom.

                                   ARTICLE 7
                         REPRESENTATIONS AND WARRANTIES

7.1         Representations and Warranties

            The   Borrower   represents   and   warrants   as   follows  to  the
Administrative  Agent and each Lender and  acknowledges  and  confirms  that the
Administrative  Agent and each Lender is relying upon such  representations  and
warranties:

<PAGE>
                                      -38-

      (a)   Corporate  Status.  The Borrower is a corporation duly  incorporated
            and  validly  existing  under  the  laws  of  Canada,  each  of  the
            Guarantors  other than MNL is a corporation  duly  incorporated  and
            validly  existing  under  the  laws of  Delaware,  MNL is a  private
            company  limited by shares duly  incorporated  and validly  existing
            under the laws of England and Wales, and each of their  Subsidiaries
            is a  corporation  duly  incorporated,  amalgamated  or  is  validly
            existing as a  partnership  or is  otherwise  organized  and validly
            existing under the laws of the jurisdiction of its incorporation and
            the Borrower,  each Guarantor and each of their Subsidiaries has all
            necessary  corporate  power and authority to conduct its business as
            presently conducted and to own or lease its properties and assets in
            each  jurisdiction  where such properties and assets are situated or
            such business is conducted.

      (b)   Corporate  Power and Authority.  The Borrower and each Guarantor has
            full corporate power and authority to enter into the Loan Documents,
            to which they are a party, and to do all acts and things and execute
            and deliver all documents as are required hereunder or thereunder to
            be done,  observed or performed by it in  accordance  with the terms
            hereof or thereof.

      (c)   Authorization  and  Enforceability.  This  Agreement and each of the
            other  Loan  Documents  to which  the  Borrower  is a party has been
            delivered  by the  Borrower  and  constitutes  a valid  and  legally
            binding  obligation  of  the  Borrower  enforceable  against  it  in
            accordance  with  its  terms,  subject  to  applicable   bankruptcy,
            insolvency  and other laws  affecting the  enforcement of creditors'
            rights  generally and, when delivered by a Guarantor,  the Guarantee
            and  each  of the  Guarantor's  Security  Documents  to  which  such
            Guarantor  is a party will  constitute  a valid and legally  binding
            obligation of such  Guarantor  enforceable  against it in accordance
            with its terms,  subject to applicable  bankruptcy,  insolvency  and
            other laws affecting the enforcement of creditors'  rights generally
            and general principles of equity.

      (d)   Conflict  with  Constating  Documents  and  Agreements.  Neither the
            execution and delivery of the Loan Documents nor the consummation by
            the Borrower or any Guarantor of any of the transactions  herein and
            therein  contemplated,  nor  compliance  by  the  Borrower  and  the
            Guarantors with the terms, conditions and provisions,  will conflict
            with or  result  in a  breach  of any of the  terms,  conditions  or
            provisions of:

              (i)    the  constating  documents,  certificates  or  articles  of
                     incorporation  or by-laws of the Borrower and any Guarantor
                     or any unanimous shareholders' agreement relating to any of
                     them;

             (ii)    any  resolution  of  the  shareholders,  directors  or  any
                     committee of directors of the Borrower or any Guarantor;

            (iii)    in any  material  respect,  any  agreement,  instrument  or
                     arrangement  to which the  Borrower,  any  Guarantor or any
                     Subsidiary is now a party or by

<PAGE>
                                      -39-

                     which it, or its properties  are, or may be, bound, or will
                     constitute  a  default  thereunder,  or will  result in the
                     creation or  imposition  of any Lien (other than  Permitted
                     Encumbrances)  upon any of the  properties or assets of the
                     Borrower, any Guarantor or any Subsidiary;

             (iv)    any judgment or order,  writ,  injunction  or decree of any
                     court; or

              (v)    any Applicable Law presently in effect.

      (e)   No Other Authorization or Consents Necessary.  No action (including,
            without  limitation,  the  giving of any  consent,  licence,  right,
            approval,  authorization,  registration,  order or  permit)  of,  or
            filing  with,  any  governmental  or  public  body or  authority  is
            required to authorize,  or is otherwise required in connection with,
            the  execution,  delivery  and  performance  by the  Borrower or any
            Guarantor of the Loan Documents or in order to render this Agreement
            and the Security Documents legal, valid,  binding or enforceable and
            no  consents,  approvals  or other  authorizations  are  required in
            connection  with the assignment of accounts  receivable  pursuant to
            the Security Documents except those actions which have been obtained
            or filings  which  have been made and such  consents,  approvals  or
            authorizations   which  may  be  required  in  connection  with  the
            assignment  of  Governmental  Receivables  pursuant to the Financial
            Administration  Act (Canada),  federal laws of the United States and
            comparable   provincial,   state  or   territorial   legislation  or
            legislation in any political subdivision thereof.

      (f)   No Third Party  Consents.  No consent or approval of any other party
            is  required  in  connection   with  the  execution,   delivery  and
            performance  by the Borrower or any Guarantor of the Loan  Documents
            or in  order  to  render  this  Agreement  or any  of  the  Security
            Documents legal, valid, binding or enforceable except those consents
            or approvals which have been obtained.

      (g)   Financial Statements.  The audited consolidated financial statements
            of the Borrower for the year ended April 30, 2002 and the  unaudited
            consolidated  financial  statements  of the  Borrower for the period
            ended October 27, 2002 present fairly, in all material respects, the
            financial  position of the Borrower as at each such respective date,
            subject,  in the case of the  financial  statements  for the  period
            ended  October 27, 2002, to normal year end  adjustments;  and since
            October 27, 2002,  there has been no material  adverse change in the
            assets,   liabilities,   condition  (financial  or  otherwise),   or
            prospects of the Borrower  and its  Subsidiaries,  taken as a whole,
            other than changes disclosed in writing to the Administrative Agent.

      (h)   Litigation.  Other  than (i) as  disclosed  in  Schedule  G, or (ii)
            actions,  suits or proceedings  claiming solely payment  (whether by
            way of an amount  owing,  damages  or  otherwise)  of an amount  not
            exceeding  Cdn.  $500,000  in  respect  of any  one  matter  or Cdn.
            $1,000,000  in  the  aggregate,  there  are  no  actions,  suits  or
            proceedings  pending or, to the best of the  knowledge and belief of
            the Borrower,  threatened  against or affecting  the  Borrower,  any
            Guarantor or any of their

<PAGE>
                                      -40-

            Subsidiaries or any of their  undertaking,  property and assets,  at
            law,  in  equity  or  before  any  arbitrator  or  before  or by any
            governmental department, body, commission,  board, bureau, agency or
            instrumentality  in respect of which the Borrower has  determined in
            good faith that there is a reasonable possibility of a determination
            adverse to the  Borrower,  any  Guarantor  or  Subsidiary  and which
            could, if determined adversely,  materially and adversely affect the
            legality,  validity  or  enforceability  of  this  Agreement  or the
            Security  Documents or the ability of the Borrower or any  Guarantor
            to perform its  obligations  under this  Agreement  and the Security
            Documents and none of the Borrower,  any Guarantor or any Subsidiary
            is in default with respect to any Applicable Law or any order, writ,
            injunction or award of any government,  commission,  board,  agency,
            court,  arbitrator  or  instrumentality  which  would  have any such
            effect.

      (i)   Licences,  etc. and Compliance with Laws. Other than as disclosed in
            Schedule  H,  all  licences,  franchises,   certificates,  consents,
            rights,   rights-of-way,    easements,   entitlements,    approvals,
            authorizations,  registrations,  orders and  permits  (collectively,
            "Permits") required to enable the Borrower,  the Guarantors and each
            of their Subsidiaries to carry on their respective businesses as now
            conducted by them and to own, lease and operate their properties and
            assets have been duly obtained and are currently  subsisting in good
            standing,  except for such Permits, the absence of which has not had
            and would not  reasonably  be expected to have,  a material  adverse
            effect on the  business,  operations  or financial  condition of the
            Borrower and its Subsidiaries  taken as a whole.  The Borrower,  the
            Guarantors  and  each of their  Subsidiaries  have  complied  in all
            material respects with all terms and provisions  presently  required
            to be  complied  with by them  in all  such  Permits  and  with  all
            Applicable Law (other than  Environmental  Laws) and they are not in
            violation of any of the respective provisions thereof and in respect
            of which there is a reasonable  possibility that such non-compliance
            or violation  could  materially  and adversely  affect the business,
            operations   or   financial   condition  of  the  Borrower  and  its
            Subsidiaries,  taken as a whole,  or the ability of the Borrower and
            the  Guarantors  to  perform  their   obligations   under  the  Loan
            Documents.

      (j)   Compliance  with  Environmental  Laws.  Other than as  disclosed  in
            Schedule H:

              (i)    the  Borrower,  each of the  Guarantors  and  each of their
                     Subsidiaries  and,  to the  best  of the  knowledge  of the
                     Borrower and the Guarantors after due inquiry, those of any
                     party  having  charge,  management  or  control of any real
                     property of any of the Borrower,  the  Guarantors and their
                     Subsidiaries   have  been  and  are  in   compliance   with
                     Environmental Laws which are currently  applicable to their
                     operations and the release,  emission,  deposit,  issuance,
                     discharge,  transportation  or disposal  ("Release") of any
                     Hazardous Materials; the Borrower, the Guarantors and their
                     Subsidiaries  have no contingent  liabilities in connection
                     with any Release or likely  Release and have no  conditions
                     on any property,  which now, or with the passage of time or
                     the giving of notice or both,  may give rise to  liability,
                     and in respect of which there is a  reasonable  possibility
                     that  such   non-compliance,   contingent   liabilities  or
                     conditions could have a material

<PAGE>
                                      -41-

                     adverse  effect on the  Business,  operations  or financial
                     condition of the Borrower and its Subsidiaries,  taken as a
                     whole;

             (ii)    neither  the  Borrower,  the  Guarantors  nor  any  of  the
                     Subsidiaries  of the foregoing  has received  notice of any
                     judicial  or   administrative   proceeding   alleging   the
                     violation  of  or  any   potential   liability   under  any
                     Environmental Laws and none of the Borrower, the Guarantors
                     nor any of their  Subsidiaries has received notice of or is
                     subject to any Environmental Claim; and

            (iii)    neither  of the  Borrower,  the  Guarantors,  any of  their
                     Subsidiaries  or,  to  the  best  of the  knowledge  of the
                     Borrower and the Guarantors after due inquiry, or any party
                     having  charge,  management or control of any of their real
                     property  has  ever  caused  or  permitted   any  Hazardous
                     Material to be placed, held, located, stored or disposed of
                     on, in, under,  through or at any such property or any part
                     thereof except in compliance with Environmental Laws.

      (k)   Encumbrances.   The  Borrower,   the  Guarantors  and  each  of  its
            Subsidiaries  has good and  valid  title  to all of its  assets  and
            property and there are no Liens on any of the assets or  undertaking
            of the Borrower,  the  Guarantors or their  Subsidiaries  other than
            Permitted Encumbrances.

      (l)   No Default or Event of  Default.  No Default or Event of Default has
            occurred and is continuing.

      (m)   No Action for Winding-Up or Bankruptcy.  There has been no voluntary
            or involuntary  action taken either by or against the Borrower,  any
            Guarantor or any Subsidiary for any such  corporation's  winding-up,
            dissolution,  liquidation, bankruptcy, receivership,  administration
            or similar or  analogous  events in respect of such  corporation  or
            partnership or all or any material part of its assets or revenues.

      (n)   Taxes.  The  Borrower,  each of the  Guarantors  and  each of  their
            Subsidiaries  has filed all tax  returns  which were  required to be
            filed,  paid all Taxes (including  interest and penalties) which are
            due and  payable  other  than any Tax the  payment of which is being
            contested  in good faith and for which  adequate  reserves are being
            maintained.

      (o)   Subsidiaries.  Schedule I describes all of the material Subsidiaries
            of the  Borrower  and its  interests  therein as at the date of this
            Agreement.  Each of MNI,  MNSI and MNL is an  indirect  wholly-owned
            Subsidiary of the Borrower.  Neither the Borrower nor the Guarantors
            have any  material  investment  or material  equity  interest in any
            other  Person  other than those  entities  described  in the note to
            Schedule I and any such  investment or equity acquired in accordance
            with Section 8.2(e).

<PAGE>
                                      -42-

      (p)   Location of Business.  The chief executive office of the Borrower is
            located in Ottawa,  Ontario;  the principal office of MNI is located
            in  Herndon,  Virginia  and  payments  in respect of MNI's  accounts
            receivable  are made to an  account  of MNI at Bank One in  Detroit,
            Michigan;  the  principal  office  of MNSI is  located  in  Herndon,
            Virginia and payments in respect of its accounts receivable are made
            to an  account  of MNSI at Bank  One in  Belleville,  Michigan;  the
            principal office of MNL is located at Portskewett, Monmouthshire and
            payments in respect of its accounts  receivable are made to accounts
            of MNL at Barclays  Bank plc located at  Corporate  Banking  Centre,
            Windsor Court, Windsor Place, Cardiff, Wales CF10 3ZL.

      (q)   Location of Collateral.  With the exception of inventory in transit,
            at least  95% (on a net book  value  basis) of all  tangible  assets
            comprising the Borrower's Collateral (as that term is defined in the
            Borrower's  Security  Documents)  are  situate  in the  Province  of
            Ontario.

      (r)   Registrations.  All  registrations,  filings and  recordings  as are
            necessary to preserve,  protect and perfect the charges and security
            interest  created,  or  intended  to be  created  by,  the  Security
            Documents have been made.

      (s)   Pension  Plans.  All  material  obligations  of the Borrower and the
            Guarantors   (including   fiduciary,    funding,    investment   and
            administrative  obligations)  required to be performed in connection
            with the pension  plans of the  Borrower or any  Guarantor,  and the
            funding agreements therefore, have been performed on a timely basis.

7.2         Survival of Representations and Warranties

            The  representations  and warranties set out in this Article 7 shall
survive  the  execution  and  delivery of this  Agreement  and the making of any
Advances to the Borrower,  notwithstanding  any  investigations  or examinations
which may be made by the Administrative  Agent, any Lender or the Administrative
Agent's Counsel to any of them.

                                   ARTICLE 8
                                    COVENANTS

8.1         Affirmative Covenants

            The Borrower covenants and agrees with the Administrative  Agent and
each Lender  that,  unless the  Administrative  Agent and the  Required  Lenders
otherwise  consent  in  writing,  so long as any  amount  payable  hereunder  is
outstanding:

      (a)   Financial  Reporting.  The Borrower  shall  deliver,  or cause to be
            delivered,  to the  Administrative  Agent, with sufficient  original
            copies for each Lender:

<PAGE>
                                      -43-

              (i)    not later than March 15, 2003, a  certificate  contemplated
                     by Section  8.1(a)(iii) or other evidence,  satisfactory to
                     the  Lenders,  that  EBITDA  for the fiscal  quarter  ended
                     January 26, 2003 was positive;

             (ii)    within 45 days  after  the end of each of the  first  three
                     fiscal  quarters  of the  Borrower  in  each  fiscal  year,
                     commencing  with the fiscal  quarter on the last  Sunday in
                     January   2003,   the  unaudited   consolidated   financial
                     statements of the Borrower, including balance sheet, income
                     statement  and  statement  of cash flow,  all  prepared  in
                     accordance with GAAP (except for the absence of footnotes);
                     and

            (iii)    within  120 days after the end of each  fiscal  year of the
                     Borrower  (commencing  with the fiscal  year  ending on the
                     last  Sunday  in  April  2003)  the  audited   consolidated
                     financial   statements  of  the  Borrower  for  such  year,
                     including balance sheet,  income statement and statement of
                     cash  flow   together   with  the  report   thereon  of  an
                     independent auditor of recognized national standing;

            each of such  financial  statements  referred to in clauses (ii) and
            (iii) above to be prepared in accordance with GAAP;

             (iv)    together with the financial  statements  delivered pursuant
                     to Sections  8.1(a)(i) and (ii), a certificate of the Chief
                     Financial  Officer of the  Borrower  to the effect that the
                     information  contained in such  statements  is prepared and
                     presented in  accordance  with GAAP (except for the absence
                     of  footnotes  in  unaudited  statements)  and in a  manner
                     consistent with the past practices of the Borrower and that
                     such  financial  statements  are  true and  correct  in all
                     material   respects,   subject  to  normal  year-end  audit
                     adjustments in the case of unaudited financial  statements,
                     and present fairly the results of operations and changes in
                     the  financial  position  of the  Borrower as of and to the
                     date of such  financial  statements  and  stating  that the
                     Borrower is in  compliance  with the covenants set forth in
                     Article 8 including,  without  limitation,  those financial
                     covenants  set forth in Section 8.3 and, in respect of such
                     financial   covenants   providing   detailed   calculations
                     evidencing   compliance   therewith,   that   each  of  the
                     representations and warranties of the Borrower set forth in
                     Section 7.1 is true and correct by  reference  to the facts
                     and circumstances  existing on the date of such certificate
                     (or specifying inaccuracies therein) and that no Default or
                     Event  of  Default  has  occurred  and  is  continuing  (or
                     specifying  such  non-compliance  or  Default  or  Event of
                     Default and stating what action,  if any, the  Borrower,  a
                     Guarantor  or  any   Subsidiary  is  taking  in  connection
                     therewith); and

              (v)    within  10  days  of the  end of  each  calendar  month,  a
                     Borrowing Base Certificate  together with a detailed report
                     on accounts receivable of the Borrower and each Guarantor.

<PAGE>
                                      -44-

      (b)   Corporate Status.  Subject to Section 12.1, the Borrower will remain
            a corporation  duly continued and validly  subsisting under the laws
            of Canada or a province  thereof and the  Borrower  shall cause each
            Guarantor and Subsidiary to remain a corporation  duly  incorporated
            or organized and validly  subsisting  under the laws of its existing
            jurisdiction  of  incorporation  or the laws of  Canada or any other
            province  thereof  and,  in  each  case,   registered  or  otherwise
            qualified  in all  material  respects  to carry on  business in each
            jurisdiction where necessary to conduct its business.

      (c)   Conduct  of  Business.  The  Borrower  will,  and  will  cause  each
            Guarantor  and each other  Subsidiary  to,  continue  its  business,
            except as the board of directors or duly authorized  officers of the
            Borrower  may  otherwise,  in good faith,  determine  is in the best
            interests of the  Borrower,  and will not  materially  and adversely
            affect  the  business,  operations  or  financial  condition  of the
            Borrower and its  Subsidiaries,  taken as a whole, or the ability to
            perform  any  of  their  obligations  under  this  Agreement  or the
            Security Documents. The Borrower will, and will cause each Guarantor
            and each  other  Subsidiary  to,  manage its  business  in a proper,
            prudent  and  efficient  manner  (as the board of  directors  of the
            Borrower may determine in good faith) in all material respects.

      (d)   Notice  of  Event of  Default.  The  Borrower  will  deliver  to the
            Administrative  Agent,  forthwith upon becoming aware of any Default
            or Event of Default,  a  certificate  of an officer of the  Borrower
            specifying  such  Default  or  Event  of  Default  together  with  a
            statement of an officer of the  Borrower  setting  forth  details of
            such Default or Event of Default and the action  which has been,  or
            is proposed to be, taken with respect thereto.

      (e)   Other   Notifications.   The  Borrower  shall  promptly  notify  the
            Administrative Agent of:

              (i)    any change in the name or jurisdiction of  incorporation or
                     organization  of the Borrower or any  Guarantor  and of any
                     change in the  location of the  registered  office or chief
                     executive  office or  material  assets of any of them which
                     are  subject  to a Lien  in  favour  of the  Administrative
                     Agent;

             (ii)    any action, suit, proceeding,  complaint,  notice, order or
                     material  Environmental  Claim which is commenced or issued
                     or of  which  it  becomes  aware  (and  which  has not been
                     disclosed  in  Schedule  G or H) which is pending or issued
                     against or, to the best of its  information,  knowledge and
                     belief,  affecting  the  Borrower,  any Guarantor or any of
                     their  Subsidiaries or any of their  undertaking,  property
                     and assets at law,  in equity or before any  arbitrator  or
                     before or by any governmental department, body, commission,
                     board,  bureau,  agency or  instrumentality  in  respect of
                     which the Borrower determines in good faith that there is a
                     reasonable  possibility of a  determination  adverse to the
                     Borrower,  any  Guarantor  or any  other  Subsidiary  which
                     would, if determined  adversely,  reasonably be expected to
                     materially and adversely affect the business,

<PAGE>
                                      -45-

                     operations  or condition  (financial  or  otherwise) of the
                     Borrower  and its  Subsidiaries,  taken as a whole,  or the
                     ability  to  perform  any of their  obligations  under this
                     Agreement or the Security  Documents or the  enforceability
                     of  the  Security,  and  any  action,  suit  or  proceeding
                     claiming  payment  (whether  by  way  of an  amount  owing,
                     damages or otherwise) of an amount exceeding Cdn.  $500,000
                     in  respect  of any one  matter or Cdn.  $1,000,000  in the
                     aggregate;

            (iii)    the occurrence of any default or event of default under the
                     EDC Facility;

             (iv)    any cancellation,  termination, amendment or restatement of
                     the  funding  agreement  between  Her  Majesty The Queen in
                     right of Canada, the Borrower,  March Networks  Corporation
                     and  Mitel  Knowledge  Corporation,  under  the  Technology
                     Partnerships Canada program,  signed in October,  2002 (the
                     "Technology Partnerships Canada Agreement);

              (v)    the  issuance by the Borrower or any of the  Guarantors  of
                     any  equity  or  Subordinated  Debt,  other  than  any such
                     issuances by the Borrower or the Guarantors to the Borrower
                     or any of its wholly-owned subsidiaries,  including details
                     thereof and gross proceeds and costs and expenses of issue;

             (vi)    any  trade  account  of  the  Borrower  or  the  Guarantors
                     becoming secured by way of a bank letter or guarantee, with
                     the notice  including a statement  that such security shall
                     be  assigned  by  the  Borrower   and/or   Guarantors,   as
                     applicable,  in favour of the Administrative  Agent, if the
                     Administrative Agent so requests; and

            (vii)    the results of any report providing an actuarial  valuation
                     or other  assessment of any pension plan of the Borrower or
                     any Guarantor, upon any such report being made available to
                     the Borrower,  including, without limitation, the actuarial
                     valuation  report on the  pension  plan of MNL as of August
                     31,  2003 which  report is  expected  to be received by the
                     Borrower in October 2003.

      (f)   Compliance with Applicable Laws. The Borrower shall, and shall cause
            each of the Guarantors  and each other  Subsidiary to, comply in all
            material respects with all Applicable Laws, including  Environmental
            Laws, the  non-compliance  with which would materially and adversely
            affect  the  business,  operations  or  financial  condition  of the
            Borrower and its  Subsidiaries,  taken as a whole, or the ability to
            perform  any  of  their  obligations  under  this  Agreement  or the
            Security  Documents  or the  enforceability  of the Security and the
            Borrower  shall,  and shall cause each  Guarantor  to, comply in all
            material  respects  with the  terms of and  maintain  all  consents,
            licences,  franchises,  certificates,  consents,  rights, approvals,
            authorizations, registrations, orders or permits from, and make such
            filings with,  any  governmental  or public  authority and to comply
            with  such  Applicable  Laws as may be  necessary  to  carry  on its
            respective businesses, to own, lease and

<PAGE>
                                      -46-

            operate its  properties  and to enable the  Borrower and each of the
            Guarantors  to enter into and perform their  obligations  under Loan
            Documents  or to render this  Agreement  or the  Security  Documents
            legal, valid, binding or enforceable.

      (g)   Payment of Taxes. The Borrower shall, and shall cause each Guarantor
            and each other Subsidiary to, pay or cause to be paid, when due, all
            Taxes,  property taxes,  business taxes,  social security  premiums,
            assessments  and  governmental  charges or levies imposed upon it or
            upon its income,  sales, capital or profit or any property belonging
            to it unless any such Tax,  social  security  premiums,  assessment,
            charge or levy is  contested  by it in good faith  with  appropriate
            reserves,  and to  collect  and  remit  when  due  all  payroll  and
            withholding taxes.

      (h)   Insurance.  The Borrower shall maintain,  or cause to be maintained,
            on behalf  of the  Borrower  and its  Subsidiaries,  insurance  with
            responsible  and reputable  insurance  companies or  associations in
            such  amounts  and  covering  such  risks as would  be  prudent  for
            companies   engaged  in  similar   businesses   and  owning  similar
            properties  and  assets  in the same  general  areas  in  which  the
            Borrower or such Subsidiaries (as the case may be) operate.

      (i)   Visitation  Rights.  The Borrower  shall  permit the  Administrative
            Agent and each  Lender,  at any  reasonable  time or  times,  within
            normal business hours,  following reasonable notice to the Borrower,
            to (provided the Administrative Agent and each Lender is accompanied
            by a senior  officer of the  Borrower)  visit the  properties of and
            examine and make copies of and abstracts  from the books and records
            of  the  Borrower,  the  Guarantors  and  their  Subsidiaries.   All
            information  received shall be held by the Administrative  Agent and
            each Lender in confidence  for use in respect of the  administration
            of the Facility and for no other purpose.

      (j)   Keeping of Books. The Borrower shall, and shall cause each Guarantor
            and each  other  Subsidiary  to,  keep  proper  books of record  and
            account,  in which  full and  correct  entries  shall be made of all
            financial  transactions  and the assets and business of the Borrower
            and each of its  Subsidiaries in accordance with generally  accepted
            accounting principles consistently applied.

      (k)   Compliance with Material Leases, Contracts and Other Agreements. The
            Borrower  shall,  and shall  cause  each  Guarantor  and each  other
            Subsidiary  to,  comply in all  material  respects  and  perform its
            obligations  under all leases  (whether real or personal  property),
            contracts and other agreements to which it is a party or by which it
            is bound if the  non-compliance  or  non-performance  of obligations
            thereunder  could  reasonably be expected to have a material adverse
            effect on the  business,  operations  or financial  condition of the
            Borrower and its  Subsidiaries,  taken as a whole, or the ability to
            perform  any  of  their  obligations  under  this  Agreement  or the
            Security Documents.

      (l)   Dividends to Borrower.  The Borrower will cause its  Subsidiaries to
            pay,  to the  extent  they  are  legally  able to do so,  dividends,
            interest,  amounts  due in respect  of  inter-company  accounts  and
            capital or other distributions to the Borrower in an

<PAGE>
                                      -47-

            aggregate  amount  sufficient  and as may be  required to enable the
            Borrower to satisfy its obligations  under this Agreement and to pay
            all amounts due and owing hereunder.

      (m)   Registrations. The Borrower shall, and shall cause each Guarantor to
            maintain  all such  registrations,  filings  and  recordings  as are
            necessary to preserve,  protect and perfect the charges and security
            interest  created,  or  intended  to be  created,  by  the  Security
            Documents.

      (n)   Dealings with Collateral.  The Borrower shall not, without the prior
            written consent of the Administrative  Agent,  locate any Collateral
            (as such term is defined in the  Borrower's  Security  Documents) in
            any  province  other than the  Province  of Ontario if, as a result,
            less than 95% (on a net book  value  basis) of all  tangible  assets
            comprising such Collateral, are situate in the Province of Ontario.

      (o)   MNI, MNSI and MNL to Remain  Subsidiaries.  The Borrower shall cause
            each of the  Guarantors to remain a direct or indirect  wholly-owned
            Subsidiary of the Borrower.

      (p)   Governmental  Receivables.  Upon request by the Administrative Agent
            or the Required  Lenders at any time  following the  occurrence of a
            Default or Event of Default,  the Borrower  shall  promptly  deliver
            specific  assignments  of  all  or  any  part  of  its  Governmental
            Receivables as requested by the Administrative Agent or the Required
            Lenders  and  shall  obtain  such  consents,   acknowledgements  and
            approvals or  authorizations  as may be required in connection  with
            enforcement  of  the  Lien  against  such  Governmental  Receivables
            granted by the Borrower  and the  Guarantors  to the  Administrative
            Agent  pursuant  to the  Security  Documents  as may be  required by
            applicable  law  including,   without   limitation,   the  Financial
            Administration  Act (Canada),  federal laws of the United States and
            comparable   provincial,   state  or   territorial   legislation  or
            legislation in any political subdivision thereof.

      (q)   Establishment  of EDC Facility.  On or prior to a date occurring not
            more than five (5) Banking Days  following the Closing Date, (i) the
            EDC Facility  shall have been  established  and the Borrower and MNL
            shall  have  satisfied  all  of  the  conditions  precedent  to  the
            availability  of the EDC  Facility  other  than for such  conditions
            precedent  as relate to this  Facility,  and (ii) the  Intercreditor
            Agreement,  in form and on terms satisfactory to the Lenders, acting
            reasonably, shall have been duly authorized,  executed and delivered
            to the Administrative Agent by each of the Borrower,  the Guarantors
            and EDC and shall constitute legal, valid and binding obligations of
            each of such parties.

      (r)   Drawdown  under EDC  Facility.  On or prior to a date  occurring not
            more than eight (8) Banking Days  following  the Closing  Date,  the
            Borrower  shall have fully drawn down the entire  amount of Sterling
            4,100,000  available  under the EDC Facility and shall have provided
            notice of same to the Agent pursuant to Section 8.1(s) below.

<PAGE>
                                      -48-

      (s)   Notices under EDC  Facility.  The Borrower  shall  notify,  or shall
            cause MNL to notify the Administrative  Agent in writing and provide
            to the Administrative Agent a copy of any drawdown notice or similar
            document  delivered  to EDC in  connection  with  the EDC  Facility,
            simultaneously with the delivery of the same to EDC.

      (t)   New  Equity  Round.  In the event  that,  by August  31,  2003,  the
            Borrower  shall not have  received  net  proceeds  of at least  Cdn.
            $20,000,000  from the issuance of common shares or preferred  shares
            to persons other than Affiliates of the Borrower on terms consistent
            with the  Confidential  Offering  Memorandum  of the Borrower  dated
            September  25, 2002,  the Borrower  shall pay to the  Administrative
            Agent,  for  account  of the  Lenders,  on August 31,  2003,  a risk
            premium fee equal to 1.0% of the Commitment.

8.2         Negative Covenants

            The Borrower covenants and agrees with the Administrative  Agent and
the Lenders  that,  unless the  Administrative  Agent and the  Required  Lenders
otherwise  consent  in  writing,  so long as any  amount  payable  hereunder  is
outstanding:

      (a)   No Merger, Amalgamation,  etc. The Borrower shall not, and shall not
            permit any Guarantor or other Subsidiary to, directly or indirectly,
            sell, lease, transfer, assign, convey or otherwise dispose of all or
            substantially all of its property and assets,  and will not merge or
            amalgamate  pursuant to statutory  authority  or otherwise  with any
            other Person except upon compliance with Article 12.

      (b)   Negative  Pledge.  The Borrower  shall not, and shall not permit any
            Guarantor or other Subsidiary to, create, incur, assume or permit to
            exist any Lien,  other than  Permitted  Encumbrances,  on any of its
            property, undertaking or assets now owned or hereafter acquired.

      (c)   Restriction  on Debt.  The Borrower  shall not, and shall not permit
            any  Guarantor or other  Subsidiary  to,  create,  incur,  assume or
            otherwise  become liable upon or suffer to exist (after knowledge of
            the existence thereof) any Debt other than Permitted Debt.

      (d)   Restriction on Disposition of Property.  The Borrower shall not, and
            shall not permit any  Guarantor or other  Subsidiary  to, enter into
            sale and leaseback  transactions or  securitization  transactions or
            sell,  exchange,  lease,  release or abandon or otherwise dispose of
            any of its fixed  property or other  assets to any Person other than
            (i) bona fide sales, exchanges,  leases,  releases,  abandonments or
            other  dispositions  in the  ordinary  course  of  business  for the
            purpose of  carrying  on the same,  including,  without  limitation,
            sales  of  inventory  in  the  ordinary   course;   (ii)   Permitted
            Securitization  Transactions;  (iii) sale and leaseback transactions
            completed by the Borrower,  its  Guarantors and  Subsidiaries  taken
            together,  in an aggregate amount not exceeding Cdn. $15,000,000 (or
            its Equivalent Amount in another currency); and (iv) the disposition
            by MNL of the

<PAGE>
                                      -49-

            managed service contracts portion of its business for gross proceeds
            of approximately(pound)8.4 million.

      (e)   Restriction    on   Financial    Assistance   to    Non-Wholly-Owned
            Subsidiaries.  The  Borrower  shall  not,  and shall not  permit any
            Guarantor or other  Subsidiary to, directly or indirectly,  make any
            investment  in (other than as  permitted  in this  Section  8.2(e)),
            advances to, capital contributions to, loans to or guarantees to, or
            give any  financial  assistance  to or for the benefit of any Person
            other  than (i)  financial  assistance  (including  investments  in,
            advances to, capital  contributions to or loans or guarantees to) to
            the Borrower or a direct or indirect wholly-owned  Subsidiary of the
            Borrower,  or (ii) financial assistance  (including  investments in,
            advances to, capital  contributions to or loans or guarantees to) to
            Tianchi-Mitel  Telecommunications  Corp.  or any other Persons in an
            amount not  exceeding  U.S.  $5,000,000 in the  aggregate,  it being
            acknowledged  by the  Administrative  Agent and the Lenders that the
            existing  investments  by MNL and MNI in preference  shares of Mitel
            Knowledge Corporation shall be permitted investments for purposes of
            this Section  8.2(e),  including  the  transfer of such  investments
            within members of the Mitel group of companies.

      (f)   Restriction on Take-Over Bids. The Borrower shall not, and shall not
            permit any Guarantor or other Subsidiary to, directly or indirectly,
            make any  Take-Over Bid which is financed in full or in part by this
            Facility and make  investments  in or  acquisition  of other Persons
            which are in excess of U.S.  $5,000,000 in respect of any one matter
            or U.S. $10,000,000 in the aggregate over the term of the Facility.

      (g)   Transactions with Affiliates.  The Borrower shall not, and shall not
            permit  any  Guarantor  or  other  Subsidiary  to,  enter  into  any
            transaction or series of related  transactions with any Person which
            is  Controlled  by T.H.  Matthews,  or any Affiliate of such Person,
            other than transactions  between the Borrower and one or more of the
            Guarantors or  transactions  between two or more of the  Guarantors,
            except on terms and  conditions no less  favourable to the Borrower,
            the Guarantor or the Subsidiary of the Borrower as could  reasonably
            be obtained by the Borrower, Guarantor or Subsidiary at that time in
            a comparable  transaction entered into at Arm's Length with a Person
            at Arm's Length with the Borrower and provided that the Borrower,  a
            Guarantor  or  any   Subsidiary  of  the  Borrower  may  enter  into
            employment agreements with respect to the procurement of services of
            their  respective  officers and employees in the ordinary  course of
            business, including executive compensation arrangements.

      (h)   Restriction on Distributions.  The Borrower shall not, and shall not
            permit any Guarantor or other Subsidiary,  to declare,  make, permit
            or pay (i) any  dividend  or other  distribution  on  issued  shares
            (other  than  dividends  in kind  paid by the issue of shares of the
            Borrower); (ii) the purchase,  redemption or retirement price of any
            issued  shares,  warrants or any other  options or rights to acquire
            shares of the Borrower, the Guarantors or any of the Subsidiaries of
            the  Borrower  redeemed or  purchased  by the Borrower or any of its
            Subsidiaries; (iii) loans to any shareholders thereof; (iv) loans to
            any directors or officers thereof on terms more

<PAGE>
                                      -50-

            favourable  to such  directors  or officers  than normal  commercial
            terms;  or  (v)  any  similar   distributions   (each  a  "Corporate
            Distribution") other than (vi) any Corporate  Distribution made only
            to the Borrower or a Guarantor;  and (vii)  provided that no Default
            or Event of Default would result therefrom and provided further that
            each of the  covenants of the  Corporation  set forth in Section 8.3
            would be satisfied on a pro forma basis after giving  effect to such
            Corporate Distribution.

      (i)   Pension Plan  Compliance.  The Borrower shall not (a) terminate,  or
            permit a Guarantor to  terminate,  any pension plan in a manner,  or
            take any other action with respect to any pension plan,  which would
            reasonably  be expected to result in any  material  liability of the
            Borrower or a Guarantor,  or (b) fail to make, or permit a Guarantor
            to fail to make,  full payment when due of all amounts which,  under
            the provisions of any pension plan,  agreement  relating  thereto or
            applicable  law,  the  Borrower or a Guarantor is required to pay as
            contributions thereto. In addition, the Borrower shall promptly pay,
            and shall cause the  Guarantors  to promptly  pay, not less than the
            minimum  funding  requirement  from time to time  established by any
            actuarial report with respect to any pension plan of the Borrower or
            any Guarantor.

8.3         Financial Covenants

            The Borrower covenants and agrees with the Administrative  Agent and
the Lenders  that,  unless the  Administrative  Agent and the  Required  Lenders
otherwise  consent  in  writing,  so long as any  amount  payable  hereunder  is
outstanding:

      (a)   Minimum EBITDA. The Borrower shall not permit its EBITDA (determined
            on a consolidated  basis in accordance with GAAP as in effect on the
            date of this  Agreement  and  measured  as at the  last  day of each
            fiscal  quarter of the Borrower for such fiscal quarter then ending,
            commencing  with the first such quarter to end following the date of
            this Agreement) to be less than 80% of the following amounts,  being
            the projected  EBITDA for the relevant fiscal quarter,  as set forth
            in the Business Plan:

              (i)    for  the  fiscal  quarter  ending  April  27,  2003,   Cdn.
                     $5,600,000,

             (ii)    for  the  fiscal  quarter   ending  July  27,  2003,   Cdn.
                     $6,700,000,

            (iii)    for the fiscal quarter ending October 26, 2003, $8,300,000,
                     and

             (iv)    for each  fiscal  quarter  ending on or after  January  25,
                     2004, Cdn. $10,300,000.

<PAGE>
                                      -51-

                                   ARTICLE 9
                                   GUARANTEES

9.1         Guarantors to Provide Guarantees

      (a) Each Guarantor  shall  guarantee to the  Administrative  Agent and the
Lenders the due and punctual  payment of all debts,  liabilities and obligations
of the Borrower arising hereunder and shall duly authorize,  execute and deliver
to the  Administrative  Agent and the Lenders the Guarantee and the  Guarantors'
Security  Documents,  in  substantially  the  form  of the  Borrower's  Security
Documents  or  in  such  other  form  and  terms  as  are  satisfactory  to  the
Administrative Agent and the Lenders, acting reasonably.

      (b) Each  Guarantor  shall  deliver  to the  Administrative  Agent and the
Lenders  certified copies of its constating  documents and borrowing by-laws (if
any),  a resolution  authorizing  the  Guarantee  and the  Guarantor's  Security
Documents  to which it is a party  and the  incumbency  of the  officers  of the
Guarantor signing the Guarantee and the Guarantor's  Security  Documents and any
other documents or instruments to be provided pursuant to the provisions thereof
and the provisions of this Agreement and a certificate of status,  good standing
or like  certificate  with  respect  to such  Guarantor  issued  by  appropriate
government officials of its jurisdiction of incorporation.

      (c) Each  Guarantor  shall  deliver  to the  Administrative  Agent and the
Lenders a confirmation and acknowledgement, in form and on terms satisfactory to
the Lenders,  confirming the continuing  obligations of such Guarantor under the
Guarantee and the Guarantor's Security Documents  notwithstanding the amendments
to the Original  Credit  Agreement or any subsequent  amendments,  restatements,
renewals or extensions of this Agreement and the Facility.

      (d) The Guarantors shall deliver an opinion of their counsel, addressed to
the Administrative Agent and each Lender from time to time party hereto, in form
and substance satisfactory to the Administrative Agent and each Lender.

                                   ARTICLE 10
                                    SECURITY

10.1        Borrower's Security Documents

      (a) As security  for all  Advances  made to it and as security for all its
other  liability  or  indebtedness,  both  present  and future,  hereunder,  the
Borrower shall assign, by way of security (the "Borrower's  Security") in favour
of the  Administrative  Agent as Agent for  itself and each  Lender,  all of its
receivables  howsoever  arising in connection with the sale or lease of goods or
services by the Borrower to customers located in Canada or the United States and
shall deliver, or cause to be delivered,  the following documents  (collectively
called the  "Borrower's  Security  Documents")  all in form  satisfactory to the
Administrative Agent and each Lender:

              (i)    a general security agreement of the Borrower;

<PAGE>
                                      -52-

             (ii)    a  direction  to  pay  addressed  to  EDC   respecting  the
                     receivables of the Borrower  insured by EDC acknowledged by
                     EDC;

            (iii)    a general assignment of receivables of the Borrower;

             (iv)    an assignment by the Borrower under section 427 of the Bank
                     Act; and

              (v)    such other documents as the  Administrative  Agent and each
                     Lender  may now or  hereafter  reasonably  require  to give
                     effect to,  register  and  perfect the  security  interests
                     created  by  the  Borrower's   Security  Documents  in  the
                     jurisdiction where such charged assets are located.

      (b) So  long as no  Default  or  Event  of  Default  has  occurred  and is
continuing,  any amounts received by the Administrative  Agent from EDC pursuant
to the direction to pay referred to in Section  10.1(a)(ii) shall be paid to, or
to the order of, the Borrower.

      (c) The Borrower  hereby  confirms and agrees that each of the  Borrower's
Security  Documents  previously  delivered  by  the  Borrower  and  all  of  the
Borrower's  Security continues as security for all Advances made to the Borrower
under this Agreement and as security for all of the Borrower's  liabilities  and
indebtedness,  both present and future, hereunder notwithstanding any amendments
to the  Original  Credit  Agreement  or  any  future  amendments,  restatements,
extensions or renewals of this Agreement or the Facilities.

10.2        Guarantors' Security Documents

            As security for all Advances  made to it and as security for all its
other liability or indebtedness, both present and future, hereunder, each of the
Guarantors  shall  assign,  by way of security (the  "Guarantors'  Security") in
favour of the  Administrative  Agent as Agent for itself and each Lender, all of
its receivables  howsoever arising in connection with the sale or lease of goods
or services by the  Guarantor to  customers  (i) located in Canada or the United
States in the case of MNI and MNSI,  and (ii)  located in the United  Kingdom in
the case of MNL, and shall  deliver,  or cause to be  delivered,  the  following
documents (collectively called the "Guarantor's Security Documents") all in form
satisfactory to the Administrative Agent and each Lender:

      (a)   the Guarantee;

      (b)   a general  security  agreement  of the  Guarantor  (except  for with
            respect to MNL);

      (c)   a general assignment of receivables of the Guarantor; and

      (d)   such other documents as the Administrative Agent and each Lender may
            now or hereafter  reasonably require to give effect to, register and
            perfect the security  interests created by the Guarantor's  Security
            Documents in the jurisdiction where such charged assets are located.

<PAGE>
                                      -53-

                                   ARTICLE 11
                            DEFAULT AND ACCELERATION

11.1        Events of Default

            The occurrence of any one or more of the following events (each such
event  and the  expiry  of the  cure  period,  if any,  provided  in  connection
therewith, being herein referred to as an "Event of Default") shall constitute a
default under this Agreement:

      (a)   if the  Borrower  shall fail to pay the  principal of any Advance as
            and when the same becomes due and payable;

      (b)   if the Borrower  shall fail to pay interest on any Advance or to pay
            any other amount due hereunder  within three Banking Days  following
            the due date;

      (c)   if the  Borrower,  any  Guarantor  or  any  other  Subsidiary  shall
            encumber  any of its assets  contrary to the  provisions  of Section
            8.2(b) hereof and fails to discharge such Lien within a period of 15
            days after  notice in writing  has been given by the  Administrative
            Agent to the Borrower requiring such discharge;

      (d)   if the Borrower  shall default in the  observance or  performance of
            any agreement, covenant or condition contained in Section 8.1(a) and
            such  failure  shall remain  unremedied  for 15 days after notice in
            writing has been given by the Administrative Agent to the Borrower;

      (e)   if the Borrower  shall,  or shall permit any  Guarantor or any other
            Subsidiary  to,  default in the  observance  or  performance  of any
            agreement,  covenant or  condition  contained  in Section 8.2 (other
            than Section 8.2(b)) or 8.3;

      (f)   if the Borrower, any Guarantor or any other Subsidiary shall default
            in any material  respect in the  observance  or  performance  of any
            agreement,  covenant or condition contained in this Agreement (other
            than a covenant or condition  whose breach or default in performance
            is elsewhere in this Section 11.1 specifically  dealt with) and such
            default shall not be remedied, if capable of remedy, within a period
            of 15  days  after  notice  in  writing  thereof  is  given  by  the
            Administrative Agent to the Borrower;

      (g)   if any one or more of the  Borrower,  the  Guarantors  or any  other
            Subsidiary  shall  fail to pay  the  principal  of,  or  premium  or
            interest on, any Debt outstanding in a principal amount which,  when
            aggregated with the principal amount of all other Debt in respect of
            which any of them has failed to pay the  principal of, or premium or
            interest on, exceeds Cdn.  $1,000,000  (or the Equivalent  Amount in
            any other currency) (excluding Debt due to the Lenders hereunder and
            Debt  owing  by  the   Borrower  or  a  Guarantor   to  any  of  its
            Subsidiaries)  when the same  becomes  due and  payable  (whether by
            scheduled maturity,  required  prepayment,  acceleration,  demand or
            otherwise)  and such failure  shall  continue  after the  applicable
            grace  period,  if any,  specified in the  agreement  or  instrument
            relating  to such  Debt,  or any  other  event of  default  or early
            termination event (howsoever

<PAGE>
                                      -54-

            described or designated)  shall occur or condition shall exist,  and
            shall continue after the applicable grace period, if any,  specified
            in any  agreement  or  instrument  relating to any such Debt and the
            effect of such event is to  accelerate,  or permit the  acceleration
            of,  Debt of  either  of  them in a  principal  amount  which,  when
            aggregated  with the  principal  amount of all other  Debt of any of
            them  which is, or may be,  declared  due and  payable  prior to its
            specified maturity as a result of an event of default,  exceeds Cdn.
            $1,000,000 (or the Equivalent Amount in any other currency);

      (h)   if the Borrower or any  Guarantor or any material  Subsidiary or any
            other  Subsidiary  which owns shares of a Guarantor  shall generally
            not pay its  debts as such  debts  become  due,  or  shall  admit in
            writing its inability to pay its debts  generally as they become due
            or shall make a general assignment for the benefit of creditors;  or
            any proceeding shall be instituted by or against the Borrower or any
            Guarantor or any material  Subsidiary or any other  Subsidiary which
            owns shares of a Guarantor  seeking to  adjudicate  it a bankrupt or
            insolvent,   or  seeking   liquidation,   dissolution,   winding-up,
            reorganization,   arrangement,  adjustment,  protection,  relief  or
            composition of it or its debts under any law relating to bankruptcy,
            insolvency or  reorganization  or relief of debtors,  or seeking the
            entry of an order  for  relief  or the  appointment  of a  receiver,
            trustee or other similar official for it or for any substantial part
            of its property and, in the case of any such  proceeding  instituted
            against it (but not instituted by it), either such proceeding  shall
            remain undismissed or unstayed for a period of 30 days or any of the
            actions sought in such proceeding  (including,  without  limitation,
            the entry of an order for relief against it or the  appointment of a
            receiver, trustee, custodian or other similar official for it or for
            any  substantial  part of its property) shall occur; or the Borrower
            or any Guarantor or any material  Subsidiary or any other Subsidiary
            which owns shares of a Guarantor  shall take any action to authorize
            any of the actions set forth above in this Section 11.1(h);

      (i)   if any judgment or order or series of  judgments or orders  (whether
            or not related)  for the payment of money in an aggregate  amount in
            excess of Cdn.  $1,000,000  (or the  Equivalent  Amount in any other
            currency), other than any judgment or order for which one or more of
            the Borrower,  the  Guarantors and their  Subsidiaries  will recover
            under a policy of  insurance,  shall be rendered  against any one or
            more of the Borrower,  the Guarantors and their Subsidiaries and (i)
            such  judgment  or order or series of  judgments  and/or  orders are
            final  with no  further  right of appeal  and the  Borrower  has not
            satisfied the Required Lenders, acting reasonably, that the Borrower
            or the  relevant  Guarantor  or  Subsidiary  is able to satisfy such
            judgment  or order or series of  judgments  and/or  orders;  or (ii)
            enforcement  proceedings  shall have been  commenced by any creditor
            upon such judgment or order or series of judgments and/or orders, as
            the  case  may  be;  or  (iii)  there  shall  be  any  period  of 20
            consecutive days during which a stay of enforcement of such judgment
            or order or series of judgments  and/or orders,  as the case may be,
            by reason of a pending appeal or otherwise, shall not be in effect;

<PAGE>
                                      -55-

      (j)   if any  representation  or warranty made or deemed to be made by the
            Borrower or any Guarantor in any of the Loan  Documents  shall prove
            to have been  incorrect or misleading  in any material  respect when
            made or deemed to be made;

      (k)   if the Borrower,  any Guarantor or any other Subsidiary shall be the
            subject  of  any  proceeding  or  investigation  pertaining  to  the
            discovery of any  Hazardous  Material on any property or the Release
            by such entity of any  Hazardous  Material or any  violation  of any
            Environmental  Law shall occur which, in each case, could reasonably
            be expected to have a material and adverse  effect on the  financial
            condition or position of the Borrower and its Subsidiaries  taken as
            a whole;

      (l)   if the  obligations  of the Borrower or any  Guarantor  hereunder or
            under any other Loan Document  shall cease to constitute  the legal,
            valid and binding  obligations  of the Borrower or the Guarantors or
            shall  cease to be in full force and effect or the  Borrower  or any
            Guarantor  shall  have  contested  the  validity  of any of the Loan
            Documents or denied that it had any liability  under any of the Loan
            Documents;

      (m)   if  Dr.  Terence  H.  Matthews   ceases  to  Control   (directly  or
            indirectly)  the Borrower or if any of MNI, MNSI or MNL ceases to be
            a direct or indirect wholly-owned Subsidiary of the Borrower;

      (n)   if any of the Security shall cease to be a valid and perfected first
            priority  security  interest  relative to third parties  (subject to
            Permitted Encumbrances) and such Security is not restored to being a
            valid and perfected  first priority  security  interest  within five
            Banking Days after the earlier of (i) the Borrower or any  Guarantor
            becoming aware thereof, or (ii) notice from the Administrative Agent
            or any Lender;

      (o)   if the  Technology  Partnerships  Canada  Agreement  (as  defined in
            Section  8.1(e)(iv))  is cancelled or terminated or any event occurs
            which  entitles or permits the  Government  of Canada not to provide
            funding  under such  agreement  or such  agreement is amended in any
            manner which is adverse to the Borrower;

      (p)   if the covenant in Section 8.1(q) has not been performed on or prior
            to a date not later than five (5) Banking Days following the Closing
            Date,  and such  breach  of  covenant  continues  for  more  than an
            additional three (3) Banking Days; or

      (q)   if the covenant in Section 8.1(r) has not been performed on or prior
            to a date not  later  than  eight (8)  Banking  Days  following  the
            Closing Date.

11.2        Acceleration

            Upon  the  occurrence  of an  Event  of  Default  and  at  any  time
thereafter while an Event of Default is continuing, the Administrative Agent may
or, if so  directed  by the  Required  Lenders,  shall by written  notice to the
Borrower  declare the Advances  made to the Borrower to be  immediately  due and
payable  (whereupon  the same shall  become so  payable  together  with  accrued
interest  thereon  and any other sums then owed by the  Borrower  hereunder)  or
declare

<PAGE>
                                      -56-

such Advances to be due and payable on demand of the  Administrative  Agent. If,
pursuant to this Section 11.2,  the  Administrative  Agent declares any Advances
made to the  Borrower  to be due and  payable on demand,  then,  and at any time
thereafter,  the Administrative Agent may by written notice to the Borrower call
for  repayment of such  Advances on such date or dates as it may specify in such
notice  (whereupon  the same shall become due and payable on such date  together
with  accrued  interest  thereon  and any other  sums then owed by the  Borrower
hereunder  and the  provisions  of Section  11.4 shall  apply) or  withdraw  its
declaration with effect from such date as it may specify in such notice.

11.3        Remedies Cumulative and Waivers

            It is expressly  understood  and agreed that the rights and remedies
of the  Administrative  Agent  and the  Lenders  hereunder  or under  any  other
instrument  executed  pursuant  to  this  Agreement  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 Administrative  Agent or
any Lender of any right or remedy for a default or breach of any term, covenant,
condition or agreement  contained in this Agreement  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 the  Administrative  Agent or any  Lender  may be
lawfully entitled for such default or breach.  Any waiver by the  Administrative
Agent and the Lenders of the strict  observance,  performance or compliance with
any  term,  covenant,  condition  or  other  matter  contained  herein  and  any
indulgence   granted,   either  expressly  or  by  course  of  conduct,  by  the
Administrative  Agent and the Lenders  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 Administrative Agent or any Lender
under this  Agreement  as a result of any other  default or breach  hereunder or
thereunder.

11.4        Suspension of Lenders' Obligations

            Without prejudice to the rights which arise out of this Agreement or
by law,  the  occurrence  of a Default  or Event of  Default  shall,  while such
Default or Event of Default  shall be  continuing,  relieve  the  Lenders of all
obligations to make any Advances  hereunder (whether or not a Drawdown Notice in
respect of any such Advance shall have been received by the Administrative Agent
prior to the occurrence of a Default or Event of Default) or to accept or comply
with any  Drawdown  Notice or to convert any Advance  into a Libor  Advance or a
Bankers'  Acceptance  Advance or to accept any  Rollover  Notice in respect of a
Libor Advance or to accept or comply with any  Conversion  Notice  converting an
Advance into an Advance in a different currency.

11.5        Application of Payments After an Event of Default

            If any Event of Default shall occur and be continuing,  all payments
made by the Borrower hereunder shall be applied in the following order:

(a)   to amounts  due  hereunder  as costs and  expenses  of the  Administrative
      Agent;

(b)   to amounts due hereunder as fees;

<PAGE>
                                      -57-

(c)   to any other  amounts  (other  than  amounts  in respect  of  interest  or
      principal) due hereunder;

(d)   to amounts due hereunder as interest;

(e)   rateably to amounts due hereunder as principal; and

(f)   any balance to the Borrower or as a court of competent  jurisdiction shall
      determine.

                                   ARTICLE 12
                               SUCCESSOR COMPANIES

12.1        Certain Requirements in Respect of Merger, Etc.

            The  Borrower  shall not,  and shall not permit the  Guarantors  to,
enter into any transaction  (whether by way of  reconstruction,  reorganization,
consolidation, amalgamation, merger, transfer, sale or otherwise) whereby all or
substantially  all of its  undertaking,  property  and assets  would  become the
property of any other  Person or, in the case of any such  amalgamation,  of the
continuing company (collectively,  a "Reorganization")  resulting therefrom,  or
whereby the obligation of the Borrower to pay amounts under this Agreement would
become  subject to novation or assumed or undertaken by any other such Person or
continuing  company,  provided that (i) this Section 12.1 is not applicable to a
Reorganization  involving  the Borrower  and a  wholly-owned  Subsidiary  of the
Borrower;  provided,  however,  in the  event  of  such a  Reorganization  which
involves an amalgamation or merger of the Borrower with any of its Subsidiaries,
the  Successor  Corporation  shall  be  required  to  execute  and  deliver  the
supplemental  agreement and opinion referred to in Section 12.1(a) and take such
other  actions  and  deliver  such  other  documents  and  agreements  as may be
necessary  to ensure that the  perfection  and  priority of the  Security is not
impaired;  and (ii) it may do so and such  Person  or  continuing  company  (the
"Successor Corporation") shall become a party to this Agreement if:

      (a)   the  Successor  Corporation  shall  execute  and/or  deliver  to the
            Administrative  Agent  an  agreement  supplemental  hereto  in  form
            reasonably  satisfactory to the Administrative Agent and the Lenders
            and execute and/or deliver such other instruments,  if any, which to
            the  reasonable  satisfaction  of the  Lenders and in the opinion of
            Counsel to the Borrower  addressed to the  Administrative  Agent and
            the  Lenders,  are  necessary  to  evidence  the  agreement  of  the
            Successor  Corporation  to observe and perform all the covenants and
            obligations  of the Borrower under this Agreement and any other Loan
            Document and to be bound by all the terms of this  Agreement and any
            other Loan  Document  so far as they relate to the  Borrower,  which
            instruments, if any, shall be in form reasonably satisfactory to the
            Administrative Agent and the Lenders;

      (b)   such  transaction  shall,  to  the  reasonable  satisfaction  of the
            Administrative  Agent and the  Lenders and in the opinion of Counsel
            to the  Borrower  addressed  to the  Administrative  Agent  and  the
            Lenders, be upon such terms as to preserve and not

<PAGE>
                                      -58-

            to impair any of the rights and powers of the  Administrative  Agent
            and the Lenders;

      (c)   the perfection and priority of the Security shall not be impaired;

      (d)   all Other Taxes  payable as a result of such  transaction  have been
            paid by such Successor Corporation;

      (e)   such  transaction  will not result in any claim for increased  costs
            pursuant  to  Section  5.1 or result  in any Tax being  levied on or
            payable by the Administrative  Agent or any Lender (except for Taxes
            on the overall net income or capital of the Administrative  Agent or
            any Lender  provided  there is no increase in such Taxes as a result
            of such transaction);

      (f)   such  transaction  will  not  cause,  or  have  the  result  of  the
            Administrative   Agent  or  any  Lender  being  in  default   under,
            non-compliance with, or violation of, any Applicable Law;

      (g)   an opinion of counsel to the Successor Corporation  substantially in
            the form and as to matters  addressed  in the  opinion of Counsel to
            the  Borrower  delivered  pursuant  to  Section  6.1 shall have been
            delivered to the Administrative Agent and the Lenders;

      (h)   the creditworthiness of the Successor  Corporation (as determined by
            the  Administrative  Agent and each  Lender in its sole  discretion)
            shall not be less than the  creditworthiness  of the Borrower or the
            relevant  Guarantor  immediately  prior  to  giving  effect  to such
            transaction; and

      (i)   no Default or Event of Default shall have occurred and be continuing
            or will occur as a result of such transaction.

12.2        Vesting of Powers in Successor

            Except in the case of an amalgamation or other transaction  pursuant
to which the Successor  Corporation is liable for all of the  obligations of the
Borrower by operation of law, whenever the conditions of Section 12.1 above have
been duly observed and performed, the Administrative Agent and each Lender shall
execute and deliver the supplemental  agreement  provided for in Section 12.1(a)
and thereupon:

      (a)   the  Successor  Corporation  shall possess and from time to time may
            exercise  each and every right and power of the Borrower  under this
            Agreement  in its  own  name  or in the  name  of  the  Borrower  or
            otherwise  and  any  act or  proceeding  by any  provision  of  this
            Agreement  or  the  Security  Documents  required  to  be  done  and
            performed  with like  force  and  effect  by the like  directors  or
            officers of the Successor Corporation; and

      (b)   at the request of the Borrower,  the Borrower shall be released from
            its  liability  and   obligations   under  this  Agreement  and  the
            Administrative  Agent and the

<PAGE>
                                      -59-

            Lenders,  at the request and at the expense of the  Borrower,  shall
            execute  and  deliver  to the  Borrower  such  instruments  as shall
            reasonably be requisite to evidence such release.

                                   ARTICLE 13
                       COSTS, EXPENSES AND INDEMNIFICATION

13.1        Costs and Expenses

            The Borrower shall pay promptly,  upon request by the Administrative
Agent accompanied by reasonable supporting  documentation or other evidence, all
reasonable  costs  and  expenses  in  connection  with  preparation,   printing,
execution and delivery of this Agreement and the other documents to be delivered
hereunder including,  without limitation,  the reasonable fees and out-of-pocket
expenses of the Administrative Agent's Counsel with respect thereto.  Except for
ordinary  expenses  of the  Administrative  Agent  relating  to  the  day-to-day
administration  of  this  Agreement,  the  Borrower  further  agrees  to pay all
reasonable  costs  and  expenses  (including  reasonable  fees and  expenses  of
counsel,  accountants and other experts) in connection with the  interpretation,
preservation  or  enforcement  of  rights of the  Administrative  Agent and each
Lender  under this  Agreement  and the  Security  Documents  including,  without
limitation,  all reasonable costs and expenses  sustained by them as a result of
any  failure by the  Borrower  or any  Guarantor  to  perform  or observe  their
obligations  contained in this  Agreement  and all costs  incurred in connection
with obtaining any required consents,  approvals or authorizations  contemplated
by Section 8.1(p) and otherwise in enforcing and realizing upon the Security.

13.2        Indemnification by the Borrower

            In addition to any  liability of the Borrower to the  Administrative
Agent and each Lender  under any other  provision  hereof,  the  Borrower  shall
indemnify the  Administrative  Agent and each Lender and hold the Administrative
Agent and each Lender harmless against any reasonable costs or expenses incurred
by the  Administrative  Agent and each  Lender as a result (i) of any failure by
the Borrower or any Guarantor to fulfil any of its obligations  hereunder in the
manner  provided  herein  including,  without  limitation,  any cost or  expense
incurred by reason of the  liquidation or  re-employment  in whole or in part of
deposits or other funds required by the Administrative  Agent and each Lender to
fund or  maintain  any  Advance as a result of the  failure of the  Borrower  to
complete  a  Drawdown  or to make any  repayment  or other  payment  on the date
required  hereunder  or  specified  by it in any  notice  given  hereunder  (but
excluding costs arising solely out of loss of anticipated  profits); or (ii) the
failure of the Borrower to pay any other amount including,  without  limitation,
any interest or fee due  hereunder on its due date;  or (iii) as a result of the
prepayment  or repayment by the Borrower of any Libor  Advance prior to its date
of maturity or the last day of the then current  Interest  Period for such Libor
Advance,  including,  without  limiting the  generality  of the  foregoing,  any
repayment or prepayment resulting from the circumstances  referred to in Section
2.6(b).

13.3        Funds

            Each amount  advanced,  made available,  disbursed or paid hereunder
shall be advanced,  made  available,  disbursed or paid,  as the case may be, in
immediately available funds

<PAGE>
                                      -60-

or, after notice from the  Administrative  Agent, in such other form of funds as
may from time to time be customarily  used in Toronto,  Canada 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.

13.4        General Indemnity

      (a) Indemnity.  Subject to paragraphs (b), (c) and (d) below, the Borrower
agrees to indemnify and save harmless the Administrative  Agent, each Lender and
each of their  respective  officers,  directors,  employees,  agents,  advisors,
representatives   and   affiliates   (collectively,    the   "Indemnitees"   and
individually, an "Indemnitee") from and against any and all liabilities,  costs,
claims, damages, penalties, losses and expenses (including reasonable legal fees
and  disbursements  of counsel but excluding  loss of profits and  consequential
damages)  (collectively,  the  "Losses")  as a result of any claims,  actions or
proceedings  ("Claims")  asserted against the Indemnitees by a Person other than
the Indemnitees in connection with the agreement of the Administrative Agent and
each Lender to provide the Facility,  the commitment of the Lenders to establish
the Facility and the Advances made by the Lenders including, without limitation:
(i) the costs of defending and/or counterclaiming or claiming over against third
parties in respect of any Claim; and (ii) subject to the provisions set forth in
paragraph (d) below, any Losses arising out of a settlement of any Claim made by
the Indemnitees.

      (b) Limitations to Indemnity. The foregoing obligations of indemnification
shall not apply to any Losses  suffered by the  Indemnitees or any of them or to
any Claim  asserted  against the  Indemnitees  or any of them to the extent such
Loss or Claim has resulted from the gross negligence or wilful misconduct of the
Indemnitees or any of them.

      (c) Notification. Whenever an Indemnitee shall have received notice that a
Claim has been commenced or threatened,  which, if successful, would subject the
Borrower (the "Indemnifying  Party") to the indemnity provisions of this Section
13.4,  the  Indemnitee  shall,  as soon as reasonably  possible,  notify (to the
extent permitted by law) the  Indemnifying  Party in writing of the Claim and of
all relevant  information the Indemnitee  possesses relating thereto;  provided,
however,  that failure to so notify the  Borrower  shall not release it from any
liability  which it may  have on  account  of the  indemnity  set  forth in this
Section 13.4,  except to the extent that the Indemnifying  Party shall have been
materially prejudiced by such failure.

      (d) Defence and Settlement.  The Indemnifying  Party shall have the right,
but not the obligation,  to assume the defence of any Claim in any  jurisdiction
with legal  counsel of  reputable  standard  in order to protect  the rights and
interest of the Indemnitees.  In such respect,  (i) the Indemnifying Party shall
require  the  consent  of the  Indemnitees  of the  choice of legal  counsel  in
connection with the Claim,  which consent shall not be unreasonably  withheld or
delayed;  and (ii) without  prejudice to the rights of the Indemnitees to retain
counsel and participate in the defence of the Claim, the Indemnifying  Party and
the Indemnitees shall make all reasonable efforts to co-ordinate their course of
action in  connection  with the  defence of such Claim.  The  related  costs and
expenses sustained in such respect by the Indemnitees shall be at the expense of
the  Indemnifying  Party,  provided  that the  Indemnifying  Party shall only be
liable for the costs and expenses of one firm of separate counsel in addition to
the cost of any local counsel that may be required.  If the  Indemnifying  Party
fails to assume defence of the Claim,

<PAGE>
                                      -61-

the  Indemnitees  will (upon further  notice to the Borrower)  have the right to
undertake,  at the expense of the  Borrower  and the  Guarantors,  the  defence,
compromise  or settlement of the Claim on behalf and for the account and risk of
the Indemnifying Party, subject to the right of the Indemnifying Party to assume
the defence of the Claim at any time prior to  settlement,  compromise  or final
determination thereof.

            Notwithstanding the foregoing,  in the event the Indemnitee,  acting
reasonably,  does not agree  with the  manner or  timeliness  in which the legal
counsel of the  Indemnifying  Party is carrying on the defence of the Claim, or,
pursuant to the opinion of a reputable counsel retained by the Indemnitee, there
may be one or more legal defences available different from the one carried on by
the legal counsel of the Indemnifying Party, the Indemnitee shall have the right
to assume its own defence in the Claim by appointing its own legal counsel.  The
costs and the expenses  sustained by the  Indemnitee  shall be at the expense of
the Indemnifying Party provided that the Indemnifying Party shall only be liable
for the costs and expenses of one firm of separate  counsel,  in addition to the
costs of any local counsel that may be required.

            The Indemnifying Party shall not be liable for any settlement of any
Claim  effected  without its written  consent  (which shall not be  unreasonably
withheld or delayed). In addition,  the Indemnifying Party will not, without the
prior written consent of the Indemnitee (which consent shall not be unreasonably
withheld or delayed), settle, compromise or consent to the entry of any judgment
in or otherwise  seek to terminate any Claim or  threatened  Claim in respect of
which indemnification or contribution may be sought hereunder.

            If an offer  for  settlement  made to any  Indemnitee  and which the
Indemnifying  Party has recommended for acceptance is rejected by the Indemnitee
and the final  liability  of the  Indemnitee  in respect of such  action and all
related  damages is greater than such offer,  the liability of the  Indemnifying
Party will only be to indemnify the Indemnitee up to the amount of such offer.

13.5        Environmental Claims

      (a) Indemnity.  Subject to paragraphs (b), (c) and (d) below, the Borrower
agrees to indemnify and save harmless each of the  Indemnitees  from and against
any and all Losses as a result of any Claims asserted against the Indemnitees by
a Person other than the Indemnitees with respect to any material presence or the
Release on, into,  onto, under or from any property which at any time was owned,
used,  occupied,  operated  or under the  control  of any of the  Borrower,  the
Guarantors or any of the  Subsidiaries  of any of the foregoing of any Hazardous
Material (as  hereinafter  defined) or which arises out of or in connection with
any action of, or failure to act by,  the  Borrower,  a  Guarantor  or any other
Subsidiary  or any  predecessor  or successor  thereof in  contravention  of any
Environmental  Laws including,  without  limitation:  (i) the costs of defending
and/or  counterclaiming or claiming over against third parties in respect of any
Claim;  and (ii) subject to the provisions set forth in paragraph (d) below, any
Losses arising out of a settlement of any Claim made by the Indemnitees.

      (b) Limitations to Indemnity. The foregoing obligations of indemnification
shall not apply to any Losses  suffered by the  Indemnitees or any of them or to
any  Claim  asserted  against  the  Indemnitees  or any of them  which  relates,
directly or indirectly, to any action or

<PAGE>
                                      -62-

omission  of any of the  Indemnitees  while  in  possession  or  control  of the
property of the Borrower, any Guarantor or any other Subsidiary which is grossly
negligent or constitutes wilful misconduct.

      (c) Notification. Whenever an Indemnitee shall have received notice that a
Claim has been commenced or threatened,  which, if successful, would subject the
Borrower to the indemnity provisions of this Section 13.5, the Indemnitee shall,
as soon as  reasonably  possible and in any event on or before the expiry of the
date (the "Notification Date") which is the earlier of (i) the tenth Banking Day
after the receipt of such notice by the Administrative Agent, and (ii) such date
as will  afford  sufficient  time for the  Borrower to prepare and file a timely
answer to the  Claim,  notify  the  Borrower  of the  Claim and of all  relevant
information the Indemnitee  possesses relating thereto.  If the Indemnitee shall
fail to so notify the Borrower and provide it with such information on or before
the  Notification  Date, the Borrower shall not have any liability  hereunder in
respect of any Losses  suffered by the  Indemnitees  in respect of such Claim to
the extent such Losses may be  reasonably  attributable  to such  failure by the
Indemnitee.

      (d) Defence and Settlement.  The provisions of Section 13.4(d) shall apply
to any Claims under this Section 13.5.

                                   ARTICLE 14
                            THE ADMINISTRATIVE AGENT

14.1        The Administrative Agent

            Each Lender hereby irrevocably  appoints the Administrative Agent to
act as its  Administrative  Agent in connection  with this  Agreement,  the Loan
Documents, and any matter contemplated hereunder, and authorizes irrevocably the
Administrative  Agent to exercise  such rights,  powers and  discretions  as are
delegated  to the  Administrative  Agent  pursuant to this  Agreement,  the Loan
Documents,  and any  matter  contemplated  thereunder,  together  with  all such
rights, powers and discretions as are incidental hereto or thereto. The Borrower
may in all  respects  assume  that the  Administrative  Agent has  obtained  all
necessary  authorities  from the Lenders and is acting in full  conformity  with
this  Article 14 at all times.  The  Administrative  Agent shall have only those
duties and responsibilities which are expressly specified in this Agreement, and
it may perform such duties by or through its agents or employees. This Agreement
shall not place the  Administrative  Agent under any fiduciary duties in respect
of any Lender.

14.2        The Administrative Agent's Responsibility

            The Administrative Agent may:

      (a)   assume that:

              (i)    any representation made by the Borrower in or in connection
                     with any of this Agreement or any Drawdown Notice is true;

             (ii)    no Event of Default has occurred; and

<PAGE>
                                      -63-

            (iii)    the  Borrower  is not in breach of or in default  under its
                     obligations  under any of this  Agreement  or any  Bankers'
                     Acceptances;

            and the Administrative Agent may also:

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

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

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

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

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

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

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

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

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

<PAGE>
                                      -64-

14.3        Administrative Agent's Duties

            The Administrative Agent shall:

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

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

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

      (d)   subject to the foregoing  provisions  of this Section  14.3,  act in
            accordance  with  any  instructions  given  to  it by  the  Required
            Lenders; and

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

14.4        Protection of Administrative Agent

            Notwithstanding  anything  to  the  contrary  expressed  or  implied
herein, the Administrative Agent shall not:

      (a)   be bound to enquire as to:

              (i)    whether any  representation  made by the  Borrower in or in
                     connection  with this Agreement or any document  incidental
                     thereto is true;

             (ii)    the occurrence of any Event of Default;

            (iii)    the  performance by the Borrower of its  obligations  under
                     any of this Agreement or any document incidental thereto;

             (iv)    any breach of or default  by the  Borrower  of or under its
                     obligations under this Agreement or any document incidental
                     thereto; or

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

<PAGE>
                                      -65-

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

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

      (d)   accept any  responsibility  for the accuracy and/or  completeness of
            any information supplied in connection herewith or for the legality,
            validity,   effectiveness,   adequacy  or   enforceability  of  this
            Agreement, any Bankers' Acceptance or any document incidental hereto
            or  thereto  and the  Administrative  Agent  shall  not be under any
            liability  to any Lender as a result of taking or  omitting  to take
            any action in relation to the Agreement,  any Bankers' Acceptance or
            any document  incidental hereto or thereto save in the case of gross
            negligence or wilful misconduct, and each of the Lenders agrees that
            it will not assert or seek to assert against any director,  officer,
            employee  or agent of the  Administrative  Agent  any claim it might
            have  against any of them in respect of the  matters  referred to in
            this Section 14.4.

14.5        Indemnification of Administrative Agent

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

14.6        Termination or Resignation of Administrative Agent

      (a)  Notwithstanding  the  irrevocable  appointment of the  Administrative
Agent,  the  Required  Lenders may (with the consent of the  Borrower  not to be
unreasonably  withheld),  upon  giving the  Administrative  Agent 90 days' prior
written notice to such effect,  terminate the Administrative Agent's appointment
hereunder provided that a successor  Administrative  Agent has been appointed at
or prior to expiry of such notice.

      (b) The Administrative  Agent may resign its appointment  hereunder at any
time without  assigning  any reason  therefor by giving  written  notice to such
effect  to each of the  other  parties  hereto.  Such  resignation  shall not be
effective until a successor Administrative Agent has been appointed.

      (c) In the event of any such  termination  or  resignation,  the  Required
Lenders  shall  appoint  a  successor  Administrative  Agent  acceptable  to the
Borrower,  deliver  copies of the  Accounts to such  successor  and the retiring
Administrative  Agent shall be discharged from any further obligation  hereunder
but shall remain  entitled to the benefit of the  provisions  of this Article 14
and the  Administrative  Agent's  successor and each of the other parties hereto
shall

<PAGE>
                                      -66-

have the same rights and obligations  among themselves as they would have had if
such successor originally had been a party hereto as Administrative Agent.

14.7        Rights of Administrative Agent as Lender

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

14.8        Authorized Waivers, Variations and Omissions

            If  so   authorized  in  writing  by  the  Required   Lenders,   the
Administrative  Agent  may  grant  waivers,  consents,  vary  the  terms of this
Agreement and do or omit to do all such acts and things in  connection  herewith
or  therewith.  Except  with the prior  written  agreement  of all the  Lenders,
nothing in this Section 14.8 shall  authorize (i) any decrease in the Applicable
Margin,  the  Stamping  Fee,  the  Standby  Fee or the  Libor  Margin,  (ii) any
extension  of the date for, or  alteration  in the  amount,  currency or mode of
calculation  or  computation  of any payment of  principal  or interest or other
amount,  (iii) any increase in the  Committed  Amount of a Lender (other than as
referred to in Section  2.6(b)),  (iv) any extension of the Final Maturity Date,
(v) any  change in the terms of  Articles  9, 10 or 13,  (vi) any  change in the
definition  of  Required  Lenders  (vii)  the  release  of the  Borrower  or any
Guarantor from its obligations  under any Loan Document or (viii) any amendments
to this Section 14.8.

14.9        Financial Information Concerning Borrower

            Subject to Section 14.3(a),  the Administrative Agent shall not have
any duty or responsibility  either initially or on a continuing basis to provide
any Lender with any credit or other  information  with respect to the  financial
condition and affairs of the Borrower.

14.10       Knowledge of Financial Situation of Borrower

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

14.11       Legal Proceedings

            The  Administrative  Agent shall not be  obligated to take any legal
proceedings  against the  Borrower or any other  Person for the  recovery of any
amount due under this  Agreement  or under any Bankers'  Acceptances.  No Lender
shall bring legal proceedings against the Borrower or any other Person hereunder
or in connection herewith, or exercise any right

<PAGE>
                                      -67-

arising hereunder or in connection  herewith over the property and assets of the
Borrower or any other Person  without the prior written  consent of the Required
Lenders.

14.12       Capacity as Administrative Agent

            In performing  its functions  and duties under this  Agreement,  the
Administrative Agent shall act solely as the Administrative Agent of the Lenders
and shall not assume, and shall not be deemed to have assumed, any obligation as
agent or trustee for the Borrower or any other Person. The Administrative  Agent
shall not be under any liability or  responsibility of any kind to the Borrower,
the Lenders, or to any other Person arising out of or in relation to any failure
or delay in  performance  or breach by any Lender or Lenders or, as the case may
be, by the Borrower or any other Person  pursuant to or in any way in connection
with this Agreement.

14.13       Capacity as Lead Arranger

            The  Borrower  and the Lenders and the  Administrative  Agent hereby
agree and confirm that BMO has  performed its functions and duties in connection
with the  arrangement  of the Facility  and shall not be under any  liability or
responsibility  of any kind to the  Borrower,  the Lenders,  the  Administrative
Agent or any of them  arising out of or in relation  to the  arrangement  of the
Facility or this Agreement.

14.14       Deposits or Loans Respecting the Borrower

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

                                   ARTICLE 15
                                     GENERAL

15.1        Term

            The Facility shall expire on the Maturity Date.

15.2        Survival

            All  covenants,  agreements,  representations  and  warranties  made
herein or in  certificates  delivered in connection  herewith by or on behalf of
the Borrower, the Guarantors or any other Subsidiary shall survive the execution
and  delivery of this  Agreement  and the making of the Drawdown  hereunder  and
shall  continue in full force and effect so long as there is any  obligation  of
the Borrower to the Administrative Agent or any Lender hereunder.

15.3        Benefit of the Agreement

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

<PAGE>
                                      -68-

15.4        Notices

            All notices,  requests,  demands or other  communications to or from
the parties hereto shall be in writing and shall be given by overnight  delivery
service, by hand delivery or by telecopy to the addressee as follows:

              (i)    If to the Borrower:

                     Mitel Networks Corporation
                     350 Legget Drive
                     Ottawa, Ontario K2K 2W7

                     Attention:    Treasurer

                     Telecopier:   613-591-2320
                     Telephone:    613-591-2122, ext. 4431

             (ii)    If to the Administrative Agent:

                     BMO Nesbitt Burns Inc.
                     Structured and Project Lending
                     1 First Canadian Place
                     4th Floor, P.O. Box 150
                     Toronto, Ontario M5X 1H3

                     Attention:    Genga T. Arulampalam

                     Telecopier:   416-867-6977
                     Telephone:    416-359-6996

            (iii)    If to a Lender:

                     To the  address  set  forth  next to its  signature  on the
                     signature page of this Agreement

or at such  other  address  or to such  other  individual  as the  Borrower  may
designate by notice to the Administrative  Agent or the Administrative Agent may
designate by notice to the  Borrower.  If any notice,  request,  demand or other
communication  is delivered or  transmitted on a day other than a Banking Day or
after  3:00  p.m.  on any  Banking  Day,  the same  shall be deemed to have been
effectively given and received on the next following Banking Day.

15.5        Amendment and Waiver

            This  Agreement and documents  collateral  hereto may be modified or
amended and a waiver of any breach of any term or  provision  of this  Agreement
shall be effective  only if the Borrower  and the  Administrative  Agent and the
Required Lenders or each Lender, as the case

<PAGE>
                                      -69-

may be, so agree in writing.  A waiver of any breach of any term or provision of
this Agreement shall be limited to the specific breach waived.

15.6        Governing Law

            This Agreement shall be governed by and construed in accordance with
the laws of the  Province of Ontario and the federal  laws of Canada  applicable
therein.  Each of the  Administrative  Agent, the Lenders and the Borrower agree
that any legal suit,  action or proceeding  arising out of this Agreement may be
instituted in the courts of Ontario,  and each of the Administrative  Agent, the
Lenders  and  the  Borrower  hereby  accepts  and  irrevocably  submits  to  the
non-exclusive  jurisdiction of said courts and acknowledges their competence and
agrees to be bound by any judgment thereof.

15.7        Further Assurances

            The Borrower  shall  promptly  cure any default in its execution and
delivery of this Agreement.  The Borrower, at its expense, will promptly execute
and deliver, or cause to be executed and delivered,  to the Administrative Agent
and the Lenders, upon request, all such other and further documents, agreements,
certificates  and  instruments  in  compliance  with, or  accomplishment  of the
covenants and agreements of the Borrower and the  Guarantors  hereunder or under
the Security  Documents or more fully to state the  obligations  of the Borrower
and the Guarantors as set out herein or therein or to make any  recording,  file
any notice or obtain any  consents,  all as may be necessary or  appropriate  in
connection therewith.

15.8        Enforcement and Waiver by the Lenders

            The Administrative Agent and the Lenders shall have the right at all
times to enforce the provisions of this Agreement and agreements to be delivered
pursuant  hereto  in  strict  accordance  with the  terms  hereof  and  thereof,
notwithstanding  any conduct or custom on the part of the  Administrative  Agent
and the Lenders in refraining from so doing at any time or times. The failure of
the  Administrative  Agent and the  Lenders at any time or times to enforce  its
rights under such provisions, strictly in accordance with the same, shall not be
construed as having created a custom or in any way or manner  modified or waived
the same.  All rights and remedies of the  Administrative  Agent and the Lenders
are  cumulative and concurrent and the exercise of one right or remedy shall not
be deemed a waiver or release of any other right or remedy.

15.9        Execution in Counterparts

            This Agreement may be executed in counterparts,  each of which shall
be considered  an original and all of which taken  together  shall  constitute a
single agreement.

15.10       Assignment by the Borrower

            The rights and  obligations of the Borrower under this Agreement are
not  assignable  to any other  Person,  except in  accordance  with  Article 12,
without the prior written consent of the Administrative Agent and the Lenders in
its sole discretion.

<PAGE>
                                      -70-

15.11       Assignments and Transfers by the Lenders

      (a) With the prior written consent of the Borrower, such consent not to be
unreasonably withheld or delayed, any Lender may, at any time, assign all or any
of its rights and  benefits  hereunder  or transfer in  accordance  with Section
15.11(b) all or any of its rights, benefits and obligations hereunder to another
Person (the  "Transferee");  provided  that any partial  assignment  or transfer
shall be with respect to a minimum  commitment of Cdn.  $5,000,000  and integral
multiples  of Cdn.  $100,000  in excess  thereof or such  lesser  amount as will
result in each of the Lender and the Transferee  having a minimum  commitment of
Cdn. $5,000,000.  Notwithstanding the foregoing,  the consent of the Borrower is
not required in connection  with the assignment or transfer of all or any of the
rights, benefits and obligations hereunder to (i) any Subsidiary or Affiliate of
the Lender,  provided that, in either case, any such assignment or transfer does
not give rise to a claim for increased  costs  pursuant to Article 5, or (ii) to
any  financial  institution  or to any other  Person if an Event of Default  has
occurred and is continuing.

      (b) If a Lender assigns all or any of its rights and benefits hereunder in
accordance  with Section  15.11(a),  then,  unless and until the  Transferee has
agreed  with the  Lender  and the  Borrower  pursuant  to a  transfer  agreement
substantially  in the form of  Schedule  J hereto  (or such other form as may be
agreed to by the Lender and the Borrower) that the Transferee  shall be bound by
the same  obligations of the Lender as the  Transferee  would have been under if
the  Transferee  had been an original  party hereto,  the Borrower  shall not be
obliged to recognize  such  Transferee as having the rights against the Borrower
which the  Transferee  would  have had if the  Transferee  had been such a party
hereto.

      (c) A Lender may  participate  all or any part of its interest  hereunder,
provided that any such participation does not give rise to a claim for increased
costs  pursuant to Article 5. The  Borrower  shall not be obligated to deal with
any  participant  and shall be  entitled  to deal solely with the Lender and the
Lender shall not be released from any of its  obligations to the Borrower or the
Guarantors  as a result  of such  participation  except to the  extent  that the
participant has fulfilled such obligations.  Such participants shall be bound to
the same  confidentiality  provisions  with  respect to the  Facilities  and the
Borrower and each Guarantor as are applicable to the Lender.

15.12       Set-Off

            Subject to the  provisions  of the  Intercreditor  Agreement,  if an
Event of Default has  occurred  and is  continuing,  each Lender  shall have the
right to set off against any  accounts,  credits or balances  maintained  by the
Borrower  or any of the  Guarantors  with the Lender  any amount due  hereunder.
Except  for  payments  to a Lender  from the  Administrative  Agent  which  were
received  by the  Administrative  Agent  for  the  account  of  such  Lender  in
accordance  with the  provisions of this  Agreement,  if any Lender shall at any
time receive  payment or  satisfaction  of all or a part of any amounts  payable
hereunder,  whether by set-off or otherwise,  in a proportion which, in relation
to any  amounts  received  by any other  Lender  or  Lenders  at the same  time,
represents more than its pro rata  Participation,  then such Lender shall notify
the  Administrative  Agent thereof and pay to the  Administrative  Agent for the
account of the other  Lenders  such  amount as will ensure that each Lender will
receive a proportion of such payment

<PAGE>
                                      -71-

equal to such Lender's pro rata Participation. In the event that at any time any
Lender shall be required to refund any amount which has been paid to or received
by it by set-off or otherwise on account of any part of the  Advances,  interest
thereon or any other  amount  payable  hereunder  and which has been paid to any
other  Lender  pursuant to this Section  15.12,  such other Lender shall repay a
proportionate amount of the amounts so refunded without interest. If a Lender is
required to make any payment to any other Lender pursuant to this Section 15.12,
then,  subject to the foregoing  sentence,  the liability of the Borrower to the
Lender making such payment under this  Agreement  shall be treated as not having
been reduced by the amount of such payment and the  liability of the Borrower to
any Lender receiving such payment shall be treated as having been reduced by the
amount of the payment received by such Lender.

15.13       Time of the Essence

            Time shall be of the essence in this Agreement.

15.14       Judgment Currency

            To the extent  permitted by applicable law, if any judgment or order
is rendered and expressed in a currency other than the currency (the  "Agreement
Currency")  in which  amounts are payable under the Facility (i) for the payment
of any  amount  owing  by the  Borrower  in  respect  of the  Facility  or  this
Agreement,  or (ii) in respect of a judgment  or order of another  court for the
payment of any amount described in (i) above, the Administrative  Agent and each
Lender,   after  recovery  in  full  of  the  aggregate   amount  to  which  the
Administrative  Agent and each  Lender is entitled  pursuant to the  judgment or
order, will be entitled to receive  immediately from the Borrowers the amount of
any shortfall in the Agreement Currency received by the Administrative Agent and
each Lender as a consequence of sums paid in such other currency and will refund
promptly to the Borrower any excess of the  Agreement  Currency  received by the
Administrative Agent and each Lender as a consequence of sums paid in such other
currency if such  shortfall or such excess  arises or results from any variation
between the rate of exchange at which the Agreement  Currency is converted  into
the currency of the judgment or order for the purposes of such judgment or order
and the rate of  exchange at which the  Administrative  Agent and each Lender is
able, acting in a reasonable manner and in good faith in converting the currency
received into the Agreement  Currency,  to purchase the Agreement  Currency with
the amount of the  currency of the  judgment or order  actually  received by the
Administrative  Agent and each  Lender.  The term "rate of  exchange"  includes,
without  limitation,  any premiums and costs of exchange  payable in  connection
with the purchase of or conversion into the Agreement  Currency.  Any amount due
from the Borrower  under the  provisions of this Section 15.14 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 the Facility or this Agreement.

15.15       Equal Ranking of Lenders

            The Lenders,  and to the extent  necessary,  the Borrower,  agree as
between  themselves  that any  indebtedness  of the Borrower  towards any Lender
hereunder,  in respect of any Advance or any Bankers'  Acceptance,  or otherwise
hereunder shall at all times rank equally and without  preference or distinction
with the indebtedness of the Borrower towards any other Lender hereunder.

<PAGE>
                                      -72-

15.16       Sharing of Information

The  Borrower  agrees  that the  Administrative  Agent and the Lenders may share
amongst  themselves any information which any of them may possess concerning the
Borrower in respect of the Borrower's undertakings,  obligations or indebtedness
towards any Lender  pursuant  to this  Agreement,  any Advance and any  Bankers'
Acceptance, as well as any payment received from the Borrower by any Lender.

15.17       Continuing Obligations and Liabilities

            Each of the  Borrower  and BMO agrees and  confirms  that all of its
liabilities and obligations under the Original Credit Agreement  existing on the
Closing  Date are amended and  restated by this  Agreement  and continue in full
force and effect hereunder, except to the extent amended by this Agreement.

            IN WITNESS WHEREOF the parties hereto have executed this Agreement.

                                                MITEL NETWORKS CORPORATION

                                                by
                                                   -----------------------------
                                                     Name:
                                                     Title:

                                                by
                                                   -----------------------------
                                                     Name:
                                                     Title:

                                                BANK OF MONTREAL, As
                                                Administrative Agent And Lead
                                                Arranger

                                                by
                                                   -----------------------------
                                                     Name:
                                                     Title:

                                                by
                                                   -----------------------------
                                                     Name:
                                                     Title:

<PAGE>
                                      -73-

Address:
                                                BANK OF MONTREAL, As Lender
BMO Nesbitt Burns Inc.
Structured and Project Financing                by
1 First Canadian Place                             -----------------------------
4th Floor, P.O. Box 150                            Name:
Toronto, Ontario                                   Title:
M5X 1H3
                                                by
                                                   -----------------------------
                                                   Name:
                                                   Title:

<PAGE>

                     SCHEDULE A - BORROWING BASE CERTIFICATE

<PAGE>

                          SCHEDULE B - DRAWDOWN NOTICE

To:         Bank of Montreal
            Structured and Project Lending
            100 King Street West
            1 First Canadian Place
            4th Floor, P.O. Box 150
            Toronto, Ontario
            M5X 1H3

            Attention:    Manager

            This Drawdown Notice is being delivered  pursuant to the amended and
restated loan  agreement  made as of February 27, 2003 (the "Credit  Agreement")
made between the Borrower, the Administrative Agent and the Lenders. Capitalized
terms used herein but not defined  herein  shall have the  meanings  ascribed to
such terms in the Credit Agreement.

            We hereby  request  the  following  Advance  on  __________________,
_______. The Advance shall be pursuant to:

      check the applicable boxes

      0     Prime Rate Advance in the principal amount of Cdn.$____________.

      0     Bankers'  Acceptance  Advance  in  the  aggregate  Face  Amount  and
                  principal amount of  Cdn.$____________  having a term of _____
                  days.

      0     Libor  Advance  in the  amount of  U.S.$____________  and  having an
                  Interest Period of _____ months.

      0     U.S. Base Rate Advance in the amount of U.S.$____________.

      0     Letter  of Credit in the Face  Amount  of  Cdn.$____________  and/or
                  U.S.$____________   with   __________________  as  beneficiary
                  having a term of ____ days.

            Payment instructions:    _____________________________________

                                     _____________________________________

                                     _____________________________________

            The  representations  and warranties set forth in Section 7.1 of the
Credit  Agreement  are,  mutatis  mutandis,  true and  correct  in all  material
respects on and as of the date

<PAGE>
                                       -2-

hereof,  both before and after giving  effect to the  Drawdown of the  requested
Advance and to the application of proceeds therefrom,  by reference to the facts
and  circumstances  now existing and assuming that each of such  representations
and warranties and the Schedules referred to therein had been amended to reflect
any notices provided by the Borrower to the  Administrative  Agent in respect of
the matters dealt with therein and, with respect to the representation set forth
in Section 7.1(g) of the Credit Agreement, the reference to the date October 27,
2002 shall be deemed to be a reference to the date of the  financial  statements
of the Borrower most recently delivered pursuant to Section 8.1(a) of the Credit
Agreement  and,  with  respect  to  unaudited  financial  statements,  that such
statements  fairly  present the  financial  condition  of the  Borrower  and its
Subsidiaries  as at such  date  and the  results  of  their  operations  for the
financial  period then ended,  in  accordance  with GAAP  consistently  applied,
subject to normal year end audit adjustments.

            No Default or Event of Default has occurred and is  continuing,  nor
shall any such event  occur as a result of making the  requested  Advance or the
application of proceeds therefrom.

            DATED this _____ day of _____________________, ________.

                                                MITEL NETWORKS CORPORATION

                                                by
                                                   -----------------------------
                                                   Name:  |X|
                                                   Title: |X|

                                                by
                                                   -----------------------------
                                                   Name:  |X|
                                                   Title: |X|

<PAGE>

                         SCHEDULE C - CONVERSION NOTICE

To:         Bank of Montreal
            100 King Street West
            1 First Canadian Place
            4th Floor, P.O. Box 150
            Toronto, Ontario
            M5X 1H3

            Attention:    Manager

            This Conversion  Notice is being  delivered  pursuant to the amended
and  restated  loan  agreement  made  as  of  February  27,  2003  (the  "Credit
Agreement") made between the Borrower, the Administrative Agent and the Lenders.
Capitalized  terms used herein but not defined  herein  shall have the  meanings
ascribed to such terms in the Credit Agreement.

            We hereby request the following  Conversions on  __________________,
_______. The Conversions shall be as set forth below:

      check the applicable boxes

      0     Prime Rate  Advance  in the  principal  amount of  Cdn.$____________
                  shall be converted into a Bankers' Acceptance Advance having a
                  term/Interest Period of _____ days.

      0     Prime Rate  Advance  in the  principal  amount of  Cdn.$____________
                  shall be converted  into an  Equivalent  Amount U.S. Base Rate
                  Advance.

      0     Prime  Rate  Advance  in the  principal  amount  of  Cdn.$  shall be
                  converted  into an Equivalent  Amount Libor Advance  having an
                  Interest Period of months.

      0     Bankers'    Acceptance   in   the    aggregate    Face   Amount   of
                  Cdn.$____________   shall  be  converted  into  a  Prime  Rate
                  Advance.

      0     Bankers'    Acceptance   in   the    aggregate    Face   Amount   of
                  Cdn.$____________ shall be converted into an Equivalent Amount
                  U.S. Base Rate Advance.

      0     Bankers'    Acceptance   in   the    aggregate    Face   Amount   of
                  Cdn.$____________ shall be converted into an Equivalent Amount
                  Libor Advance having an Interest Period of months.

      0     Libor Advance in the principal amount of U.S.$____________  shall be
                  converted into a U.S. Base Rate Advance.

<PAGE>
                                      -2-

      0     Libor Advance in the principal amount of U.S.$____________  shall be
                  converted into an Equivalent Amount Prime Rate Advance.

      0     Libor Advance in the  principal  amount of U.S. $ shall be converted
                  into an Equivalent Amount Bankers' Acceptance Advance having a
                  term/Interest Period of days.

      0     U.S. Base Rate Advance in the principal amount of  U.S.$____________
                  shall be  converted  into a Libor  Advance  having an Interest
                  Period of _____ months.

      0     U.S. Base Rate Advance in the principal amount of  U.S.$____________
                  shall  be  converted  into an  Equivalent  Amount  Prime  Rate
                  Advance.

      0     U.S.  Base Rate  Advance in the  principal  amount of U.S.$ shall be
                  converted  into  an  Equivalent  Amount  Bankers'   Acceptance
                  Advance having a term/Interest Period of days.

            No Default or Event of Default has occurred and is  continuing,  nor
shall any such event occur as a result of making the requested conversion.

            DATED this _____ day of _____________________, ________.

                                                MITEL NETWORKS CORPORATION

                                                by
                                                   -----------------------------
                                                   Name:  |X|
                                                   Title: |X|

                                                by
                                                   -----------------------------
                                                   Name:  |X|
                                                   Title: |X|

<PAGE>

                          SCHEDULE D - ROLLOVER NOTICE

To:         Bank of Montreal
            Structured and Project Lending
            100 King Street West
            1 First Canadian Place
            4th Floor, P.O. Box 150
            Toronto, Ontario
            M5X 1H3

            Attention:   Manager

            This Rollover Notice is being delivered  pursuant to the amended and
restated loan  agreement  made as of February 27, 2003 (the "Credit  Agreement")
made between the Borrower, the Administrative Agent and the Lenders. Capitalized
terms used herein but not defined shall have the meanings ascribed to such terms
in the Credit Agreement.

            We hereby request the following:

      check the applicable box

      0     Rollover in respect of the Libor Advance  currently  outstanding  in
            the amount of  U.S.$____________  and with an Interest Period ending
            on  _____________,  ______.  The next Interest Period for such Libor
            Advance commencing on such date is to be _____ months.

      0     Acceptance of Bankers'  Acceptances in the aggregate Face Amount and
            principal amount of Cdn.$____________ having a term of _____ days.

            No Default or Event of Default has occurred and is  continuing,  nor
shall any such event occur as a result of making the requested rollover.

            DATED this _____ day of _____________________, ________.

                                                MITEL NETWORKS CORPORATION

                                                by
                                                   -----------------------------
                                                   Name:  |X|
                                                   Title: |X|

<PAGE>

                      SCHEDULE E - [Intentionally deleted]

<PAGE>

                       SCHEDULE F - PERMITTED ENCUMBRANCES

"Permitted Encumbrances" means the following types of Encumbrances:

             (i)     liens in  respect  of taxes,  assessments  or  governmental
                     charges or claims the payment of which is not, at the time,
                     overdue;

            (ii)     statutory liens of landlords,  statutory liens of banks and
                     rights   of   set-off,   statutory   liens   of   carriers,
                     warehousemen,    mechanics,    repairmen,    workmen    and
                     materialmen,  and other liens  imposed by law, in each case
                     incurred in the ordinary course of business (a) for amounts
                     not yet  overdue or (b) for  amounts  that are  overdue and
                     that (in the case of any such amounts  overdue for a period
                     in excess of five days) are being  contested  in good faith
                     by appropriate proceedings, so long as (1) such reserves or
                     other appropriate provisions,  if any, as shall be required
                     by generally accepted  accounting  principles as applied in
                     Canada shall have been made for any such contested amounts,
                     and (2) in the case of a lien with  respect to any  portion
                     of the  collateral in respect of which the Lenders,  or the
                     Administrative  Agent  on  their  behalf,  have a  security
                     interest  in respect  of the  obligations  of the  Borrower
                     hereunder  (the  "Collateral"),  such  contest  proceedings
                     conclusively operate to stay the sale of any portion of the
                     Collateral on account of such lien;

           (iii)     liens  incurred or deposits made in the ordinary  course of
                     business  in   connection   with   workers'   compensation,
                     unemployment  insurance and other types of social security,
                     or  to  secure  the   performance  of  tenders,   statutory
                     obligations,   surety  and  appeal  bonds,   bids,  leases,
                     government  contracts,  trade  contracts,  performance  and
                     return-of-money   bonds  and  other   similar   obligations
                     (exclusive  of  obligations  for the  payment  of  borrowed
                     money),  so  long  as  no  foreclosure,   sale  or  similar
                     proceedings have been commenced with respect to any portion
                     of the Collateral on account thereof;

            (iv)     any  attachment  or judgment  lien not involving (i) in any
                     individual case an amount in excess of $1,000,000,  or (ii)
                     in the  aggregate  at any time  outstanding  an  amount  in
                     excess of  $2,500,000  (in either  case to the extent  such
                     amount is not adequately covered by insurance as to which a
                     solvent and unaffiliated insurance company has acknowledged
                     coverage)  except if any such  attachment  or judgment lien
                     shall  remain  undischarged,  undisputed  (in the case of a
                     writ  in  the  United  Kingdom),   unvacated,  unbonded  or
                     unstayed  for a period  of 60 days (or in any  event  later
                     than  five  days  prior  to the date of any  proposed  sale
                     thereunder);

             (v)     leases or subleases  granted to third  parties which do not
                     interfere in any material respect with the ordinary conduct
                     of the business of the Borrower
<PAGE>
                                      -2-

                     or  any  of  its  subsidiaries  or  result  in  a  material
                     diminution in the value of any of the Collateral;

            (vi)     easements, rights-of-way,  restrictions, encroachments, and
                     other minor  defects or  irregularities  in title,  in each
                     case which do not and will not  interfere  in any  material
                     respect  with the  ordinary  conduct of the business of the
                     Borrower or any of its subsidiaries or result in a material
                     diminution in the value of any of the Collateral;

           (vii)     any (a)  interest or title of a lessor or  sublessor  under
                     any operating lease in respect of which the Borrower or any
                     of its  subsidiaries  shall be, or  become  liable  whether
                     directly or by assignment or as a guarantor or other surety
                     for the  obligations of the lessee under any such operating
                     lease,  to the  extent  that the  aggregate  annual  rental
                     payments of the Borrower and its subsidiaries in respect of
                     all such operating leases shall not exceed $20,000,000, (b)
                     restriction  or  encumbrance  that the interest or title of
                     such  lessor  or  sublessor  may  be  subject  to,  or  (c)
                     subordination  of the  interest of the lessee or  sublessee
                     under such lease to any restriction or encumbrance referred
                     to in the  preceding  clause  (b), so long as the holder of
                     such  restriction  or  encumbrance  agrees to recognize the
                     rights of such lessee or sublessee under such lease;

          (viii)     liens arising from the filing of Personal Property Security
                     Act or UCC financing statements, relating solely to leases;

            (ix)     liens in favour of customs and revenue  authorities arising
                     as a matter of law to secure  payment of customs  duties in
                     connection with the importation of goods;

             (x)     any zoning or similar law or right reserved to or vested in
                     any  governmental  office or agency to control or  regulate
                     the use of any real property;

            (xi)     liens  against  owners'  or  sublessors'  interest  in  any
                     leasehold  property used or occupied by the Borrower or any
                     of its subsidiaries;

           (xii)     liens   securing   obligations   (other  than   obligations
                     representing   indebtedness   for  borrowed   money)  under
                     operating,   reciprocal   easement  or  similar  agreements
                     entered  into in the  ordinary  course of  business  of the
                     Borrower or any of its subsidiaries;

          (xiii)     licences  of  patents,  trademarks  and other  intellectual
                     property  rights  granted  by  the  Borrower  or any of its
                     subsidiaries  in the  ordinary  course of business  and not
                     interfering  in any  material  respect  with  the  ordinary
                     conduct of the business of the Borrower or such subsidiary;
<PAGE>
                                      -3-

           (xiv)     liens  granted to evidence  the  security  interests of the
                     Lenders,  or the  Administrative  Agent on their behalf, in
                     the Collateral;

            (xv)     Permitted Purchase Money Security Interests;

           (xvi)     Liens  granted  in  connection  with  obligations  incurred
                     pursuant  to  clause  (ix)  or  (x) of  the  definition  of
                     Permitted Debt;

          (xvii)     Liens not  included in any of the  foregoing  in respect of
                     obligations   not  exceeding   Cdn.   $5,000,000   (or  its
                     Equivalent Amount in another currency) in the aggregate;

         (xviii)     Liens granted to EDC in connection  with the obligations of
                     MNL incurred  pursuant to the EDC Facility  (including  the
                     Liens granted to EDC by the Borrower,  MNI, MNSI and MNL in
                     connection   therewith),   provided  that  EDC  shall  have
                     executed an intercreditor agreement with the Administrative
                     Agent in a form  satisfactory to the  Administrative  Agent
                     and such agreement is in full force and effect; and

           (xix)     certain   rights  of  the   Government  of  Canada  in  the
                     intellectual  property  of  the  Borrower  pursuant  to the
                     Technology Partnerships Canada Agreement.
<PAGE>

                             SCHEDULE G - LITIGATION

<PAGE>

                       SCHEDULE H - NON-COMPLIANCE MATTERS

Nil.

<PAGE>

                            SCHEDULE I - SUBSIDIARIES

<PAGE>

                         SCHEDULE J - TRANSFER AGREEMENT

TO: MITEL NETWORKS CORPORATION

            WHEREAS  the  Borrower  entered  into an amended and  restated  loan
agreement   dated   February  27,  2003  (the  "Credit   Agreement")   with  the
Administrative  Agent and the Lenders  whereby the Lenders agreed to provide the
Borrower with a revolving  credit facility in an aggregate  principal amount not
exceeding Cdn. $30,000,000 or the Equivalent Amount in United States Dollars for
the general corporate purposes of the Borrower;

            AND WHEREAS  pursuant to and in accordance with Section 15.11 of the
Credit  Agreement,  any  Lender  may,  with the  prior  written  consent  of the
Borrower,  assign or transfer all or any of its rights, benefits and obligations
under the Credit Agreement by duly  completing,  executing and delivering to the
Administrative Agent and to the Borrower this Transfer Certificate;

            AND  WHEREAS  any  Lender  (the  "Transferor")  wishes  to assign or
transfer to  __________________  (the  "Transferee")  the rights,  benefits  and
obligations of the Transferor under the Credit Agreement specified herein;

            AND WHEREAS the Borrower has consented in writing to such assignment
or transfer;

            NOW  THEREFORE in  consideration  of the  foregoing and of $1.00 and
other  good  and  valuable  consideration,   the  receipt  of  which  is  hereby
acknowledged, the signatories hereto agree as follows:

All   capitalized  terms  defined  in the  Credit  Agreement  and not  otherwise
      defined herein have the same meaning as in the Credit Agreement.

The   Transferor  assigns and transfers to the Transferee the following  rights,
      benefits and obligations (the "Transfer"):

            [description of the Transferred  Rights,  Benefits and  Obligations,
            indicating   retained   interest  or  fees,   if   applicable,   and
            Transferee's commitment and Participation]

            (the  "Transferred   Rights",   the  "Transferred   Benefits",   the
"Transferred  Obligations",  as applicable,  and  collectively  the "Transferred
Rights, Benefits and Obligations").

The   Transferee   accepts  the  Transfer  and  (if   applicable)   assumes  the
      Transferred Obligations (the "Assumption").

<PAGE>
                                      -2-

The   Transferee agrees with the  Administrative  Agent and the Borrower that it
      shall be bound by the same  obligations  of the Lenders as the  Transferee
      would have been under if the  Transferee had been an original party to the
      Credit Agreement.

The   Transfer and the  Assumption  are governed by and subject to Section 15.11
      of the Credit Agreement.

The   Transferee  acknowledges and confirms that it has not relied upon and that
      the  Transferor  and/or the  Administrative  Agent  has/have  not made any
      representation or warranty  whatsoever as to the due execution,  legality,
      effectiveness,  validity or  enforceability of the Credit Agreement or any
      other documentation or information  delivered by the Transferor and/or the
      Administrative  Agent to the Transferee in connection therewith or for the
      performance  thereof by any party  thereto or for the  performance  of any
      Guarantee by any Guarantor or for the financial  condition of the Borrower
      or of  any  Guarantor.  All  representations,  warranties  and  conditions
      expressed or implied by law or otherwise are hereby excluded.

The   Transferee  represents and warrants that it is not a  non-resident  within
      the meaning of the Income Tax Act  (Canada)  and that it has itself  been,
      and will continue to be, solely responsible for making its own independent
      appraisal   of   and   investigation   into   the   financial   condition,
      creditworthiness,  affairs,  status and nature of the Borrower and has not
      relied  and  will  not  hereafter  rely  on  the  Transferor   and/or  the
      Administrative  Agent to appraise  or keep under  review on its behalf the
      financial condition,  creditworthiness,  affairs,  status or nature of the
      Borrower.

Each  of the  Transferor  and the  Transferee  represents  and  warrants  to the
      Borrower  and the  Guarantors  that it has the capacity and power to enter
      into the Transfer and the  Assumption in accordance  with the terms hereof
      and to perform its obligations arising therefrom,  and all action required
      to authorize the execution and delivery hereof and the performance of such
      obligations has been duly taken.

This  Transfer Certificate shall be governed by and construed in accordance with
      the laws of the Province of Ontario, Canada.

            DATED this __________ day of _____________________, 200__.

                                                BANK OF MONTREAL

                                                by
                                                   -----------------------------
                                                   Name:     |X|
                                                   Title:    |X|

<PAGE>
                                      -3-

                                                [TRANSFEREE]

                                                by
                                                   -----------------------------
                                                   Name:     |X|
                                                   Title:    |X|

                                                MITEL NETWORKS CORPORATION

                                                by
                                                   -----------------------------
                                                   Name:     |X|
                                                   Title:    |X|

<PAGE>

                         SCHEDULE K - COMMITTED AMOUNTS

                  LENDER

                  Bank of Montreal                    Cdn. $30,000,000

<PAGE>

                           SCHEDULE L - BUSINESS PLAN

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